How social impact strategies advance ESG agendas

Successful environmental and governance strategies depend on a thoughtful social approach.

In brief

• A thoughtful social approach puts positive human impact at the center of every ESG transformation.
• Social impact strategies affect how the company is perceived by its customers, employees and partners.
• Organizations that have diverse perspectives and an inclusive culture drive better decision-making, stimulate innovation and increase organizational agility. 

While we know sustainability and ESG — short for environmental, social and governance — are of increasing importance to stakeholders and investors, we most often hear about climate-related strategies (the E) and ESG reporting. But the S of ESG, when combined with the E, plays a critical role in defining the kind of story companies tell about their positive impact on the world and the communities in which they operate.

A strong S strategy can transform how a company operates, how it manages its relationships with its workforce, suppliers, communities and customers, how it manages resources, and how it creates long-term value for all its stakeholders. It also impacts how the company is perceived by its customers, employees and partners. 

What comprises the S in ESG?

The social component of ESG speaks to the relationships a company, government organization or nongovernmental organization has with people. It centers on leadership, diversity, equity and inclusion (DEI), human rights, teaming, community, and maintaining a healthy corporate culture.

Social considerations include labor policies such as fair pay and relationships with suppliers (and their labor policies), customers and communities. It also includes legal obligations such as the U.S. Foreign Corrupt Practices Act, which outlaws bribery, and the European Union’s General Data Protection Regulation, which preserves data privacy.

Companies are responsible for the health and safety of their workforce, for training and for improving working conditions broadly — being a force for good that provides opportunities for all, irrespective of differences such as gender, gender identity, sexual orientation, racial or ethnic background, or abilities.

The S also takes form in different ways in different sectors, such as striving for financial inclusion in the financial services industry, bridging the digital divide in the technology, media and telecom industry, and achieving health equity and access in the health care industry.

The overlooked importance of the S

While E-related issues such as energy usage and carbon footprints¹ and G concerns like financial disclosures² have grabbed most of the headlines related to ESG to date, the S can be a company’s competitive advantage. You cannot have a successful environmental strategy without getting the S right. In fact, social sustainability is linked to the E and the G. For instance, employee behaviors impact a company’s environmental metrics and things like executive compensation and board representation are tied to the G.

A thoughtful social approach, as part of a holistic sustainability and ESG strategy, can impact how an organization recruits and retains talent — particularly among younger generations of people where it’s become an expectation. It also helps define the impact an organization has on the communities in which it does business or operates.

Organizations that have diverse perspectives among their workforce, combined with an inclusive culture, drive better decision-making, stimulate innovation, increase organizational agility, and strengthen resilience to disruption.

To that end, DEI is central to a company’s social strategy. Many organizations who may not have been prioritizing DEI, have shifted their thinking about its importance over the past few years, driven in part by the murder of George Floyd in 2020 and the ensuing social justice movement. COVID-19 also had a disproportional impact on certain communities, which further highlight systemic inequities. Those seismic shifts brought issues of injustice and discrimination, quite literally, home for everyone.

How to enhance your social sustainability strategy

A company’s focus on the S means putting positive human impact at the center of every ESG transformation. We consider four critical areas when working with clients to help them establish their social sustainability strategies: 

Compliance reporting

Proactively monitor and manage compliance, stakeholder materiality and risk management related to social sustainability. 

Traditional talent management that invests in your people

Align talent initiatives and goals with current state disclosures, aspirations and stakeholder materiality

Enabling employees’ personal sustainability goals

Champion behaviors, programs and incentives that support an employee’s personal sustainability agenda.

Social impact and community engageme

Advance employee initiatives and programs for positive corporate citizenship and social impact

Effectively addressing these areas means rethinking everything from recruiting to compensation to ensuring an equitable playing field for all employees. Implementing this transformation will require buy-in and accountability across an organization’s entire leadership team. 

Leading social sustainability at the EY organization

The EY organization has been investing in social sustainability for more than 25 years. We remain steadfast in our commitment to create long-term value for our stakeholders and realize our daily purpose of building a better working world. We do this in many ways, including leveraging our influence to help eradicate racism and discriminations through strategic efforts in our organization, in the communities where we work and through public policy.

We also challenge ourselves internally to drive DEI progress further and faster. DEI is not a “nice-to-have” initiative. It’s a “must-have” imperative. And we live this throughout our organization.

It’s also about creating a positive impact on the people and communities in which we work. One example is our corporate responsibility program, EY Ripples, which aims to positively impact 1 billion lives by 2030. Through skills-based volunteering, EY professionals create long-term value for society by supporting our three focus areas: the next-generation workforce, impact entrepreneurship and environmental action. By amplifying the social impact of the skills we use in our business every day, we are creating a ripple effect that is felt across organizations and communities. 

The EY organization has also engaged in a series of investments that further align with our values around the S portion of ESG, including DEI. For example, we have taken the following actions to implement social equity strategies:

• Through the EY Entrepreneurs Access Network we’re addressing the disparity gap for Black- and Hispanic-/Latino-owned companies, many of whom do not reach their full potential due to lack of mentoring, connections and capital.
• We’re helping bridge the digital divide distance learning gap. We do this by helping to provide internet connectivity, devices and online mentoring to underserved students.
• We’re challenging ourselves to review our internal talent and business practices to further advance equity across the organization.
• We launched the Social Justice Fund as a platform where EY US people can recommend nonprofit organizations whose primary missions are to address inequity, discrimination or racism. Our most recent social justice and antiracism investments have now reached over $10 million.
• In our collaboration with the King Center, we are supporting the organization in its ambition to drive global citizens and organizations toward shaping an equitable world.
• We teamed with clients to expedite COVID-19 vaccine distribution while addressing health inequities and working for social justice. EY US provided funding for faculty research grants at a historically Black college to look at the impact of COVID-19 on Black communities.

This focus is reinforced by the EY US Board Diversity Statement along with the EY Global Human Rights Statement. With this foundation of leadership accountability, we’ve set key priorities for our organization that align with our focus and drive strategic execution and long-term social sustainability.