With an increasing focus on incoming regulations and the challenges of commercial impacts, businesses must understand how to effectively embed diversity and inclusion (I&D) throughout their organisation and determine what they should report on regarding social impact.
Our ESG snapshot research surveyed 800 mid-market business leaders to understand their ESG strategies and how close they are to achieving their ambitions. Among the six focus areas examined, people and social impact emerged as key pillars in creating a successful ESG agenda.
The findings highlight that companies are increasingly prioritising their employees. This raises important questions about how organisations should address the people and social element of their ESG strategy and what actions they can take to retain a competitive advantage.
Many businesses are now embedding relevant sustainability strategies and proactively addressing upcoming environmental reporting requirements throughout their organisation. However, addressing the 'E' in your ESG agenda without considering the 'S' in mind could result in duplicating efforts.
While the introduction of regulations for reporting social impact data might not follow the same timeline across the board, certain instances, like the CSRD, stand as examples of synchronisation.
In other cases, the intent has been expressed to introduce reporting requirements for the ‘S’ aspect.
Therefore, instead of building a strategy, approach and governance around 'E' reporting in isolation now and then having to do the same again when 'S' reporting comes in, it makes sense to address them both in one go.
A holistic approach that addresses both simultaneously offers several advantages, notably providing the opportunity to proactively lead the way in mandatory reporting and instigate positive changes that set the pace for progress well ahead of reporting deadlines.
But what does reporting on your social impact look like?
This area is essential yet challenging to quantify, as it significantly affects two critical stakeholder groups: your employees and wider society.
Understanding where to focus your attention and investment in terms of strategy and implementation is crucial. Companies need to ensure their people initiatives align with their overall purpose, values and what constitutes success for their organisation.
You may have already implemented new working practices, established I&D frameworks, engaged wider society, or discussed well-being and social initiatives with your employees, or you might just be starting out.
Either way, measuring the impact of these efforts and ensuring compliance with incoming regulations, especially non-financial reporting, can become complex.
Examples include measuring workforce diversity and comparing it to census data or pay gap reporting data, measuring engagement or how included people feel in work through employee engagement surveys.
Mismanaging the 'S' in ESG can wield significant brand impact, affecting business valuation, client relationships and overall public engagement.
Getting the ‘S’ wrong often ignites substantial media attention as mistreatment of individuals is an emotionally charged issue that resonates on a global scale.
Many brands have suffered the consequences of being the latest organisation to fall foul of public and employee expectations on its ‘S’ agenda. This shortfall has far-reaching implications, affecting consumer choices and, consequently, both revenue and shareholder value.
This can be from the organisation itself or extend to entities within its supply chain, such as engaging in discriminatory practices or paying a fair wage.
From a talent perspective, the impact often results in increased expenses. Organisations find themselves compelled to offer higher salaries, as the alignment of values and reputation will no longer serve as enticing factors.
In some cases, you will struggle to attract any top-tier talent where people have the choice of where to work.
Many larger organisations, the public sector, and purpose-driven smaller organisations may choose not to use businesses at all in their supply chain based on their ESG credentials, potentially resulting in a loss of customers.
The total opposite is true of getting the 'S' right. The opportunities for an organisation to distinguish itself through prioritising the S agenda are significant.
If you stand out as an employer of choice, it will support your talent attraction and retention strategies significantly. You'll end up spending less in other areas you need to invest in throughout your employee value proposition (EVP), as talent will want to work for you due to a sense of values and purpose alignment.
Many media articles showcase businesses 'doing the right thing' aligned with their values and showing the revenue boost of people voting with their spending aligned to that. It has a true brand impact in the most commercial sense. It has not been previously seen that the people agenda and approach to employees have such a direct link.
Having strong environmental, social, and governance practices can make a company worth more when it's being bought or merged with another company. ESG, in its simplest form, makes you more attractive to people who want to work for you but also those who want to work with you.
Understand the breadth of the ESG agenda and realise the benefits of getting ahead of mandatory reporting. When delving into ‘E’ reporting, consider the 'S' to streamline your efforts in building a strategy, approach and governance, given that both aspects will ultimately require your attention. As well as time savings, this approach drives positive change, propelling progress in advance of reporting deadlines.
Outline your vision and your why, aligning your activities to your strategic priorities and business goals. In doing so, adopt a practical approach to distinguish between 'must-do' and 'should-do' activities.
Familiarise yourself with your current baseline – where are you now?
Build the pathway – prioritise and highlight quick wins and momentum-building steps, employing an evidence-based methodology for efficiency and accuracy.
Choose your approach - either undertake a comprehensive transformation all at once or be iterative and prioritise tasks within your process.