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4 6月 2024
Insight
Global
1m read
With opportunities, come challenges for businesses seeking to explore how to unlock value from prioritising and investing in understanding ‘S’ factors.
Simply articulating an ESG-aligned purpose or commitment to specific ‘S’ goals is insufficient if not backed up by what employees and other stakeholders experience in practice. In fact, it is more likely to attract negative publicity, including criticisms of ‘social washing’, and lead to an erosion in employee engagement.
“It’s all very well to have a policy,” Stutt says. “But if you don’t have people to do the human rights due diligence or respond to questions being raised, if you’re not resourcing for that, then you’re almost better off not having the policy in the first place.”
Major companies are grappling with how to better prioritise social factors and then operationalise them. While 84% of respondents cite having policies and processes, only 71% of respondents consider there has been integration of social commitments into business activities.
Our survey identified shifts in accountability for social performance, targets and metrics. Until now, accountabilities have largely been dispersed throughout the different departments of a company. Procurement might handle supply chain due diligence, while the HR department manages workplace matters. However, the trend is strongly toward overall responsibility sitting with the board and CEO, or a dedicated senior executive. Chief Sustainability Officer is an increasingly common title at C-suite level.
The task of structuring accountability for ‘S’ targets is complex and the mandate for a senior executive tasked with oversight in this field needs to provide broad and real influence across the business, while guarding against ‘ring-fencing’ or siloing accountabilities in a single title.
Human rights offers a good case study on the challenge of operationalising social commitments. While more than half of respondents say they have a human rights risk management system in place, these systems overwhelmingly focus on suppliers and due diligence. A lower number of respondents have a clear accountable executive, or investigation and remediation protocols. As Wootton notes, “Those are all areas we can expect a wider range of companies to develop as regulatory and stakeholder attention continues”.
Chapters
- Stuck in the Middle? Unlocking ESG Investment in Australia 2024
- Social or ‘S’ issues gain momentum
- The social opportunity for businesses
- Operationalising ‘S’ commitments
- Climate still the top ESG dimension
- Net zero commitments – moving from talk to action
- ‘E’ = more than just climate
- ‘G’ is the common thread
- What lies ahead for ESG?
Key contacts
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© Herbert Smith Freehills 2024