A new report from The Young Foundation, the UK’s home for community research and social innovation, explores how the ‘social’ dimension of ESG is interpreted by businesses in the UK.
The report, The Quest for the ‘S’ in ESG, draws on analysis of FTSE100 companies and a large survey of SME and large UK businesses and finds strong evidence that UK businesses have been seized by the material, moral – and regulatory – responsibility to take action on the climate crisis, but uncovers a lack of attention, measurement and commitment to social outcomes as part of ESG strategies.
The report sets out a framework to help businesses develop their social impact strategies to both support and extend current notions of how to drive societal change and impact. Supporting businesses to plot their journey toward long-term meaningful collective social impact, the Framework has four scopes:
Scope one
People: measures to provide a safe, fair, secure, diverse and well workforce
Scope two
Suppliers: measures to enable a socially responsible and impactful supply chain
Scope three
Communities: measures to meet the needs and priorities of local and stakeholder communities
Scope four
Collective impact: measures to help meet community needs and priorities in partnership with other sectors and industries, ensuring social and environmental outcomes are aligned and long-term social outcomes are measured.
This Framework takes ESG strategies beyond the workforce, where most social activities are currently focused, toward a sustained and generative relationship with communities, which are cited by 76% of FTSE 100 companies as ‘key stakeholders’. The Framework also supports the concept that social and environmental action are fundamentally linked, helping businesses drive a fair and just transition to a sustainable economy and society.
Beyond Scope four, the report recommends companies assess vulnerabilities in their communities in relation to their plans to transition to net zero, targeting their social, community support towards these needs, households and groups.
Helen Goulden, OBE, CEO at The Young Foundation, said: “There is no shortage of challenges besetting businesses right now, as a result of the compounded impacts of Brexit, the pandemic, political turbulence, rising costs and the war in Ukraine. Yet the motivation to create positive environmental and social change continues in the UK’s most progressive businesses. This simple four scope sramework offers a route to driving social impact across the entire value chain, not just within the workforce or through charitable giving. It brings the ill-defined notion of ‘communities as stakeholders’ much more concretely into the realm of social responsibility for a business. And creates expectations of collaboration between businesses, public, academic, and civic actors to work on long-term, complex social and environmental challenges together.”
Sara Williams OBE, CEO at Staffordshire Chambers of Commerce, said: “This welcome report highlights that there is both willingness and opportunity for UK business to support positive change through their ESG work – but if they are to drive social change meaningfully, there is work to be done. This is a moment for organisations to work collaboratively with their stakeholder communities.”
Fiona Cannon OBE, Group Sustainable Business Director at Lloyds Banking Group, said: “ESG was once seen as something for businesses to do ‘on the side’. This report shows just how far we’ve moved from that position. At Lloyds Banking Group, we started as an organisation with a purpose statement, but we’re now working towards becoming a purpose-driven organisation. That’s a vital reframing, and one that’s supported by the Quest for the S in ESG, helping businesses to question their role in society and explore how they can respond to social challenges with collective action.”
