After climate, one of the next ESG priorities is social. Are you ready?
Results from PwC’s annual global investor survey show greenhouse gas emissions to be the leading individual Environmental, Social and Governance (ESG) consideration for investors and an important factor in decision making. However, the survey highlights that sustainability for businesses needs to be about more than emissions reduction and notes an increased focus on the social element of ESG. Following emissions reduction, the top three cited ESG issues for global investors; ensuring worker health and safety; improving workforce and executive diversity equity and inclusion, and addressing human rights in the supply chain. Interestingly, for Australia and New Zealand respondents, the level of importance given to these social issues was higher than the global average.
Why are social issues important?
• It’s the right thing to do
The COVID pandemic, rising inflation and global conflict have brought to light the consequences of overlooking ESG issues. These recent events have brought some real-work meaning to the long-term call to address environmental, social and governance issues as simply the right thing to do, and an increased expectation that businesses can and should play a leading role.
• It’s personal
Employees and job-seekers see it as increasingly important for organisations to be living (or at least developing) their ESG story. They can afford to choose who they work for, and current employees are seeking confirmation that their employer is making a difference, which plays a strong role in staff retention. In the talent acquisition processes, you’re under interview too!
• It makes business sense
Businesses are rethinking who they buy from and do business with, and are now considering both positive and negative impacts their wider supply chain has on achieving their social objectives – these decisions have commercial impact. For example, this may involve investigating modern slavery in the supply chain, and gender and cultural diversity in terms of pay gaps, employment practices and procurement.
What can organisations focus on?
Because of the increasing importance of social measures for customers, employees and investors, ESG needs to be more than a tick box and companies need to place ESG at the heart of their businesses. Focus should include:
- Which social risks and opportunities have a material impact on reputation, compliance or performance?
- What metrics should we be using to measure and report progress and how are we positioning to achieve them?
- Do we have the capacity, interest and skills to develop an ESG strategy? If not, how do we plug the skills gap?
- Do we have the systems and processes to track and monitor our progress?
- How do we use incentives and structure in the business to steer towards our social goals?
- Are we taking an interest in regulation that might affect us? Have your say on MBIE’s open consultations on Modern Slavery and Worker Exploitation proposal (closing 7 June 2022).
More information on how to drive improvements in social outcomes through your corporate strategy and day to day operations can be found at www.pwc.co.nz/services/consulting/sustainability/sustainable-products-procurement-and-supply-chains.
We know New Zealand businesses have started incorporating climate risk and opportunities into strategy and risk management, some have begun transforming the way they do business. Where is your business on this journey and are you ready to start thinking about the ‘S’ in this way?
