In the previous article, The Impacts of Environmental Considerations on Business Decisions, we explored environmental implications in a corporate setting and how taking the sustainable route is now essential to business survival. However, when discussing ESG (Environmental, Social and Corporate Governance), equally important is analyzing how social governance affects modern corporations.
The social dimension of ESG entails how businesses treat the key players: consumers, employees, and host communities. Businesses with a strong social performance build a trusting relationship with their entire community of stakeholders, benefiting in a stable ground for growth and expansion.
Social considerations are now rapidly becoming a priority for many investors. Businesses must establish evaluation and disclosure strategies of their social performance to keep up with evolving stakeholder demands.
Meaningful discourse between an enterprise and the community develops mutual trust and fosters long-term cooperation.
Active communication with host communities enhances a business’ social license to operate and demonstrates an in-depth understanding of how sustainability in business goes beyond regulatory compliance. Meaningful communication can detail a company’s:
- Commitment to safe work practices that protect employees and the environment
- Job opportunities that provide economic growth for the community
- End-of-life care plans, especially for high-impact businesses such as mining and construction
Innovations in business such as the introduction of new products, development of management initiatives, and implementation of marketing strategies are also largely driven by market trends and social pressures. Effective community engagement keeps businesses up to date with marketable ideas and social trends, protecting their relationship with target consumers as well as their host communities.
Charitable giving also attracts both customers and prospective employees. Connecting with the local community through familiar, cause-related marketing campaigns helps international businesses establish relationships with customers, build trust, and increase revenue by overcoming nationalistic barriers.
Rapid, short-term growth projections without long-term considerations do not make for a sustainable business model. In engaging their local community, businesses attract sales and increase their bottom line while building growth opportunities for that community.
Protecting human rights and labor relations within the entire supply chain is an important piece in safeguarding long-term business interests.
Globalization has been heavily utilized in industries to decentralize production, and thereby reducing costs. Unfortunately, this also loosened occupational safety and health standards. With mounting international pressure to create safe and just work environments, human rights and labor relations now stand at the forefront of creating long-term value in business.
Practicing disregard towards human rights and community wellbeing shows naivety towards the corresponding socials risks and implications. Valuation discounts are just one example of how investors are disincentivizing companies that ignore the impacts of their operations on employees and local communities.
In 2014, the International Labor Organization sought to expand sustainable workplace practices. In the context of recognized international standards for human rights and labor conditions, the ILO publicized reports of country-specific performances in meeting regulations.
In 2015, when the United Nations proposed the Sustainable Development Goals (UN SDGs), the category of decent work was included. Businesses that align their practices with the SDGs attract investors, in part, by showing readiness to embrace regulations adapted for international partnerships.
Businesses should invest heavily not only in just and safe work practices that fulfil international standards but also in tracking and disclosure tools that communicate accountability to their stakeholders.
Winning and keeping good employees is half the work when it comes to efficient business operations.
Recruitment is strongly anchored in employer brand.
7 in 10 job seekers polarize towards companies with a visibly positive employer brand. Businesses can grow in this aspect by leaning on key performance indicators such as workplace wellbeing and safety.
Communicating commitments, targets, and results to employees is crucial.
9 in 10 employees see employers as the source of their safety from infectious diseases, such as COVID-19. Employers that successfully communicate safety assurances to employees are likely to build a more positive employer brand.
Aspects of employee engagement and retention, including productivity levels, hiring and training costs, knowledge transfer difficulties, and branding threats caused by undesirable employee exits all affect long-term stability for companies. Companies that actively value employee wellbeing experience lesser turnover rates, productivity losses, and reputational risks.
Workplace safety also constitutes a crucial aspect of human capital management that goes beyond employer branding. In 2019, unsafe work practices cost the United States roughly $575 billion, highlighting the serious financial implications of poor work safety protocols. An investment in environmental health and safety management software to track safety performance and promote efficiency can greatly improve workplace safety.
A holistic approach to managing human capital, from recruitment through retention, has huge financial implications for any enterprise. Paying close attention to these implications is critical in maintaining business operations.
The social impacts of business operations promote safeguarding long-term interests. Businesses can build meaningful relationships with stakeholders and secure long-term value through:
- Conducting impact reports for the sake of customers, employees, host communities, and other stakeholders
- Establishing and communicating social performance targets based on impact research
- Monitoring key performance indicators of social performance
- Adopting useful tools to upgrade the performance metrics recording and communication process.
Planning beyond mere regulatory compliance and equipping your enterprise with a social license to operate brings in both short and long-term financial benefits and sends investors a message of resiliency to mounting international pressure and future regulatory stringency.
The SafetyStratus Research Advisory Group (RAG) brings together thought leaders from the global environmental, health and safety community to promote best practices and provide key insights in the profession and the industries they serve. The Research Advisory Group also advocates, where practical, the intersection of and advances with the use of technology, such as the SafetyStratus enterprise EHS software platform. Group membership consists of representatives from across varied disciplines and market sectors as well as select members of the SafetyStratus team.
The primary objectives of the SafetyStratus RAG partnership are to:
- Build a strategic partnership between EHS practitioners and the SafetyStratus team.
- Provide engaging and practical content to the global EHS community.
- Provide discipline and market feedback specific to SafetyStratus products and services.
While the objectives of the RAG are varied, the primary public-facing outcome will be available through engaging and practical content found on the SafetyStratus resource pages. Various articles, papers, and other valuable resources will be produced and shared as part of an ongoing effort to cultivate a robust community. Ultimately, the SafetyStratus RAG will expand to have a broader reach and provide opportunities for more inclusion by all interested EHS professionals in a collaborative community environment.
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International Labour Office. (2014). Rules of the game: A brief introduction to international labour standards (3rd ed.).
McFeely, S. (2019). This Fixable Problem Costs U.S. Businesses $1 Trillion. Gallup.com. Retrieved 8 September 2021, from https://www.gallup.com/workplace/247391/fixable-problem-costs-businesses-trillion.aspx .
Mercer-Mapstone, L., Rifkin, W., Louis, W., & Moffat, K. (2017). Meaningful dialogue outcomes contribute to laying a foundation for social licence to operate. Resources Policy, 53, 347-355. https://doi.org/10.1016/j.resourpol.2017.07.004
Min, J., Kim, Y., Lee, S., Jang, T., Kim, I., & Song, J. (2019). The Fourth Industrial Revolution and Its Impact on Occupational Health and Safety, Worker’s Compensation and Labor Conditions. Safety And Health At Work, 10(4), 400-408. https://doi.org/10.1016/j.shaw.2019.09.005
Poor Health Costs US Employers $575 Billion and 1.5 Billion Days of Lost Productivity Per Integrated Benefits Institute. Integrated Benefits Institute. (2020). Retrieved 8 September 2021, from https://www.ibiweb.org/poor-health-costs-us-employers-575-billion/.
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Singh, S., & Duque, L. (2019). Familiarity and format: cause-related marketing promotions in international markets. International Marketing Review, 37(5), 901-921. https://doi.org/10.1108/imr-10-2018-0307
Sloggett, J., & Reinboth, B. (2017). ESG Integration: How Are Social Issues Influencing Investment Decisions. Principles for Responsible Investment. Retrieved from https://www.unpri.org/download?ac=6529
THE 17 GOALS | Sustainable Development. United Nations. (2015). Retrieved 8 September 2021, from https://sdgs.un.org/goals.