Empty Promises and Eroded Trust: How to Avoid “Commitment Drift”
By Lauren Hilliker and Marlies Dikkers
While environmental, social and governance (ESG) considerations have long been factored into the financial assessments and strategic plans of corporations, evolving consumer expectations and the sharp increase in ESG-focused shareholder proposals have elevated the topic’s importance among consumer-facing companies. Fifty percent of consumers today say they rank sustainability as a top-five value driver (Simon-Kucher & Partners) and 76 percent say they will discontinue relations with companies that treat the environment, communities and their employees poorly (PricewaterhouseCoopers). In response, many B2C corporations have sought to make more meaningful promises to stakeholders, such as ensuring supply chain transparency, offering more sustainable products and providing fair and equal opportunities to employees.
However, commitments do not always equal results, and when that disconnect happens it diminishes stakeholder trust. According to a 2022 survey (PwC), there is now a significant gap between the trust consumers have in companies (30%) and the trust business leaders think consumers have in their organizations (87%). As a result of thisdiscrepancy, “commitment drift” – the inability of a company to fulfill its most important promises – has emerged as a new challenge: how can businesses do a better job of making promises they can keep and how can they more effectively communicate their progress to maintain, or regain, stakeholder trust?
1) Identify the most meaningful – and practical – commitments before making a public announcement.
When making corporate commitments, it’s important to remember that quality is more important than quantity. Competing interests will always exist and it is unrealistic to think that any corporation can satisfy every need of each stakeholder group. That is why leadership teams need to set goals and priorities based on what is attainable and what best matches the company’s overall strategy.
Before announcing ESG targets publicly, corporations should first analyze their growth against the desired metric to assess the feasibility of their proposed target. To ensure proper due diligence in this process, leadership should communicate across departments to check for any contradictions that could, ultimately, create distrust or raise questions among stakeholders. Remember: companies can change their viewpoints on a specific issue or initiative (because of evolving priorities, feasibility, etc.), but they should be equipped to explain that change, especially if a proposed initiative conflicts with words or actions of the past.
2) Ground each ESG announcement in the ‘why’ and ‘how.’
Once sustainability, diversity and other ESG-related targets have been approved across departments, corporations should map out internal milestones to monitor progress and ensure that each person responsible for advancing the initiative understands how their individual role ladders up to the team’s larger mission.
When it’s time to communicate these goals externally, companies should clearly communicate why each promise is being made and how the company will ensure success (i.e., what steps are being taken). The Walt Disney Company provides a good example of how to do this. In December 2022, the company published a 30-page presentation detailing its 2030 environmental goals and spotlighting the exact actions the company planned to take to meet its targets. This level of transparency helps convey to stakeholders how thoroughly each goal has been thought out and puts a concrete plan in place to achieve each objective.
3) Regularly communicate ESG progress – and across different channels.
To help stakeholders monitor progress, corporations should publish regular updates by annual report, sustainability report, earnings call or another mechanism, wherein they address stakeholder concerns, reset guidance, highlight progress or spotlight course-correcting tactics.
While we encourage corporations to share ESG updates across different channels, what is most important is that all communications be consistent year-over-year, both in timing and format. For some companies, this means issuing an annual ESG Report in the same quarter of every year, while for others, like JPMorgan Chase and Walmart, it means dedicating a section of their annual report to ESG, wherein they reiterate their ESG goals and provide stakeholders with updates on progress. By creating a predictable reporting structure, companies are better held accountable and more inclined to stay on top of their targets.
4) Take responsibility and maintain accountability.
In today’s increasingly complex social environment, corporations’ goals and progress, or lack thereof, will continue to be analyzed under a microscope and elicit public interest, as “progress” for one stakeholder group is deemed “a step backward” for another.
Whether corporations are meeting their stated goals or not, it is imperative that they not hide from the information they have. While it may seem detrimental to highlight one’s struggles, or failures, to meet certain goals, it is better than omitting information for the sake of “looking good.” It is tempting to look at the macroeconomic environment or industry trends and point to them as catalysts behind a company’s struggles, but deflecting responsibility only does more harm than good. Corporations should instead adjust their messaging and priorities to focus on the steps they’re taking to ensure future progress, rather than hyper-focusing on the root of the cause.
Regardless of any external factors, progress should never be stagnant, nor should an organization’s communications with its stakeholders. Corporations are going to continue to make commitments, but they don’t need to perpetuate “commitment drift.”
Lauren Hilliker, a Vice President at H/Advisors Abernathy, provides stakeholder engagement and reputation management counsel to corporate leadership teams and Boards of Directors on transactions, shareholder activism, crisis and governance matters. She has counseled clients on a variety of complex situations, with a focus on maximizing business continuity and protecting corporate valuations.
Marlies Dikkers, a Vice President at H/Advisors Abernathy, provides strategic communications counsel to clients across industries, including energy, technology, telecommunications, consumer goods, and financial services. Her areas of expertise include media relations, reputation management, corporate communications, crisis planning and strategic advisory, frequently working with executive teams to help them communicate most effectively with stakeholders.