A Spotlight on the ‘S’ in ESG
Sustainability and ESG are at the forefront of minds and on the top of agendas at the moment. COP26 served to add urgency to sustainable progress, and countries, governments and companies are under increasing pressure to make significant changes to the way they operate and make decisions. Whilst climate change is perhaps first on the list of priorities, the social pillar is a fundamental part of this paradigm shift.
When we look at the 17 Sustainable Development Goals the majority are directly related to reducing inequality and improving livelihoods for communities. In other words, they are principally focussed on the ‘S’ in ESG. By 2030, the world has been tasked with achieving no poverty, zero hunger, reduced inequalities, peace, good health, quality education, and gender equality. These are ambitious targets, and if we are going to achieve them, we need some ambitious action. So, let’s put a spotlight, for a moment, on the social component of ESG and what it means for businesses.
Why should businesses be concerned about the social pillar of ESG?
If you have a clear understanding of who your business activities are impacting and how these people are being affected, you are probably ahead of the game. Most business decisions are made from the top down, taking an organisational, and financially driven view on progress. There is little consideration as to how decisions might affect the people and communities who lie within and around the business. This old way of operating has served a system biased towards financial return above all, but the world has realised that this approach has run its course
Businesses have a golden opportunity to change lives through their practices, make their mark and contribute to these ambitious SDGs. And if you aren’t driven by the moral impetus behind this ambition for a fairer, more inclusive world, then perhaps consider the business case. Multiple studies are emerging to show that companies that are actively engaged in their sustainability and ESG agendas are more successful. An article from Harvard Business School puts it well: “Companies, investors and governments who fail to act on ESG will likely face greater risks and miss significant opportunities compared to ESG leaders in many key areas, ranging from better access to capital to operational improvement and pursuing new business ventures”1. Whether it be through directly reducing costs, innovative product design, a better reputation, more customers, improved employee engagement and retention, or avoiding costly legal issues, the correlation is clear. Whichever way you look at it, managing your social impact is crucial to the ongoing success of your business. And if you haven’t started to consider it, you really should, as you are missing a major trick.
What to do?
“What gets measured, gets managed” - a quote attributed to Peter Drucker, and one that is undeniably true and relevant to this topic. The Global Reporting Initial (GRI) standards for sustainability reporting are a good place to start as they contain key criteria that you can use to measure your performance against a number of people-centric indicators. Standards like these are a great way to put a stake in the ground and benchmark your company against others and your future evolution. If this is something you are interested in doing, our global Moore team would be very happy to guide you through this framework, or indeed others, like the B Corp Certification. However, alongside these metrics, a deeper analysis is required. Measuring your social value is about getting to the heart of how you are impacting all of your stakeholders. This list may include your workers, local communities, supply chains and customers - everyone who is materially affected by what you do. Absolutely central to this understanding is meaningful stakeholder engagement. Are you engaging with these groups regularly, and do you really understand how you are, either positively or negatively, affecting lives?
A company’s social value goes hand-in-hand with their wider purpose and their future prosperity. Companies making decisions that take into account everyone who is or will be affected are going to be the most successful. In order to make better decisions, genuinely contribute to this global movement of sustainability and prepare for the future of business, accounting for your social value is essential. Indeed, it’s time to shine the spotlight on the ‘S’ in ESG.
Moore Kingston Smith is member firm of the global Moore network. We have a team of three Advanced Social Impact Practitioners who can support your business on this transformative journey.