Companies are increasingly expected to show the positive impact they are having on the world, often through linking their activities to the UN SDGs. To find out more, Sarah Welsh speaks to European companies at the forefront of reporting on their environmental and social impact
Long gone are the days when ESG activity received a token mention in shareholder communications. Telling a company’s ESG story is now a critical part of the IR function as shareholders increasingly want to understand the positive impact of their investments and the pledges companies are making toward progressive actions.
In a complex landscape of fragmented ESG aims and commitments, there’s currently little in terms of relatable ambitions investors can benchmark activity against.
This is why the United Nations’ Sustainable Development Goals (UN SDGs) have been adopted by many companies seeking to report on their ESG impact, linking their activity to a set of common goals that are increasingly understood – and used – across the globe.
Consisting of 17 interconnected goals, the UN SDGs are a global call to action to address poverty, injustice and inequality, as well as tackle climate change, with a single vision ‘to achieve a better and more sustainable future for all’.
Formed in 2015 by the UN General Assembly, the UN SDGs are intended to be achieved by 2030, and are included in UN General Assembly Resolution 70/1 (2015), the 2030 Agenda for Sustainable Development, more commonly known as the 2030 Agenda.
Ignacio Cuenca, Iberdrola
Impact reporting in action Ignacio Cuenca is director of investor relations and communications at utilities multinational Iberdrola.
Speaking about his company's impact reporting, he comments: ‘Iberdrola satisfies the growing demand by society in general – and shareholders and investors in particular – for companies to provide a detailed report of their non-financial performance in the ESG field, with the understanding that good performance in these areas is an essential factor for long-term success.
‘At Iberdrola, we incorporated the 2030 Agenda into our business strategy and governance and sustainability systems. We are committed to strong business leadership, which is vital for achieving the radical and necessary transformation the UN SDGs require.’
Every year, Iberdrola publishes its sustainability report, highlighting the company’s performance in the area of sustainability, with relevant information on the social dividend provided by the group and on its contribution to the UN SDGs. In addition, it publishes an interactive online report covering ESG matters, as well as including its ESG performance within its quarterly reports and annual integrated report.
In a testament to its reporting success, Iberdrola was the only Spanish company in the world ranking of the 100 best integrated reports in 2021, according to the League of American Communications Professionals. The organization, which assessed nearly 1,000 annual reports from different companies in more than a dozen countries around the world, awarded Iberdrola its platinum award with a score of 99 out of 100, considering it one of the best in Europe.
‘The appetite for investors to hear about the positive ESG work we are doing is something the market is increasingly asking for, and even requesting as a must,’ says Cuenca. ‘At Iberdrola, we listen to our shareholders and have responded to their demands by providing clear, detailed and updated information.’
The appetite for investors to hear about the positive ESG work we are doing is something the market is increasingly asking for, and even requesting as a must
Lauren Swales, AstraZeneca
Highlighting specific goals Global biopharmaceutical company AstraZeneca evaluates its contribution to the SDGs by connecting them to its targets, annual progress, material focus areas and future strategic direction. Its 2021 sustainability report directly links its business activities to nine SDGs, including SDG 3 – good health and wellbeing, SDG 6 – clean water and sanitation and SDG 15 – life on land.
It provides transparency on its ESG approach and progress in a number of ways, including a sustainability section within its quarterly results, issuing annual sustainability reports and sustainability data summaries, broadcasting fireside topical discussions with its chair and senior executives and hosting an annual ESG roadshow to meet with shareholders.
‘We recently published our annual sustainability report, which was followed by our annual roadshow,’ says Lauren Swales, director of investor relations at AstraZeneca. ‘The roadshow provided a great platform for feedback, not only on our materials but also what topics shareholders were most focused on. We received positive feedback via the brokers, where investors were pleased with the transparency of materials and access to senior sustainability team members.’
Marking its third annual report dedicated to the SDGs, global energy company Repsol has recently published its SDG 2021 report, which covers numerous indicators, projects and testimonials showing its contribution at global and local levels.
Leticia Padura, Repsol
‘Repsol has supported the 2030 Agenda since its approval in 2015, and works to implement it at all organizational and business levels,’ explains Leticia Padura, the company's ESG manager.
‘As an energy company, our main efforts focus on SDGs 7, 8 and 13, due to their relationship with access to energy and contribution to social and economic development, and to combat climate change; SDGs 6, 9 and 12, prioritizing innovation, sustainable management and efficient use of resources in our operations; and SDG 17, establishing partnerships with other stakeholders and actively participating in industry associations.’
Dedicated events Last year, Repsol held the oil and gas industry’s first ever ‘low-carbon day’, showcasing the company’s updated decarbonization goals. The event focused on innovation, progress and the latest targets, with more than 180 analysts and investors following the live broadcast and a further 263 post-event replays.
‘The event was held at our technology lab, a cutting-edge private R&D facility in Spain, and was highly praised by investors for the depth and breadth of the information provided,’ recalls Padura. ‘It has already been recognized as best practice in the market, becoming a milestone in Repsol’s award-winning ESG communication strategy, an evolved concept from previous sustainability days we held from 2014 to 2019.
‘The day helped galvanize the presence of ESG-oriented investors in Repsol’s shareholder base which, two months after the event, reached 39.9 percent of all shares managed by institutional investors – the second-highest percentage among our European peers. This KPI serves as a proxy for investor support for Repsol’s long-term strategy.’
To ensure its ESG actions are hitting the right notes, AstraZeneca proactively seeks the opinions of stakeholders through dedicated feedback activity, Swales explains.
‘The feedback we have received from investors is that our level of disclosure and transparency strikes the right balance,' she says. '[But] sustainability is an evolving topic, so to address this we continue to review key stakeholders’ areas of focus, being guided by our materiality assessment – the most recent of which was in 2021.
‘The process involves inviting internal and external stakeholders to contribute their views and help us to prioritize. The most recent assessment led to a broadening of the scope of nine material focus areas where we could make the most impact, each with its own targets and commitments.
‘Our reporting will evolve to align with outcomes of the materiality assessment feedback from key stakeholders, as well as ensuring we meet upcoming regulatory requirements.’
Nobody can deny that ESG topics are considered by investors as a top discussion priority now
Hot topics So what are investors keen to hear about? According to Padura, investors are digging deeper than ever before to hear about impact as well as action when it comes to ESG.
‘Nobody can deny that ESG topics are considered by investors as a top discussion priority now,’ she says. ‘The commitment to supply clean and affordable energy and deliver a cost-efficient energy transition along with the decarbonization of the sector is key.
‘Investors are increasingly starting to focus on measuring impact and, in this regard, during the last year we have noticed how investor dialogue on ESG has deepened on a wide range of topics, from climate and regulatory issues to human rights and biodiversity, among others.’
For AstraZeneca, the spotlight has understandably focused on its vaccine work. ‘We have seen significant shareholder engagement on our environmental impact as well as our access initiatives’ says Swales. ‘In particular, our Covid-19 vaccine has been a key topic for shareholders with its development and supply putting broad and equitable access at the heart of our pandemic response. Together with our global partners, we supplied 2.6 bn vaccine doses to more than 180 countries in 2021. Of these, around two thirds went to low and lower-middle-income countries.’
There’s no getting away from the impact of Covid on companies of all shapes and sizes, and this impact will continue to shape ESG activity and reporting in the future, Swales adds.
Sustainability is an evolving topic, so to address this we continue to review key stakeholders’ areas of focus
‘ESG has emerged as a dominant theme for the new decade,’ she points out. ‘The climate crisis has become ever more apparent and the pandemic has highlighted the chronic fragilities of the world’s health systems, economies and societies. Both of these issues have raised critical awareness of the importance of sustainability.’
In line with this changing landscape, AstraZeneca’s communication with shareholders has evolved significantly in order to meet the demand and interest in ESG.
‘Over the past two years the pandemic has shone a light onto sustainability issues and there is now a heightened sense of awareness and urgency to combat climate change and social inequality, and key stakeholders are keen to learn more about our approach in addressing these,’ says Swales. ‘We now have a more formal agenda for interactions with stakeholders, such as annual roadshows and fireside discussions, as well as a commitment to attend ESG conferences where appropriate.’
The pandemic has also further strengthened Iberdrola’s focus on ESG. ‘We are firmly convinced that the recovery of the economy and employment after Covid-19 can only be green’ says Cuenca. ‘In this regard, we are advocates for promoting the transition toward a new socioeconomic model that is climate-neutral, resilient, sustainable and inclusive. For this reason – and in line with our activity – we are focusing mainly on SDG 7 (affordable and clean energy) and SDG 13 (climate action).’
The United Nations’ Sustainable Development Goals have been adopted by many companies seeking to report on their ESG impact
Looking to the future The 2030 Agenda has undoubtedly provided a framework of goals for companies to align their activities with, and promote their successes against, but change is on the way.
Established at COP26, the International Sustainability Standards Board is developing a comprehensive global baseline of sustainability disclosures for the capital markets. Consultation has already been launched on its first two proposed standards: one for general sustainability-related disclosure requirements and the other for climate-related disclosure requirements.
‘We welcome the recent steps taken by the IFRS working group to consolidate various reporting frameworks such as SASB and the Climate Disclosure Standards Board,’ says Padura. ‘The idea of consolidating the many existing ESG reporting frameworks and aligning them to the TCFD recommendations makes a lot of sense and should help companies communicate more effectively.’
Cuenca, however, points out that while upcoming regulatory changes will strengthen commitments, they will also change the reporting balance – and come at a financial cost.
‘The metrics within these standards should be clearly and deeply defined,’ he notes. ‘If approved, the costs borne by a company will dramatically increase, while the reporting requirements for non-financial information, in comparison with financial information, will be elevated.’
