Bertina Ceccarelli is CEO of NPower, a national nonprofit, rooted in community and on a mission to advance equity in the tech industry.
As environmental, social and governance (ESG) investing grows—rising 84% to $34 trillion by 2026, PwC estimates—so are questions, especially among consumers and politicos, about the true value of ESG strategies.
However, ESG-forward investors and companies have no doubt. “Belying questions of whether financial and ESG performance might conflict, nine of 10 asset managers surveyed believe that integrating ESG into their investment strategy will improve overall returns,” PwC said.
The Business Roundtable of 250 top U.S. CEOs concurs. “Companies should serve not only their shareholders, but also deliver value to their customers, invest in employees, deal fairly with suppliers, and support the communities in which they operate,” its Purpose of a Corporation states.
Yet, the “S” in ESG, as in what companies are doing to make society stronger, is unfairly targeted because its measure and value is often in the eye of the beholder.
The “E” can be quantified and measured in carbon emissions, energy use and waste production. The international Financial Stability Board’s Task Force on climate-related financial disclosures provides standardized reporting of climate-related financial information. The “G” faces strict rules, regulations, reporting and enforcement by the U.S. Securities and Exchange Commission and others.
Because reporting standards are not as clearly drawn for “S” as they are for “E” and “G,” companies have the freedom to report their social impact as they wish. The downside is that companies struggle to draw lines between what they can and cannot do for society.
They are pressured to issue statements about the social issues of the day without concrete actions to back them up. They face accusations of hollow promises, lack of tangible change and brand-polishing. In the process, they lose faith and trust—among employees and customers alike—when their actions fall short of their values.
Coming from both sides of the social equation as a career corporate executive and now CEO of a nonprofit, I believe companies can sharpen the “S” in their ESG in five key ways:
1. Define your lane through your business.
Every company can advance a more equitable society through the products and services they already provide. Telecoms are bridging the broadband access gap. Housing finance is tackling the homeownership gap. Healthcare is bringing basic medical service to socially vulnerable communities.
Tech companies that support food banks, for instance, are great. Better yet is finding ways to reduce the need for food banks in the first place by helping individuals secure tech jobs through training, due to the higher wages and economic mobility, those jobs can bring.
2. Metrics matter.
Peter Drucker’s classic mantra, “What gets measured, gets managed,” is now 70 years old. Today’s ability to gather and mine data to manage companies and measure results is both easier and expected.
Social good is hard to measure and, therefore, manage. But it is possible if companies clearly define, goal-set, track and report their social-good commitments.
For instance, it’s not about how many corporate dollars they give, but the tangible societal impact in terms of the people and places they help. This is easier when nonprofits adopt return-on-investment sensibilities and provide transparency on results for donor companies to meet their own ROI requirements.
3. Start inside.
Social good begins with your people.
Set firm DEI goals and employee engagement scores, especially among historically marginalized and underrepresented populations. It’s important to continue pursuing DEI goals regardless of economic fluctuations.
Also, align and combine ESG and corporate social responsibility functions with corporate giving and employee volunteer programs. Too often they silo, work in cross-purpose, send mixed messages and squander valuable resources. Tap employee passion for your mission to offer volunteering and giving options that extend your ESG goals, and set numeric stretch goals.
It’s been said many times, but I still see companies talking primarily about the social good of DEI and rarely about the business benefits. Yet, Wall Street is increasingly pursuing business with women- and minority-owned banks, not for DEI goals, but to boost their ability to raise capital.
4. Reach out.
Find, engage, and prioritize doing business with corporate partners, vendors and supply chain providers to meet social good goals together for a powerful force-multiplier benefit. Leverage purchasing power to encourage them and others to join you.
When companies are focused on social-good initiatives that seek to close racial gaps, they’re also opening new markets to serve. It’s been said many times, but I still mostly see companies talking primarily about the social good, and rarely about the business benefits.
One leading financial company explicitly pursues business with minority securities dealers, not just for DEI goals, but to see, serve and benefit from opening long-ignored markets.
5. Partner with nonprofits.
There is nobody better to help you meet measurable social goals. Nonprofits are on the front lines of social good, aware of everyday real and present needs.
Giving to large national and global nonprofits is a safe bet. Supporting local community nonprofits with a closer ear to the ground about what works can redouble your social investment.
You can also help build or strengthen a community nonprofit’s operational infrastructure and impact and let the expert leaders decide what to do with your generosity. Think about giving “unrestricted” funds to smaller community organizations and letting them apply it to the areas most in need.
Sharpening the “S” in ESG with a business mindset will help investors and the public alike recognize that that doing social good is simply good business.
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