“How should we address the ‘S’ in Environmental, Social and Governance (ESG) practice?”
In 2021, I shared my five keys, the “S-Five,” to maximizing corporate social impact as part of overall ESG strategy. More than two years later, this question continues to be top-of-mind for corporate executives as they try to better understand ever-shifting public reporting and business practice expectations from investors and stakeholders.
Great progress has been made in environmental and governance arenas, though as we all know, there’s much more to be done. However, as was the case in 2021, I continue to see an incomplete perspective on the range of essential business considerations included within the Social component and their connection to their business, with the ‘S’ often seen as just the feel-good part.
Environmental and governance practices seem like much easier disciplines to wrap your head around and to establish operational targets, KPIs, and improvement processes around. However, treating the “S” as nice, soft, or secondary puts the business at risk and leaves opportunities off the table. A company’s social principles and practices are powerful drivers of business success and should be approached intentionally and strategically.
The “Social” disciplines are human-centered and tap into complex areas of behavior, emotion, bias, equity, and quality of life. To some, they may seem less core to the business, until they are put in the context of recruiting, retention, morale, employee engagement, customer affinity, supply chain, community permission to operate, fair-wage policies, diversity, equity, and inclusion (DEI), and other critical arenas. Social practices are not siloed from Environmental and Governance practices; rather, they are all core components. Companies like Unilever, Microsoft, and Sweetgreen that prioritize and integrate social elements are often ones that invest in and rally around corporate purpose as a north star guiding their work every day.
Over the past years, new governmental regulations across the globe and a barrage of investment screening questions from the financial sector have catapulted ESG terminology, standards, and reporting expectations into the C-suite and boardroom. For some companies, the rigor is new, but for most it is just a fresh look at a wide range of standard business practices they have been categorizing for decades as corporate responsibility, sustainability, community investment, and corporate citizenship, among others. This time the efforts are being driven by investors seeking more transparency and data around how companies are managing business risks and opportunities.
Don’t get sidetracked by the rhetoric about “woke-ism” and ESG. Use this dialogue to ask yourself better questions about the true nature and impact of your company’s work.
It is important to utilize reporting frameworks, such as those from the Sustainable Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), and others to inform your work, but be cautious. Investors tend to narrow social elements into areas that are more tangible, quantifiable, short-term, and easily reflected in reporting. At the same time, critical stakeholders (employees, consumers, community members, and governments) take a much broader perspective on the social role of business.
A company’s responsibility and actions must extend beyond financial analysts’ priorities and points of view. As a matter of fact, many in the financial community have been historically late to the game in voicing concern about Social and Environmental-related issues. Today health equity, social justice and human rights, economic and workforce development, and access to education are among the many global issues that straddle both business and society. I anticipate expectations regarding social parameters will only expand over time.
Here are five keys, the “S-Five,” to maximizing your work in the Social arena:
1) Strategize – Treat Social practices as you do every other essential business discipline. Make them a central part of strategic and long-term planning, assign dedicated and accountable teams, and invest in research, modeling, and systems. Ensure that leaders of social-related practice areas have a voice and a seat at decision-making tables and that governance structures are integrated, not siloed.
2) Strive – Drive toward tangible, measurable human impact. Put aside “nice-to-do issues” and “pet projects” and focus on what really improves and changes lives. Identify pressing, relevant challenges in the lives of employees, customers, community members, and other stakeholders and develop a theory of change model that connects desired business and social outcomes with inputs that you are willing to apply. Look to the UN Global Sustainable Development Goals (SDGs) and more localized frameworks to gain deeper guidance on systemic issues.
3) Synergize – Integrate business unit activities, programs, partners, and expertise as part of everything you do. Internally, this means connecting the dots and breaking down siloed ESG-related activities. Develop a company-wide theme and principles to unify and guide your wide range of corporate responsibility / ESG practices. Externally, continuously seek to bring the broadest range of programs and partners together to have collective impact.
4) Spark – Develop policies, practices, and programs that inspire people to take action. Provide ways for employees and external stakeholders to listen, share, and engage. Create branded external social impact programs that bring to life your corporate values and purpose, engage key stakeholders, and differentiate the company through demonstrated leadership. Programs such as Empower by GoDaddy, which focuses on inclusive entrepreneurship, and Adobe Youth Voices, committed to creativity and STEM, are powerful examples. And remember real, impact-focused solutions do not come out of a few internal brainstorming meetings; they are built by adhering to a rigorous strategic approach that requires ongoing innovation.
5) Share – Increase transparency around ESG. This includes both providing relevant data and putting it into context through stories of business and human impact. It is essential to think beyond investor audiences and translate often complex ESG practices for other stakeholders. Move beyond lists of activities you have performed toward articulating the business and social outcomes you are achieving. CSR/ESG reports are just some of the many tools in your corporate communications arsenal.