Focusing on the Social in ESG in the food and drink industry
We explain what your business needs to consider regarding its social impact.
The third bulletin in our series in which we examine the importance of ESG for businesses in the food & drink sector looks at the ‘S’ element, which refers to Social. David Plowman explains what your business needs to consider regarding its social impact.
To recap, ESG stands for Environmental, Social and Governance, which provides an overarching framework to measure the true sustainability of your business: how it impacts the environment and society, its transparency and accountability. (Look out for Part 1, which provides an overview of ESG, and Parts 2 and 4, which examine the ‘E’ - Environment, and ‘G’ – Governance, respectively.).
The ‘S’ element
The ‘S’ element asks businesses to consider their contribution to communities and how they look after employees and other stakeholders.
When considering ESG, many organisations are heavily focused on the ‘E’ element: the Environmental. In some ways, this is understandable as it is a more easily measurable element and perhaps the area most focused upon by investors, customers and other stakeholders.
However, when we consider what sustainability really means for a business, it can be costly to neglect considerations around the ‘S’ element. Failure to attend to ethics and the well-being of people connected directly or indirectly with the business can lead to a significant loss of reputation – and reputation is something that can take many years to build, but can be lost in a moment.
Greater attention now paid to ‘S’
Following recent negative press, particularly pertaining to larger businesses, there is now increased attention in this area, and we see many ethical audits now being undertaken throughout the supply chain.
While these audits don’t currently create too many significant issues for most UK-based businesses, the expectations around the appropriate level of attention that should be given to ‘S’ is increasing.
For example, consider the changes that many of us will have noted in relation to diversity and inclusion, with significant legislation passed, such as the Equality Act 2010.
Where to begin?
When considering ‘S’, there are several factors to consider:
- What are the core ethics of your business?
- How does your business show that it cares for the well-being of people?
- How does your business demonstrate justice and fairness to people?
Demonstrating that you embrace the ‘Social’ aspect of ESG entails more than health & safety and employee well-being, although they are important factors.
Businesses also need to consider the wider impact that their activities have on people and communities - and it should be accepted that we live in a global community, where businesses operate in a society that is intrinsically inequitable
How your CSR programme can help
Many businesses already have CSR (Corporate Social Responsibility) programmes in place, which will assist with meeting targets under the ‘S’ element of ESG.
For example, a well-embedded CSR programme should establish the culture of the business, with success measured by ethical, as well as economic, performance.
Measuring ‘S’ Performance
The United Nations maps several SDG (Sustainability Development Goals) in relation to the ‘S’ element of ESG, which fall under four key headings:
- Human Capital
- Product Liability
- Stakeholder Opposition
- Social Opportunities
Businesses should consider these areas in relation to both their direct activities and throughout the value chain. Within the food & drink sector, the value chain is of particular importance, given the reliance on grown products from various parts of the world, with differing standards on employee rights and access to key well-being facilities.
Human Capital is the easiest section to consider, as it covers employee relations, diversity/inclusion, working conditions, training/development and supply chain labour standards
Product Liability considers such elements as product quality/safety, chemical safety, data security/privacy, financial product safety and responsible investment.
Stakeholder opposition covers further supply chain transparency, community relations and controversial sourcing.
Social Opportunities covers access to core functions, such as communications, finance, healthcare and opportunities in nutrition/health.
Commercial advantages of the ‘S’ element
Attracting and retaining quality, motivated employees is a significant part of the success of any business within the food and drink sector. In the post-Brexit UK, there have been significant challenges around recruitment, and recently, increased pressure on farming communities.
Where employees perceive a business to have a strong ethical culture that shows care and concern for people, they will be more motivated, less likely to seek alternative employment and encourage likeminded peers to join the organisation.
How PIB can help
We have a range of tools and products which can assist with your ESG journey, as well as having a strong ESG performance ourselves, making us a suitable supplier for your insurance broking and other risk needs.
Our risk advisory approach to your business goes beyond your basic insurance needs, working in partnership with you to navigate the broader risk landscape.
In addition to insurance broking, we offer a broad range of products, including employee benefits and risk consultancy from our own internal teams.