· 6 min read
ESG has become a battleground. Once a beacon of responsible business, it is now facing a barrage of criticism, with some companies rolling back commitments and politicians decrying "woke capitalism." While the "E" (environmental) and "G" (governance) rightfully command attention, it is the "S" (social) that holds the key to ESG's redemption and, ultimately, its success.
Why? Because the "S" is fundamentally human. It is about people, communities, and the very fabric of society. In a world increasingly defined by social inequality, distrust, and polarisation, ignoring the "S" is morally questionable and strategically shortsighted.
The current ESG backlash: A symptom of neglected social issues
Much of the current backlash stems from a perceived disconnect between ESG's lofty ideals and the lived realities of everyday people. Critics argue that ESG prioritises abstract environmental targets over tangible social issues like job security, affordable housing, and access to healthcare.
This perception creates fertile ground for populist rhetoric that paints ESG as an elite agenda out of touch with ordinary citizens' concerns. Furthermore, the focus on quantifiable metrics, often skewed towards environmental impacts, has overshadowed social performance's more nuanced and qualitative aspects.
This has led to a situation where companies can boast impressive carbon reduction figures while neglecting systemic issues like workplace discrimination or supply chain exploitation.
Amplifying the "S": A path to rebuilding trust and resilience
To counter the current headwinds and restore faith in ESG, we need to shift the focus towards a more robust and integrated approach to social performance. This means:
• Prioritising stakeholder engagement: Move beyond shareholder value to genuinely engage with all stakeholders, including employees, customers, suppliers, and local communities. Understand their concerns and incorporate their perspectives into decision-making.
• Addressing social inequality: Tackle systemic issues like income inequality, racial injustice, and gender disparity. This requires going beyond surface-level initiatives and implementing concrete policies that promote equity and inclusion.
• Investing in human capital: Recognise that employees are a company's most valuable asset. Invest in their well-being, provide fair wages and benefits, and create a safe and supportive work environment.
• Building strong community relationships: Support local communities through philanthropic initiatives, partnerships, and responsible sourcing practices. Foster trust and build long-term relationships that benefit the company and the community.
• Measuring social impact meaningfully: Develop robust and transparent metrics that capture the true impact of social initiatives. Go beyond simple output measures and focus on outcomes that demonstrate tangible improvements in people's lives.
• Transparency and accountability: Publicly disclose social performance data and be accountable for progress. Embrace transparency as a tool for building trust and demonstrating commitment.
The "S" as a strategic imperative
Amplifying the "S" is not just a moral imperative but a strategic necessity. Companies that prioritise social performance are better positioned to:
• Attract and retain talent: Employees increasingly want to work for companies that align with their values
• Enhance brand reputation: Consumers are more likely to support brands that are committed to social responsibility
• Mitigate risks: Addressing social issues proactively can help prevent costly reputational damage and legal liabilities
• Build resilience: Strong relationships with stakeholders can help companies navigate challenging times and adapt to changing social and economic conditions
• Drive innovation: Diverse and inclusive workplaces are more likely to generate creative ideas and solutions
What does good look like?
Some examples of companies that are amplifying the 'S' in ESG through their social impact initiatives:
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Cisco systems inc.: Cisco has significantly contributed to community programs, amounting to $477 million. The company focuses on bridging the digital divide by providing technology and resources to underserved communities.
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Npower: This nonprofit organisation is focused on advancing equity in the tech industry. They emphasise the importance of social impact through their mission to bridge the digital divide and provide tech training to underserved communities
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White & Case LLP: This international law firm has joined forces with Refinitiv and other industry partners to emphasise the importance of social criteria within ESG investing. they have published a white paper to debunk myths and provide practical actions to strengthen social metrics in investment management
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Refinitiv: Leveraging social indicators from over ten thousand companies globally, Refinitiv examines industry approaches to identify thematic indicators that capture social impact. Their work highlights the significance of social themes such as inclusion, labour standards, and human capita
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Tata power: TP Renewable microgrid, a wholly owned subsidiary of Tata power, uses a shared value-creation approach for community engagement. This creates an ecosystem enabling local communities to use microgrids' benefits for overall socio-economic development, amplifying India's efforts to provide reliable and clean power to rural communities currently dependent on fossil-based power.
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Iberdrola: Iberdrola’s convive programme20 has three main action areas: 1) contributing to socio-economic development; 2) protecting and enhancing biodiversity; and 3) improving the impact of renewables and the social acceptance of the energy transition through third-party partnerships
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Adidas: Adidas's corporate responsibility structure is built on three pillars: community involvement, employee engagement, and corporate giving. The company supports various social initiatives, including promoting physical activity and education in underserved communities.
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Equitable origin: This non-profit is bridging the digital divide by expanding amazon connectivity through partnership with the internet society foundation and techsoup.
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Mission 300: Mission 300 aims to bring electricity to 300 million africans by 2030 through African leadership, increased funding, and accelerated partnerships to close the energy access gap and help African communities build better lives. the ambitious initiative will combine increased infrastructure investments with comprehensive policy reforms across the entire electricity supply chain
These companies demonstrate how integrating social sustainability into their core strategies can positively impact society while enhancing business operations.
Moving forward: A call for action
In the face of the current backlash and rollback of ESG ambitions, amplifying the 'S' in ESG offers a pathway for companies to demonstrate their commitment to social sustainability. Embracing the 'S' in ESG advances sustainability agendas and contributes to society's well-being and the business's sustainability.
By adopting a strategic approach, engaging with stakeholders, measuring impact, and integrating social initiatives into their business strategy, companies can navigate the challenges and create lasting positive change. It is time to move beyond rhetoric and embrace a more holistic and human-centred approach to ESG.
The current backlash against ESG presents a critical opportunity to redefine its purpose and strengthen its impact. By amplifying the "S," we can create a more just, equitable, and sustainable future for all.
Let us demonstrate that responsible business is not just about environmental targets or financial returns but about creating a world where everyone can thrive with dignity and respect.
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Illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
