As Environmental, Social, and Governance (ESG) continues to be a critical consideration for investors (and therefore for businesses), the ‘S’ is becoming a more significant pillar to focus on.
Social performance evaluates the relations a company has with its workers, customers, suppliers, and the local community it impacts. This covers social capital and human capital, with the most important topics including, human rights, diversity and inclusion, health and safety, and training and development.
Measuring social performance is not as clear cut as environmental or governance
Unlike some other straightforward KPIs used to monitor sustainability performance such reduction of CO2 emissions, social aspects are not as easy to measure due to their intangible nature, making them difficult to quantify. For example, how do we appropriately measure inclusion? How can we best measure the performance of training and development initiatives?
The complexity means that measuring social data change and translating them into meaningful KPIs for investors is difficult. The simplicity of the SASB framework for ESG (including social topics) explains the rapid adoption of the standard – 28% surveyed had SASB integrated in 2020, up by 7% from 2017.
Coronavirus – a gamechanger
We are just beginning to see the consequences and impacts of the pandemic emerging in today’s culture. Studies now have some sort of timespan to base their analysis trends, such as Berenberg’s UK Exploring Investor Sentiment 2021 survey that labels the pandemic the biggest driver for the shift in focus on social issues. 47% of investors considered the ‘S’ aspect the most important when making decisions, overtaking ‘E’ at 35%.
The pandemic has also interestingly increased awareness in the nexus between workforce wellbeing and business performance, operational resiliency, and therefore sustainability. New aspects such as general job uncertainty, unusual working styles and employee burnout (which would traditionally fall in the domain of occupational health and safety) is helping develop the concept of health and safety further to reflect the changes in society. We started off with safety functions, progressed to health and safety, and now when we speak about this area we are talking about safety, health and wellbeing - a function used by the healthcare company Roche, for example.
Health and safety has however, always been a crucial topic and historically, one of the first key non-financial performance indicators to have surfaced for the heavy industries (oil/gas, construction etc.) For obvious reasons, indicators such as lost time injuries (LTIs) and fatalities are essential metrics of performance for these industries. GlobalData’s ESG in Construction 2021 survey showcases this still, as health and safety was selected as the most significant ESG concern, with 51% of respondents marking improving health and safety on sites as top focus.
It might have taken a pandemic for companies to consider wellbeing a core social and sustainability topic, but the connection between employee wellbeing and business resilience is clear.
Not managing social factors will harm your financial performance
EY say that businesses that manage their social and human capital can help create long-term value by highlighting dependencies and risks, improving decision-making, and promoting meaningful communication and engagement with a broader range of stakeholders.
Failing to address social impacts can decrease investor confidence, damage reputation, and bring legal and regulatory fines. Deliveroo for example, saw a 26% drop in share price when it floated in March this year - after expressed investor concerns over the treatment of its workers.
Amazon was also included in COSH’s “Dirty Dozen” list of most dangerous employers in the US earlier this year, reporting six fatalities and hundreds of injuries due to the breakneck pace of next-day delivery. Worker safety has been dubbed by CNBC as one of Amazon’s biggest and hardest to solve issues, with injury rates for delivery drivers being 50% higher than UPS drivers, and regular workers being twice as likely to be injured on the job as Walmart workers.
Take action in assessing your social impacts
Social topics are becoming more pertinent as sustainability continues to significantly shape our culture. What was previously accepted socially may no longer be accepted now. Therefore, the way we conduct business is also changing, with performance now explainable through financial, environmental, and social metrics. Companies must give appropriate attention to the ‘S’ if they wish to evolve with the changing world.
Here at Emex, our sophisticated solution supports clients in assessing social impacts through the management of their sustainability data. Our platform enables companies to:
- Perform materiality assessments
- Determine social metrics
- Collect quality data from social and human capital surveys
- Track social initiatives
- Develop dashboards
- Share social reports with all stakeholders
Measure the social impact of your business and
enable your ESG strategies with Emex.
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