A Case for Unified Control of ESG and Sustainability Claims for Advertising and Investor Communications


How are ESG and sustainability claims used for marketing purposes connected to similar claims used for investor reporting purposes at your company? If your answer is that they are siloed and not drawn from a single source of truth, you’re certainly not alone. But it’s time to reconsider your approach.

Where Companies Use ESG and Sustainability Claims

There are two distinct areas in which ESG and sustainability claims are used by companies.  

The first is in the context of advertising and product claims. These Claims are an essential part of how a company communicates ESG priorities and progress against various targets to consumers - whether about the company itself, its brands, or the products it sells. I’ve written several other blogs and articles on this general topic.

The second area is investor communications. Whether required by regulatory mandate or as part of voluntary reporting, the same or similar claims can be part of annual reports, ESG reports, PR or other forms of investor focused communications.

The urgency around establishing a single source of truth for all ESG and sustainability claims is only increasing. This is being driven by increasing regulatory pressure from both stock exchange authorities, as well as consumer advertising oversight authorities.

Tightening Investor Claims Regulation in the EU and US

Both the European Securities & Markets Authority (ESMA) and the US Securities & Exchange Commission (SEC) are increasing regulatory requirements for ESG reporting. As the EU seeks to solidify the promise of the European Green Deal, ESMA is aggressively pursuing its sustainable finance initiative, and through the Corporate Sustainability Reporting Directive (CSRD) has recently expanded broad reporting requirements to include many more companies within the EU as well as companies outside the EU based on various requirements related to EU derived revenue and subsidiaries. For a good summary of the implications of these new requirements for US companies, see this recent article in the National Law Review.

Although the US SEC is certainly lagging behind the EU/ESMA in terms of mandatory reporting requirements for listed companies, the SEC too has recently announced plans around mandatory reporting. This past March, the SEC released its proposed rule for the Enhancement and Standardization of Climate-Related Disclosures for Investors. This proposed rule would phase in mandatory climate risk reporting as well as GHG emissions reporting as part of annual financial reports for all companies trading on US exchanges regardless of country of incorporation.

More Critical Regulator Focus on ESG Consumer Claims

At the same time that investor reporting requirements around ESG and sustainability are increasing and oversight becoming more stringent, the same trend is playing out in consumer advertising.  

The EU Green Deal has increased focus on ESG and sustainability claims in an effort to combat the greenwashing that has become rampant. An EU sweep of online ‘green’ claims found that 42% were likely to be false or misleading. EU member countries are also undertaking their own efforts to clamp down on greenwashing and ensure adequate substantiation for green claims. The French Climate and Resilience Law (summarized well by JD Supra) is a good example of this, with very rigorous standards for substantiation of any sort of carbon neutral claim, explicit or implied.

The US is following a similar path, though predictably behind the EU. The US Federal Trade Commission (FTC) is soon to be releasing updated Green Guides to establish guidelines for various sorts of environmental claims. And similar to Europe, many US states are taking matters into their own hands, with California being the poster child. Last year, California enacted strict regulations around a variety of green claims (recyclable, biodegradable, etc) covering virtually all consumer products. Given California’s size, these regulations have effectively become de facto national standards.

The Investor and Consumer Realms are Merging

If the imperative to maintain a single source of truth is not compelling based on the growing importance of ESG and sustainability claims and increasing regulation within investor and consumer communications, perhaps evidence of these two worlds merging may tip the balance.  

The FTC and the National Advertising Division of the BBB (NAD) have both held that claims made around ESG in annual reports to investors are considered national advertising in that these claims can influence consumer purchase decisions around the goods and services provided by these companies. As such, any false or misleading claims in investor reports would potentially draw enforcement action from these regulators, as well as from the SEC.

Furthermore, the standards for supporting claims made for advertising purposes and those made for investor reporting are very similar, perhaps even identical in many cases. Take for example the earlier mentioned French Climate and Resilience Law, which was modified earlier this year to clarify substantiation requirements for any “carbon neutral” or similar claims. Any company wishing to make such claims must now provide a summary report containing annual GHG emissions covering the entire lifecycle of the product, the reduction plan with progress targets over 10 years, details around offsets, and annual updates on progress against targets. If GHG emissions increase at any point from prior year, any claims related to carbon neutrality must be removed from advertising. These standards are effectively what would be required for investor reporting, and surely should be maintained in the same single source of truth within a company.

The Problem of Functional Silos for ESG Claims

The silos that exist today in many companies with regard to advertising claims and investor claims make sense given how companies have evolved. However these silos result in inconsistencies in ESG claims and substantiation across the company which can have serious consequences.

Historically, advertising claims primarily focused on communicating to consumers about brands and products. Investor communications focused on communicating to investors about aggregated financial performance and related matters. The subject matter rarely overlapped. Different functional groups and processes arose to ensure compliance and manage communications in each sphere.  

However, as ESG has become a priority for both advertising claims and investor communications, no common oversight function exists today to manage claims across both channels. The office of the Chief Sustainability Officer may have a unifying effect. And indeed a PwC report on Empowered Chief Sustainability Officers points out that as many CSO’s were appointed in 2020-2021 as in the previous eight years combined.

An Approach to Unify Control of ESG Claims for Marketing and Investor Communications

Despite the challenge of making ESG and sustainability claims for marketing and investor purposes, there are a few steps that companies can take to ensure a harmonized approach.

  • Establish a single source of truth for the substantiation data and documentation for ESG claims used across the company. This substantiation should be directly linked to the claims it supports, and refreshed regularly to ensure accuracy.
  • Record permitted usage of ESG and sustainability claims explicitly in your single source of truth and make it transparent across the company.  For instance if a claim can only be used at the corporate level, or with specific brands, or perhaps only in investor communications, make sure this is abundantly clear.
  • Link the usage of the claims in advertising or investor communications directly to your single source of truth so it’s clear where a claim is used and adjustments can be made to communications if a claim needs to change or be withdrawn.
  • Treat ESG claims with the same level of rigor you would treat other investor data and information - maintain audit trails, use e-signatures for sign off, approve related substantiation documentation and control versions.



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