The ‘S’ of ESG is about more than just planting trees

I spend a lot of time looking at Environmental, Social, and Governance (ESG) reports published by companies across the built environment. A fair number limit their discussion of the ‘S’, the social elements, of ESG to outward facing social value elements. These might include philanthropy, voluntary time at schools and colleges, they may even include some community engagement projects. Voluntary efforts for teams may consist of planting trees.

I’m not discounting the fact that these activities can add real value. And I know I’m being facetious with the title, but it does raise two questions – what about the other social elements that are material to businesses? And how do we think about value, specifically social value?

On the first, thinking about the S of ESG, there are a range of material considerations to be taken into account. Many of these are spelt out in various frameworks and guidelines such as those from Global Reporting Initiative (GRI), GRESB, INREV and EPRA. If you don’t know where to begin, these are a good starting point. They include reporting against factors such as health & safety, labour conditions, training and education, and diversity.

Taken at face value, these may appear box ticking exercises as they often refer to having various policies and processes in place. However, if you dig beneath these, you will encounter some hard questions such as: What is rate of staff turnover and how does this compare with companies of a similar type and size? What do the results from staff surveys tell you? Where issues have arisen, how have these been managed and what lessons have been learned?

Moving onto social value, and this isn’t a subject I can do justice to in so few words, there is no agreed way to measure it. It has a squishiness than can be difficult to impossible to quantify. Perhaps it’s something we don’t always need to quantify, though there are specific market drivers to do so. But it’s pretty obvious that some activities will provide significantly more value than others, even if it’s not always possible to measure outcomes and impacts. For example, giving a young person not in education, employment or training mentoring or on the job training, or having employees use their expertise to support local businesses and charities, can make a real difference.

I’m not discounting planting trees. It can add value in all sorts of ways including improving public realms, enhancing spaces, reducing flood risk and supporting team building and company morale. Where I would query it is when it’s seen as not only addressing social value, but covering the S of ESG.

In reading these reports, perhaps it’s just me, but I want to read about the good, the bad, the ugly. I want to know if things have gone wrong, or expectations not met, and why. For instance, if a company were to identify poor labour conditions in their supply chain, I would want to know this and what they’ve done to address it rather than hiding it under the rug. Indeed, doing ESG well may mean identifying all sorts of issues that companies weren’t aware of. I also want to read about when things go well. These factors would give me some degree of faith in the contents any annual ESG/sustainability or integrated report.