Don’t forget the “S”
September 26, 2023
September 26, 2023
World leaders including Emmanuel Macron, Luiz Inácio Lula da Silva, Ursula von der Leyen, Rishi Sunak and Joe Biden published an open letter in June 2023 called “A green transition that leaves no one behind.” It outlines how important both environmental and social issues are to the sustainability agenda. The authors argue that 'poverty reduction and protection of the planet are converging objectives’ and pledge ‘to advance concrete actions that deliver on the promise of the United Nations Sustainable Development Goals (SDGs) for our prosperity, people and planet.’
On the face of it, the world’s business leaders agree. Even before COVID-19 deepened many societal challenges, corporate executives proclaimed the importance of the social dimension of their companies’ agendas. In 2019, 65% of senior executives said that having a positive social impact was just as important as making money. Post-pandemic, 91% of CEOs believe part of their role is to protect local communities.
Despite this, many companies are still not embedding social impact aspects of sustainability into the core of their strategy and operations. This means they are not only falling short of their obligations to society, but also missing important opportunities to grow and create value for all stakeholders—including shareholders. By embracing the social aspect of sustainability, companies could unlock a trillion-dollar opportunity within this decade through impact investing efforts, inclusive product development, and more.
What’s hindering progress? Unlike the environmental agenda, the mandates for social action are less clear and there is no unifying goal such as holding global warming to 1.5° C, so there is not as much urgency. At the same time, measuring a company’s social impact and the return on investment of social initiatives can be uniquely challenging. For example, we analyzed the public statements of 20 large companies in a range of industries around the world and found that only three of them mentioned social considerations as part of their core strategy, and only four consistently backed their social commitments with clear initiatives and measurements.
It took 25 years of stakeholder pressure and mounting regulations to get to the point where environmental sustainability is a central consideration for many companies. While momentum is starting to build around social issues through current regulatory proposals like the Task Force on Inequality-related Financial Disclosures (TIFD) and the Corporate Sustainability Reporting Directive, it’s still in its early stages. If companies don't make faster progress on embedding social considerations and impact into business, the world may fall further behind the SDGs, which, according to UN estimates could lead to 620 million people1 living in extreme poverty, 1.6 billion people2 lacking access to safe drinking water and 1.2 billion climate refugees3.
The complex web of issues at the heart of the social agenda makes uncoordinated or individual action shortsighted. Companies could achieve greater progress toward achieving social impact by partnering with NGOs and international development implementers. These partnerships will be needed to advance and measure social sustainability and the SDGs overall. Many companies aren’t taking as much advantage of strategic partnerships as they could: fewer than 20% of CEOs named international development implementers as the most important or influential factor in achieving the SDGs.
Putting people at the center isn’t just good for people, it’s good for business. For instance, a project we conducted in partnership with an NGO and a major insurance company looked to insure residents in vulnerable urban settlements in Brazil through new insurance products tailored to residents’ needs. Beyond contributing to five different SDGs at the same time, this opportunity identified a group of 800,000 potential new customers to target and potential annual revenue of R$30 million.
Embedding social sustainability certainly isn’t easy, and very few companies can say they’ve achieved it. Most organizations are still taking an incremental approach, where, for example:
As organizations look to move from these ‘bolted on’ initiatives to embedding social sustainability, they should first understand that it’s unlikely they will be able to do everything at once. Instead, they can approach embedding from whichever entry points make the most sense for them—knowing that embedded social sustainability will look different for every company.
To start the process of building social sustainability, leaders can take the following actions:
These actions will take time, resources, and creative partnerships internally and externally. But the value realized will be worth it for business and society.
By deliberately linking environmental and social issues together, companies can go a long way toward meeting the needs of the broadest range of stakeholders across society. At the same time, they can capitalize on business opportunities to unlock new markets and growth possibilities.
This blog is part of a series discussing how leaders can embed sustainability into different aspects of their organizations to create value and impact. The other topics are: