Social responsibility has become a priority trend for organizations internationally. Most S&P 500 companies indicate that positive social impact is an essential factor in brand strategy and major investors are shifting their portfolios towards sustainable financial products.
CSR and ESG concepts
In a company everything is measurable even sustainability, because what is not measurable cannot be improved. In this way, social impact becomes a quantifiable variable through 2 concepts:
1. CSR: Corporate Social Responsibility. This describes the way in which private companies regulate themselves in order to allocate part of their profits to social objectives for the community. Currently, legislation in many countries has been tightened, forcing companies to contribute beyond strategic purposes such as brand reputation.
2. ESG: Environmental, Social and Governance. These three criteria encompass the practices that an organization has to comply with to ensure its sustainability. How the company's activities affect the environment; and what impact these activities have on the community in terms of diversity, education or human rights, are two of the main questions that these metrics try to find out.
The big challenge companies face in being a sustainable business, in the broadest sense of the word, is related to the balance between ESG priorities and financial objectives.
Areas of business intervention
Companies' key stakeholders (shareholders/investors, customers and employees) are leading the movement towards sustainability. Indeed, in many cases they are demanding it.
Investors are calling for social objectives, consumers are increasingly sensitive to socially responsible brands, and employees are requesting fairer working conditions that also allow for a work-life balance.
This trend will be consolidated in the medium term in all large companies in any sector, establishing their priorities according to the activity they carry out.
An energy company can reduce its emissions and those of its supply chain to reduce its direct and indirect environmental impact. Or an industrial company might include ESG metrics on accident reduction to add value to the safety of its facilities.
Other examples of intervention would be investing in community areas through education, employability, health or human rights.
Companies striving to put people first
A business is not just about generating jobs and paying taxes. A company is an economic and social dynamo of a territory, as small as a village or as large as a country.
We all associate the IKEA furniture brand with Sweden without hesitation; it is part of the country's external image to which it adds a beneficial value of awareness.
Or to take another example, LEGO, the toy company for children and not-so-children, which is still headquartered where it was founded in the town of Billund, Denmark and built an airport there in 1964 – now public – and a Legoland theme park. Do these Nordic companies have anything else in common?
Both show a strong commitment to society and try to generate as much positive social impact as possible. Initiatives that in LEGO's case are obviously focused on children, whereas IKEA focuses on equality and inclusiveness.
Social impact is beneficial for everyone, but...
We must not lose sight of the fact that even the most sustainable company from an ESG point of view has to be able to secure jobs in the first place, because if it does not have positive results, it will not have the financial muscle to invest in social work.