Going Deeper on the 'S' in ESG: Unlocking the Power of Community Benefit
In today's rapidly evolving business environment, Environmental, Social, and Governance (ESG) criteria have emerged as an important framework for assessing the sustainability and ethical impact of companies. While much focus lies on the “E” of ESG, the social dimension (“S”) is often overlooked. In this series, we explore the importance of social impact within ESG, its impact on sustainable growth, stakeholder relationships, and business success.
While much has been said about the moral and ethical pressure on companies to improve their social footprint, less attention is paid to how prioritising the "S” in ESG can generate value for companies by enhancing reputation, mitigating risks, and supporting long-term business success. Maximising community benefit is increasingly seen as a fundamental aspect of responsible business practise and corporate sustainability. Here we explore what it is, what the opportunities and risks are, and how we can help you on this journey.
What is ‘Community Benefit’?
‘Community benefit’ refers to the positive impacts an organisation can have on the communities that are affected by its operations. It is a key component of the “S” in ESG. Examples of community benefit activities can include:
Community development projects, such as investments in local infrastructure.
Philanthropy and charitable giving.
Support for local economies, such as sourcing from local businesses and suppliers.
Community engagement, for example collaborative decision-making processes.
Environmental protection and conservation, i.e. enhancing the E in ESG.
Boosting local employment opportunities through training and vocational schemes.
In infrastructure projects, it is often synonymous with community benefit funds, set up by projects to pass on some of the benefits to local communities. Whilst these funds have been in place for a long time, and referred to collectively under this banner, 'community benefit’ can refer to many different types of investment structures, and varying impacts.
What are the benefits for business?
The benefits to communities might be clear, but what about the benefits to business? Much of the push towards better social footprinting has come from the proliferation of regulatory frameworks that have sprung up in recent years. However, increasing levels of investor pressure point to the financial returns that can be generated from investing in local community benefit.
According to research by New Philanthropy Capital (NPC), 1 in 3 employees prefer to work in organisations that strive towards positive community benefit; consumers are 4 times more likely to buy from a company with a strong purpose (this applies to B2B sales as well as B2C); and the general public is 6 times more likely to protect a company with a strong purpose in the event of a misstep or public criticism.
Investing in community benefit can yield numerous other advantages for a company, including: enhanced reputation, positive stakeholder relationships, attracting additional investment, and fostering a culture of innovation and creativity through engaging with diverse stakeholders to solve local issues.
What about the risks?
It’s clear that the concept of “do no harm” is no longer enough when it comes to companies’ impact on their local community. The risks of not investing in community benefit can include: resistance and opposition from community stakeholders to proposed projects or expansion, employee dissatisfaction and high staff turnover, lack of access to high quality staff, missed business opportunities, and regulatory and legal barriers leading to increased operational costs.
How can our ESG team help you unlock the potential of community benefit?
With decades of experience working in social impact organisations, across stakeholder engagement, impact measurement, and corporate strategy, our team can help you to:
Develop a community benefit strategy that:
Aligns with your core company values.
Is integrated with your wider ESG frameworks.
Addresses reputational risks.
Engages staff and local communities.
Is transparent and well governed.
Understand, measure, and communicate your community impact, through KPIs and impact measurement tools that support internal and external reporting.
Build an internal business case for community benefit investment by researching the strengths and weaknesses of different approaches and identifying what ‘good’ looks like for your business.
Identify and broker relationships with local partners (charities, local authorities, etc.) to deliver community benefit and build long-term positive value.
Reach out if you would be interested in exploring this further: aross@futurealternative.co.uk.