While many companies have managed to provide great environmental and governance data in recent years, the ‘S’ in ESG seems to have fallen a bit behind.
How are companies measuring social impact, if they are measuring it at all? And, what is the best way to provide investors and ESG rating systems with good, accurate and transparent information about company efforts upon the ‘S’ in ESG?
These questions have recently gained importance among company boards regarding their ability not only to work upon their social impact initiatives, but also the way in which they can offer measurable data to investors and stakeholders.
With greenwashing still posing a big and real danger among the corporate world, investors are increasingly weary of the ESG information organizations have to offer. In this regard the ‘S’ has become a significant challenge for many. Let’s dig in.
The importance of social impact metrics
Although there is still much work to be done, companies seem to have understood the importance and implications of measuring and verifying their environmental impact data, that being because of regulations or the great societal pressure to act upon our declining climate.
Governance also seems to be right in place, with transformative and resilient thinking trends inside companies’ executive boards, businesses are increasingly aligning themselves with people and the planet, and in the process, some are managing to provide accurate and transparent information.
Engage employees in the sustainability strategy
The same cannot really be said about the ‘S’ in ESG; and although the issue is not necessarily just a matter of companies’ little social action, the problem lies in the fact that, more often than not, the information provided lacks either, or both, quantitative and qualitative elements that assure investors about the efficiency of an organizations’ overall ESG strategy.
But such pieces of information are as crucial as a company’s ability to generate social value. Why? Because a company’s purpose does not lie on their profits, but rather on the progress they can create, which, now more than ever, does not equal money, but rather social (and environmental) progress.
Furthermore, the lack of social impact, as well as the inability to provide measurable metrics will most likely become a risk for a company’s overall survival.
Measuring the 'S' in ESG
Without a doubt, a company’s ability to provide social value and be able to verify such impact has become a top priority for ESG investors, fund managers and companies themselves. But how can organizations approach measuring the ‘S’ in ESG?
Quantitative and qualitative data
Quantitative data is just as important as qualitative information; this is, measuring social impact should consist of a complete approach to the information we gather.
Let’s take for example a company that manages a food donation program to help feed the homeless or those in need in the community. While it does showcase a great initiative with clear benefits for society, the quantitative data wouldn’t be enough to understand how good of a social initiative this is.
The amount of meals provided (quantitative) should be accompanied by, for example, how healthy (qualitative) such food options are in order to truly understand the value and social benefits of this action.
Independent and transparent information
Nothing beats greenwashing claims like transparency and independent sources of information. However, many companies choose to opt out this, and instead use so-called ‘green-hushing’ techniques to avoid bad reputation, only to find the downside of such a dangerous trend.
Additionally, the lack of transparency and independent quantitative and qualitative surveys and interviews are not only an obstacle to reputation, but in fact pose a great risk for company performance. To put it simply, you cannot manage what you don’t understand.
And although company insights are crucial, bias is inevitable, and investors know this. It is essential that we look for qualitative and independent ways to verify the social value that has been created.
Guide to the benefits of transparency
Using technology for good
In the digital and technological era we live in, we cannot undermine the power of technology to create social value, as well as environmental and governance related.
Looking for a digital transformation of the company’s ESG strategy could not only provide with a better sustainability performance, but also with a greater assessment and metrics of the good (and the not so good) we are helping create.
Furthermore, a technological approach to social impact can help engage more people into the mix and help better understand the impact that needs to happen and the development of the journey to get there.
The role of employees in the company's ESG strategy
Far from being indifferent from participation in company ESG efforts, employees look for the opportunity to be actively engaged and find purpose in having a positive impact through their jobs.
In DoGood we believe that working collectively can help us find that which alone may seem unattainable or useless. That is why we think the workplace is the perfect environment to find that collective eagerness to make a difference, both for the sustainability and purpose of the company and a more sustainable way of being for all.
Through our technology we are able to activate and track employees’ impact, creating engagement that translates into improved ESG metrics, reputational value and an overall positive impact for the environment and society.