Using an ESG Strategy to Drive Social Impact

Environmental, social, and governance (ESG) strategies have become an integral aspect of organisations’ business plans.

The benefits are too great to ignore. Recent research from McKinsey found that the majority of c-suite executives and investment professionals agree that ESG programmes create shareholder value and benefit organisations of all sizes – critical for impacting lasting change and sustainable growth.

However, there is an argument that the true strength of an ESG strategy lies beyond the bottom line. The ‘S’ in an ESG strategy stands for ‘social criteria’ and addresses the fact that an organisation operates within a broader, more diverse society. It also considers the idea that a business has a responsibility not only to its employees, but to the world at large. That begs the question - how can organisations use an ESG strategy to drive social impact?

A Force for Good in a Changing World
Between rising energy prices, climate change, and an ongoing global pandemic, there can be no doubt that we’re facing challenges the world has never seen before. Where ‘sustainability’ once meant reducing paper usage and turning off the lights after leaving the room, it’s now extended to include all aspects of a business, from employee happiness to ethical procurement to reducing overall carbon emissions.

The expanding definition of sustainability allows businesses to introduce social criteria – the programmes that improve an organisation from the inside out. This aspect of an ESG strategy can help businesses develop the
following:

• A staff wellbeing strategy: according to the Thrive at Work report issued by the UK government, poor mental health costs employers between £33 and £42 billion each year, and the effects reach far beyond the profit margin. Burnt out employees are less productive and more likely to report feelings of depression. Therefore, many businesses choose to implement mental health programmes to combat these effects and ensure staff wellbeing as part of an ESG strategy.
• A positive community impact: recent research from Accenture examined post-pandemic consumer behaviour; specifically, what makes a consumer more likely to purchase from one business rather than another. According to the study, 60% of consumers are more likely to purchase from a company that treats its employees well, has strong ethical values and a transparent strategy to improve the environment. Even more interesting? Thirty-eight percent of consumers are more likely to buy from a brand that gives them a sense of purpose and community. The social value function of an ESG strategy has two objectives: to improve the lives of company employees, and to improve the community surrounding the organisation. Many ESG strategies include volunteering clauses, paid internships and apprenticeships, but the most effective strategies offer creative solutions. For example, many of the businesses need employees with degrees and expertise in the Science, Technology, Engineering and Maths (STEM) field. Some organisations have chosen to solve this problem at the source, visiting schools, educating, and encouraging children of all ages to pursue careers in STEM. These organisations are investing in the communities around them – and in some instances, have invested in future employees.
• Social value and government contracts: social value is nearly impossible to quantify without key touchpoints, and the UK government has done its best to circumvent this problem. The recent legislation included in PPN-06/20 outlines the ways that organisations can measure social value within its programmes. In brief, these include:

- Opportunities for employment: creating programmes that require additional resource
- Opportunities for entrepreneurship: organisations offering support, whether financial or through mentoring smaller businesses
- Opportunities for innovation: organisations pledging to stay open to new ideas and technologies, and providing the support to enact them
- Opportunities for education: organisations funding further education for employees or research to improve social value

Assessing Social Value: The TOMS Method

Much of sustainability revolves around perceived social value. One of the most challenging aspects of my position is helping organisations identify and understand the measures that can make a difference, and how to measure and report the value of making these changes. A commonly implemented method applicable to all sectors is the TOMs method – a themes/outcomes/measures system that holds campaigns to account:

• Themes: the ‘themes’ are the visionary parts of a business’ sustainability goals – the social value areas that mean the most to them, and the ones that they wish their business to focus on. When assessing social value, I recommend that organisations look first to themes, and ask the question – what does the business want to be known for?
• Outcomes: the ‘outcomes’ of a social value campaign are (broadly) the results that a business can expect. For example, a theme might be ‘Promoting Social Innovation’, but an outcome would be ‘support responsible, and sustainable business’ or ‘a happier, more engaged organisation’.
• Measures: finally, we have the ‘measures’, or the quantifiable actions that businesses take to deliver the outcomes. This could be the amount of carbon emissions saved on a contract, or the number of local jobs created, or hours by staff spent volunteering for charity.

Are you curious about an ESG strategy or ways to make your organisation more sustainable? I’m passionate about helping businesses of all sizes prioritise the world around them and futureproofing their business. For more information, get in touch today.