Understanding the social component of ESG is crucial for businesses today

While climate change has rather monopolised headlines in recent years, the social element of ESG[1] – the S – seemingly has steadily been gaining ground, and, since Covid-19, has definitely moved more into the limelight.

19 Oct 2020 . 2 min read

This imbalance between the E and the S is partly because the latter is that much harder to assess. Corporate social responsibility goes beyond the most obvious aspects such as workers’ rights, gender pay equality and diversity. It comprises all corporate interactions with suppliers, lawmakers, customers, communities and society as a whole.

It means protecting employees’ physical and mental health, but also ensuring that suppliers’ working conditions and workforce composition are sound.

Getting the S in ESG right means supporting diversity and inclusion; black, Asian and minority ethnic (BAME) equality, LGBTQ[2] rights and social mobility. These create long-term social benefit and diversity of thought.

And they bring commercial advantages, too. There’s plenty of evidence that socially responsible companies are better equipped to deal with major crises, such as the Covid-19 pandemic[3].

Companies with a strong ESG focus continually assess long-term and emerging risks, helping them to draw up contingency plans. As part of their focus on the “S” they also engage more regularly with their stakeholders, understand their needs and communicate purpose. All this improves business resilience and attracts customers.

Ignoring stakeholder risk, on the other hand, can turn out to be costly. Boycotts and social-media storms destroy sales, reputation and recruitment.

That is why it is so important to get the S in ESG right

Notes

[1] ESG Environmental. social & governance

[2] LGBTQ Lesbian, gay, bisexual, transgendered & queer/questioning

[3] https://www.spglobal.com/ratings/en/research/articles/200420-the-esg-lens-on-covid-19-part-1-11444298

Sustainability

ESG