Broadening your perspective: How social factors impact your business

Internal factors

Oftentimes, your outward-facing social efforts will be seen as hollow if you don’t have your own house in order first. Here are some examples of internal factors that fall under the “S” umbrella:

Culture

Even if the task seems elusive, you have a responsibility to oversee and shape your organization’s culture. How you choose to run your organization, and the quality of the relationships between your team members, all fall under the “social” umbrella. 

Ask yourself: Does our organization, consciously or unconsciously, harbour behaviours like bullying, intimidation, or exploitation? Are we doing enough to create psychological safety, and a workplace where people enjoy contributing and building relationships?

Equity, Diversity, and Inclusion (EDI)

It’s not enough to simply have an EDI policy. Your role as a business owner or people leader includes overseeing its effectiveness, being a champion of its execution, and making sure everyone has a voice.

Ask yourself: Are decisions regarding compensation, promotion, and hiring made with equity top-of-mind? Do our people have the confidence and the tools to speak up if they are a victim of discrimination, or witness it?

Working conditions

You may not immediately associate issues such as occupational health and safety to the “S” side of ESG, but the truth is working conditions can play an immense role in your team members’ quality of life. Going above the minimum legal requirements to ensure your employees have a positive experience at work, and being an advocate for safety (in all its forms), is among your social responsibilities.

Ask yourself: Do we solicit the feedback of our team members to ensure their work life doesn’t hinder their well-being? Aside from obvious items like workplace injuries, what aspects of safety do we need to think about more seriously?

Customer data privacy

Your clients and customers expect you to be transparent and honest with how you handle and protect their personal information. While there are laws and standards surrounding cybersecurity, there is also a moral imperative to be vigilant with the data they’ve entrusted to you.

Ask yourself: Do we only seek to meet the legal requirements, or do we hold ourselves to a higher standard? How would our organization respond to a cyber attack in a way that puts our customers and clients first?

External factors

Your customers and your people are your first responsibility, but being mindful of what happens outside of your organization is crucial too. Socially conscious organizations can be a key part of creating healthy, safe, and sustainable societies.

Modern slavery

While you may think of modern slavery as one of those farfetched issues that “could never happen to us”, it’s important to keep in mind just how prevalent the issues of forced labour and child labour are, even today. Major North American companies have already had their operations stalled or faced other repercussions because they couldn’t prove these illegal labour practices were fully absent from their supply chain.

A study from York University showed that only 29 percent of Canadian companies are actively looking beyond their first tier of suppliers, even though modern slavery often lurks in the lower tiers of the supply chain. Stricter regulations for oversight and reporting of forced or child labour are already on their way for Canadian organizations.

Ask yourself: Has our organization performed enough due diligence with suppliers to identify labour practices that are not compatible with your standards and values, at home or abroad? Would we be able to recognize and rectify forced labour if you did encounter it?

Human rights

The challenge of human rights violations is so broad and profound that you may wonder how your organization can make any meaningful difference. But as you pay attention to the ills affecting society and the places where you do business — violence, oppression, and discrimination in all their forms — you can align yourself with causes and projects that will help make a small difference.

Ask yourself: What human rights violations are the most likely to impact our workplace, and the lives of our team members and consumers? How will we communicate about these sensitive issues, and our own efforts to create positive change, internally and externally?

Risks of ignoring the “S” in ESG

It’s possible that when economic storm clouds start brewing, your organization may be inclined to focus less on the “S” in ESG and more on its balance sheet. But regardless of what happens to inflation, interest rates, and the economy in general, these issues will not go away.

All of the internal and external issues mentioned above carry risks when they’re left by the wayside. Here are a few examples:

• Litigation
• Insurance claims and related costs
• Loss of investor confidence
• Reduced employee satisfaction and retention
• Regulatory fines
• Reputational damage
• Loss of customers or clients, or reduced spending

As time passes, organizational leaders and board members are being held to a higher standard of accountability on social issues. Agency oversight is critical. It is now more difficult to claim ignorance of these issues, distance yourself from risks by relying on agents or middlemen.