A new report from The Young Foundation offers a framework to help organisations ‘take ESG strategies beyond the workforce.’ Could this be a tipping point? Sustainable Future News spoke with CEO Helen Goulden to find out.
The social element of ESG has traditionally taken a back seat compared to the environmental and governance aspects. Yet the social challenges besetting the globe today, from poverty, to diversity, to health – fuelled by inequality – could not be more stark.
Some have advocated that now is the time for progress. In July, PwC argued that as a result of consumer preferences, employee attitudes and emerging regulation, more businesses are realising how integral social issues need to be in their wider sustainability strategy. “In our view, an organisation’s purpose can only be fulfilled if environmental and social challenges to the business are considered together,” the company noted.
But how do you take such pressing, wide-ranging issues and formulate a path to tackling them? A new report has offered a plan – with a nod to established emissions frameworks.
The SME survey demonstrated the ‘rising profile of ESG’ across the business landscape
The report from The Young Foundation, a non-profit focusing on social innovation, titled ‘Quest for the S’, the report offers scopes one to four to help businesses develop their social impact and ‘take ESG strategies beyond the workforce where most social activities are currently focused.’ Scope one focuses on people; measures to provide a safe, fair, secure, diverse and well workforce. Scope two looks at suppliers; measures to enable a socially responsible and impactful supply chain. Scopes three and four look at communities and collective impact respectively, focusing on longer-term outcomes and partnership with other sectors and industries.
The report analysed FTSE100 companies’ frameworks, as well as surveying 250 SME and large UK businesses. The SME survey demonstrated the ‘rising profile of ESG’ across the business landscape, with some views entrenched and others less certain. Respondents believe their organisation understood the needs and priorities of their communities (79%), while a similar number (77%) said they understood what would have the greatest impact for them.
Yet less than a third (32%) said they invested in or contracted with businesses who could demonstrate strong social impact and value. The foundation sees this as a ‘potentially huge untapped area.’ “By bringing social value into decisions on procurement, businesses can directly contribute to positive social, economic and environmental impact while also supporting a shift in behaviour in the market to a longer-term system change, focused on positive impact,” the report noted.
The foundation works to support communities across the UK from the health sector to local authorities; hence the big picture focus. Helen Goulden, CEO of The Young Foundation, notes that now is the right time to tie the loose threads.
[The S in ESG] it’s a bit neglected, it doesn’t really understand its place in the world
“Some places are better than others – some of the big, combined authorities, some of the bigger players – but often they’re just not seen as part of the story,” Goulden tells Sustainable Future News. “We fundamentally believe that they are a big part of the story.” Goulden notes a recent conversation in which she was told the ‘S’ in ESG was like the ‘classic middle child’. “It’s a bit neglected, it doesn’t really understand its place in the world,” she explains.
There are plenty of wider frameworks and metrics which currently exist. Many of the latter were noted in companies’ annual reports and, subsequently, in The Young Foundation analysis. This includes the Dow Jones sustainability index, and ESG ratings from MSCI and Sustainalytics among others. For social value specifically, the TOMs framework (themes, outcomes and measures) is an example of a UK-wide measurement standard which started as a solution for the Social Value Act, which came into force a decade ago requiring public service providers to think about how they can also secure wider social, economic and environmental benefits.
Goulden notes the positive impact of such frameworks, but argues that some missing links remain. “You’ve got the TOMS framework for the Social Value Act and the way in which [the] public sector procures, that attaches both a set of things that you might do to create social impact and then attach a cost to them,” says Goulden.
“What you’re really doing is measuring inputs and outputs,” she adds. “You’re basically saying ‘I can employ five ex-offenders, and then basically demonstrate this financial value or social impact’, which is fine. I don’t want to take away from that. But if you look at the scale of the challenges we have in our society, that’s not really social impact, as far as I would consider it to be. It’s just a broader set of corporate social responsibility.”
There are ‘very well developed’ indices for areas such as wellbeing, social fabric and social capital, but Goulden argues they are ‘fundamentally disconnected to the story of social value.’ Goulden cites Stoke-on-Trent as an example of more connected thinking. More than three in five adults in the city have a reading age of 11 years or under, and as a result, businesses are coming together to focus on literacy.
“What we’re really interested in is connecting those big, long-term measures of change on social indicators – and then thinking about how you map that to a collective notion of impact on a business,” adds Goulden.
As the report lent on one familiar concept with its scoping framework, it nudges another in its conclusion of a just transition, borrowed from the COP events as a way of achieving a sustainable society and economy in a way which is inclusive and fair for everyone.
Don’t hit all your targets and miss the point
It is wide-ranging, and certainly a hard task, but Goulden advocates a ‘progress, not perfection’ approach for now. “Anybody interested in expanding beyond the workforce, and beyond how you influence your own supply chain – really listen to your stakeholders,” explains Goulden. “Whether your employees – but your employees as people, rather than employees – or communities; just being able to understand what the broader mood music is telling you about what people think your responsibilities are.”
Achievement is important, but so too is authenticity. “Don’t hit all your targets and miss the point,” says Goulden. “There are some things that intrinsically, if they are aligned to your purpose and your sense of leadership, you will advance on them – even if you might not be able to say today it’ll do this to your bottom line, or it’s this quantifiable amount of social impact.
“The people that we’re working with a lot are entering that really tricky territory of understanding the trade-offs that you have to make, and how you make those trade-offs,” Goulden adds. “It’s difficult enough when you say ‘if we do this to achieve our net zero target it’ll have this impact on our profitability’, because it’s not always an upside. If you introduce a social dimension to that, so you’re actually triangulating three things rather than two, it does become a really interesting question.
“That’s where social value could end up losing out unless you’ve got that really long-term goal and vision for where you want to get to.”
Full report from The Young Foundation below.
