What text analysis of companies’ ESG reports tells us about sustainability
When you hear the word sustainability, what do you think of? Chances are you picture the environment – or being green.
While this is a key part of sustainability, it isn’t the only component.
Sustainability also encompasses social, financial and governance aspects. For example, ensuring security and no exploitation in supply chains should be part of an organization’s sustainability strategy, despite not being directly connected to the environment.
Given this complete definition, one way of assessing business sustainability is through their ESG (environment, social, governance) reporting. These strategic documents offer more than just a guide for investors, they’re a window into how companies view sustainability. They contain interesting nuggets – if you have the tools to find them.
To coincide with COP27, Relative Insight worked with The Sustainability Group (TSG) to uncover more about companies’ attitudes to sustainability. Combining our text analysis software with the FuturePlus Indicators – unique measures of business sustainability – we surfaced intriguing insights from a variety of sources to analyze just how sustainable firms are.
We created a report using these insights – here are just some of the findings contained within it.
Smaller companies are proud of sustainability measures, but don’t lead
One of the report’s key areas of comparison were differences in ESG reports from large, listed companies and smaller, non-listed companies. We wanted to find out how words and language differed for companies mandated to produce ESG reports versus those creating them voluntarily.
Our analysis, which incorporated over one million words, found that smaller companies took pride in their sustainability initiatives. They were 13.7x more likely than their larger counterparts to use words related to ‘pride’. This chimes with the fact that they’re choosing to publish their sustainability initiatives, meaning they have something to shout about.
“We proudly align to the ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption.”
However, despite being best placed to lead on sustainability due to their agility, smaller businesses don’t see themselves as leaders on the issue. Larger businesses were more likely to discuss ‘leadership’ in their ESG reports, using the word 1.8x more than non-listed firms.
“We will reinforce the approach set out in our strategy, such as our focus on sustainable forests and human rights and labour relations and food waste and other areas that offer opportunities for us to demonstrate bold action and leadership.”
With smaller businesses often more innovative when it comes to setting out sustainability standards, our analysis suggests that these firms should be more assertive in highlighting that they’re taking the lead.
Disconnect between businesses and the public
We also examined the differences between the language businesses and the public use when discussing sustainability. Using a social listening tool, we took one year’s worth of tweets related to sustainability and compared them to ESG reports from companies of all sizes.
There were several areas of disconnect between the two. The general public used words and phrases which created a sense of urgency, such as ‘climate crisis’ (24.x more likely) and ‘huge impact’ (36.3x more likely).
“You really want to help? Declare a stop on all new fossil fuel projects and invest in renewables. You’ve known about climate change for decades but have put profit ahead of people and planet.”
Companies need to be aware that the public want to see change come rapidly rather than incrementally – they’re demanding businesses take significant action now. Whether this is realistic or not, firms looking to present themselves as sustainable must demonstrate what they’re doing right now to earn this label.
Additionally, our analysis found that the public have become extremely savvy at identifying attempts at greenwashing. They’re aware of companies’ overall contribution to the world around us and consider their holistic impact, rather than being swayed by one-off campaigns.
The public are also unafraid to name and shame brands which are inauthentically adopting sustainability initiatives in an attempt to attract consumers looking to spend sustainably. This means businesses need to ensure they follow through on pledges – and that these initiatives will make a tangible difference.
Find out more in the report
Given this environment, businesses need as much information as possible to ensure they’re taking the right steps to improve sustainability. Companies must demonstrate to both the public and investors they’re committed to sustainability and follow authentic strategies – not cynical attempts to mislead.
You can read the complete findings of our joint research with The Sustainability Group – Analyzing ESG: revealing differing attitudes to sustainability through how we talk.