Taking a Strategic Approach to the ‘S’ in ESG: Creating a Social Impact Strategy

In recent years, the concept of sustainability has transcended a solely environmental focus to encompass a much broader set of considerations. While the ‘E’ in ESG has received significant attention, effort, and investment from regulators and organizations alike, the ‘S’ pillar, which pertains to social sustainability and social impact, is equally essential for organizations to address.

With increased regulatory accountability when it comes to ESG, we also see shifting priorities and increased scrutiny from investors, customers, talent, and community stakeholders. This is influencing the extent to which organizations are expected to report and act on their social sustainability activities and social impact.

Estimating the scale of change

Social sustainability is about developing prosperous organizations while aiming to ensure that current and future generations can thrive, live healthy lives, and be free of inequity and oppression. This involves proactively identifying and managing business impacts on employees, workers in the value chain, customers, and communities. It encompasses a company's commitment and activities related to issues such as human rights, DEI, labor practices, and community engagement, among others.

Social impact goes hand in hand with social sustainability but refers specifically to the positive and negative impact of an organization’s activities on stakeholders and society at large. Social impact involves measuring and understanding the tangible impacts of an organization’s activities on people.

By embracing social sustainability, organizations can attract business partners and investors, enhance employee morale and engagement, drive innovation to unlock market opportunities, and even bolster financial performance. Integrating social impact into business strategies not only advances ESG agendas but also contributes to the overall sustainability of the business.

Social impact strategy

Managing the impact of an organization on society is a complex yet important task. Ensuring that your organization’s social sustainability activities are having the desired impact and are aligned with broader business goals, requires a strategic approach. This is where a social impact strategy comes in, as it can transform how a company operates and its relationships with suppliers, communities, and customers.

What is a social impact strategy?

A social impact strategy is a comprehensive plan crafted by organizations to generate, measure, and connect positive social change to their activities. It involves creating measurable goals for social good, engaging all stakeholders, and aligning an organization's brand mission, operations, and desired social impact. This approach is essential for aligning social impact with overall business and ESG objectives. An effective social impact strategy should:

1. Have clear objectives and outcomes

Defining clear objectives and outcomes allows organizations to focus their resources on the initiatives that have the greatest potential for impact, rather than spreading efforts across many potentially less effective projects.

Objectives and outcomes provide a framework for measuring progress and impact. Choosing the right success indicators is essential as it can allow the organization to measure progress on its goals and progress toward meaningful outcomes. By defining what success looks like, organizations can track their performance year over year, adjust strategies as needed and demonstrate accountability to stakeholders.

2. Align with overall business strategy

Alignment with existing business priorities, such as brand and strategy, can help maximize social impact, ensure alignment with organizational values, and ultimately drive sustainable change.

A social impact strategy can, for example, help reinforce brand values and mission by creating a coherent narrative that resonates with stakeholders. This alignment can enhance trust, loyalty, and engagement with customers, employees, investors, and the community at large.

Aligning social impact with overall business strategy allows organizations to make informed decisions that can benefit both the bottom line and society, allowing them to identify opportunities for growth, innovation, and competitive advantage while driving positive change. 

3. Address the needs of key stakeholder groups

It is important that a social impact strategy demonstrates that the organization understands how its activities could impact these groups. Stakeholders could include employees, investors, community groups, business partners, suppliers, and customers. Engaging stakeholders in development helps organizations tailor their social impact strategies to address real-world challenges and opportunities. It also helps ensure that the strategy effectively is truly impactful.

4. Take a long-term, sustainable view guided by data and measurement

Taking a long-term view helps organizations shift their perspective from short-term gains to sustainable outcomes. One way to do this is by leveraging data and applying a social impact measurement approach.

Social impact measurement is an ongoing process that requires regular data collection, analysis, and feedback to track progress, identify trends, learn from successes and challenges, and adapt strategies accordingly. Not only can this support informed decision making and strategizing, but it can also identify gaps in an organization’s approach or areas where they are not having the desired impact over time. This provides the organization with opportunities to make changes as necessary, ultimately making their approach more sustainable.

Getting started

While social impact strategies are multi-faceted, getting started doesn’t have to be daunting. To get started on creating a social impact strategy, begin by asking the following questions designed to support a detailed and effective approach:

What makes addressing social impact important for your organization? 

It is important to understand what the internal and external drivers of social sustainability are for your organization. To do this, seek answers to questions like these:

• What political or economic factors are influencing sentiment and activities in your market?
• How are social behaviors and expectations changing, and how might that affect your business?
• What are new or imminent reporting standards or regulations that may affect how your business operates?

Taking more of an internal focus, it is important to understand things like:

• What workforce issues currently exist?
• How would I like the brand to be recognized in the current landscape?
• What role does social impact play on my overall business strategy?
• Which of my business activities have the greatest social impact?

Who needs to have a say? 

When developing a social impact strategy, identifying key stakeholders is an important step. Here are a few things to keep mind:

• Take a detailed view and identify stakeholders from across domains (e.g., employees, investors, community groups, business partners, suppliers, customers and regulatory bodies).
• Incorporate stakeholders who may not typically be included in discussions but may be indirectly impacted by your organization’s activities.
• Once identified, determine how stakeholders differ according to impact, influence, interest, or needs to tailor communication and engagement strategies effectively.
• Begin to communicate and engage with stakeholders through channels like emails, calls, meetings, events, newsletters, social media, or blogs.
• Seek to build trust, rapport, and mutual understanding with stakeholders by informing, consulting, involving, or collaborating with them.

By identifying a broad list of stakeholders and aligning with their needs, social impact initiatives can become more relevant, sustainable, and responsive, to changing circumstances over time.

What is my organization already doing? 

Take account of all the current social impact actions and initiatives across your organization. Here are a few things to keep in mind:

• Consider the activities your organization labels as social impact as well as the social impact of your operational activities (i.e., how does the work you do impact your employees, environment and community directly or indirectly?).
• Collect and review available data, organizational reports and engage with all business lines to understand what they are doing and what impact it is having.
• Assess where your strengths and opportunities are. This can help provide you with a starting point as you begin to develop your social impact strategy.

By prioritizing social sustainability in a strategic manner, companies can demonstrate their commitment to ethical business practices, meet shareholder expectations, and contribute to a more sustainable and inclusive world. By embracing social impact, they not only drive meaningful change but also position themselves as leaders in a rapidly evolving, competitive marketplace.

 

This article was written by Corinne McNally, Ramsha Ahmed, Oriana Vaccarino and Silvia Gonzalez-Zamora from 3BL Media and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.