Don’t wait to report bad ESG news

– Avoiding reporting bad news exacerbates a bad situation because your reputation will take a hit when the cover-up is discovered.
– The article below provides examples of how companies attempt to smooth over the rough edges.

When you’re reporting ESG metrics and information, it’s probably inevitable that you’re going to miss some targets – or perhaps a strategy you were implementing isn’t working out. The temptation is there to avoid reporting about that “miss” at all – or fudge it somehow.

This note from the “Small Cap Institute” reminds us about how that is a bad idea. Here is an excerpt:

Here’s a sample of how revenue-producing companies regularly try to distract investors from bad news:
• Serial, italicized, headline subtitles that refocus attention away from key financial results
• Overemphasis upon non-GAAP results, and even discussing them to the exclusion of GAAP results
• Introducing completely new reporting metrics – just for the quarter – to highlight data that might distract investors from the poor results
• Long-winded CEO quote setting forth how “unbelievably excited” they are about some of the “extremely transformative” things the company is working on that make them “incredibly optimistic”
• Changing the comparative reporting periods to opportunistically highlight sequential results, since the year-over-year comparisons are bad
• Lengthy, bullet-pointed lists of “business highlights” that are predominantly comprised of immaterial information
• Introduction of new initiatives that investors don’t hear much about thereafter