Companies don’t win over investors just by issuing sustainability reports and engaging in other standard ESG practices. What they need to do, says Harvard Business School’s George Serafeim, is integrate ESG efforts into strategy and operations. He makes five recommendations: Identify the material issues in your industry and develop initiatives that set your firm apart from rivals; create accountability mechanisms to ensure the board’s commitment; infuse the whole organization with a sense of purpose and enthusiasm for sustainability and good governance; decentralize ESG activities throughout your operations; and communicate regularly and transparently with investors about ESG matters.
The Board’s Role in Sustainability
To build long-term profitability, boards of directors must pay more attention to ESG concerns—and a compelling corporate purpose should underpin their efforts. That’s the contention of the authors, who offer a research-based framework called SCORE to guide boards’ actions: Simplify—define and communicate your purpose clearly; Connect—link your purpose to strategy and capital allocation decisions; Own—ensure that all employees embrace the firm’s mission and have the means to deliver on it; Reward—tie executive compensation to metrics that include ESG performance; Exemplify—use data and narrative accounts to show stakeholders how you’re achieving your purpose and improving sustainability.
The Challenge of Rating ESG Performance
Over the past decade, more and more institutional investors have taken an interest in companies’ records on environmental sustainability, social responsibility, and governance. In this article the head of ESG research at Sustainalytics, which gathers information on tens of thousands of companies worldwide, explains why this data matters and how his firm arrives at its performance ratings. The process involves identifying the risks a company faces, assessing how well it’s managing them, and engaging in follow-up dialogue to ensure accurate analysis. MacMahon also discusses why certain companies’ ratings have improved or worsened and how to put your best foot forward.
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FAQs
Expert-Verified Answer
Option -D: Social-impact efforts that create real value must be woven into a company's strategy. The long-term plan for attaining a company's goals and objectives is referred to as its strategy.
What are social impacts examples? ›
This can include improving people's health, increasing access to education, promoting equality, and supporting the local economy. Organizations and individuals striving for positive social impact generally focus on improving the world by addressing social issues and promoting positive change.
What is an example of a social impact strategy? ›
Social impact strategy is a process for planning, measuring, and attributing positive social change to an organization's work and actions. For example, a sustainable food products company might choose to focus on: Promoting organic, sustainable, and regenerative agriculture.
Why is social impact important? ›
Social impact is a significant change that positively addresses a pressing injustice or challenge, such as climate change, human rights, or the education gap. When businesses and organizations establish social impact initiatives, the difference is felt beyond the communities the efforts or activities serve.
What is an example of a social value? ›
Wellbeing benefits – eg measures to support the physical and mental health of workforces and communities, providing well-paid, meaningful work. Social benefits – eg provision of communal amenities like libraries, playgrounds, and community spaces, support for and involvement with community groups.
What is social impact value? ›
The key difference between social value and social impact is that social value focuses on the short-term benefits that a business provides to society, whereas social impact looks at the long-term, sustainable impact that a business has on society and the environment.
What are social impact outcomes examples? ›
Social Outcome
Social outcomes are often the long-term effects that are sought after through various social impact initiatives and can include improved health, education, economic stability, or equality.
What are social impact measures examples? ›
Social impact measurement is a process and framework for measuring and attributing positive social change to an organization's direct actions. For example, a non-profit community garden and food pantry might measure impact metrics like: Number of meals served. How many community members it gives care and shelter to.
What is an example of social impact theory? ›
Social Impact Theory Model: Factors
Strength is the perceived power of the person exerting social force. If a friend tries to get you to stay after class to study, you are less likely to do so than if a teacher does the same. The teacher has more influence and power to affect your life than a friend.
How do you create social impact? ›
Businesses can create social impact by integrating responsible practices, such as ethical sourcing, community engagement, and sustainable operations. Aligning business goals with societal needs fosters positive change and enhances reputation.
Communicate what your organisation achieves in the world
You can find this out by asking what impacts if we were not achieving them, would stop us from meeting our mission? Are there any other things we need to know about – such as unexpected impacts of our activities (either positive or negative)?
What are examples of social impact? ›
Social impact refers to the positive or negative effects on society resulting from actions, policies, or projects. Positive examples include job creation, improved access to education and healthcare, reduced crime rates, environmental conservation efforts, and cultural preservation initiatives.
What is social impact simple? ›
Social impact can be defined as the effect on people and communities that happens as a result of an action or inaction, an activity, project, programme or policy.
What is social impact and responsibility? ›
Social impact and responsibility is a broad, multidisciplinary, and evolving area. The social impact & responsibility concentration is designed to help students address the question: “How should business enterprises and business thinking be engaged to improve society in areas not always associated with business?”
What are the types of societal impact? ›
Positive examples include job creation, improved access to education and healthcare, reduced crime rates, environmental conservation efforts, and cultural preservation initiatives. But social impact can also mean negative consequences, such as increased inequality or displacement of communities.
What are the key aspects of social value? ›
Social value is the societal, environmental and economic impact of your organisation. It shifts the core indicator of value beyond money and profitability and emphasises the 'relative importance that people attribute to changes in their lives' (Social Value UK).
Why is creating social value important? ›
By taking this relative importance into account we can ensure that the decisions we make focus on what is valuable to people, and through this we can start to increase the positive and reduce the negatives effects and ultimately increase the overall value of our work.
What is the social value of development? ›
Social Value refers to the wider financial and nonfinancial value created by an organisation through its day to day activities in terms of the wellbeing of individuals and communities, social capital created and the environment.
