“S” As In ESG
“Social” is at the heart of the organization’s culture
What does the “S” of ESG actually mean? What is indisputable, at least, is that we are talking about people and relationships between people and that the context is corporate 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 measures and working on these issues through leadership, administration, and management.
Broadly speaking, the term Social covers issues relating to people. In the past, the two more popular terms, CSR (corporate social responsibility) and sustainability, were often understood as CSR covering people-related issues. In contrast, 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 the 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. ESG can be seen as a simplifying thinking tool.
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 on the list is human rights. All of these themes are human rights, so the result is a list of human rights, with ‘human rights’ listed as a separate topic under that listing of human rights contents.
Understandably, there is little knowledge of 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 subject matters human rights include.
“Social” may also be perceived as 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 ease 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 the substantive side of social rights.
Emotions and emotional intelligence have recently begun to be highlighted more as quality factors 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 perspectives to be taken into account, which is why it is important to keep all stakeholders closely involved in CSR work. In ESG, “Social” means that consideration needs to be given to the rights and opinions of employees, customers, partners, contractors, 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 is 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 making a sustainability strategy. Strongly participatory processes, continuous monitoring, measurement, and improvement are essential. Transparency, leadership by example, and actual means for participation and contribution are also key factors.
Seeking outside assistance 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 as well as new ways of doing business.
A slightly different version of the text was originally published here.
Read the post, “E” As In ESG, on green transition here.
