- While the ‘E’ and the ‘G’ are now more or less well-defined when it comes to the public understanding of ESG, the ‘S’ has not been given the same attention.
- Our media analysis found that philanthropy and diversity are the most powerful ‘S’ reputation drivers, while companies like Netflix and Activation Blizzard were at the forefront of the debate.
- We suggest that PR and comms can help put ‘S’ on the ESG map by championing a single social principle to drive momentum and ensuring cause-brand compatibility.
You’ve probably noticed that many media outlets use ESG and sustainability in the same sentence — in some cases, you might even see them used interchangeably. For example, when we last analysed the media conversation around the financial sector, where ESG is the talk of the town, we found that green bonds – bonds specifically designed to support climate or environment-related projects – were almost synonymous with ESG as a whole.
PR pros have also made real progress in achieving a better understanding of governance standards (the ‘G’ in ESG), focusing on issues like a better representation of women on corporate boards and in executive ranks, corporate mobility for people of colour or compensation and oversight of CEOs and top executives.
But while the ‘E’ and the ‘G’ are now more or less well-defined when it comes to the public understanding of ESG, the ‘S’ has not been given the same attention. One major challenge that all stakeholders face is how complex it can be to capture the ‘S’ in ESG; how much more difficult it can be to define and quantify it than the ‘E’ and ‘G’ factors; and how far the lack of consistency and comparability in approaches risks impeding the drive towards more socially sustainable business activity and investing.
The difficulty is in part because the ‘S’ doesn’t observe measurable changes within the company itself. If the other aspects of ESG – environmental and governance risks and opportunities –are primarily concerned with a corporation’s effects on the planet or on its internal and political functions, social factors are primarily those that will arise in the relations between a company and people or institutions outside of it.
So there’s the conundrum for PR and comms teams: if you can promote your ‘E’ by reducing greenhouse emissions and your ‘G’ by increasing the percentage of women in executive ranks, how do you promote your ‘S’?
To answer this question, let’s first look at how ‘S’ stories are covered in the media.
Philanthropy and diversity – the most powerful ‘S’ reputation drivers
To see how the ‘S’ factor has been reflected in the media, we analysed 328,264 English language articles published in the period Jan’21-Mar’22.
We found that Donations was the most prominent reputation driver, responsible for twice as much media coverage as the second most prominent driver.
This goes to show that corporate philanthropy is still widely used by PR teams to demonstrate to the local community and target audiences that their company is dedicated to a certain cause. For many comms practitioners, a properly implemented philanthropy programme has robust benefits and directly impacts the bottom line. And ever since the pandemic, the media is increasingly paying attention to good corporate citizenship, since supporting a cause by contributing funds and time to the community has become the need of the hour.
In the meantime, the Gender equality driver came second in terms of media resonance, since issues like the #MeToo movement, the male-female wage gap and women’s role in the workplace have become central for many mainstream publications. In addition, many brands started to focus their marketing efforts on addressing gender diversity, as consumers’ preferences have moved more palpably towards empowerment and inclusiveness.
The Racial/ethnic inclusion driver gained particular prominence after George Floyd’s death and the growth of the Black Lives Matter movement. In this regard, consumers want the corporate world to step up and play a central role in addressing systemic racism – 60% of respondents in an Edelman survey said that brands must take a stand to publicly speak out against racial injustice and that they need to use their marketing dollars to advocate for racial equality and to educate the public on the issue. That same 60% also said that they will buy or boycott a brand based on how it responds to the current protests.
Similarly, the Sexual orientation inclusion driver is growing in prominence as the LGBTQ+ community is growing in scale and we are seeing the impact of media representation on cultural acceptance. The majority of consumers are not only comfortable seeing LGBTQ+ people in media and ads, but actually look more favourably upon brands which are LGBTQ+-inclusive, according to GLAAD and P&G’s LGBTQ+ Inclusion in Advertising & Media report. More than 90% of agencies and advertisers agree that companies can make consumers more familiar with diverse groups of people and break down social barriers through representation.
All of these media drivers are usually a result of companies’ proactive comms strategies and have a positive impact on a company’s reputation. However, the most prominent negative drivers – Human rights violations, Gender discrimination and Racial/ethnic discrimination – usually put companies in crisis management modes and have adverse reputational implications.
Netflix and Activation Blizzard in the centre, but for different reasons
To see how individual companies performed in terms of both media visibility and sentiment when it comes to ‘S’ stories, we composed a Performance matrix, presenting the top 30 players in terms of media visibility (the X-axis) and average sentiment (the Y-axis).
The company with the highest media visibility – Netflix – managed to gain a fair share of media attention due to the Sexual orientation inclusion driver. The streaming giant has for the past few years led the annual GLAAD nominations, which honour various branches of the media for their outstanding representations of the lesbian, gay, bisexual and transgender community and the issues that affect their lives.
However, this wasn’t enough for Netflix to have a good media reputation – the company’s media sentiment suffered as it was portrayed in a negative light by some Gender discrimination stories, as Georgian chess legend Nona Gaprindashvili filed a $5 million defamation suit against the company, saying her depiction in the hit TV show “The Queen’s Gambit” was “sexist and belittling.” A copy of the lawsuit with a California court accused Netflix of distorting Gaprindashvili’s achievements in the fictional series.
Netflix’ reputation also suffered from some Sexual orientation discrimination stories, as it has been urged to pull comedian Dave Chappelle’s latest stand-up show from its platform over his comments in the special around transgender people. GLAAD has accused Chappelle of delivering “anti-LGBTQ+ diatribes”, writing on Twitter: “Dave Chappelle’s brand has become synonymous with ridiculing trans people and other marginalised communities.”
The second most prominent firm in terms of media visibility was Activision Blizzard, one of the world’s largest game companies. However, the gaming giant attracted media attention for all the wrong reasons – it featured in many Gender discrimination stories as it paid $18 million to settle a sexual harassment lawsuit filed by the U.S. Equal Employment Opportunity Commission. In addition, the California Department of Fair Employment and Housing (DFEH) accused the company of having a “frat boy” workplace culture where male employees “banter about their sexual encounters, talk openly about female bodies and joke about rape.”
Microsoft and Apple also had a hard time with discrimination
Following Activation, the second most prominent tech company was Microsoft, which also featured in Gender discrimination stories as it opened an inquiry into how it responds to workplace sexual harassment, including its handling of allegations about co-founder Bill Gates. Nearly 78% of shareholders at the company’s recent annual meeting voted to demand more accountability in addressing workplace sexual harassment complaints.
In addition, the U.S. Justice Department found that the software maker demanded more information than necessary on the citizenship status of job candidates, which resulted in a number of Racial/ethnic discrimination stories. The DOJ said, in announcing a settlement with Microsoft, that between February 2018 and January 2020, the company violated federal law by asking six or more lawful permanent residents to “reverify their continuing permission to work in the United States.”
In the meantime, Apple‘s reputation took a hit from some Sexual orientation discrimination stories, as a new report said its App Store in China removed 27 apps related to the LGBTQ+ community and claimed the tech giant is ‘actively helping governments around the world’ isolate, silence and oppress people – a claim Apple vehemently denied.
Vaccine heroes Prizer and J&J didn’t get their ‘S’ straight
Amid the near-miraculous speed with which Pfizer’s coronavirus vaccine was produced and is being administered, questions have been raised not about the vaccine, but about whether governments have agreed to research that undermines citizens’ privacy rights. This resulted in some Human rights violations stories and dampened the effect of Pfizer’s positive drivers such as Donations, which included `sending medicines worth USD 70 million to India.
Fellow pharma giant Johnson & Johnson was worse in terms of sentiment, as a Black women’s advocacy group filed a lawsuit accusing it of selectively marketing the company’s talcum-based products, including Johnson’s Baby Powder, to African-American women despite knowing for years that the items had been linked to ovarian cancer.
Another pharma player – Eli Lilly – was actually the company with the worst sentiment in our sample due to the prevalence of Gender discrimination reports. A former top lobbyist for the pharmaceutical giant accused a high-ranking executive and another senior manager of engaging in sexual discrimination, harassment and retaliation against women in its Washington D.C. office.
Financial services have a good hold of ‘S’
The company with the best ‘S’ reputation came from the financial services industry. Bank of Nova Scotia was mentioned for its Gender equality initiative, designed to increase economic and professional opportunities for Scotiabank clients who identify as women or non-binary by providing access to capital and tailored solutions, specialised education, advisory services and mentorship to help them succeed on their own financial terms. The bank also made a donation of $200,000 to the Red Cross’ Ukraine Humanitarian Crisis Appeal.
Another bank to gain positive media attention with a Gender equality programme was HSBC, which structured Bangladesh’s first-ever sustainability-linked loan targeting gender equality for DBL Group, one of the largest knit garment manufacturers and exporters of Bangladesh.
Meanwhile, JPMorgan and Bank of America gained prominence with Racial/ethnic inclusion endeavours – JPMorgan announced its latest round of initiatives to support banks and credit unions that are primarily owned or directed by people of colour, while Bank of America expanded its four-year, $1 billion program to advance racial equality to five years and $1.25 billion
Companies with low ‘E’ were good with the ‘S’
It’s interesting to note that some companies that are often in the news for their environmental failings were covered in a positive light when it comes to their social work.
For example, Procter & Gamble, which is often named as being amongst the top biggest plastic polluters worldwide, has a good ‘S’ reputation for its Gender equality initiative to build, fuel and connect a pipeline of diverse female talent in advertising, media and content opportunities. Procter & Gamble is pushing its work on improving diversity in the ad industry further as it looks to ensure that its company, supply chain and advertising more accurately portray the audience it serves.
Another well-known plastic polluter, Pepsi, featured in some Racial/ethnic inclusion stories with its Black Restaurant Accelerator Program, a partnership with the National Urban League to give 500 black restaurant owners a total of $10 million over the next five years. Journalists remarked that the racial reckoning that shook the globe a few months into the pandemic made many companies, like Pepsi, realise they need to do much more to improve social and working conditions for their customers and employees of colour.
Meanwhile, Toyota, which ranks worst among global carmakers for decarbonisation, announced it will no longer donate to members of Congress who voted against certifying President Joe Biden’s 2020 election win in January.
How PR and comms can advance the ‘S’ in ESG?
The social element of ESG may be more difficult to define and quantify, but it can make a big difference to trust, confidence, inclusion and effective stakeholder engagement.
Based on our analysis, here are a few tips PR and comms can put the ‘S’ in ESG:
- Rethink corporate philanthropy. The media is more likely to cover corporate philanthropy that appears more likely to make a real difference in the social ill it aims to ameliorate. And just as political candidates receive boosts from popular figure endorsements because such endorsements make the candidate seem more credible, endorsements from recognised nonprofit organisations boost media attention to corporate philanthropic initiatives. In addition, in-kind product donations tend to attract much more media attention than cash-only donations. Because product and service donations address needs directly, their social impact is potentially more helpful than cash alone. They often are easier to observe (and photograph) making for more compelling media stories.
- A single social principle needs to be championed to drive momentum. The social component of ESG needs to undergo a similar transformation to that which has been achieved with the environmental. For example, if we take the financial services industry, the focus on climate-related financial risks is helping to drive the environmental component of sustainable finance more broadly, forcing such issues onto the balance sheet and into related financial disclosures. The social dimension of sustainable finance does not yet enjoy the same visibility and prominence. It needs a similar driver, an equivalent lead issue that could provide a sense of priority and focus and build the momentum for the ‘S’ in sustainable finance as climate change is doing for the ‘E’.
- Make ‘S’ and ‘E’ intertwine. As the ‘people’ impacts of sustainability are rising up the agenda, companies can try to tackle environmental issues while also addressing the structural inequities that mean some groups – such as women, BIPOC communities, LGBTQ+ communities and people with disabilities – are disproportionately impacted. Companies need to address the social dimension of global warming, showing that they understand that the most vulnerable people bear the brunt of climate change impacts yet contribute the least to the crisis. As the impacts of climate change mount, millions of vulnerable people face greater challenges in terms of extreme events, health effects, food security, livelihood security, water security, and cultural identity.
- Communicate your genuine motives. PR agencies designing cause marketing campaigns should carefully assess whether the brand’s genuine motives are conveyed to consumers. While brands are increasingly being asked to show responsible behaviour and commitment to social causes, consumers remain largely sceptical about the motives behind such practices. Cause PR campaigns appealing to consumers’ guilt can only be effective if these are able to communicate that the brand has genuine motives for societal welfare. Consumer inferences of ulterior motives can be pre-empted through creating advertisements with low-intensity images, language, and music aimed at insulating potential inferences about profit-driven motives of the brand and of its social efforts.
- Ensure cause-brand compatibility. Food brands, for example, appear to be perceived as highly compatible with social causes related to, for instance, fighting child hunger. In our analysis, notable examples of food brands that seem to have carefully considered their compatibility to the sponsored social cause include Kellogg’s in its commitment to providing food to people in need, also communicated in the campaign, ‘Breakfast for better days’. A key consideration for brands is to carefully select the social cause to sponsor, especially when championing controversial social causes. The 2017 Pepsi advertising campaign featuring the model Kendall Jenner advocating social unity is an example. The campaign backfired and was ‘pulled’; consumers did not directly see the brand’s compatibility with the cause and accused Pepsi of exploiting a social issue.