The current fashionable framework for corporate sustainability – ESG (Environmental, Social, Governance) – puts the social dimension, quite literally, in the centre of the sustainability agenda.
This is of course not new. Consideration of the business impact on people and society was part of the ‘triple bottom line’ concept proposed by John Elkington more than 25 years ago.
Despite this long history and attention, the social dimension remains the least understood aspect of corporate sustainability.
With the world counting the enormous societal costs of a pandemic and important social movements for equality and inclusion gathering momentum, it is timely to re-examine the social component of sustainable development and its interconnectedness with other dimensions. Business still needs to grapple with major risks and challenges regarding its societal impact, but there are also emerging pathways for business to be a powerful force for positive change.
Revisiting sustainable development
When many people refer to sustainability, they often have in mind the environmental dimensions of sustainable development. They are concerned about operating within the limits of our essential natural systems. In the midst of a climate crisis and failing ecosystems, this is absolutely important.
However, sustainable development is also fundamentally about the betterment of society – improving the health and well-being of individuals and communities, and doing so in a way that shares the benefits with everyone.
If we look at the UN’s Sustainable Development Goals (SDGs) – now explicitly mentioned in many organizations’ sustainability objectives – the majority of the goals refer to these social outcomes e.g. health, education, poverty reduction, decent work for everyone.
The SDGs embody a profound shared aspiration to give basic opportunity to all, with the possibility of living lives free from chronic poor health, lack of education, and discrimination.
This is a core thesis of Nobel-Prize-winning economist Amartya Sen, who described development as ‘freedom’. Sen also made the critical observation that freedom – empowering people and giving them choices – is both the desired outcome and the process by which we get there.
This empowerment opportunity is important because this is something that business (at its best) can help enable for millions of people – be they employees, customers or local communities.
It is also crucial to understand that the dimensions of sustainable development are actually highly interconnected. The poor and disadvantaged – whose livelihoods are often directly dependent on stressed natural resources – are the ones who suffer first and hardest from environmental crises.
Awareness of these interconnections are becoming more prominent in corporate discourse. As Larry Fink, CEO of Blackrock, says in his much-quoted Letter to CEOs, it is ‘misguided’ to draw stark distinctions between categories. He asks: “…climate change is already having a disproportionate impact on low-income communities around the world – is that an E or an S issue?”.
What does this mean for business?
There should be no doubt that businesses have enormous footprints with respect to social sustainability. However, this is an inherently complex space and there is often an implicit assumption that social concerns are outside the core focus of business. This is why the ‘S’ component of corporate reporting is often boiled down to an inventory of local community investment initiatives and workforce diversity statistics. In the modern world, this is inadequate and misses the opportunities for positive transformation.
Businesses still need to ensure, as an absolute minimum, that they do no harm. Despite several decades of focus and improved management systems, protection of human rights, elimination of child and slave labour, and decent working conditions in supply chains are still urgent issues (and significant risks) for modern corporations.
These are issues everywhere. For example, Canadians should all be profoundly disturbed by reports that workers in North American online shopping warehouses – services we are all using in the midst of a pandemic – are having to urinate into plastic bottles because they do not have time for toilet breaks to reach their minimum targets.
Also important is the question of taxation. Managers have reasonable incentives (and indeed a fiduciary duty) to minimize tax liabilities. However, taxation is also society’s primary – if imperfect – mechanism for utilising the wealth created by enterprise to deliver basic services and opportunities for all citizens (as well as the public goods that firms rely upon to generate profits). There are no easy answers to resolving this apparent trade-off. It is important to acknowledge the inherent inconsistency in a company that publishes a glossy sustainability report, while also being registered in the Cayman Islands and paying a negligible amount of tax.
Towards a Positive Agenda
Managing risks and challenges is critical. However, the business contribution is more fully leveraged where there is also a clear mandate for positive action that unlocks opportunity and innovation. We are seeing this positive agenda emerging in a range of powerful – and often connected – ways, including:
- Social purpose. Many businesses are being explicit about stating their societal purpose as a key mechanism for mobilizing the organization toward positive impact. This is one of the key tenets of the rapidly-growing B Corporations movement.
- Inclusive business models. Business has enormous (and often untapped) power to empower people through the products and services they provide – be it financial inclusion, insurance, health services, or access to affordable, nutritious food (as just a few examples). The ‘base of the pyramid’ movement has shown us that even the poorest customers can be profitably served with the right business models and offerings .
- Equality, diversity and inclusion (EDI). We are at an important moment – driven by the Black Lives Matter and the #MeToo movements – in which businesses are starting to play a transformational leadership role with respect to equality, diversity and inclusion. The business case for action is clear – embracing EDI makes organizations more productive, creative and opens a much wider pool of talent. However, the impact of internal action is greatly magnified by external advocacy with customers, suppliers and policy makers.
Furthermore, ambitious sustainability action in any dimension can have positive implications for societal wellbeing. A real and ambitious commitment to net-zero emissions carries an implicit statement that it is not acceptable for a poor farming family in Sub-Saharan Africa to be driven off their lands because the rains now fail, and that it is not acceptable for pensioners in Chicago to be dying of heat stress in persistent summer heat waves.
A final thought
As sustainability is increasingly seen as pivotal to the long term success of businesses, there is an important conversation to be had on the new expectations and opportunities for the business contribution to the wellbeing of humanity.
Achieving the SDGs and the Paris Climate Agreement will only happen with commitment and action from the private sector. There is a way forward that frames this necessity as a powerful agenda for aligning organizational and societal purpose for the benefit of everyone.
