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Reframing the narrative on ESG: forget ‘Social’, think ‘Society’

Company leaders who ignore the “S” in ESG (Environmental, Social and Governance) are missing out on an opportunity to increase their bottom lines, argues Carmen Garcia AM.

Mar 18, 2024, updated Mar 18, 2024
Globally, ESG leaders had annual returns of 12.9 per cent versus 8.6 per cent for slackers.

Globally, ESG leaders had annual returns of 12.9 per cent versus 8.6 per cent for slackers.

Understanding the environmental and governance aspects of ESG is fairly straightforward since companies and consumers can see many of the environmental changes ­– think going paperless – and most governance is enshrined in law.

The “S” in ESG, however, is not so well defined.

Companies who avoid activating the “S” tend to do so because the word “Social” for many is associated with “charity”. As disappointing as this is in my world, this is what we regularly come across in the boardroom.

There is an unconscious assumption that to succeed in social means companies have to spend money for little measurable return.

Sometimes, I even hear business leaders reference ESG as “environmental, sustainability and governance”, dropping the social aspect altogether.

What’s more, unlike environmental credentials, social or inclusion credentials in the procurement world remain ad hoc across government and major companies, which perpetuates social as just a “nice to have”.

So why do so many companies struggle with thinking about social?

It all comes back to the narrative.

When we talk to companies, we drop the “social” and talk “society” because for businesses making an impact on society is much clearer – it’s about their workforce and their customers. Two top priorities in any business.

The workforce challenges we all now face are indisputable.

Filling everything from entry-level roles to skilled software engineers is hard, employee attrition is on the rise, and all this is hitting companies’ bottom lines.

Companies need to do more attract and then retain talent.

Actively facilitating safe and welcoming workplaces where employers can set clear expectations of culture and conduct can have a significant impact on counteracting the current rise of polarisation in society.

Workplaces where people feel a sense of inclusion and belonging reap the rewards. But this takes effort and goes beyond simply offering flexible work arrangements.

Looking outwardly, today’s consumers are much more diligent about where they spend their hard-earned dollar. So, companies wanting to grow consumer market share must consider what a purchase means.

Consumers want to know what the company stands for and how the company’s values align with theirs.

At the moment, some companies seek to tick the social box with donations or volunteering, which perpetuates the notion that this space costs businesses money with no return.

The right question to ask is what is a company doing to contribute towards a stronger, equitable and more cohesive society?

At Community Corporate we have proven inclusive hiring is one way where everyone wins.

As diversity and inclusion specialists, we have given employers access to hidden talent pools that face bias in recruitment practices. For migrants and refugees this is often due to a lack of recognition of their overseas qualifications and experience and having limited local references.

We have moved refugees who could not get a job other than stacking shelves or picking tomatoes into data engineer and business analyst roles, thanks to our inclusive corporate champions willing to challenge conventional thinking in recruitment.

Speaking to our employer partners, the benefits are, in fact, measurable. We assess the return on investment for companies as “feel good”, “financial good” and “future good”.

Simply put, we know customer service is how you make people feel, so the “feel good” can be measured by attributing the value of a company’s reputation among staff being an employer of choice and customer loyalty and affiliation. Many companies fall short and stop here, assuming hosting an International Women’s Day lunch makes them inclusive. It’s a start but business can do better.

“Financial good” is about measuring the value of cost savings with inclusive hiring initiatives commensurate with output costs associated with ongoing recruitment, training, onboarding and offboarding.

In our case, employers report they have seen longer tenure, lower absenteeism, greater career progression and other measurable indicators by opening their doors to hidden migrant and refugee talent.

Community Corporate’s 12-month retention rate average for culturally inclusive hiring stands at 89 per cent and has led to a return of $4.20 for every dollar spent with us.

Finally, “future good” is not necessarily about prioritising people and planet over profit, but actively creating balance among all three.

It is measuring contributions that demonstrate a company’s proactiveness and credentials as leaders in our society, invested in a secure and sustainable future.

It is about redrawing the balance between the haves and have nots by investing in our society as a whole.

Ultimately, doing good is just good for business.

An ESG and Global Investor Returns Study of over 13,000 companies across a variety of industries around the globe found that companies with better ESG ratings outperformed their peers with lower ratings. Globally, ESG leaders had annual returns of 12.9 per cent versus 8.6 per cent for slackers.

Now is the time for businesses to lead by example, change the narrative on social responsibility by setting standards on inclusion and actively playing their role in building a better society for all of us to live, work and thrive.

Carmen Garcia is the CEO and Founder of Community Corporate and an alumnus of InDaily’s 40 Under 40.

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