At Pearl Consulting, we are seeing these 5 social impact trends in 2023 and beyond
#1 Doubling down on social impact, the ‘S’ in ESG (Environmental, Social and Governance) and creating opportunity for under-represented groups
We predict companies will further align their social impact goals with business goals, with an increased emphasis on engaging with under-represented or minority groups. Organisations will further apply critical thinking to analyse how to marry social impact goals with business goals. We predict companies will increase their engagement with the not-for-profit and social enterprise sector to develop initiatives around supporting the growth of minority-owned/led businesses, investing in capability building through mentorship and network-building, supporting the unlocking of capital, and paying heightened attention to their supply chains with a focus on eliminating modern day slavery.
We expect to see a growth in membership organisations uplifting under-represented groups. Two worth watching are WEConnect International, connecting multinationals like Standard Chartered and Alcatex Group with women-owned businesses. In Australia, there are organisations like Femeconomy, building networks of women-owned businesses and advocating for and securing changes to government procurement policies to set targets for procuring products and services from women-owned businesses.
#2 Purpose and meaningful work a priority for talent
There is growing awareness amongst and interest from younger talent in terms of a business’s “purpose”, and whether the business prioritises sustainability and social impact practices within the way the company operates. This has become an even greater focus as seen through the great resignation and during rising inflation rates and the cost-of-living crisis.
Attracting and retaining good talent is increasingly challenging for businesses. The rise of the B Corp movement, an independent certification that a business meets the highest environmental and social standards, has continued to build momentum, with around 6,500 B Corps now certified around the world, and steadily growing. Cognizant’s The Purpose Gap report explains that, from their study conducted in September 2021, they found that eight in 10 millennials say that responsible and ethical business practices are extremely or very important to them when choosing an employer, and, among Gen Z, 84% consider this area extremely or highly important.
#3 Increased importance of metrics, frameworks, and disclosure
We see the increase of importance of metrics, frameworks, and disclosure, and that investors are reframing risk. For example, BlackRock, the world’s largest asset manager, has publicly stated that a company’s climate risk mitigation strategy and environmental performance will be an important consideration in their investment strategy (source: Black Rock’s ‘Where We Stand’ report, p.19). A company’s ability to efficiently navigate the global regulatory environment and scale compliance systems will offer companies a significant competitive advantage. Forbes notes that, following a survey of 2,600 CEOs, they found 98% agree that ESG is core to their roles.
Collating ESG data for reporting is difficult and evolving, it needs to be transparent and detailed from along the value chain. As standards evolve, companies must adapt their frameworks, and ensure sustainability metrics are aligned to company strategy and objectives, and that processes are embedded within the organisation.
#4 Increased adoption of systems to support data collection and reporting
With Scope 3 emissions regulations on the rise, we predict the continued increase in adoption of sustainability and social impact data collection through technology solutions that increase collection efficiency, provide reporting, and support transparency and accountability. This will apply to the entire product life cycle. For example, we can expect to see ‘digital product passports’, a unique digital thread, tracking various aspects such as the product’s carbon footprint and then sharing information collected across the company, with suppliers and regulatory agencies.
#5 Linking employee compensation to the ESG goals
We are seeing an increase in ESG targets being not only embedded across the organisation, but also tied to employee remuneration, providing further incentive and accountability towards stated goals. Multinationals are among those leading the way. In 2021, Mastercard announced that it was taking a shared accountability approach, starting at the top with the most senior executives as, collectively, they have both the ability and responsibility to influence and help the business grow. The USD $900 billion global asset management company, Axa Investment Managers, is following suit, having recently announced that it will begin including ESG targets in the incentive compensation packages for senior executives, including goals focused on reducing the carbon footprint of investment portfolios.