Companies are increasingly aware of the importance of embracing sustainability. They’re integrating sustainability into their business model, daily activities and corporate reporting. But sustainability is a broad concept, so it can be hard for companies to translate it into practical plans to implement. Whether they want to focus on sustainability’s environmental aspect (E), social aspect (S) or good governance (G), it can be tricky to know where to start and how to communicate or report on ESG.
Meanwhile, investors as well are making their portfolios more sustainable. If a certain company is not in line with an investor’s sustainability criteria, the investor may decide to divest. This gives investors significant power to positively influence companies and urge them to become more sustainable.
But how can companies know what investors expect in terms of sustainability? That’s where dialogue comes into play. When investors engage in dialogue with companies, they can point out which sustainability weaknesses they’d like to see addressed. Sometimes, they may even give companies direct advice on how to become more sustainable, and help companies define clear targets and follow-up goals.
This kind of dialogue is mutually beneficial. On the one hand, companies gain insight into investors’ expectations and find out what practical steps to take. On the other hand, investors end up with a more interesting investment portfolio, and can give specific information to their clients on their sustainability efforts and results.