Corporate Social ‘Impact’ Expected Today
Once measured by Corporate Social Responsibility, Environment, Social, and Governance (ESG) standards have hit a higher criterion, enacting Social Impact.
Environment, Social, and Governance standards (ESG) have been the talk of moving businesses into the future for a number of years.
ESG standards were first developed in the United Nation’s Principles for Responsible Investment (PRI) report in 2006, and have since taken the EU by storm, where many companies are now being required to incorporate ESG criteria into the financial evaluations of companies.
This includes evaluations of a company’s efforts to examine its impact on the environment, its social role, and its legal governance structure.
Although the “E” and the “G” responsibilities are relatively easy to define, the “S” in ESG stands for Social Impact — which encompasses a whole range of activities and behaviors.
It is clear that ESG is increasingly starting to take U.S. markets by storm as well. But how are businesses to go about preparing for this increasingly likely, regulatory future? Especially for expectations as big as “social impact”?
The benchmark for Social Impact isn’t just about risk management, but about encouraging prosocial behavior. It is a holistic measure of how a business will contribute to society and maintain relationships with key, outside parties — like customers, local communities, the public, and the government.
In other words — regulators of the future will not only be looking at financial risks, but also looking at how a company’s actions, policies, and investments can impact people’s lives. This is a tall order.
Below, is a breakdown of two proactive strategies that businesses can take while global ESG standards shake out.
Action-plan development requires true reflection on what your business’ authentic values are — and how those values interact with your community.
Approach with Authenticity and Develop Measures in Accordance
In June of 2020, businesses raced to put out PR statements indicating their support for George Floyd and Black Lives Matter activists in their regions and states. These statements were often met with skepticism, backlash, and downright scorn in the public sphere. Why? Because many businesses, in their rush to issue PR statements, neglected the missions and actions of their own companies.
The lesson here was not related to PR. Instead, a bigger takeaway is this: are you taking authentic steps to engage in your community?
The businesses that were called out online were called out for the incongruity between their own internal actions and their public statements of solidarity and support. If you aren’t backing up your statements with your actions, then you are definitely making yourself vulnerable to this type of criticism.
Developing an internal Diversity, Equity, and Inclusion (DEI) program or designating a chief diversity officer is not going to cut it anymore — stakeholders are looking for more than just the existence of a program. And although it’s easier said than done, this type of action-plan development requires true reflection on what your business’ authentic values are — and how those values interact with your community.
The best place to start is to think about who you serve with your business, and how you serve them. Does that service tie-in naturally to a social justice or other community issue? Are there other groups in the community that you can partner with on this issue? Are there other ways that you can make a direct impact on the issue? Can that impact be measured in a meaningful way?
Starting from a place of authenticity helps streamline your social engagements and ensures that they remain long-term community commitments rather than striking the public as one-off publicity moments. This also will help keep you ahead of the curve as the world races to keep up to create Social Impact standards.
The new regulatory goal, instead, is to encourage businesses to act in a way where they are prosocial citizens that have a net positive effect on their community.
Using Creative Policy Approaches to Back Words with Action
Most businesses believe that, at this point, all of the “actions” that are available to them are either: one, internal policy and procedural change, or; two, external change accomplished through either publicity or lobbying. Although internal change is incredibly important, it must be complemented by actual, external engagement strategies in order to truly put the strength of action behind words.
The only option to engage with public policy, contrary to popular belief, is not to hire a lobbyist. Although lobbying is an avenue of legal change, it is relatively overutilized and can often deliver inconsistent results. Not to mention that it is not cost-effective and that most of the public believes that lobbyists are undermining our democracy. So, how do businesses put their words into action that promotes actual policy change? Here are a few ideas that don’t involve lobbyists but can still deliver immediate and measurable results.
- Amicus Briefing in State Appellate Courts: This is an incredibly powerful yet underutilized litigation tool. If there is currently a pending case on appeal that raises issues of law that directly affects your business, or a group of businesses like you, briefing those concerns to the appellate courts is an effective way of making a public statement with direct and almost immediate impact.
- Social Impact Litigation: Is the issue that is closest to your company’s heart ripe for change through litigation? This is an underutilized strategy that can deliver results in tandem with other policy changes.
- Regulatory and Administrative Proceedings: At a local level, this is where the rubber hits the road. For example, passionate about workforce development? This is a great place to look and see if your local community or municipality actively encourages workforce education and reconfiguring to meet future needs, and then advocating for regulatory change in line with that vision.
The point of Social engagement in ESG is to discourage businesses from acting in a way that only benefits stakeholders. The new regulatory goal, instead, is to encourage businesses to act in a way where they are prosocial citizens that have a net positive effect on their community. And that is a vision for the world that we can all believe in.
Ruchi Kapoor is the founder and principal of Kapoor Law + Policy, where she focuses on litigation that creates social justice change. As an attorney, Ruchi has litigated over 100 appeals, with several resulting in published opinions that changed the law for the better. She also consults with businesses to create strategic plans for sustainable policy change. Learn more, at: Kapoor Law + Policy, Equity with Compassion.