Sunday, April 14, 2024

Exploring the social dimensions of ESG practices

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Among the ESG pillars, the environmental aspect is commonly recognized while the social dimension is often misinterpreted. The social pillar of ESG goes beyond philanthropic donations rather, it is about the development a strong organizational culture committed to shared purpose and values among stakeholders. Delivering shared purpose involves establishing a common goal that aligns the interest of the company and stakeholders. The social dimension of ESG requires companies to adopt a holistic approach in generating positive impact within their operations. This involves considering factors such as human rights, diversity and inclusion, community relations and supply chain management.  

Recognizing all three dimensions of ESG are interconnected, investors have shown a preference to companies that address issues within the social pillar, as it reflects their values through their investing. Therefore, companies with a strong social performance, provides investors with the confidence that their investment will not only generate financial returns but also create long – term value creation.  

Related: Empowering Communities, Driving Change: The Power of Social Sustainability in Business.

Creating shared value entails integrating social objectives into business strategy to achieve social impact. Companies are increasingly recognizing the interconnectedness between business goals and societal needs. This trend is observable within the insurance industry whereby there is a rise in microinsurance products catering to the low-income population and underinsured. Similarly, the banking sector has developed microfinance products catered to the low income and marginalised communities all with the aim of establishing themselves as responsible corporate citizens.  

Promoting diversity, equity and inclusion is critical within the social dimension. Companies should not only focus on creating a work environment that embraces individuals despite their demographic background, but also foster diversity within its supply chain. This entails implementing supplier – related policies to include supplier diversity which includes Persons with Disabilities (PWDs) and marginalised groups to provide an equal opportunity for individuals to engage with the company, with the ultimate goal of creating a more equitable society.  

Also read:Mapping Your Sustainability Stakeholders: A Practical Guide.

Human rights due diligence is essential for companies to prioritise and address. It is important for companies to recognise that adhering to human rights is not limited to their operations but also extends to their supply chain. This calls for companies to perform their due diligence prior to engaging with a supplier to ensure fair labour practices and human rights protection throughout the supply chain.  

Community development is critical in social sustainability. Through the corporate foundation, companies can be actively involved in community affairs and create positive social change where they operate. Positive social change can be achieved by developing strategy that aligns the core business value and the needs of the community to create shared value.  

Companies have an opportunity to leverage their influence and resources to address pressing social challenges. By adopting a holistic approach that integrates social considerations into business strategies, companies can contribute to building more resilient and inclusive communities while generating long-term value for shareholders and stakeholders. 

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