Why brands should stay committed to clear communication

More companies are scaling back their climate change commitments at a time when the new Trump administration is withdrawing from the Paris agreement and casting doubt on ESG requirements and sustainability commitments – as well as issued Executive Orders to increase coal-fired power and oil exploration. In March, the FT reported that more than 200 US companies had removed DEI initiatives from their annual reports. This has drawn criticism from activists who believe that companies are following political trends rather than sticking to principles. While some businesses have taken the opportunity to realign their commitments, citing a variety of reasons – ranging from initially setting over ambitious targets to increased shareholder pressure driven by lower returns – many have failed to communicate their positions.

This has led to very public misunderstandings, jumped on by both anti-ESG campaigners, who claim another victory in their quest, and climate activists, who rally against companies for dropping commitments.

It is important to communicate openly and transparently as groups on opposing sides of the argument are quick to spin soundbites for their own gain. So, how can a brand navigate complex issues like ESG, while staying clear and transparent?

Financial institutions’ commitments to environmental goals appeared to take a step back in January when Blackrock followed the six largest US banks by pulling out of net zero industry coalition groups, raising concerns that more companies are scaling back their climate change commitments.

The departures from the Net Zero Asset Managers initiative (NZAM), an environmentally focused investor group, and the Net Zero Banking Alliance (NZBA), a UN-backed collective of global banks, have been attributed to the new Trump presidency and pressure from Republican politicians, but closer analysis paints a different picture.

Rather than pulling back from climate commitments, Blackrock told clients that its sustainable-investment efforts are "driven by the needs of our clients and our continued investment conviction that the energy transition is a mega force shaping economies and markets", adding that its portfolio managers "continue to assess material climate-related risks". However, it did cite confusion over its membership and subsequent legal inquiries from public officials as a reason for its departure. NZAM has since committed to reviewing its activities due to “recent developments in the US and different regulatory and client expectations in investors’ respective jurisdictions”.

In January JP Morgan joined Morgan Stanley, Bank of America, Citigroup, Wells Fargo and Goldman Sachs in withdrawing from NZBA. While climate groups suggested this was due to pressure from the new US government the decisions seem to be due to dissatisfaction with the organization rather than waning climate commitments. All six banks restated their commitment to sustainability goals, including reaching net zero by 2050.

The announcement’s timing attracted media attention and the ire of climate activists who have blamed the moves on anti-ESG sentiment among US Republicans, with Reclaim Finance saying “US financial institutions have faced threats from right-wing politicians and pundits over the past couple of years for their membership of net zero alliances”.

The anti-ESG narrative has been reinforced by companies across the corporate world rolling back their commitments over the last 18 months, largely due to being unable to meet ambitious pledges: Shell and BP said rising oil prices were the reason for reducing their commitments to lower carbon emissions; Coca-Cola and Nestle deferred on reducing virgin plastic use after failing to meet previous targets; and Crocs postponed its net zero carbon emissions targets from 2030 to 2040.

Attention grabbing headlines can give the impression there is a full-scale weakening of commitments, but they can obscure the nuanced changes companies are making. Many are simply reducing targets, extending deadlines, or scaling back pledges rather than abandoning ESG goals completely, but some media and opposing activist groups have used these changes to support their own agenda.

This means that ESG is still a potent force. Some business leaders believe the realignment of climate priorities is a transitional phase and new sustainability goals will be integrated more deeply “into business operations, product development and marketing” and focused on delivering sustainability performance as opposed to making unrealistic pledges.

ESG is just one part of a solution to a high-complexity problem. There are no “easy wins” or “low hanging fruit” here. But the current media landscape does not process complexity at all. When a brand shifts on its commitments, it dances on a razors edge. This is why clarity is key. You can pivot or change plans, especially in the face of complexity. But your message must retain its clarity and commitment to purpose. Otherwise, groups on either side of an argument can throw you into a very public minefield.

Don’t become part of someone else’s agenda – the current culture war around issues such as net zero, ESG and DEI show how easy it is for business decisions to be (intentionally or otherwise) co-opted by activists and pundits to build a narrative that suits their agenda – be vigilant to such risks when making and communicating decisions and strategies.

Be open and transparent about any changes – communicate the reasons for any change so people are clear on what is happening and why. This means changes are less likely to be misinterpreted or miscommunicated. Clearly explaining the rationale behind any changes will help maintain stakeholder confidence and help them understand your revised strategy.

Show real achievements to build trust – commitments should be backed up by actions. Address this through evidence-based communications that substantiate any claims or initiatives.

Be authentic and share good news and bad – don’t only share positive developments, let stakeholders know which areas or goals are harder to reach and provide a clear course of action that you are taking to address this.