The S in ESG: Incorporating social impacts into your business strategy
Chances are, people in your business are doing good things to make our society a better place. They build teams to fundraise for local causes. They come together to volunteer for their favourite community organization. They donate to suppliers’ employee campaigns. But are those activities unified and aligned with your business strategy, or are you missing the opportunity to harness real value while you herd all those well-intentioned cats?
ESG is all about holistic, sustainable impact. The clue is in the name – Environmental, Social and Governance sustainability. The philosophy behind ESG is that sustainability is not about doing good in one area while neglecting others; rather, it’s about incorporating sustainability as a core value that’s integrated across the entire business. An integrated ESG strategy can have positive ripple effects you may not have even considered.
Businesses have recognized the importance of making a social impact for some time, beginning with concepts of corporate philanthropy, which grew into Corporate Social Responsibility. ESG builds on these foundations to view social sustainability as a way to create value today, without robbing the ability of future generations to create value for themselves. When we adopt an ESG lens, we see business as an integral contributor to the growth of our communities. As such, businesses have rights, balanced by their responsibilities – the same social contract we expect of citizens.
More than just a moral obligation to ‘do good’, social sustainability has been demonstrated time and again to be good for business. According to global consulting firm McKinsey and Co, sustainable investment now tops $30 trillion globally (yes, trillion with a T!), up 68% since 2014. Investors are demanding that firms govern sustainably for the future, exemplified by the recent election of shareholder climate activists to the Exxon board. The equation is straightforward: sustainable practices attract capital, whereas businesses that neglect sustainability are viewed as an investment risk.
However, many businesses still see their social impact as separate from their strategic goals, rather than being an integral part of them. They consider social sustainability to be a cost of doing business, rather than a revenue driver.
Hazelview Properties is one business that sees social sustainability as an investment. Colleen Krempulec, VP, Brand Marketing & Corporate Social Responsibility, notes that while the company’s culture always leaned towards philanthropic activities, a corporate rebrand provided the opportunity to embed sustainability into the company in a way that truly aligned with the business strategy – something that investors have been enthusiastic about. “Ultimately our investors know that over the long term, it helps us build a stronger business, a more profitable business,” she says.
Krempulec also notes the extremely positive reception that Hazelview’s sustainability program has received from staff. While many staff had taken on “side of desk” philanthropic projects in the past, the opportunity to become involved in company-wide programs designed to improve the wellbeing of Hazelview residents and local communities has been exciting for the team, with many staff calling Krempulec directly to ask how they can help with the program’s roll-out. “Our team members want this to be more a part of their day job,” she says. “People want to work at a company where they’re contributing to society as part of their job.”
While the program is still in its development stage, the benefits are already being felt outside the company’s four walls, as well as amongst staff. The sales team benefit from being able to talk confidently with investors about the positive work Hazelview is doing, because social sustainability is integrated with the business strategy and is clearly communicated internally. The communications team feel confident about building Hazelview’s reputation with the media and general public, because the business has clear commitment to community wellbeing. “All of that is the potential upside to doing this work,” Krempulec says.
And her hopes for the program aren’t just wishful thinking. Studies show that nearly 60 percent of employees consider a company’s social and environmental commitments when deciding where to work, a figure that jumps to 75% for millennials, who will soon make up three quarters of the workforce. What’s more, companies with a strong ESG proposition have been shown to outperform the market by nearly 4% over a 25 year period, no small beans when you factor in the many influences on profitability over a quarter of a century.
Social sustainability programs, as part of a wider ESG strategy, can have a significant positive impact across all aspects of an organization, from culture and talent management, to media and investor relations. Of course, it’s not possible to tackle every social issue, but companies that align their social commitments with their business purpose tend to perform best against their objectives. Hazelview’s programs are well received because they conducted a significant amount of engagement with stakeholders, including residents, with qualitative and quantitative surveys feeding into program design. Other businesses that have best practice approaches in social sustainability are Maple Leaf Foods, who are investing in food security across Canada, and Ikea, whose goal is to inspire people to live healthier and more sustainable lives – both commitments which have a clear alignment to the businesses’ purpose, and support cohesive story-telling about impact.
The evidence is clear – a social sustainability program, aligned with strategic objectives, isn’t just about providing a feel good factor. It can generate a net benefit to the bottom line.
