Creating value through social sustainability
Companies can be a force for good by integrating social objectives into their core strategy
AS MORE businesses prioritise sustainability objectives, there is a predominant focus on environmental and governance issues, thereby often relegating the social dimension to the background. Yet, this dimension is pivotal in shaping organisational culture and stakeholder relationships.
The social aspect of ESG (environmental, social and governance) broadly covers two sectors – talent management and societal contributions. Talent management covers traditional human resource functions, staff movement, and health and safety, as well as newer challenges such as mental well-being, diversity and inclusion, and the social contract between employees and employers.
“The ‘S’ part of ESG is essentially the human part, because without humans you don’t have a business. And under the GRI (Global Reporting Initiative) Sustainability Reporting Standards, we are talking about things like health and safety, and employee well-being,” said Dennis Lee, partner and deputy industry lead, ESG Practice, RSM Singapore.
The GRI is an independent standards organisation that helps companies understand their impact on issues such as climate change, human rights and corruption.
Businesses today are also expected to be more socially responsible in their practices and give back to society. “One value of social sustainability is the ability to connect to the community, because it’s not just about making money for your shareholders. It’s also about being relevant to your community that you’re operating in,” said Jeffery Tan, chief sustainability officer, Jardine Cycle & Carriage.
While the responsibility for elevating social sustainability spans the organisation, this effort has to be driven by the board and the senior management team. “Similar to ESG oversight, tone from the top is critical even for social sustainability. To ensure long-term success, the board and management must drive organisational change,” explained Cherine Fok, partner, KPMG ESG, KPMG in Singapore.
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“Organisations are faced with the fundamental challenge of redefining their purpose during a time of great uncertainty. Leaders will need to be keenly aware of how developments outside their organisation will impact their business strategy, including their response on social matters,” she added.
Finding value
Some companies may question whether there is intrinsic value in focusing on social sustainability. While talent is increasingly drawn to businesses with a social purpose, organisations must understand that the return on investment (ROI) for social initiatives often manifests over an extended period.
“As people today turn up for work every day to be part of an organisation that is creating impact, the S is actually quite a powerful space to focus on. The challenge is to start looking at ROI for social impact slightly differently, not something that you get immediately in the short term, but in the longer term,” said Sheela Parakkal, group head of leadership, people development and experience, Prudential. Parakkal, together with Lee and Tan, were part of a panel discussion at CPA Australia’s CFO Connect Symposium held in July this year.
Thankfully, more businesses are gradually recognising the value of investing in social sustainability. To enhance this focus, greater education and awareness will be key in helping organisations identify how they can best contribute towards addressing various social issues.
Value-driven approach
As the social aspect of ESG gains prominence, a pertinent question arises – should this focus be driven by compliance, or seen as a moral obligation to society? Experts said the answer lies in a blend of both. Certain jurisdictions, for instance, mandate corporate social responsibility contributions, but this requirement is largely driven by values and built on trust.
“Addressing the social aspect of ESG should be driven by complying with regulations, as well as by the company’s responsibility towards the community,” said Fok. In other words, regulatory frameworks serve as a guide, but it is the ethical responsibility towards the community that should be the catalyst for action.
However, shifting from mere compliance to a value-driven approach requires overcoming numerous challenges like budget constraints, management priorities, as well as cultural impediments. To overcome these obstacles, organisations will need to redefine their core objectives in an age rife with challenges such as income inequality, technological shifts and geopolitical tensions.
“The company needs to define the true purpose of why it exists. And that purpose needs to be communicated and aligned with what the people think. If you have that alignment, you then get commitment. Of course, you have to reinforce that not just with lip service, but with programmes and actions to actually get things to work,” said Lee.
The ‘S’ in ESG, though understated, is a significant cornerstone for companies striving for a well-rounded approach to sustainability. Addressing the social aspect is not just a matter of compliance, but it’s critical for long-term business sustainability. By nurturing an organisational ethos that prioritises social sustainability, companies stand to gain not just in terms of financial rewards, but also in fostering a more equitable and inclusive world.
Said Parakkal: “To continue to be sustainable, to continue to create impact in the lives of our stakeholders, we should focus on the S, making sure it’s loud, clear and central to the business strategy. And we have to make sure that’s the narrative that is being cascaded right through the organisation.”
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