A guide to the benefits and how to get started
More and more companies see sustainability issues as being fundamental to the success of their business. But a recent Accenture/UN Global Compact survey of more than 100 investors and 1,000 corporate CEOs finds that, although 88 percent of investors see sustainability as a route to competitive advantage, companies are not communicating this effectively. So what can we do to improve the communication?
The Prince’s Accounting for Sustainability Project
The Prince’s Accounting for Sustainability Project (A4S) was established by HRH the Prince of Wales in 2004 to convene senior leaders in the finance, accounting and investor communities in order to catalyze a fundamental shift toward resilient business models and a sustainable economy.
The A4S Chief Financial Officer Leadership Network was launched in December 2013, bringing together a group of leading CFOs from large European businesses seeking to embed the management of environmental and social issues into business processes and strategy.
A practical guide for IR teams to engage on the drivers of sustainable value
For the CFO Leadership Network, a sustainable business is one that delivers financial returns in the short and long term in a way that generates positive value for society and operates within environmental constraints. The network has published a guide to assist investor relations teams as they seek to engage investors on the link between sustainable business models and the creation of shareholder value. If you communicate that sustainability matters to your business, many of your investors will also understand that it is good for business.
The guide covers overarching principles for communicating with investors on sustainability and offers practical ideas that are quick and easy to implement, such as incorporating sustainability information into investor presentations, as well as some that may take more time, such as moving away from quarterly reporting of financial results. It is based on interviews and advice from a wide range of market participants and offers insights into some of the network members’ experiences of successes and pitfalls.
Prerequisites: what needs to be in place first to convince investors that sustainability matters?
Before launching into investor communications on sustainability, think about how integrated it really is into how your business is run. The IR team won’t be able to put these prerequisites in place, but it can work with the CFO and others in the company to make sure steps are taken, and investors are engaged in that process. Once you have started to put the fundamentals in place, you can develop the narrative for investors and begin to share it with them.
There are a number of areas that provide a clear signal in terms of how serious you are – and are definite giveaways if sustainability is not a core part of how the business is run. Key questions to ask yourself when considering how integrated sustainability is into your business include:
• How sustainable is your business model?
• Do you have an integrated strategy?
• Is sustainability integrated into your governance arrangements?
• How is it reflected in remuneration?
• What targets and performance measures do you use for regular management and external reporting?
Overarching principles on communicating with investors on sustainability
The basic rules for communicating on sustainability are the same as those for any communication with investors. While the time horizon can be longer than some companies typically discuss with the markets and it can be harder to demonstrate the link between investment and return, the same can be said of investment in talent and in building strong brands, so this should not be seen as an entirely new challenge.
The fact that we were not able to find many companies whose investors believe they are already doing it well, however, shows we still have a long way to go. We have developed a set of overarching principles that could help how you communicate and interact with your investors:
1. Link to strategy: build communications around the long-term corporate strategy
2. Provide context: quantify external drivers
3. Have a long-term focus: put short-term results in the context of long-term goals
4. Adopt a commercial tone: link sustainability to revenue growth, cost reduction, risk management or retention of key people
5. Integrate: integrate sustainability throughout all communications, not as a stand-alone section
6. Be consistent: be consistent year on year and across different communications
7. Use standards: use recognized standards to report sustainability performance and get external assurance for the key metrics.
So how do you apply the principles to IR activities?
The guide contains examples and case studies for practical application broken down into the following areas: people, digital, presentations and reports, quarterly updates and analyst calls, and IR strategy and operations.
You can download the guide and those for the other 2014 network projects (capital expenditure appraisal, natural and social capital accounting and uncertainty and risk) from www.accountingforsustainability.org/cfos/network-of-chief-financial-officers/a4s-cfo-leadership-network-activities.
Network members would value feedback on these guides, so please send any comments to: [email protected].
CFO Leadership Network investor project team: Marion Cazenave (Danone), Charlotte Cowley (Burberry), Kellie Herman (Sainsbury’s), Dave Huizing (DSM), Marleen Janssen Groesbeek (DSM), Laura Palmeiro (Danone), Majda Rainer (Marks and Spencer), Roger Seabrook (Unilever).
Charlotte Cowley is director of IR at Burberry
