ESG – social

The ‘social’ credentials of businesses are becoming increasingly important as stakeholders from customers and employees to investors and supply chains look to them when making decisions about whether to engage with you. They are key to your competitiveness, and increasingly so as businesses of all shapes and sizes focus more intently on this, for example through the B Corp movement, which legally requires certified businesses to consider the impact of their decisions on society and the environment as well as shareholders.

The S in ESG:

• Is crucial to your reputation and in building trust
• An essential part of regulatory compliance as laws around workplace practices, diversity and inclusion and supply chain responsibilities increase
• Increasingly important in fulfilling customer and supplier expectations
• Vital in attracting and retaining employees 

The social aspects of ESG run through every part of your business from HR and risk management to finance, customer relations, product design and supply chain management.

The start point is understanding the landscape in the context of your business. You need to be clear on regulations, what applies to your business and industry, and where the risks and opportunities lie.

Developing the right policies and procedures is essential. Your social considerations need to be clearly defined, embedded across your business and supported by strong governance.

Reporting is critical both in terms of fulfilling mandatory obligations and in communicating your actions, performance and progress to stakeholders. This relies on detailed, accurate data from across your business, for example diversity and inclusion metrics or those demonstrating broader social impact.

Data is also essential in helping you understand how your business is performing now and in informing your plans. You’ll need to collect this data, ensure protection and governance around it and turn it into meaningful MI. 

Your people are crucial to your business and how you treat them is at the heart of ESG. Employment tax policy has a significant role to play here because it helps ensure fairness – not just for individuals but for society. Your employment tax policy and ESG policy should be aligned.

Two key employment tax areas to call out are:

The National Minimum Wage sets a legal minimum rate of pay to ensure workers are treated fairly and those on low pay are protected from exploitation. It has risen sharply in recent years so employers must make sure they are complying with regulations and take extra care with policies and processes around working hours and time-keeping. Factors such as salary sacrifice agreements can add complexity.

How you classify workers – for example employed or self-employed – affects their legal rights around pay, job security and benefits such as pensions, holiday or sick pay. Classifying workers correctly and ensuring they don’t miss out on statutory rights is fundamental to ESG. Complying with off-payroll working rules such as IR35 also ensures contractors are paying the correct amount of tax and contributing fairly. 

From the theft of personal data and sensitive information to the disruption of key services, cyber crime has a huge and far-reaching impact on people and society. This makes cyber security crucial to the social dimension of ESG – as well as ESG as a whole – and an essential consideration for all ESG policies and plans.

Developments such as Ransomware-as-a-Service are unfortunately opening up criminal activity to more perpetrators while at the same time digital activity is expanding. In fact, digital transformation is usually an important part of an organisation’s ESG strategy and net zero plans, creating further opportunities for criminals to exploit any weaknesses. 

While fraud, stolen financial data and other cyber crimes can bring operations to a halt and cause significant financial and reputational damage, the proceeds – for example from ransoms – also fuel exploitation and illicit activities. They are significant contributors to human trafficking, the drug trade, terrorism and arms dealing, all of which have a catastrophic impact on people and destabilise society.

Your business must take proactive steps to build cyber resilience and protect people and society by:

• Understanding the risks you face and identifying weakness by assessing your business against a cyber security framework
• Implementing strong data protection policies that safeguard employee, customer and other stakeholder data, and ensuring they are compliant with regulations such as GDPR  
• Developing and implementing a cyber security plan that aligns with your ESG plans
• Educating employees on cyber risks through training and ensuring clear procedures
• Managing supply chain security to ensure standards, prevent vulnerabilities and hold third-parties accountable

Our multiskilled team is here to help you navigate the social aspects of ESG, supporting you in developing a response that aligns with the goals and values of your business, rises to the expectations of your stakeholders and complies with regulations.

This includes:

• Helping you understand ESG more broadly, what ‘social’ is, how it applies to your business and the key risks and opportunities for you
• Demonstrating how others in your market are responding and what you need to do to remain competitive
• Working with you to develop and implement your ESG strategy and plans, including those around workplace wellbeing, diversity and inclusion, and support for your community
• Exploring whether B Corp certification is right for you
• Advising you on employment taxes, including offering your business a comprehensive Employment Taxes Health Check to ensure you are compliant with new and changing legislation and your tax policy is supporting your ESG goals
• Supporting you in understanding your cyber risks and building a strong cyber security defence to help ensure people’s data is safe and there are no harmful consequences. If you have suffered a breach or near miss, we can help you improve processes and controls

During this workshop-style health check, you’ll get the opportunity to discuss your business and ESG journey with our expert team. We’ll help you:

• Define your challenges and opportunities
• Establish your key priorities in relation to the social aspects of ESG and, where relevant, across environmental and governance areas too
• Identify the next steps on your ESG journey