What does the "S" of ESG actually mean? What is indisputable, at least, is that we are talking about people and relationships between people, in the context is responsibility, sustainability and ethics. But where do the core themes come from and what should be done about them?
S is for Social
The term ESG groups sustainability work under three headings: Environment, Social and Governance. Environment and Social describe the issues that are the focus of sustainability work. Governance, aka Good Governance, focuses on implementing and working on these issues through leadership, administration and management.
Broadly speaking, the term Social covers issues relating to people. In the past, the more popular terms CSR (corporate social responsibility) and sustainability were often understood as CSR covering people-related issues, while sustainability was seen as more concerned with nature and the environment. However, when you begin to deconstruct and study these terms, one quickly realizes that both happily blend human and environmental issues. It may be precisely because of that confusion and vagueness of the other concepts that the notion of ESG has found favor. Many people seem to perceive ESG as a more comprehensive term.
What’s in a name?
From an international law perspective, ‘Social’ in ESG mainly contains human rights. Often when people are asked to list topics under the S section, that are relevant to their organization, the list might include things such as health, discrimination, education, equality, diversity... and the last item is human rights. All of these themes are human rights, so the result is a list of human rights, with a ‘human rights’ listed as a separate topic under a list of human rights.
Understandably, there is little knowledge on the broader content of human rights amongst laymen, which is why Social may be a more workable concept in practice. It is easier to focus directly on the human rights themes and contents themselves, under the term social, than to start teaching each employee in each organization what human rights entail.
‘Social’ may also be perceived more inclusive and flexible as a concept than human rights. It is easier to outline practices that are known in the organization as 'our way of doing things' under it. These practices are not necessarily about right and wrong, but may be more a matter of taste.
Identifying and addressing such features of organizational culture is also valuable in clarifying common policies. Discussing them is useful both to improve well-being at work and to eases tasks and responsibilities of management. In this way, these social aspects can also have a knock-on effect on those well-being issues that can easily be lumped under human rights. It is difficult to implement abstract declaratory corporate social responsibility objectives without working concretely, openly and honestly on the existing organizational culture.
How does S promote corporate social responsibility?
All measures, plans and actions related to sustainability and CSR are linked to people's behavior and emotions. When contemplating the social aspect of ESG it is useful to think about the social structures and behaviors that contribute to sustainability objectives in addition to the promotion of substantive side of social rights.
The importance of emotions and emotional intelligence has recently begun to be highlighted more as a quality factor in management, leadership and organizational practice. Employee engagement is a hot topic, especially as the corona epidemic led many to reflect more closely on their values and priorities in life. The result was a wave of resignations. Emotional intelligence and empathy in leadership have a strong influence on how seriously and concretely social rights are taken into account in an organization's activities. This is reflected in the well-being of those involved and has a direct impact on the level of engagement.
Various CSR guidelines and regulations require stakeholder perspective to be into account, which is why it is important to keep it closely involved in CSR work. In ESG, ‘Social’ means taking into account the rights and opinions of employees, customers and other affected stakeholders. These groups rights and freedoms should be considered and listened to with an open mind. An organization is at its strongest when the interests of all stakeholders are taken into account and the direction of company activities are carefully aligned.
Where to start?
Organizations have multiple tools at their disposal to set a common direction. You can start by defining the core company values, drawing ethical guidelines, conducting ESG-mapping exercises or by making a sustainability strategy. Strongly participatory processes, continuous monitoring, measurement and improvement are essential. Transparency, leadership by example, and real means for participation and contribution are also key.
Seeking outside assistant to implement projects helps to keep integrity intact, so that there is not too much temptation to sugarcoat reality and implement sustainability projects only in appearance. At best, projects undertaken only as formalities result in wasted man-hours. At worst, they undermine operations by taking away credibility from all of the organization's policies and programs. At best, sustainability projects can be harnessed for a wide range of value-adding for the organization in terms of employee satisfaction, improved reputation and finding funding opportunities.
Would you like to discuss further? I am happy to help with any CSR, ESG or Code of Conduct matter.
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- Jenna Nordman