Expert Opinion: Narrowing in on the ‘S’ in ESG

Katrina Kroeze, senior ESG advisor specializing in stakeholder engagement, ESG strategy & program development and sustainability reporting at GHD, will be joining a panel discussion on people-centered climate action — supporting the "S" in ESG — at Environment Analyst's Global Business Summit (27-28 June, Chicago).

Here, Katrina shares her insights on how we can better understand the social imperatives that will help us balance ‘people and planet’ outcomes.

BY KATRINA KROEZE

With debate swirling around definitions of ESG and its effectiveness as a tool to tackle climate change, how do we cut through the commentary to gain consensus on what it means and how it can be leveraged? How can we think outside the emissions box to better understand the social imperatives that will help us balance ‘people and planet’ outcomes?

While many businesses are currently and understandably focused on the "E" (environment) in ESG, the "S" (social), including inclusion and diversity, human rights and many other social considerations, is becoming better understood as an equally critical driver of an integrated sustainability strategy.

Social impact experts, social psychologists and other stakeholder engagement specialists will be key to achieving success here.  It has already been shown that businesses that put in place a methodology to quantify their impact on the "S" improve the overall success of their business performance. Increasingly, today’s social risks will be tomorrow’s material business impacts, with the World Economic Forum identifying several key social factors that businesses should be considering now.

A holistic, collaborative approach is needed

Looking at each ESG component, there are a multitude of connection points that clearly need to be considered together. Similarly, social issues that people are passionate about, for example, poverty reduction or the rights of Indigenous peoples, can be a lever for positive environmental action, demonstrating that an equal focus on both the E and S can have a ‘mutual benefit’ in the context of an integrated ESG strategy.

The S represents collaboration, offering an opportunity for the humanities, engineering, and technology to come together, to help decide what is of most importance to a particular group of people. As we continue to evolve in this space, social and behavioral scientists will be more involved in S evaluation alongside environmental scientists and economists.

Social engagement is critical to positive change

There are already good examples of businesses and asset owners thinking about the S. In discussions with communities traditionally reliant on the oil and gas sector, for example, our advisors have been exploring opportunities, alongside our clients, to upskill workers in lower-carbon industries, to ensure the transition away from fossil fuels does not negatively impact the community’s productivity but rather, builds its reliance in the face of inevitable change.

 If an organization’s strategy is truly rooted in ESG, the S needs to be on an equal footing to the E and understood to have a quantifiable and material impact to the bottom-line. 

Let’s not forget the G

And that’s not to forget the G; too loose a governance structure lacks the transparency needed for the E and S to be taken seriously. 

Organizations that are able to balance all three elements in a holistic way will be better placed to add financial and non-financial value over time, regardless of popular trends — whether that be a political ethos or an editorial perspective.

No sector or business is exempt from the impacts of climate change. But with a collaborative approach and the desire to create lasting community benefit, and with good planning and tools, organizations can build resilience, adapt to and even benefit from change and uncertainty. Businesses are increasingly recognizing a bigger, civic responsibility and are embedding sustainability into their business planning, creating an organization-wide culture of ESG.

It is incumbent on organizations (private and public) and infrastructure providers to do the right thing, putting people and planet at the heart of their forward plans. 

The growing prominence of social issues and their connectivity to environmental goals and financial imperatives is what will really drive progress in this area. Ultimately, it will be a combination of societal expectations and market pressure that will underpin positive change — putting the S firmly where it belongs, at the heart of ESG.

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Katrina Kroeze, Senior Advisor - ESG & Strategic Sustainability, GHD

Katrina's area of expertise is in designing and implementing ESG/sustainability strategies and programs with stakeholders in mind. Over the past 12 years, Katrina has used her stakeholder engagement experience to understand the needs of her clients and find ways to effectively engage and communicate what’s needed to drive ESG outcomes.

In addition to her consulting responsibilities, Katrina is the sustainability & resilience service line leader for GHD. In this capacity, Katrina champions a culture that puts technical excellence at the heart of all client solutions.