Capstone to Our 2021 Global ESG Survey
Extending a heartfelt thank you to all of you who attended our webinar Beyond Checking the Box: An Authentic and Strategic Approach to Incorporating ESG into Your Culture, which was the culmination of our 4-part 2021 Global ESG Survey and recent global Investor and Corporate surveys.
- Overview of the ESG Landscape (“Setting the Stage”): Notable events and key developments over the past year that have shaped the landscape as it exists today
- Primary Research on ESG: Buy side perspectives
- Corporate Perspectives and ESG Communication Practices: Including how companies are communicating their ESG journey
- Executive Summary: Best practices and recommended strategies for effectively communicating your ESG journey
Rebecca Corbin spoke with Patrick Decker, CEO of Xylem and Katherine Collins, Head of Sustainable Investing at Putnam Investments.
Insights: Corbin ESG Research
- Investor Views: n=133
- IRO Views: n=74
Expertise & Experience
- Panel Discussion
Rebecca Corbin
Founder and CEO Corbin Advisors
Patrick Decker
President and CEO Xylem NYSE: XYL
Katherine Collins
Head of Sustainable Investing Putnam Investments AUM: $7B
Click here to download Beyond Checking the Box: An Authentic and Strategic Approach to Incorporating ESG into Your Culture
Webinar Recap
Here are some of the key takeaways and themes from our engaging discussion:
Authenticity Is the Only Way
In Part 4 of our Global ESG Survey last week, we discussed how an ESG strategy that flows naturally from and is integrated into a company’s overall mission and business objectives is a powerful leadership tool. Katherine and Patrick both spoke to this, commenting that the most compelling and authentic ESG roadmap is one that is both ambitious and realistic while also being inextricably linked to the larger business strategy.
As Katherine aptly noted, “The idea that there is a cookie cutter report card that applies across the board is inherently flawed.” This means that your ESG strategy, associated metrics, and disclosure should be uniquely authentic to your sector, industry, purpose, and, most importantly, where you are on your journey today and where you aspire to be tomorrow.
“You either believe in this or you don’t. This cannot be an appendix to what you’re doing [as a company]. You have to ask, ‘How do I embed this into the culture of our company?’” – Patrick Decker
“Focus on relevant material issues, transparency, specific goals, and plans that are measurable and over time. Look at effectiveness, as in, ‘Is the plan successful and does the success actually matter.’” – Katherine Collins
ESG’s Role in Long-term Business Value
Consistent with the findings of our research, Katherine and Patrick emphasized the fundamental ties between executing an ESG approach as a pillar of overall business strategy and long-term franchise value creation for the enterprise.
Katherine observed that the collective U.S. corporate balance sheet is increasingly comprised of intangible assets and that in placing a value on those pieces of intellectual property and corporate culture inherently involves assessing the stakeholder relationships that are supported by authentic ESG delivery. She went on to emphasize the importance of clear and thoughtful corporate communication to aid investors in making more confident predictions rather than simply reporting on current or historical “static” results.
Patrick keyed in on the inherent link between having purpose around sustainability and attracting top talent.
“It’s not the rating that matters. It’s what are we doing to make sure we are making an impact. The ratings will take care of themselves. It’s a way to hold ourselves accountable.” – Patrick Decker
“The goal is to integrate ESG considerations in a fundamentally relevant way to the core investment process We are early days in terms of connecting the dots between some of the formal, structured metrics of ESG, which are helpful but really more of a starting point, and how those relate to these bigger, potentially revolutionary advances we are seeing. Most data is backwards looking and hard to put into context. So, we really do need companies to help in terms of their communications and disclosure to build that forward-looking bridge so we can analyze things appropriately.” – Katherine Collins
The Importance of an Integrated and Consistent Message
Both leaders emphasized the importance of thorough consistency in reporting across all channels, formal and informal. Not only does inconsistency demonstrate a lack of authenticity, but Katherine emphasized the growing investor toolkit to reveal such flawed reporting. Whether it is AI-enabled word recognition software tracking key references in all company communications over time or open-source satellite monitoring data of methane leaks to independently confirm emissions reporting, her team is increasingly able to detect “greenwashing”. The resulting loss of trust, not only from investors, but from other stakeholders can be difficult to recover.
Patrick touched on this theme in another important way by highlighting how Xylem ensures accountability for successful execution of these crucial ESG goals via a multi-variable measurement of key impact metrics as a material part of the compensation process, not only for the most senior executives, but increasingly deeper into company leadership.
“If I read a sustainability report or press release referencing sustainability and can’t tell what the company is when if I block out the name, that’s a danger sign. If there’s a spokesperson on sustainability and the CEO isn’t quite sure of their name, that’s a problem. ‘Is the marketing message from a company whose stock I own aligned with what I’m hearing in their investor conversations? Is that then aligned to what I’m hearing in different sustainability conversations?” – Katherine Collins
Opportunity
Patrick pointed out that initially ESG can appear to be an obligation, especially when companies think about the associated required reporting and regulation, but added, “What an opportunity to differentiate ourselves!” We agree on both views. As we detailed over the last several weeks, despite some unification of ESG reporting standards, we suspect that the reporting regime will remain complex. As leaders, however, you can use it to your advantage by embracing its necessity and leveraging the process as an opportunity to determine the metrics that are most meaningful to your company.
Continuing, an intentional, well-constructed, executed and communicated ESG strategy can lead to successful recruitment and retention efforts, as well as opportunities to build more meaningful relationships with your customers/clients as many of them are in the same boat. These strengthened stakeholder relations can reduce business volatility and deepen advantage, both of which are franchise valuation enhancing.
““If you want to get the best talent on the field and you want them leaning in and giving the extra effort, you’ve got to sign up for what we’re talking about around sustainability. It cannot be seen as a thing. It cannot be a label. It has to be authentic.” – Patrick Decker
“It’s incredible seeing the advances in the hard economy; fantastic advances in terms of actual materials – production of aluminum, production of cement, potentially revolutionarily changing both the economics and environmental intensities of those businesses.” – Katherine Collins
In Closing
We hope you derived benefit from our research-based, 4-part 2021 Global ESG Survey and associated webinar insights with two powerhouse thought leaders. We certainly enjoyed conducting the work, providing relevant insights to you, and hopefully inspiring deeper sustainability embracement.