Good morning.
Do you still use the term ESG?
In a panel session on Wednesday during the Fortune Impact Initiative conference in Atlanta, executives shared whether they use the term ESG (environmental, social, governance) in communications, including on corporate websites. And it's definitely a fine line.
“Institutional investors have said to us, ‘Please, on your website, can you have an ESG microsite so we know where to go? Don't call it something weird that we don't know what that is. We need to know where to go to get the data that we need for our own governance,’” Kathleen McLaughlin, EVP and chief sustainability officer at Walmart Inc. said. “We use it where it's useful. The trouble with the term is it's become a boogeyman. It means a lot of different things to different people.”
“Very similar, we have a section [on our website] where you can find ESG and it will then link you to the way we share our views,” said Roger Martella, chief sustainability officer at General Electric. “We cover the topics that are part of ESG, but we don’t really use those silos internally," he said.
“If you were walking down the street and asked people about ESG, a lot of people wouldn't recognize that,” said Ann Tracy, chief sustainability officer at Colgate-Palmolive. “But it is more a term used by investors and even by our board. We prefer to call it sustainability and social impact.” Tracy added, “But the website point is really important because a lot of these surveys and aggregate reports that we have no control of have the chatbots out there going out and grabbing stuff. They're looking for specific terminology to get accurate data to pull on your company.”
ESG reporting standardization
Another panel discussion during Fortune’s conference discussed the future of ESG reporting. The US and EU are both heading toward tougher regulations on ESG disclosure and standardization.
"There are some discussions around whether we'll have conflicting requests," said Marissa McGowan, chief sustainability officer for North America at L’Oréal, which is headquartered in France. "Reporting under the SEC has certain requirements and things that come along with it, and then Europe is trying to push us to report a little bit more." However, the most progressive companies have been "moving in this direction for a long time," she said.
From McGowan's perspective, reporting in the future needs standardization both at the metrics level and at the interpretation level, she said.
If standardization comes to fruition, it will be the International Sustainability Standards Board (ISSB) leading the way, said Lindsey Hall, head of ESG thought leadership, S&P Global Sustainable1, a source for sustainability intelligence from S&P Global.
“I do think the ISSB, absolutely, is crucial, particularly for that business-focused sustainability reporting and tying it to the language of financial reporting,” said Emily Pierce, chief global policy officer and associate general counsel at Persefoni, a software company that provides a climate management and accounting platform. "I also think GHG Protocol, which is the core protocol for measuring emissions, including scope three. It includes a lot of guidance around different assumptions and methodologies."
And we're expecting the U.S. Securities and Exchange Commission’s climate disclosure rule any day now. “The SEC is really thinking in a very detailed and thorough way about the feedback they've received,” said Pierce, a former assistant director at the SEC. “But I do think it is important to bear in mind that the majority of SEC rules do take 12 to 24 months to move forward.”
Sheryl Estrada
sheryl.estrada@fortune.com
