Zooming in on the "S" in ESG

04 December 2023 / Report

The “S” in ESG (environmental, social & governance) refers to a range of issues related to a company’s impact on society and its stakeholders, and companies are likely to define “S” differently based on their size, industry sector, or location. The Conference Board held a series of Chatham House Rule discussions with senior executives to discuss the social dimension in ESG. This report presents key insights from the discussions, supplemented with the results from a survey showing how 26 companies are managing social impact strategies.

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Companies need to develop their own clearly defined narrative on the social issues most relevant to their impact on business and stakeholder groups. Even within a company, social priorities may not be aligned; for example, “S” may have a different meaning for the company’s investors than for its employees.
“S” is not simply a checklist of actions but rather a fundamental component of an organization’s culture and way of doing business. Addressing social issues such as diversity and inclusion, employee well-being, human rights, customer privacy, and community engagement requires a proactive approach at all levels in the organization that includes the input and expertise of a variety of internal and external stakeholders to ensure alignment on approach, purpose, and activities.
Company metrics need to measure positive social impact as well as risk. Many companies begin by measuring risks arising from the social footprint of the company in terms of gender diversity, wages, working conditions, etc. Over time, companies move toward measuring positive social impact—the effect on people and communities resulting from a corporate action, activity, project, program, or policy.
The “S” needs senior-level engagement and sponsorship to drive tangible progress. Senior leadership involvement leads to more resources and accountability, as well as measurable targets and greater visibility of impacts and their value to the business. A systemic approach—cross-functional collaboration among experts in various fields, such as employee relations, research and innovation, marketing, and procurement—allows businesses to incorporate social impact considerations into all aspects of their operations.
Successful integration of the “S” within companies, regardless of how it is defined, hinges on three critical enablers: resourcing, governance, and business model alignment.

Building an “S” strategy: A constant learning loop