What is your real social impact?

We’re living in a volatile time, where the consequences of climate change and conflict are pushing us to examine how we live and do business, for the sake of both planet and people. Yet most companies lack clarity about the ‘S’ in ESG – their social impact. What is it, why does it matter, and how can it be improved?

What is social impact? The way your company operates influences all your employees, business partners, workers and consumers in your value chain, and people in the communities you work in – in both negative and positive ways.

Why does social impact matter? Promoting the livelihoods, health, safety, and well-being of all your stakeholders is the responsibility of all companies, but it is also crucial to your business. Increasingly, national and EU legislation require companies to respect human rights and implement comprehensive human rights due diligence. Therefore, the way you manage your social impact affects your license to operate, capacity for innovation, your risk profile, your corporate reputation, and in turn your ability to attract and keep customers, employees, and partners.

How can you work with social impact? To work effectively with your social impact, you need to understand it, systematically improve it, and finally show it.

Understand your social impact

First, you must understand the social impacts that your company has on others throughout the value chain and the demands that this places on your company by understanding relevant dimensions and by measuring its reach and extent.

Identify it: To measure and monitor your social impact – i.e., the risks and impacts that you cause or contribute to that affect the ability of any individuals or groups to enjoy their human rights, incl. livelihoods, health, safety, and well-being – you need to identify and segment all your stakeholder groups and understand the impact you have on them. Stakeholders are all those individuals and groups that are being affected or risk being negatively affected by your products, services, and operations throughout the value chain.

To live up to this responsibility, you need to perform adequate human rights risk and impact assessments to identify risks and negative impacts.

We recommend you start with your own organization as a workplace, proceed further to identify and engage with stakeholders along your value chain, and then examine your potential community impact. In doing so, you must establish indicators that can be measured, and that line up with current and coming national laws and EU regulations and directives, such as the EU Taxonomy, European Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD).

This can be a challenging task, which requires thorough expertise within human rights, stakeholder management, methodological knowledge, and sustainability legislation and policies.

Assess it: Once identified, your social impact needs to be measured by gathering and analysing both existing and new data. This needs to be based on dialogue with relevant stakeholders and can be supported by gathering relevant information from your existing business intelligence tools, through employee inclusion and well-being surveys, supplier and partner surveys or data tools, as well as through targeted measurement of relevant community impact indicators.

It is important that these be measured in a way that can be repeated at regular intervals – to enable ongoing learning and reporting.

Improve your social impact

Manage it: Improving your corporate social impact starts with a commitment to respect human rights and is dependent upon the implementation of an adequate human rights due diligence processes. This will enable your company to identify, mitigate, and prevent your risks and negative impacts as well as increasing your positive impact.

It is key to ensure that you respect human rights and drive meaningful change, rather than pursuing feel-good goals while continuing real harm, or impact washing. To do this, you must first prioritise reduction and remediation of harm before investing in new initiatives for positive impact. This requires systematic work to reduce risk by establishing and continuously conducting human rights due diligence in your operations and along the value chain.

Improve it: There are also multiple ways to raise your positive impact—both internally, in your supply chain and in the surrounding community. We recommend that you establish a targeted plan for improvement initiatives within a defined period. These may include training to personnel leaders for inclusive hiring and development practices, practical guides for inclusive meetings, and new procedures for safe work practices, and new initiatives to develop change programmes within the broader community.

Your initiatives’ potential for positive impact can be further improved if they are developed and tested in collaboration with the stakeholders they are designed to benefit, and by getting regular feedback.