Low Hanging Fruit: Positive non-financial stories are easy pickings

Regularly reporting your company’s non-financial performance and successes in areas such as community engagement, environmental stewardship and corporate responsibility provides an opportunity for positive messages to complement your financial reporting, as well as marketing opportunities to audiences beyond the financial markets. However, many smaller companies fail to effectively integrate non-financial reporting into their overall communication strategy. Why?

Keeping up with the latest fads and fashion related to the reporting on issues of sustainability, Environmental/Social/Governance (ESG), Corporate Social Responsibility (CSR), “Triple Bottom Line” – call it what you will – can be confusing. In addition to the myriad of terms that have been leant to reporting on non-financial performance, are the growing multitude of guidelines and parameters that businesses can use to inform their reporting requirements, from the Global Reporting Initiative (GRI) and the Millennium Development Goals, to different industries’ sustainable development frameworks.

Is it no wonder that for smaller companies with limited resources and time, making decisions regarding the reporting of non-financial performance can be overwhelming.

 

Being a responsible corporate citizen

Most companies are responsible corporate citizens. They have come to the realisation that non-financial performance is as much of an indication of efficient and effective business practice, prudent risk management and sustainable future growth, as positive indicators in the financial statements. Companies invest considerable resources into the communities in which they operate, pursue operational energy efficiencies to neutralise carbon footprints and to lower costs, and monitor supply chains to ensure products and services are not sourced from companies that disregard the safety and human rights of their employees.

I clearly remember establishing regular sustainability reporting as an in-house executive and being faced with scepticism from staff, who considered it an inefficient use of time and resources. The common response was “we do this as a normal part of our business, as does everyone else, why the need to catalogue and report it?” A major challenge in establishing a regular reporting regime for non-financial performance is the timely extraction of information and data from around the business. In my experience, no one was sharing the “softer” achievements resulting from community engagement or environmental stewardship across the organisation, let alone to external audiences.

 

Consider your audience

Having established channels to share and collate this information, the next challenge was tailoring the external messaging to suit target audiences. The “launch” roadshow to promote the inaugural sustainability report to receptive sell-side analysts and buy-side investors (some of whom were specialist ESG analysts employed at larger international, bulge bracket institutions) was well received. However, the following years elicited minimal interest from financial market participants.

It became apparent that financial market participants had offloaded assessment of the company’s non-financial performance to advisors such as Regnan and the Australian Council of Superannuation Investors (ACSI), as well as proxy advisors such as CGI Glass Lewis. These organisations became the primary source of feedback regarding annual non-financial reporting. The most pertinent advice was the need for year-to-year consistency of data (current and historical) in an easily accessible and digestible format.

However, the audiences where non-financial reporting gained the most beneficial traction was with existing and potential joint venture (JV) partners and governments (both national and local) in the regions where the company already operated and into which the company was looking to expand. These parties naturally assumed the company was financially successful, and were more interested in assessing non-financial factors and how an association with the company would impact on their own reputations. Non-financial reporting also assisted in raising the company’s profile and reputation in recently entered regions because local media were more interested in the “softer” issues, which resonated with their readerships more than quoting a raft of financial figures.

Non-financial reporting became a real and effective marketing tool – particularly important for a smaller company looking to gain the confidence of larger potential JV partners, governments and local communities, in order to grow the business and build shareholder value.

 

Personalise your story

What works particularly well when messaging non-financial performance is to provide real examples of your company’s successes through brief editorial-styled stories. These short exposés can appear in prominent positions on your company website or throughout printed reports. Personalising success through profiling specific individuals, communities or assets is an important aspect of engaging your audience – have you assisted a local school? Interview the principal; have you improved employee efficiency? Profile the most improved; have you achieved improved environmental performance? Seek comment from a local activist. Developing a series of videos (each no longer than three minutes) that address these successes and appear on the website is a particularly engaging way of communicating your company’s successes.

Effectively communicating your company’s non-financial performance should also be a crucial element of any crisis communication plan. When an adverse event does occur, instantly providing documented evidence of your company’s historical efforts and successes can potentially salve the extent of critical coverage and assist in conveying the message that a repeat of such an event is unlikely rather than to be expected.

So consider this: if your company has positive stories to tell around non-financial performance, are you communicating these effectively? As a first step, identify proof points that demonstrate your company’s successful efforts and performance in non-financial activities and incorporate these into your regular key messages: bring your company’s values and vision to life. There are as many people interested in the new school you have assisted to build in the local community or the initiatives you have taken to ensure your suppliers do not employ child labour, as there are in your company’s EPS, tangible assets and gearing ratio.

 

Matthew Gerber is a Director in the Citadel-MAGNUS Sydney office, following a multi-faceted career as a senior in-house corporate affairs and investor relations executive with ASX200 listed companies, a political and security risk advisor in Asia, a junior diplomat and an equity analyst. Matthew is participating in the upcoming ‘Investing in Responsibility’ conference to be held at CSFB’s Sydney offices on 15 May and will be moderating a panel discussion on ‘Effective Investor Communications on ESG’.