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Social impact of ESG

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It is understandable that much of the dialogue regarding Sustainability is focused on the Environmental element of ESG. Evidence about the effects of climate change are in the news each and every day. But this is not simply a media issue, it is an imminent threat. … Fortunately, the climate crisis is finally getting attention across regulators, the public sector and private sector alike.

That said, the Social element of ESG deserves serious attention as well. Indeed, the COVID19 pandemic only served to highlight the importance of social issues, like workplace safety and the equitable distribution of proceeds from governmental relief payments.

Being a socially-responsible business has an obvious positive impact on reputation and brand value — but it also factors into the entire corporate culture, impacting how staff behave and how decisions are made. In addition to customers, employees and investors, all stakeholder interests are considered, with a renewed focus on society and the communities in which we operate.

Customers increasingly look at the social dimension of the companies they are evaluating for the purchase of goods and services

Employees want to be part of an organisation that observes ethical business practices

Investors are concerned about the adverse valuation of companies with poor social practices and negative social impacts. As a result, the cost of capital is higher for companies that are not socially or environmentally responsible

Society at large is more aware than ever about how company policies can positively or negatively impact their welfare. Fortunately, businesses are stepping up to contribute in meaningful ways to their local communities

One of the obvious challenges with regard to the Social dimension of ESG is defining the right metrics and making them consistent across different companies in order to evaluate both absolute and relative performance. Indeed, some companies are reluctant to disclose key metrics like diversity statistics and pay gaps. There is also the challenge that many of the reported Social “metrics” are actually a sharing of policies and business practices which make it difficult to assess the impact of those measures.

So where should companies be looking as they conduct self-assessments of their ESG Social performance?

Internally, they need to look at the demographic of their workforce to evaluate the gender (and, where possible, the ethnic) composition. This data will not only inform future recruitment and promotion practices, it will also highlight issues of equity and possible pay gaps. It is also important to look at policies that have a Social dimension, such as labour and human rights, data security and ethical codes of conduct. An additional lens is the health and safety aspects of both their products and the workplace itself to ensure that any risks are appropriately managed and that considerations have been given to accessibility.

Externally, companies must inspect their entire supply chain and hold third-party vendors to the same high standards they have adopted for the rest of their ecosystem. This includes obvious topics like compliance with the Modern Slavery Act, avoidance of child labour and physical safety for staff and customers alike. But just as important are the overall labour practices of suppliers to ensure non-discrimination and a culture that disallows bad behaviors like bullying.

Finally, all of these measures are less impactful without an explicit link to executive performance and pay. Those at the top of the company need to model the right behaviours, set and achieve ambitious goals related to all dimensions of ESG, and promote an overall corporate culture that is truly inclusive and socially- responsible.

At Delta Capita, we are committed to driving the right outcomes for all of our stakeholders and are aspiring to be best-in-class from an ESG perspective. This manifests itself in every dimension of the business and we have established performance metrics to drive progress. One of our most recent Social initiatives is to grant every employee the equivalent of at least one day of paid leave to volunteer with local charities.

We have intentionally chosen charity partners in the communities where we Iive and work — and where we are confident that our efforts will have meaningful, long-term impact. Our principal focus is on mentoring people to get into the workforce, supporting themselves and their families. This initiative has been embraced by our staff with enthusiasm and we look forward to measuring the impact of our efforts.

By Diane Eshleman, Head of Americas