Levelling up social impact reporting

As companies morph Corporate Social Responsibility efforts into their ESG strategy, investors and regulators will expect to see social and community initiatives undergo the same rigour as financial reporting.

Concerns about the impact businesses have on society are not new. Many organisations have been volunteering their time and donating cash or in-kind resources to support social causes for decades. In principle, companies have long been acutely aware of the need to deliver economic returns to shareholders as well as long-term value to their stakeholders. 

This active demonstration that companies can “do good” for communities and “do well” financially, or Corporate Social Responsibility (CSR) as it is more formally known,  emerged as a business practice in the 1970s. Marketers, communications and HR departments often absorbed CSR into their remits as it proved a savvy tactic for enhancing brand image and employee morale. But despite the good intentions and reputational outcomes, CSR has been criticised as outdated, misaligned with business performance and inadequately monitored. 

Yet companies’ investments and legacy in CSR need not be lost or discounted. There is value in transitioning a “nice to have” approach to doing good into a robust strategy that aligns  social purpose and impact  with business goals. In recent years we’ve seen this taking place in many companies that have morphed CSR into ESG strategy, specifically as part of the ‘S’ in ESG. 

However, as  investors and regulators ramp up their scrutiny of corporate ESG efforts, bundling CSR into ESG means practices like philanthropic donations, staff volunteering hours and the pursuit of shared value need to be tracked, measured and reported publicly as part of company disclosures. 

This is often easier said than done, but the move towards more rigour may be what saves CSR.

By applying the rigours of financial reporting to social investment reporting, companies generate and share more credible ESG data. Seemingly subjective social and community initiatives are being quantified and data on social indicators such as community investment is being verified and audited. This is exactly the sort of comparable and consistent ESG data investors and other stakeholders are looking for.

These benefits came through loud and clear in research and interviews The Action Exchange conducted with Canadian member companies of the London Benchmarking Group (LBG Canada) that regularly subject their community investments to the scrutiny of audit.

To find out more, read the report produced for LBG Canada and SiMPACT “From story to scrutiny”, which was picked up by the Financial Post.