Across the world, environmental, social, and governance (ESG) issues are at the forefront for consumers, businesses, and investors alike.
There are better and worse ways for organizations to address the “S” in their ESG agendas. A comprehensive new study by Kearney KISP (Kearney Index of Social Performance) indicates that many companies are still exploring this lesser-known aspect of the ESG landscape.
While greenhouse gas emission targets might overshadow social benefits on most companies’ ESG priority lists, the “social” aspect is gaining traction due to heightened attention from shareholders, employees, and consumers.
Today, global companies are ramping up their investments in social initiatives as part of their ESG responsibilities.
The Kearney survey shows that many companies grapple with choosing, executing, and gauging the outcomes of these programs.
Here are some pivotal findings from the survey:
Only a third of companies solicit feedback from external communities when contemplating specific projects, thereby missing crucial insights. Likewise, just one-third of companies collaborate with external experts (foundations, research institutes) to realize their social goals, leading to knowledge and experience voids that diminish program effectiveness.
Despite these hurdles, about 5 percent of companies excel in social performance by adhering to best practices. These frontrunners have consistent diversity, equity, and inclusion policies, employ diverse strategies to yield social benefits, and actively harness data to boost program outcomes. These top-performing companies might not have a singular defining trait but often have a deep-rooted commitment to community initiatives or a leadership team renowned for social advocacy.
Healthcare companies and those based in China or the UK tend to rank higher in social maturity, possibly due to regulatory parallels and distinct situations.
The survey suggests that the 602 companies analyzed will earmark over $20 billion for social initiatives in 2023, marking a 40 percent surge from the prior year, indicating an escalating commitment to both environmental and social responsibility.
To sum it up, while companies are upping their investments in social initiatives, many face challenges in effective execution and evaluation.
A select group of leaders distinguishes itself by adopting best practices and realizing positive social impacts through diverse means and data-driven enhancements.
Healthcare firms and those located in China and the UK generally exhibit superior social maturity. Overall, there’s an evident trend of companies emphasizing ethical responsibility alongside environmental concerns.
How can companies refine the way they gauge their social programs?
Companies have no choice but to monitor certain facets of social responsibility. Consider two stark examples: human trafficking and forced labor.
Companies must be vigilant against such glaringly unethical and reputation-damaging activities. Moreover, a company might naturally want to monitor and publicize any voluntary social activities that cast it in a positive light. For instance, a grocery chain donating food in underserved areas would likely want to share data on this initiative. Similarly, a global company matching its employees’ charitable contributions would have a similar incentive.
However, if a company is solely monitoring its social programs for compliance or branding reasons, it’s missing out on a primary benefit of tracking—maximizing those investments. Social impact leaders recognize tracking’s potential in this regard. They utilize the project data they collect to guide partners and grantees on best practices, enhance their social program efficiency, or refine their social strategies.
Leaders are also more inclined to assess the economic impact of their social programs using a social return on investment (SROI) approach. This is a tactic seldom employed by those less advanced in their “S” endeavors. For those on the less mature end, simpler data points are more commonly measured.