The S in ESG is no longer silent. Historically playing third fiddle to environmental and governance concerns, emphasis on the social element of sustainability efforts is now increasing rapidly, not only for proven performance reasons but also in line with the growing demands of investors and customers. A recent analysis found that social-related shareholder proposals rose 37 per cent in 2021 compared with the previous year.
But while experts admit that this social dimension can be more difficult to define and quantify, they say a strong social performance builds trust, inspires confidence and promotes successful stakeholder involvement. Internally, the ‘S’ in ESG means that an organisation is actively tackling the social issues employees care about while, for consumers, a company’s progress on diversity, equity and inclusion, data security and privacy is now critical brand messaging. For employers and investors it can encompass issues as wide-ranging as industrial relations, organisational culture and ethical supply chains.
It isn’t that the planet is more important than people, it’s just that up to now how we protect it has been easier to quantify. A global ESG survey by BNP Paribas last year found that 51 per cent of investors surveyed (covering 356 institutions) found the ‘S’ to be the most difficult to analyse and embed in investment strategies.
Niamh O’Gorman, Accenture’s sustainability lead, notes the heightened focus on the social aspect of ESG as its impact gradually becomes more appreciated.
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“The environmental side, especially carbon, was quickly understood as it was at the centre of scientific research to transition to a net-zero carbon economy, and expectations on business have been increasing to take environmental action,” she says. “Measurement is a big factor here also – measuring the environmental impact is relatively easy; there are methodologies to measure and calculate emissions and improvements can be quantified. Defining the ‘S’ in a scientific way and measuring social impact is not so straightforward.”
Yet O’Gorman says that there is an increasing understanding and appreciation that the ‘E’ and the ‘S’ are “inextricably linked”.
“You cannot solve for one in isolation – policy changes need to be equitable and delivering climate change must also deliver for people,” she says.
Dr Karen Neville, who is a senior lecturer in the Cork University Business School (CUBS) at University College Cork, points out that this was recognised at Cop27: one of the objectives of this month’s Cop27 agenda, for instance, was finding solutions to climate “losses and damages” in an equitable way. “It is now recognised that losses and damages due to climate change are being disproportionately experienced by developing countries and by vulnerable groups, such as people of low socioeconomic class, migrant groups, the elderly, women and children.”
Equally, this recognition of the S factor is investor-driven, as expectations on businesses increase and investors demand increasing levels of transparency and disclosure to understand the risks facing businesses, she says. “This is also driven by a general realisation that without a stable planet, businesses cannot thrive.”
Businesses can show their commitment through dedicated initiatives within their organisations and externally, O’Gorman explains. “Internally, the focus needs to be on creating a culture of inclusion so everyone can thrive. This includes things like workplace policies, employee benefits, flexible working, and in particular a dedicated Inclusion and diversity culture and policy,” she says. “In the wider community, organisations can look to identifying drivers of inequality and take action to level the playing field. They can also provide equal opportunity by creating accessible pathways to employment. This could include apprenticeships or ‘returnship’ programmes, for example, or working with community partners to promote roles to candidates in their network. Lastly, they can create community programmes dedicated to social impact.”
O’Gorman praises Irish businesses, who she says “are making real strides” when it comes to earning their social stripes. “This will continue as the expectations on companies to be purpose-led will only increase. Numerous stakeholders are making sure, through increased pressure, that corporate commitment to social commitments are no longer up for debate.
“Sustainability serves industry, society and community. In business, our stakeholders and customers represent that community, so it has never been more critical to lead with integrity. There is ever-increasing demand to demonstrate credibility and accountability, so the onus is on us to ensure transparency, two-way conversation and clarity around our goals and how we plan to achieve them,” says Máire Fay, education programme manager at Dublin Chamber.
“Organisations must leverage the ‘S’ of ESG as equally as the other elements. This is vital to become more competitive and resilient to disruptions and market trends,” says Dr Karen Neville.
But she is less convinced of Irish organisations’ ability to effectively act on their social conscience. While Irish businesses “could be leaders in sustainability”, she tells Business Ireland, they are not there yet. “There is cross-sector recognition of a need to change and correctly align corporate objectives and strategies to deliver ESG impacts for both business and society. These are not mutually exclusive, yet organisations are struggling to do this.”
CUBS is one of many business schools working closely with Irish firms in a bid to help them achieve this goal. “CUBS has consulted with dozens of organisations, interviewed and surveyed their sustainability leaders/managers to determine organisational requirements, share and jointly develop ESG knowledge, create ESG CoP [communities of practice], and deliver an executive leadership in sustainability programme through the Irish Management Institute,” explains Neville.
The school also became a member of the UN PRME (principles of responsible management education) global network in January 2022 – Neville is chair of the working group – a United Nations-supported initiative that engages business and management schools to ensure they “provide future leaders with the skills needed to balance economic and sustainability goals”.
Business in the Community Ireland (BITCI), the leading organisation advising Irish businesses on sustainability and corporate social responsibility. Bróna Ní Chobhthaigh is head of communications and stakeholder relations with the organisation. She says that BITCI’s most recent “state of the nation” research highlighted the urgent need for a reimagining of business value to encompass more than profit.
“When value is widened to encompass societal value and impact, alongside profit, sustainability is placed at the core of business – rather than a secondary decision,” Ní Chobhthaigh says.
She explains that, traditionally, businesses have demonstrated their commitment to social responsibilities through corporate volunteering opportunities, charity partnership and local community engagement. “But as the ESG framework has gained traction we are also seeing an evolving maturity in the approach businesses are taking with regard to their social footprint.”
BITCI offers specific education and employment programmes, helping businesses in a practical way. “For example, BITCI work directly with people seeking to access the workforce – supporting over 4,000 job seekers and 80 top companies since 2000, bridging the gap between companies and people who struggle with access to employment, with targeted programmes supporting asylum seekers and refugees, people with disabilities and health issues, women returners and delivering one of the first programmes in Ireland to partner with business specifically to support employment for the Traveller community,” Ní Chobhthaigh says.
Meanwhile, BITCI’s education programmes link local companies with 231 Deis schools across the country; these aim to support literacy and numeracy programmes in primary schools, offering secondary-school students company site visits and insights into the real world of work. “This is particularly important after the pandemic and the widening gap in educational outcomes for those who attend Deis schools and don’t have supports versus those who had technology supports and home supports,” she notes.
Businesses who are looking to demonstrate an authentic embedded approach to diversity and inclusion often work with BITCI through the “elevate pledge” – a collective campaign committed to building inclusive workplaces that reflect the diversity within society and support everyone to thrive equally. More than 50 of Ireland’s top organisations are signatories, having committed to record and report on diversity profiles and to take tangible actions to recruit or retain diverse talent.
According to Ní Chobhthaigh, Irish organisations that are especially mature in their commitment also tend to seek certification under BITCI’s business working responsibly mark. “The mark provides a management system review and certification across four pillars: economic, environment, social and governance. The social pillar covers inclusive workplace, sustainable employment, community engagement and human rights responsibilities both in an organisation’s own workforce and through its supply chain.”
Accenture is a “proud signatory” of the elevate pledge and was recently recertified to BITCI’s business working responsibly mark for the fifth time this year. They have a flagship community investment programme, “Skills to Succeed”, providing employment and entrepreneurship opportunities, which has equipped 5.8 million people worldwide with workplace skills.
O’Gorman says concrete sustainability credentials are no longer a “nice to have” but an essential for a business seeking to impress prospective employees and retain their valued existing workforce, as well as satisfying the demands of customers and/or investors.
“We’ve seen this in our own business and with our clients, where for example, job candidates are asking about ESG factors in interviews. They want to know about a business’s purpose and how that translates into real action. Research shows employees are 30 per cent per cent more productive where they believe they work for purpose-driven organisations.”