The role of ESG in corporate purpose
Storytelling is even more important today as ESG analysts seek to understand the merits of a company
It is inevitable that any company updating its corporate strategy will seek to embed an ESG strategy but, as Reckitt’s head of corporate affairs and sustainability Miguel Veiga Pestana points out, such a move can be value creating, which provides another proof point for corporate affairs directors.
He explains: ‘That’s a very important conversation for me to have as head of corporate affairs and sustainability with my CEO and CFO, because it’s about driving the future growth of the business. We are not just a cost centre.’
Veiga Pestana predicts that, within the next two or three years, more than one quarter of shares in the UK will be traded against some kind of ESG measure, such as the Sustainalytics and MSCI indices. ‘They’re the ones that investors like BlackRock told everybody that they’re using, so everyone is paying attention. But what drives those scores?’ he asks.
‘ESG analysts are making quite subjective decisions. Often, that’s being driven by what they read… so, we get back to what is the role of communications in all this? It’s story telling. It’s about transparency.’
Scores are also influenced by actions. ‘I specifically asked to do the job of both corporate affairs and sustainability because, for me, your corporate narrative and the story that you tell of the business is absolutely intrinsically linked with your footprint and your impact on the world. If you’re not living up to that, however good I may be as a storyteller, it will fall on fallow ground.’
Veiga Pestana believes that the two roles are ‘very much two sides of the same coin’.
He adds: ‘In fulfilling my role, I am there to help inspire people inside and outside. We are change agents because we are trying to embed sustainability within our core business. But it is also about recognising that, in order to achieve all these outcomes, you have to be clear and choiceful about where you play.
‘If you’re a truly purposeful company, you should see your ESG performance improve but you have to have a strategy because it’s not a given. And you can’t deliver on your E and your S if you haven’t got the right governance and operating framework – the right guard rails to safeguard and de-risk your business.
‘It’s the old chicken and egg. What comes first? ESG and purpose? Or purpose and ESG? In some ways, it doesn’t matter. If the motivator is that you want to get your ESG scores up, and that’s your route into purpose, I’m fine with that.’
Reckitt has embarked on its transformational journey, and Veiga Pestana is now looking at how to deliver value that can be quantifiably measured. This means considering the impact on investors, driving innovation, attracting the future talent pool and the entire employee value proposition.
‘These are the conversations I am having with my CEO as well as colleagues on the executive,’ he says. ‘The communications piece is the thing that amplifies it all.’