Are investors losing interest in companies' environmental, social, and corporate governance programs and their sustainability efforts due to ineffective communication by companies?

Several recent surveys say companies need to improve how they communicate their accomplishments in these areas if they expect to get credit for what they are doing. In fact, a study by CRD Analytics, a sustainable investment research firm, and consulting firm Brandlogic, found a widening gap between the sustainability initiatives companies are taking and how the public views these efforts.

The study reviewed 141 ESG and financial metrics measuring the performance of 100 large, global companies and compared the actual metrics with the perception of these performance measures among 2,500 respondents, including investors who claimed they were “highly attentive” to sustainability efforts. The study found that stakeholders' perception of the sustainability efforts had slipped even though the companies had achieved real gains on environmental and social goals over the past year.

It's important “for companies to find appropriate communication channels and forms of engagement to reach stakeholders and tell their stories effectively,” said James Cerruti, Brandlogic's senior partner of strategy and research.

A separate survey by public relations and marketing agency Cone Communications of a diverse group of 1,019 adult consumers found that 86 percent wanted companies they purchase goods and services from to provide more information about their corporate social responsibility programs. A full 84 percent said that companies that make public commitments about their CSR program should be held accountable for producing and communicating the results of those commitments.

Stating a purpose for CSR efforts is no longer sufficient for consumers and stakeholders, said Cone Executive Vice President Jonathan Yohannan. “Proving purpose' is the new mantra for effective CSR, he said.”

“Stakeholders play more powerful roles than ever in a brand's overall success or failure, and they must be consistently engaged in a company's CSR efforts and results from the outset,” added Cone Executive Vice President Craig Bida.

Another finding of the Cone survey is that consumers are holding companies to increasingly higher standards of responsibility and these standards are not just measured by the amount of money companies donate to or invest in socially responsible programs. Companies must also demonstrate that they operate responsibly. In other words, actions speak loader than words and donations.

Yet another survey by BSR, a sustainability advocacy group, and consulting firm GlobeScan of 550 global companies concluded that over the past 20 years transparency and reporting on sustainability progressed greatly, but knowledge about sustainability efforts has not yet changed the behavior of investors, government officials, and executives working in research and development, product design, and in other areas.

“There have been a ton of successes, but if you look at the Millennium Development Goals or the amount of carbon in the atmosphere, we going in precisely the wrong direction. We need as a community, to never mistake activity for achievement,” said BSR CEO Aaron Cramer. When respondents were asked in what areas have business provided the most leadership, 40 percent said in measuring the positive impacts of sustainability efforts, while 38 percent said responding quickly and efficiently to accidents and creating innovative products and business models designed for sustainability. Respondents felt there had been less leadership, however, on improving stakeholder engagement, working with non-governmental organizations, and increasing board and CEO involvement.

“Reporting is a very well-entrenched part of the sustainability landscape,” said Cramer. It aims to reach a diverse range of authors, and reaches a lot of important audiences, but seems to have marginal impact on investors.”  According to Cramer, this may be because investors aren't reading the sustainability reports.

“Stakeholders play more powerful roles than ever in a brand's overall success or failure, and they must be consistently engaged in a company's CSR efforts and results from the outset.”

—Craig Bida,

Executive Vice President,

Cone Communications

Rivel Research Group, which measures investor motivations and perceptions, put together a list of 11 social responsibility and sustainability insight and benchmarking tools and surveyed 115 institutional investors to determine which indexes they were aware of and which ones had the potential to influence investment decisions.

The Rivel survey found that few of the social responsibility and sustainability benchmarks made the radar screens of many buy-side analysts and even fewer are commonly used during the investment decision-making process. The benchmarking tools included the Dow Jones Sustainability Index, the Carbon Disclosure Project, FTSE4Good Index, Goldman Sachs Sustain, Ceres, and the Global Reporting Initiative. As few as 4 percent had ever used any of the eight top benchmarking tools, while less than half were even aware of them.

According to the Governance and Accountability Institute, more than 330 companies are known to have published sustainability reports in all of 2011. At this time in 2011 there were roughly 200 reports tracked and this year there are 290 as of October with more reports coming in every day. An increasing number of mega-cap companies are combining their annual financial reports with their CSR reports, but the above surveys raise serious questions about whether the sustainability reports are having any real impact on investment decision-making. So, what must companies do to effectively communicate their CSR and sustainability efforts to the investment community?

Clearly, this situation demands a comprehensive communication strategy. The mere publication of an annual sustainability report or posting it on the company's Website does not mean stakeholders and investors are going to read it, much less use it to make investment decisions. Sustainability practices must become part of the company story that senior managers use when meeting with investors and that corporate communication officers use in their communications with stakeholders.

Communication on issues such as sustainability, governance, and social responsibility must be deliberate and planned. There is plenty of evidence  that chief executives, chief financial officers, and investor relations officers are not making sustainability a part of the company story, just as they tend to avoid discussing their corporate governance practices. The excuse is that investors are not asking questions about these topics unless they see a problem with governance or they think the company is taking unacceptable risks in areas that might impact its sustainability as a long-term investment.

Why wait for the questions that indicate you are having a problem? Instead, communicate proactively that you have instituted good sustainability goals and practices. And, more importantly, describe measurements you are using and any progress toward stated goals. Consider communicating highlights using a multi-media approach—including the use of social media­—that corporate marketers are using to get to customers with great success. Yet, IROs are reluctant to use social media largely over concerns about violating Regulation Fair Disclosure, which prohibits selective disclosure of material information, even though the rule is rarely applicable when communicating information about sustainability practices.

Investors like qualitative and quantitative measures when making investment decisions. Those who are looking at the long-term value of companies need to look at what the company is doing to ensure its sustainability. Effective communication is the bedrock for achieving credit for these efforts.