Prioritizing the “S” in ESG

Mark Feldman, Principal and Managing Director, Cause Consulting

“How should we address the ‘S’ in Environmental, Social and Governance (ESG) practice?” With increasing frequency, corporate executives are asking me this question as they try to better understand renewed public reporting and business practice expectations from investors and stakeholders. Often their subsequent questions, such as “isn’t the ‘S’ just the feel-good part?” reflect an incomplete perspective on the range of essential business considerations included within the Social component and their connection to their business. 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 to 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 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 Starbucks, Unilever, and Salesforce 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 few years, 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. Propelled into the C-suite by Blackrock’s Larry Fink annual shareholder letters and investment approach, and fueled by highly visible real-world global warming and social equity crises, ESG is demanding a fresh response.

 

It is important to apply reporting frameworks, such as those from the Sustainable Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI), to inform your work in the social arena, 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 in the Social arena must extend beyond financial analysts’ priorities and point 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.

 

  1. 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.

 

  1. 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 corporate responsibility / ESG practices. Externally, continuously seek to bring the broadest range of programs and partners together to have collective impact.

 

  1. 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.

 

  1. 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.

 

 

As we emerge from COVID, re-define the workplace, and seek to create new relevance for employees, customers, and consumers, this is a perfect time for executives to further act upon and embed social impact throughout their companies. Seize the moment, be bold, and think differently about how you prioritize the “S” in ESG.


Mark Feldman (mfeldman@causeconsulting.com) is the Principal and Managing Director of Cause Consulting, a social impact strategy and communications firm working with leading companies on corporate responsibility, ESG, and signature social impact strategies. Samuel Adams Brewing the American Dream, Empower by GoDaddy, NetApp Data Explorers, BAE Tech Power, Aramark Feed Your Potential 365, and Hasbro Be Fearless Be Kind are among Cause Consulting’s many signature initiatives.