The message is clear: Consumers and employees want to buy from and work with businesses who care about their social impact in the world. A recent PwC study shows that 83% of consumers believe that businesses should actively shape ESG practices and 86% of employees want to work for companies who care about the same issues they do.
Seventy-six percent of consumers also said they would discontinue their relationship with a brand if they treated the environment, their employees, or community poorly. However, the same survey reveals a huge divide between how executives and consumers perceive a business’ ESG efforts. While 60% of executives believe they provide sufficient transparency on their business practices and results, only 30% of consumers share this opinion.
This discrepancy can have serious repercussions on business growth as more consumers vote with their wallet to only support businesses they believe are socially responsible. In turn, businesses who are successful in implementing and communicating their ESG impact stand to win greater market share and the best talent.
The Power of Measuring Impact
Demonstrating the impact your business has on social causes can open up new opportunities for collaboration, attract talent, and make brands more desirable to work with overall. At a conference in 2019, the CEO of Unilever, Alan Rope, reported that the multinational consumer goods company’s Sustainable Living Brands grew 69% faster in 2018 than the rest of the business, compared to 46% in 2017. The company also saved €1 billion ($0.99 billion) in costs by improving their water and energy efficiencies.
By contrast, the food delivery firm Deliveroo saw the consequences of not focusing on positive social impact. The company started to trade on the London Stock Exchange on 31 March, 2021 and saw its stocks plummet by 31% within minutes of trading. The reason? Concerns among investors and consumers over worker pay and conditions at the firm.
The other benefits of having a social impact include:
Attracting Investment
Eighty-eight percent of investors believe that businesses that prioritize ESG initiatives represent a better investment opportunity than those who do not. If your business still relies on external capital, ESG can mean the difference between success and failure in attracting enough investment.
Improving Talent Acquisition and Retention
With so many businesses scrambling to attract and retain talent, ESG helps employers stand out. Not only are MBA programs putting a greater emphasis on ESG in their curriculum, but a recent study from the Yale School of Management found that 51% of graduates are willing to take a pay cut in order to work for a company that’s socially responsible (and 26% would not even consider a job at a company with poor practices).
Driving Growth
We no longer live in a world where the cheapest product on the shelf wins out against the competition. Eighty percent of consumers in the UK, for instance, believe that fashion brands should be required by law to state if they are paying their employees a fair living wage. Businesses that have adopted ESG practices have also been shown to enjoy faster growth and higher valuations from their competition. A Deloitte study found that purpose-driven businesses report 30% higher levels of innovation and 40% higher levels of employee retention than their competition.
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How to Get Started?
Measuring impact on a social scale can sound like a lofty goal that’s incredibly difficult to put into numbers. How do you measure your impact on poverty or carbon emission reduction?
Choose Your Causes
Start small. No matter how big or small a business’ reach, they cannot solve all the ills in the world. While employee wellbeing and ethical business practices are a given, companies can also decide on the wider social causes they would like to address by answering questions such as: Which ones can they have a direct impact on? What would that mean for their day-to-day operations? Do they need to switch suppliers? Raise wages? Or invest in more sustainable materials?
Once those decisions have been made, existing frameworks can then be used to put things into motion.
B Impact Assessment
This is an existing framework used by more than 150,000 businesses that helps measure their impact on employees, customers, and communities. Once businesses hit a certain threshold, they are awarded a B Corp Certification, which is a recognized symbol of a socially responsible business. The organization also offers best practices guides and other tools that can help along the way.
UN’s Sustainable Development Goals (SDG)
The UN has created 17 SDGs as a framework for tackling poverty, social injustice, climate change, and a range of other social issues. This is a great starting point to see what issues businesses can help address to inform their practices. For instance, a food manufacturer could focus on SDG 2 of Zero Hunger. This may mean proactively seeking out charities to which they could donate food or give away a certain percentage of their profits.
Communicating Your ESG Agenda
In order to reap the benefits of being an ESG-conscious business, companies need to let the world know about it. Firstly, define an inhouse communication strategy to inform your employees of the what and why behind the changes you are making. This should speak directly to how the changes impact your work and what they can do to support you in the process. Setting limits on flight mileage per employee, or discontinuing certain business practices can all be clearly communicated on a dedicated ESG channel on Slack or Teams, for example.
Add ESG to your investment pitch and draft a letter to your existing investors to let them know of the changes you are making. This is a great opportunity to communicate if your profitability or investment needs are going to change as a result of this switch. Then prepare an external communication strategy.
The Bottom Line
Businesses can no longer afford to engage in the rhetoric of high profit margins and rapid growth at any cost. A clear ESG vision and cohesive narrative will communicate your priorities to your customers, suppliers, and external partners. This approach demonstrates that companies are serious about changing their practices and achieving their goals.
Go beyond your website and social media presence to engage PR and other media channels to communicate your yearly achievements and innovations. Embracing ESG and corporate social responsibility can not only help safeguard long-term success, but also delight your customers and build a better world for all.
