The business case for sustainability communication
The business case for sustainability communication
What is sustainability communication?
Sustainability communication refers to the systematic practice of sharing reliable information about the enterprise’s sustainability efforts. It includes communicating about strategy, policies, performance and future business goals. The recipients of the information can be all business stakeholders: employees, investors, customers, suppliers, as well as the broader community. It can help building transparency, and credibility, as well as drive positive change within the company.
In the context of current market changes, sustainability communication is considered an essential element of business. An increasing number of companies seeks ways to efficiently articulate their practices and provide reliable information on their environmental and social performance.
While the large companies adopt their sustainability initiatives with increasing speed, with their efforts often accelerated by the new regulations, many smaller enterprises may still wonder about the benefits and potential tradeoffs of such a systematic approach.
Still, small and medium enterprises do not always lag behind in their sustainability performance. According to the research, most SMEs carry out some kind of activities that can be labelled as corporate social responsibility. At the same time, companies tend to under- or over-state the level of their commitments, and it remains difficult to accurately assess or compare any data provided. Sharing information is typically done ad hoc, posting about it on social media. The study also points out at the barriers associated with limited understanding on what constitutes sustainability and how it should be articulated.
In this article, we focus on addressing the barriers to sustainable communication. We also explore the advantages behind the good and systematic strategy of articulating the company efforts in this regard.
While sustainability communication is considered an essential element of business, companies tend to under- or over-state the level of their commitments, and it remains difficult to accurately assess or compare any data provided.
The wins of good sustainability communication
On a path to create economic value
According to the EU study, SMEs can struggle to see the positive benefits of CSR practices on costs, efficiency, or even revenue and market share. Companies can perceive environmental measures as draining profits. It is sometimes said that sustainability initiatives can be expensive in the short-term, requiring significant investments in technology, equipment, or personnel. This can put pressure on companies to prioritize short-term profitability over long-term sustainability. At the same time, some argue that achieving sustainability can include trade-offs between environmental, social, and economic goals. For example, efforts to reduce greenhouse gas emissions may result in higher energy costs for consumers, or efforts to protect biodiversity may limit access to natural resources for local communities.
However, well managed sustainable development aims at balancing economic, social, and environmental considerations, rather than promoting one at the expense of the others. Ultimately, pursuing sustainability is a matter of balancing short-term costs with long-term benefits and creating a more resilient, equitable, and sustainable future for all.
An example of cost savings, done as a result of implementing sustainability practices, is investment in energy efficiency infrastructure. By implementing energy efficient lighting systems, the consumption of electricity can decrease substantially. At the same time, the maintenance costs are economized too due to increased longevity of the equipment and less frequent need for replacement. In a similar way, other investments in energy-efficient processes and equipment can reduce the fuel and electricity bills, leading to the substantial cost savings. These cost savings can be redirected to other business activities, allowing the further company expansion. Finally, communicating about these practices – sustainability communication – can bring many additional benefits to this process, increasing the company’s visibility on the market and bringing attention of new customers.
Well managed sustainable development aims at balancing economic, social, and environmental considerations, rather than promoting one at the expense of the others.
Bound by legal compliance
In the current market, sustainability communication and legal compliance subjects are interconnected in multiple ways. Existing environmental regulations often require companies to communicate and publish information about their air and water impacts. Carrying out the GHG accounting and publishing its results is becoming increasingly required across the world. Aspects related to human rights, health and safety or gender diversity are increasingly covered by the reporting requirements and enterprises are expected to communicate about their performance in this regard. These obligations can vary depending on the country and enterprise profile and most extensive legal requirements related to the sustainability communication are focused on the large enterprises.
At the same time, small and medium companies often become involved in such compliance practices through the contracts with their customers and partners. The sustainability obligations relevant for large enterprises are typically encapsulated in the agreements concluded with their supply chain, including SMEs. As a result, the small and medium companies often face comparable challenges in sustainability communication and performance as the large companies.
Some research also highlights the positive connection between the legal compliance behaviours and corporate sustainability reporting. Such studies provide evidence that firms with voluntary CSR disclosures are less likely to be involved in future corporate misbehaviour resulting in lawsuits.
Sending positive signals to the capital market
One more advantage of the sustainability communication is that companies which demonstrate a strong commitment to environmental and social pillars often enjoy better access to the capital. Reviews of the CSR-specific literature with respect to capital market effects demonstrate a positive link between ESG disclosure and firms’ value and/or performance. Banks and investors increasingly view sustainable organisations as more attractive, better managed, facing lower risk, as well as aligned with the growing demand of the market.
Many markets seek to channel the investments towards environmentally and socially responsible projects through regulations aiming at the financial market participants. As a result, the finance institutions are under growing public scrutiny towards their investments. Their reporting obligations and sustainability communication needs are becoming increasingly relevant to the small and medium enterprises that seek funding.
Companies which demonstrate a strong commitment to environmental and social pillars often enjoy better access to the capital.
Quality sustainability communication can also have a beneficial impact on bringing on board the most talented employees. Sustainable enterprises are often considered very compelling to the skilled employees that look for the work which aligns with their values and beliefs. Companies performing highly within their environmental and social pillars and communicating around their sustainability can therefore appeal more to the valuable employees. Sustainable businesses are also more likely to create a positive workplace, where diversity and inclusion are a strong part of the enterprise culture. Such businesses not only gain a competitive advantage in the market, but also stand strong when it comes to the employee retention and reducing the staff turnover.
Addressing market expectations
For many companies, business relationships entail being a part of the complex supply chain, purchasing materials and components and delivering them to its customers. In such situation, the expectations of purchasers towards sustainability are often translated into business requirements. Pressure on business to meet specific quality needs can often contribute to increase in sustainability communication.
The past years have also brought an increasing focus on business transparency. This aspect, together with growing awareness of environmental and social challenges, is rising expectations towards sustainability communication significantly. Quality articulation of sustainability efforts can help build trust between organisations and their stakeholders, such as customers, investors, and employees. By demonstrating a commitment to the subject and informing transparently about their actions, organisations can build credibility and enhance their reputation.
Managing business performance
Implementing the sustainability communication can also help in optimising the business performance. It encourages organisations to develop new, more sustainable processes and maintain open communication about their goals. That, as a result, contributes meaningfully to building a professional culture that sows strong commitment for the environmental and social impacts.
Setting up the goals with relation to sustainability and communicating with this regard in a systematic way is also connected with keeping more track of the enterprise performance. Routines related to data gathering and assessment can deliver valuable information to the management. The certain level of formality involved with regular sustainability communication can often results in improved use of cash, higher degree of legal compliance and offer a number of competitive advantages to the businesses.
Research supports the tangible effect of sustainability communication on business performance, i.e. voluntary carbon disclosures, has been shown to be positively related to environmental performance (Luo and Tang 2014); other studies have also found that the release of non-financial information results in less extractive activities, decrease of pollution and higher work safety, particularly when compared to organisations which are not obliged to disclose sustainability information (Christensen et al. 2017; Chen et al. 2018; Rauter 2020).
Setting up the goals with relation to sustainability and communicating with this regard in a systematic way is also connected with keeping more track of the enterprise performance.
Building up company resilience
In today’s volatile markets, it is difficult to neglect the value of the business strength and adaptability against difficult conditions. Increasing resilience to external shocks is believed to be another key reason why SMEs should be interested in CSR practices (Knudson, 2018), a study which refers to the disruptions caused during the COVID-19 pandemic as being an excellent case-in-point.
Other studies have also identified insurance-like protection effects attributed to the sustainability reports and highlight connection of consistent sustainability disclosures with better management of declines in firm value in the face of an external shock (Zahller et al. 2015; Christensen 2016; Heflin and Wallace 2017; Zhang et al. 2020) . There is no doubt that the transparency and accountability that comes together with sustainability communication can contribute positively to building up business resilience.
According to the Edelman Trust Barometer 2022, trust is declining for government and media. The business organisations remain the institutions that still retain the most of public confidence. The study shows that societal leadership is becoming a core business function.
One of the main goals of communication is always to efficiently convey the information. To fulfil this premise, the sustainability communication needs to be not only clear and correct, but also accessible to the readers. Expert often underline that achieving this requires a skilful text crafting and building narratives that will rise interest and prove enjoyable for the reader. In a world overwhelmed with information, data and opinions, there’s no shortage of techniques of how to make tell a story in a compelling way.
Yet, taking this approach too far can come with additional danger to business trust. When communicating on complex, technical issues, focusing on a story rather than mere facts can compromise the accuracy of information. The sustainability communication is increasingly surrounded by market scrutiny and subject to critical assessment of the readers. In the digital environment, where all the communication is incentivised and measured by engagement, the urge to capture reader’s attention can put the factual information on a back seat. In order to deliver trust, the sustainability communication needs to strike the right balance between accuracy and accessibility. With this equilibrium in place, it can become a real engine to establish trust with the company stakeholders.
To deliver trust, the sustainability communication needs to strike the right balance between accuracy and accessibility.
Leading towards a better future
Sustainability communication can also be leading by example. It can encourage people and other companies to take action to reduce their environmental impact and make more sustainable choices. By providing information about sustainable practices and their benefits, companies contribute to creating momentum on the market and rise expectations towards their whole ecosystems.
In the studies we analysed, many stakeholders emphasised the fact that SME owners are driven by an entrepreneurial spirit of doing something they perceive as valuable. In other words, the activities to which an SME commits itself are already somewhat imbued with an attitude of “doing the right thing”. They do it with passion and a need for self-realisation. Sustainability communication can help raise awareness about these activities and their environmental and social impacts.
The new era of sustainability communication
Communicating about sustainability is becoming a key element for multiple reasons. It can differentiate the company from its competitors, improve its reputation, engage business partners, help in managing company risks, improve business process efficiency and much more. By communicating about their sustainability initiatives and programmes, enterprises demonstrate their commitment to a more sustainable future. At the same time, the path of communicating sustainably is not free of risks and is increasingly becoming a subject of careful examination.
According to the research, improved market valuation, decision-making as well as ESG benefits are realistic only if ESG information is of high quality and credible. Greenwashing became a crucial challenge in sustainability reporting especially in voluntary disclosure settings.
In that case, can credibility and gripping communication go hand in hand? At Vadviam, we believe there is a balance to be achieved between the two. Combining our technical and narrative experience, we tackle complex topics such as sustainability, climate technologies, environmental processes or engineering issues, and create sustainability communication that is credible, responsible, intelligible, and often inspiring.
Activities to which SMEs commit themselves are often imbued with an attitude of “doing the right thing”. Sustainability communication can help raise awareness about these actions and their environmental and social impacts.
Vadviam connects knowledge of environmental matters with a passion for social progress. By combining years of experience in industrial decarbonisation with novel approaches to articulating sustainability, we help companies to enhance and communicate their performance in this field.