Sustainability communication needs to answer the question, “Why?”

Companies are constantly expanding their sustainability reporting—voluntarily, but also because of regulations. In many cases, however, one central question is not answered adequately—that question is “why?”

More than a decade ago, when corporate ESG performance and corporate sustainability were still largely unnoticed, an idea caused people to increasingly question the way companies communicate: the Golden Circle, created by Simon Sinek.

At a TEDx conference, Simon Sinek revealed what makes some companies more successful than others: They know why they do what they do. According to Sinek, the “why” is at the center, followed by the questions “how” and “what”.

Convincing or not?

Let us consider the “why” of corporate sustainability and ESG. Just as a company does not appeal to its customers merely by focusing on the technical features of a product without explaining why it creates this product, sustainability communications in which the “why” remains unanswered are unconvincing.

So before a company publishes elaborate sustainability reports and establishes key performance indicators and materiality matrices, top management should have a mission and vision in the area of sustainability. The logical sequence is, therefore, “Why do we act sustainably?” followed by, “How do we act sustainably?” and, “What do we do concretely?”

Positive effects—inside and outside an organization

Only a clear sustainability strategy enables coherent and credible sustainability communications—not only externally, but also internally. Sinek’s example of the Wright Brothers—American aviation pioneers who achieved a milestone in aircraft development solely from their own resources—is a good analogy here. Those who are passionate about something attract highly motivated employees who put their heart and soul into their work.

Employee satisfaction (category “S,” for Social in ESG) is likely to be correspondingly high in a company with passionate leaders, and wages or fringe benefits in comparison to those of other potential employers will probably be of minor importance. It is no coincidence that Simon Sinek talked about “Action and Leadership” at the UN Global Compact Leaders Summit in 2016. There is a sustainability dimension to Sinek’s Golden Circle.

This leads to the question of whether addressing environmental, social, and governance aspects of business activities can be a booster of commercial success. Those who really understand why they do something communicate more successfully—and are heard by their stakeholders, customers included.

A rewarding journey

Certainly, there are activities for which a sustainability vision and mission will be difficult to find. We would expect companies whose products are antithetical to ESG concerns to struggle to find a meaningful answer to the question “Why do we act sustainably?”.

However, most companies will be able to examine the core of what they do to find the key theme for their sustainability strategy and communication. It is about more than avoiding significant harm — it requires finding the positive environmental, social, and governance contributions in a business model. We can only recommend this journey.

Renewable energies are on the rise, but efficiency targets are not

European companies prefer policy direction to specific savings commitments while a slow but steady shift in the energy mix takes place.

Energy was in the spotlight in politics, business, and society in 2022. We took this as an opportunity to examine trends in energy consumption and procurement for listed firms in Europe. The adoption of energy policies and efficiency targets differ significantly, leading to a central question: Should companies be concerned with reducing their climate-friendly energy use or not?

Energy policies: mere window-dressing?

We started by evaluating energy policies and targets and their prevalence among the companies. The discussion of whether these policies really have an effect or if they are mere window-dressing is ongoing. While nearly every company in the dataset had an energy policy in place in the year 2021, only about half of the firms had energy efficiency targets.

This observation can be explained easily. It is much simpler to set a qualitative policy—more or less strict and comprehensive—than binding quantitative reduction targets. This omnipresence of energy policies connects to the discussion if a “box-ticking” culture can really improve a company’s sustainability practice.

Over time, the number of companies with an energy policy steadily increased from an already high level of around 94 percent in 2017 to 99 percent in 2021. Energy-intensive sectors, such as Industrials and Basic Materials, started from a lower level than, for example, Healthcare and Financials.

Energy targets: not very popular

Unlike energy policies, there is no clear trend over the years for energy targets. While around 47 percent of the companies had energy targets in 2017, 48 percent did so in 2021. The Basic Materials, Industrials, and Consumer Cyclicals sectors, which account for half of the companies in the dataset, even showed a convex pattern. This means that more companies had savings targets in 2018 and 2019 than in 2017 or 2021. We will elaborate on possible reasons for this later.

Looking at the percentage ratio of energy targets by country of company headquarters, Norway had the lowest, and neighboring countries Finland and Sweden were in the upper range. With the huge amount of hydropower resources in Norway, this observation automatically leads to the question of what role the energy quality—that is whether it is renewable or not—plays in having such targets. We will also discuss this later.

Nonrenewable energy in decline

The next question was how the consumption of energy has changed over the years. Median energy use in absolute terms (GWh) for the almost 500 companies remained relatively stable over five years. Energy consumption per million dollars of revenue overall decreased by 10 percent. Renewable energy seems to be replacing other energy sources, as nonrenewable energy consumption decreased by almost one third over the same period. Interestingly, individual companies both with and without efficiency targets were able to achieve massive savings in the use of nonrenewable energy.

Even more interestingly, the group of companies that had no efficiency targets for some of the five years realized the biggest reduction in nonrenewable energy use per million dollars of revenue—around 69 percent—whereas the group of companies that kept targets over the years reduced their amount by only 13 percent. Companies with no efficiency targets at all saved almost half of their nonrenewable consumption.

The numbers are different, but the picture is the same for total energy use per million dollars of revenue: companies without efficiency targets performed better than firms with targets.

Why? Baseline effect, caution, or irrelevant?

There could be several explanations: first, the baseline effect. Companies with savings targets may have already taken the big steps. Some programs may also have been phased out. Second, companies that are challenged to reduce their energy consumption because of their energy-intensive business models might be reluctant to set efficiency targets yet might work intensely on achieving savings. And third, companies that mostly or exclusively consume renewable energy might consider efficiency targets to be unnecessary. In any case, this should be examined further.

But should companies reduce their renewable energy use or not?

The quick answer would be “no,” but this question must be thought of systemically, given the interdependencies in energy supply. The answer depends on the storage capability of a renewable energy source and the possibilities of collective optimization. We therefore conclude that the answer should be “yes” if the saving contributes to overall system stability or security of supply.

We are interested in having a dialogue about the results of our analysis and our conclusions. Your thoughts are welcome.

Carbon accounting is the first step to net zero

The earth is on a trajectory to reach a global climate disruption. There is an urgent need for short-term action to fulfill the goals set by the Paris Agreement to limit global warming to 1.5 °C per year. All companies and industries need to decarbonize and collectively accomplish the transition to sustainability, but many companies still do not systematically measure and disclose the climate change gas emissions generated by their activities.

“Carbon accounting” is needed at the company level to identify and manage climate-related transition risks and opportunities. It is of the highest interest for companies across economic sectors to know, disclose, and manage their direct and indirect emissions, categorized by scope and distinguished according to source within the organization’s value chain.

Aggregated data give a more comprehensive picture at a higher level. For example, the MSCI Net-Zero Tracker estimates that listed companies will burn through their share of the global carbon budget by February 20271. To some extent, companies are reacting: of the more than 2,900 companies in the MSCI ACWI Index, about 45 percent had set emissions reduction targets2. About one third of those targets aim to reduce the company’s greenhouse gas emissions to net zero. This means greenhouse gases going into the atmosphere are balanced by removal out of the atmosphere.

Missing information

Because the first step to reducing emissions is to know and to report those emissions, we have moved one step back and examined the disclosure of around 6,150 listed companies worldwide, based on a Refinitiv dataset3. Not even half of the companies disclosed their emissions for the year 2021. In other words, according to the data, information is missing about thousands of sources of emissions.

Most companies that make a report will disclose both Scope 1 emissions (which includes all direct emissions that occur from sources owned or controlled by the reporting company) and Scope 2 emissions (which comprise indirect emissions from purchased energy that is generated outside the companies’ own system boundaries). Their number reached just under 40 percent.

Company size matters a lot. While seven out of ten large-cap companies report on Scope 1 and Scope 2 emissions, only three out of ten small-caps do. Larger companies can be subject to stricter disclosure requirements, and in any case, they have more resources to deal with tasks not directly related to business operations.

Scope 3 emissions add complexity

The picture changes slightly when Scope 3 emissions are examined. One out of two large-caps reports on other indirect emissions not included in Scope 2 that occur in their value chain, but only one out of six small-caps provides this data. Complexity increases for Scope 3 emissions because of their origins outside of the organization, which may explain these numbers.

In Switzerland, disclosure is above average, with over 90 percent of the analyzed large-cap companies reporting their Scope 1 and Scope 2 equivalent emissions in 2021 and 82 percent showing their Scope 3 emissions. Binding rules are underway that will oblige companies of a certain size to make climate-related disclosures, probably by 2024.

An analysis of the economic sectors makes apparent that a higher percentage of companies in sectors that are generally negatively associated with climate issues disclose their emissions. For example, approximately 50 percent of basic materials producers, utilities, and energy companies report their Scope 1 and Scope 2 emissions, whereas only about 31 percent of technology companies and 17 percent of healthcare companies disclose them.

Benefits of transparency

The numbers display room for improvement. There are direct benefits from measuring, reporting, and managing environmental performance, such as lower energy and resource costs, a better understanding of the exposure to the risks of climate change, and greater credibility both internally and in their engagement with stakeholders.

In addition, not only emission-intensive companies should increase their efforts in reporting, disclosing, and reducing greenhouse gases—greater effort should be expected of low-emission entities as well. Even though their individual impact may seem relatively small, the sum of these companies can be quite significant, and every contribution counts.

1 based on their emissions as of May 31, 2022
2 as of March 2022
3 as of July 2022

With ESG data, it is all about time

Analyzing the Environmental, Social, and Governance (ESG) performance of listed companies provides valuable insights. However, restatements of past indicators, mismatches in time between financial and non-financial reporting, and redefinitions of ESG scores and categories create a burden for interpreting trends.

Some changes in the data occur at the company level. ESG data disclosed in sustainability reports are frequently restated. Some companies rectify their environmental figures from past years regularly. This is due to changing perceptions of how ESG data should be reported and to the absence of mandatory standards as exist in financial reporting. Along with this comes another issue—the publication dates of sustainability reports and financial reports are not necessarily the same, which is relevant for the next step in the data processing cycle.

An increasing number of ESG data providers pick up company data and make them accessible at different intervals according to their work and update rhythm. The ESG data are then available in a terminal environment, a feed, or a database. But it is not always clear to data providers or other interested parties when company ESG data can be expected, and there may be delays in processing. In addition, policies dictating how company restatements of past years are to be considered may vary from one data provider to another.

On the next level, many ESG company ratings and scores, which are based on the evaluation of company data by various methods, are volatile by nature, as companies are assessed relative to others and, e.g., grouped in percentiles. Again, the update cycles for scores and ratings vary. Besides, methodology changes have occurred over the years, some of which make it difficult to compare current with past data.

Depending on the type of question being asked in the work with ESG data, these aspects must be considered. Special attention is required in the context of time series analysis and back testing – an interesting case is documented here.

Overall, the quality of ESG analyses largely depends on data quality, data access, and the ability to digest the manifold information from different sources. In the context of changing ESG history, our specific workflow management helps to handle data efficiently and to extract meaningful information. Furthermore, the analysis of such changes over time is an interesting field on its own.

Commitment to the Sustainable Development Goals is not a matter of size

An analysis of almost 3,000 listed firms showed interesting patterns in clusters of nations as well as in specific sectors and industries.

With less than nine years left to achieve the seventeen Sustainable Development Goals (SDGs) outlined by the United Nations (UN), we have analyzed the support from stock-listed companies. Many companies have joined the global partnership that shares the beliefs expressed in the 2030 Agenda for Sustainable Development. Because of their economic impact and their interactions with employees, customers, suppliers, shareholders, and other stakeholders, these companies have the potential for significant influence toward achieving the Sustainable Development Goals.

We found interesting patterns in the support for certain goals in clusters of nations as well as in specific sectors and industries. The data shows that support for the UN SDGs is not primarily a question of company size—there was only a slightly positive correlation between market capitalization and support. Although the availability of resources has an impact on a company’s set of activities, intuitively, commitment for a sustainable future should not be a matter of company size.

Work and economic growth as the core domain

The Refinitiv ESG (Environmental, Social and Governance) dataset we analyzed consists of almost 3,000 companies. More than 86 percent supported SDG 8, “Decent Work and Economic Growth”. This makes sense, as it is the core domain of the firms. 84 percent of them backed SDG 13, “Climate Action”, in second place, which shows a great awareness of this topic. 74 percent of the companies supported SDG 12, “Responsible Consumption and Production”, which is also closely related to the companies’ main activities. SDG 1, “No Hunger”, SDG 14, “Life Below Water”, and SDG 2, “Zero Hunger”, were the least frequently supported goals.

A small number (7 percent) supported all 17 SDGs. Most firms, however, focused on five to nine goals. The most common constellation was to support six goals.

The priorities of companies differed by economic sector. Technology, Industrials, Financials, and Consumer Cyclicals primarily supported SDG 8, “Decent Work and Economic Growth”. Not surprisingly, SDG 3, “Good Health and Well-Being”, was the top priority in the Healthcare sector. Utilities predominantly supported SDG 7, “Clean and Affordable Energy”. The primary objective in the Energy and Basic Materials sector was SDG 13, “Climate Action”. Telecommunication Services companies put SDG 4, “Quality Education”, in front, and Consumer Non-Cyclicals favored SDG 12, “Responsible Production and Consumption”.

Socioeconomic and geographic clusters

By performing a nation-wise cluster analysis regarding similarities in support of the SDGs, we found combinations of geographically close countries, but also of nations in similar socioeconomic situations or with common cultural backgrounds. For example, the Nordic countries (Norway, Sweden, Denmark, and Finland) were in one group; Mexico, Indonesia, India, and China formed another group. One cluster consisted of the US, the UK, Germany, and Switzerland; and a fourth cluster comprised several francophone countries.

The next years will show whether more companies embrace support for the UN SDGs. There is much room for it, as we identified more than 5,000 companies that have not yet expressed their commitment.

syracom and valyt facilitate ESG data management for financial institutions

You can download the PDF file here…


Wiesbaden and Zurich, June 29, 2021. The professional management of sustainability data in the financial sector will be a competitive advantage in the coming years. ESG ratings provide a certain level of orientation for investors, but raw data and the combination of different sources will become indispensable. The Swiss ESG data consultants from valyt and the German IT consulting firm syracom are offering financial institutions the right solutions today, in a joint approach.

Environmental, social, and governance (ESG) criteria are becoming increasingly important for investors, who use the ratings thereof to evaluate these dimensions in investment decisions. However, the validity varies greatly depending on the provider. “Moreover, ratings do not exploit the full potential offered by raw ESG data,“ says Claudia Lanz-Carl, cofounder of valyt, a consultancy specializing in sustainability analysis and sustainability data that has analyzed ESG ratings and raw data in depth and is familiar with the associated challenges.

How to Manage ESG Data Efficiently and Individually

syracom and valyt provide an open, cost-effective, cloud-based approach for financial insti tutions that unites ESG data from different sources, with different formats, standardizations, and deployments, in a single well-organized database. The user can access relevant and high-quality data quickly and efficiently, and the desired information is presented in a targeted manner. As an automated solution, the database also relieves the user of numerous work steps such as validation, transformation, and normalization. The framework is flexible and new data sources can be integrated at any time, which can provide financial institutions with their own individual model for data analysis.

“Professional management of ESG data will become as important to companies as the management of financial data,” says Hendrik Kurz, Business Unit Manager Banking and member of syracom consulting AG’s executive board. “Our goal is to anchor the management of ESG data holistically and efficiently in the company. To achieve this, we use a tried-and-tested integrated solution approach that draws on experience from many implementation projects.”

About valyt

valyt organizes, prepares, and analyzes financial and ESG data from a wide variety of sources for decision-making processes and stakeholder communication. Process automation is an important component here. The independent consultants support their customers with ESG data strategy development and implementation.

Corporate contact:


Badenerstrasse 21

8004 Zurich


Phone: +41 44 552 14 05


About syracom AG

syracom is an owner-managed consulting company. Our customers appreciate our sound business understanding and IT implementation strength. With efficient business processes and lean cloud solutions, syracom consultants create future-proof solutions made to measure: business efficiency engineering for sustainable success.

syracom sees itself as a partner for whom long-term cooperation is more important than short-term success. The consulting firm was founded in 1998 and is part of the Consileon Group, with a total of 430 employees and total revenue of around 65 million euros.

Corporate contact:

syracom AG

Roswitha Steier

Head of Communication

Otto-von-Guericke-Ring 15

65205 Wiesbaden


Phone: +49 6122 91 76-36



An analysis of sustainability assessments of Swiss large-cap companies over a period of five years has shown the challenges for companies and investors.

ESG (Environmental, Social, and Governance) ratings impact the companies under scrutiny as well as the investment firms that use those ratings, and few decision-makers do not have a strong opinion on whether these evaluations are useful. ESG ratings do have their strengths and weaknesses: they provide orientation by reducing a complex matter to only one figure or a few letters, but different rating systems can provide significantly different judgments about a company’s performance. That leaves investors questioning which ratings they can rely on. Likewise, listed companies have to balance the different views on their activities.

The sustainability consultancy valyt analyzed four ESG ratings for 20 large caps, mainly SMI-listed companies, over a period of five years in a study conducted for the Swiss investor magazine Finanz und Wirtschaft. A comparison of the companies’ MSCI ESG rating, Sustainalytics Rank, S&P Global ESG rank, and ISS Quality Score showed quite a significant divergence after normalization. However, a higher level of consensus was found for companies with normalized ESG ratings above five. Swiss Re, Zurich and Nestlé displayed the highest levels of agreement from 2016 to 2020, and Roche, Geberit and Richemont the lowest. In some cases, two ratings came to almost the same conclusion.

The question of whether the 20 companies improved over time was answered inconsistently. Only three firms—Novartis, Partners Group, and Swiss Life—advanced in every rating. Some of the remaining 17 had already reached the peak and could not improve further. Around one third displayed a positive aggregated ESG trend, another third a very positive trend, and the remaining third a worsening ESG trend.

The correlations between two ratings did not exceed a value of 0.58, which is moderate. And yet, a research project by MIT and the University of Zurich came to similar conclusions two years ago, with correlations between 0.42 to 0.73 albeit in a different setting regarding time period, companies, and ratings. Florian Berg, Julian Kölbel, and Roberto Rigobon referred to measurement divergence (where rating agencies measure the same attribute using different indicators) as the main explanation.

The discussion about the relationship between ESG ratings, risk, and return is intense. There is a certain consensus that a good ESG rating can provide some protection against substantial downturns in stock prices. Some studies have focused on ESG momentum: a positive stock price reaction after an ESG rating upgrade. Others have seen strong ESG performance as an explanation for stock price returns . Still, the attribution of cause and effect should be handled with care. The more investors base their choices on ESG rating performance, the more such ratings will be able to drive stock prices.

The exclusion of certain stocks with low ESG ratings comes at the price of increased diversifiable risk. One empirical proof was presented by the University of Zurich in early 2021. Marco Ceccarelli, Stefano Ramelli, and Alexander Wagner analyzed funds with Morningstar’s “Low Carbon” designation. The researchers showed that Morningstar’s ESG rating “Globes” did not address climate risks but did limit diversification to a lesser extent than the “Low Carbon” designation.

Another important aspect in the review of ESG ratings is that they do not necessarily provide information about the impact of a company’s activities. This issue was addressed in a 2020 working paper from Harvard Business School that found the ratings instead tried to assess how companies deal with chances and risks. For instance, the absence or presence of diversity and inclusion policies is assessed in ESG ratings, but the question of how these policies are implemented is not.

The future role of ESG ratings as other methods and approaches are developed is an intriguing question. In addition, the potential of raw ESG data is largely untapped. The signaling effect of ESG ratings for the stock market, in comparison to buy recommendations or to sales and earnings surprises, remains an area of interest. Studies over longer timeframes should provide answers. In the meantime, it is helpful to understand what ESG ratings can tell us, and what they cannot.

A first version of this text was published in the Swiss investor magazine Finanz und Wirtschaft on April 2, 2021

Read the article (German version) in PDF format.