While the “S” in ESG investing has largely been overshadowed by the “E” to date, recent trends have moved social risks to the forefront, says a new report from ESG Global Advisors Inc. and Argyle Communications Inc. that assesses how well companies address those risks.
The report, “The State of Social in ESG,” found that, while organizations seem to be taking action on social issues — such as developing diversity, equity and inclusion policies — and employees are noticing, the real-world impacts lag.
“[We]’re seeing gaps in actions that generate tangible outcomes, such as those related to hiring, procurement and supply chain,” said Dustyn Lanz, senior advisor with ESG Global Advisors, in a release. “This highlights an opportunity for leaders to be courageous and take action now, rather than waiting for best practices to be defined by others.”
For example, the vast majority of organizations surveyed had developed or were in the process of developing inclusive policies and programs, but few had set established targets. Less than half of participating organizations had a human rights policy, and only 50% of that group had extended that policy to their supply chains.
Only half of the organizations had integrated social risk into their enterprise risk management systems and board governance; however, the majority of participants said they were either working on or considering doing so.
While most employees gave their organizations positive marks on social issues, there was a gap between how highly they valued social performance and how well they thought their organizations were doing.
“When it comes to attracting and retaining talent, there is a big message in this study for employers,” said Jessie Sitnick, senior vice-president of sustainable value with Argyle, in the release. “Social performance is tremendously important, and, while the bar is high, employees are receptive and responsive to progress.”
Amid an unprecedented battle for talent, 94% of participating organizations were embracing flexible work models, and 79% said they were increasing investments in employee physical and mental health.
The data for the report was collected in July 2022 from 73 organizations in Canada and the U.S. covering practices related to six social themes: human capital management; employee health and safety; diversity, equity and inclusion; Indigenous reconciliation; human rights; and governance and strategy around social issues.