April is Earth Month and to mark the occasion, Vena is looking at ESG--environmental, social and governance. Throughout the month, we'll be exploring how to integrate ESG principles into your organization.
By now, most organizations see the value of good corporate citizenship. In fact, a majority of businesses have some sort of environmental, social and governance (ESG) program in place.
Just look at a 2022 survey done by Deloitte for proof. They found that 57% of executives have implemented a cross-functional working group to drive strategic attention to ESG. Another 42% were making moves to do the same. Those leaders were introducing new roles and bringing in technology to support their efforts, underlining the importance they saw in ESG.
But for many of those businesses, the prime focus still seemed to be on the "E" of ESG: that is, their environmental impact. The chief sustainability officer took primary responsibility for ESG disclosure in 42% of the businesses surveyed.
While environmental programs are obviously critically important, what about the "S" in ESG? How can businesses bring emphasis to the social side of ESG and become good corporate citizens all around? For that matter, what does a socially conscious corporate citizen even look like?
Let's take a look.
As most of us know by now, the "S" in ESG stands for "social"--as in the social impact your business has on the world around you. And over the last few years, we've seen more and more businesses prioritize their social impact.
This includes some of the biggest brands in the world. Ben & Jerry's backed Black Lives Matter. IKEA advocated against child labor. Coors Brewing Co. has supported LGBTQIA+ rights.
In a lot of ways, it just makes good business sense. Customers are putting more value on issues such as diversity and inclusion, health and safety, human rights and ethical business practices--meaning businesses need to as well. And world events and causes such as the pandemic, Black Lives Matter, the war in Ukraine and issues around LGBTQIA+ rights have only served to bring these issues more and more into the forefront.
The more inequality people see in the world, the more they want to do their part to support the social causes that will change it. And businesses like yours are being asked to play a role as well.
But why should this matter to your business? Why should you care about these kinds of social justice issues at a corporate level?
There's reason number one, of course: It's simply the right thing to do. To build a better world, those with a voice should do what they can for those with less of one, and businesses have more of a voice than the average individual.
But there are other reasons your organization should care about social change, and do what they can to support social issues. Below, we explore how those reasons can affect your bottom line.
13% of customers say they'd pay 31% to 50% more to businesses they believe are making a positive impact on the world.
A lot of customers today want to shop ethically--meaning they'll look to do business with organizations that support diversity, human rights and other social issues. In fact, in their 2021 Consumer Intelligence Series survey, PwC found that 76% of consumers are more likely to buy from a company that stands up for social issues. Another survey found that 13% of customers would pay 31% to 50% more to businesses they believe are making a positive impact on the world. And through social programs and transparent reporting, you can show them that you're exactly that type of business.
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Source: PwC
Many employees actively search out diversity, equity and inclusion (DEI) and other socially progressive programs when they're deciding on new job opportunities. In fact, the PwC report found that 83% of employees are more likely to work for a company that stands up for social issues. And when McKinsey & Company surveyed employees across backgrounds, they found 39% had turned down or decided not to pursue a job because of a perceived lack of inclusion. So if you have active programs in place and show you take them seriously, you could be putting yourself in a better position when it comes to recruiting top talent and retaining your existing employees.
Investors commonly use ESG information as another part of their investment decision making.
"Until the mid-2010s, few investors paid attention to environmental, social and governance (ESG) data," the Harvard Business Review explains. Today, though, investors commonly use ESG information as another part of their investment decision making. Some might be focused specifically on your environmental impact, but others highlight the importance of social impact and how your business is contributing to the wider world. Investing in your social programs can affect how much they invest in your business. "As more investors look to put money into companies with stronger ESG performance, larger pools of capital will be available to those companies," the Harvard Business Review explains.
It's clear why the social side of ESG has become more important for businesses. But the next question is, how do you begin to integrate it into your organization's underlying values? To answer that, let's first look at how socially conscious organizations evolve.
Building a socially responsible organization is an evolution--one that involves collecting data, measuring your results and creating a culture of continual improvement.
Rome wasn't built in a day, and neither is a sophisticated socially impactful business. Building a socially responsible organization is an evolution--one that involves collecting data, measuring your results and creating a culture of continual improvement. As you introduce social programs and evolve them, here are the five stages of corporate citizenship you can expect to follow:
You'll start by taking baby steps. At this point, your programs are still undeveloped and leadership is often indifferent or uninvolved. In fact, your social policies and processes may largely just be a matter of compliance and lip service--all about obeying the law and protecting your reputation. But you're still making moves, and it doesn't stop here.
At this stage, leadership becomes more supportive as they begin to better understand the importance of social responsibility. The main goals are still to mitigate risks to your organization's reputation, protect against possible litigation and react to market or industry trends, but you're also doing more information gathering and getting staff involved.
This is where your business begins to fully embrace their role as a corporate citizen, taking a more comprehensive approach and getting more deeply committed. You're trying to learn more, do more and talk to a more diverse set of stakeholders and experts, while building more of a business case for good corporate citizenship by putting set criteria and metrics in place.
Corporate citizenship, at this stage, has become a strong part of your core business values. It's embedded into all areas of the organization, with key performance indicators (KPIs) and performance monitoring in place to help you continue to build on your successes and learn from your failures. And you're also embracing transparency, by reporting on your ESG endeavors.
This level is reserved for those businesses that are visionaries, reshaping what corporate citizenship looks like. Corporate citizenship is a defining part of your brand at this point and you embrace full disclosure and transparency. You likely also partner with other businesses, nonprofits and community groups to move your mandate forward.
So how do you begin making a stronger social impact as a business and start progressing through the five stages of corporate citizenship? Here are a few suggestions to get you off the ground:
To make a more positive impact, start by talking about how you can do better--and encourage honest conversations throughout your organization. By creating a safe space for discussion, you'll help create more of a force behind the positive impact you're trying to have, build a collaborative environment for change and get ideas from across departments. This might come in the form of organization-wide information forums, executive-led discussions and/or employee resource groups (ESGs) focused on social issues.
The most ethnically diverse organizations outperformed those with the least diversity by 36% in profitability.
One way those conversations thrive is by introducing different voices to the table. And that starts by hiring a diverse workforce. Setting DEI targets is a good start to introducing a social mandate to your organization--and for more ways than one. Not only does it show you're serious about having a positive social impact and helps all employees feel like their voice belongs, but those diverse voices have been shown to be better for business as well. McKinsey & Company found that the most ethnically diverse organizations outperformed those with the least diversity by 36% in profitability.
If you want to evolve beyond lip service and show your customers and stakeholders you're ready to take action, you need to look closely at your business practices and begin to make changes. Creating a positive impact and an ethical brand means aligning all of your operations, product development and marketing practices with the core values of your business. For instance, treating your workers right, abiding by fair trade policies, supporting local suppliers and offering fair compensation. Socially focused KPIs can help get you there--for example, consider introducing metrics related to:
These kinds of changes don't happen overnight, of course. But by putting a plan in place and working towards it, you're showing your team, customers and investors that you're serious about change.
And that's just the start. Embracing transparency around your successes and your failures, investing in a socially responsible way, giving back to the communities you impact and advocating publicly for the issues you believe in can all help you build your brand around your values. The more you do, the more your corporate citizenship will become intertwined with your brand's identity as a whole.
Changing the world is never going to be an easy job--but the more people that get involved, the more chance that change will have to grow. And businesses can have a major impact. By introducing good corporate citizenship and putting the right social programs in place, you can be a force for social good.
It's not only the right thing to do anymore. Today, it's also a good way to do business.
Download your ESG Reporting Template from Vena today.
