Focus on Finland: In the sustainability transformation, it is believed to have unusually good cards in hand

Medita Communication together with its Worldcom PR Group partners assessed the situation in Finland, Sweden, Germany and Great Britain. Are companies already in a hurry with their ESG work, and how are sustainability expectations affecting communications?

Finland’s ESG development stage and its effects on communications were assessed by Medita based on fresh research data and dozens of interviews with business leaders, investors and experts during autumn and winter 2022 and spring 2023.

ESG also requires D – i.e. dialogue

The lack of ESG knowledge and the amount of work that lies ahead are still surprising to many. As regulation advances, environmental and corporate social responsibility demand increasing competence, action and communication from companies of all sizes. Without stakeholder dialogue, ESG targets will not be realised and the opportunity for a value increase will remain untapped. The new business opportunities brought by the sustainability transformation might also be lost. 

The current phase of corporate responsibility brings an undeniable competitive advantage to companies that have recognised the global challenges of sustainable development well in advance and sniffed out new opportunities. This competitive advantage only exists, however, if communicated in a credible and compelling way. 

Clarifying the importance of ESG factors and earning opportunities to different stakeholders – employees, partners, financiers and investors – is not only a strategic but also a communication challenge, as well as an opportunity. Words alone will not fix the situation; instead, the added value that investments in sustainability can bring must be demonstrated. It must be possible to communicate this to important stakeholders in a concrete and understandable way, and the concerns of stakeholders must be heard. There is still a deep divide between the experts and those in need of information.

In the sustainability transformation, small Finland is believed to have unusually good cards in hand. This technologically advanced, clean electricity country with a stable and predictable society now also holds new potential in the eyes of foreign investors. It is experiencing the post-war era’s most massive wave of investments in industrial infrastructure and clean production. 

Large companies see opportunities, small ones see threats

The Finnish research company MDI, which specialises in regional development, recently studied different-sized companies’ attitudes toward the green transition. According to the study, larger enterprises see the transition as a growth opportunity, but small companies see it as a threat to their business. 

According to the study, small companies’ concern is real, as they typically do not have the resources, i.e. capital or know-how, to perform in the transformation. However, a recent study by the Finnish Business & Society (FIBS), the largest CSR network in the Nordics, reveals a knowledge gap even in larger organisations. In contrast to large companies, smaller companies believe the transition will create pressure to reduce personnel and even downsize operations. Some of the negative attitude toward the transition relates to a lack of awareness, some to an ideological opposition to everything “green”. Many small entrepreneurs consider the sustainability transformation to be nothing more than political rhetoric, and not real social change.

Stakeholder dialogue supports sustainability management in the supply chain  

Some of the opposition to the green transition and the sustainability transformation may be attributed to so-called creative destruction. Unfortunately the closing companies would probably not be replaced by new ones that would have accepted the new requirements.  The tensions reflect real problems the transformation causes for small entrepreneurs and for which solutions should be sought to help them adapt. 

The public debate about the justness of the transition is not for naught. An obvious danger is causing unnecessary human acrimony, societal grudge and material waste.

The FIBS network’s aforementioned CSR survey of Finland’s largest companies indicates that companies operating as main suppliers are not compromising on their ESG goals. According to the survey, the Covid pandemic, Russia’s war of aggression against Ukraine and the subsequent energy crisis, as well as inflation have, contrary to general expectations, prompted large companies to commit to their sustainable development goals even more rigorously than before. 

Given the aging of the population and the growing shortage of skilled workers, severely damaging disruptions in supply chains may be in store. After the recent crises, a growing challenge of the entire value chain management requires continuous and constructive stakeholder dialogue, and communication with component suppliers cannot be one way. These are shared challenges, and trust is needed on both sides for continuity management.

Where to start in improving ESG preparedness? 

Many companies that do not yet report on their responsibility in a comparable way are contemplating concrete actions they can take to enhance their ESG preparedness. 

What kind of process would help a company to get on the right development path without putting its ability to produce products and services or provide employment and livelihood out of balance? What are important stakeholders expecting? How is the company’s position on the market developing in relation to competitors?

A practical and understandable way to get started is to first create a situational picture using analytical communication tools, as has been done in the service concept developed jointly by Medita Communication and Eversheds law firm. 

The first step is to compile data on the company’s initial situation that is material in terms of ESG and stakeholder dialogue. 

1. Communication expertise is used to look into the organisation’s existing policies, commitments or quality certificates as well as surveys on the customer and employee experience from different data sources.
2. Next, comparison data on the ESG communication and preparedness of peers is sought from public sources. 
3. If needed, we will help draw up a sustainability programme to serve as the basis for future reporting, or we will assess the opportunities for developing reporting. 
4. An ESG roadmap, including recommendations for follow-up measures, is attached to the non-sugar-coated situational picture. 

When sustainable business objectives have been laid down by the company’s executive management, a schedule has been set and resources have been decided, an agile ESG communication strategy and content plan is documented to support implementation. An external multi-talented ESG communication team is also offered as required to implement the plans. 

ESG development is worthwhile both operationally and financially 

When the impact of ESG factors and communication on valuation is examined before and after the chosen development measures, evidence of the favourable effects of both the development measures and stakeholder dialogue on enterprise value has been gained. Even though this concerns the long-term development of sustainable business and communication, encouraging results showing an increase in value have already been obtained in a relatively short amount of time. Continuously strengthening ESG preparedness and reliable communication safeguard and increase a company’s value. 

A strategic challenge for boards and corporate management 

Creating a goal-oriented sustainability programme requires both business, legal and technological as well as leadership & management, communication and interaction expertise. Continuous development and reporting requires smooth data collection, for which better solutions are constantly being developed for different types of organisations. Reporting is not an end in itself; rather, its purpose is to serve development, demonstrate the effectiveness of the actions and create a foundation for reliable stakeholder dialogue.

What is essential is the commitment of the board representing the owners and the company’s senior management to the goals they themselves set, justified by the company’s value creation. Setting and achieving goals is both a strategic and operational challenge for companies of all sizes. Incentives are the immediate benefits of the development to resource and risk management, the employer image and financing opportunities. An even more significant argument is the increase in the company’s value, the fruits of which are reaped by the developer themself.

Tiinu Wuolio, CEO, founding partner, Medita Communication
Päivi Tervonen, COO, partner, Medita Communication

Read more:  Focus on ESG by Eversheds Sutherland Finland (pages 8–9)