Gita Maharaj Opinion Piece - Redefining corporate stewardship

If business is serious about driving sustainability, visionary leaders mustredefine corporate stewardship around social impact

By Gita Maharaj, CEO of Impact Institute

Globally, environmental,social, and governance (ESG) reporting has become a complex and contentiousissue. Originally designed to provide transparency and accountability about acompany's sustainability and ethical practices, ESG reporting has increasinglybecome an ideological battleground, with divergent perspectives on itsimportance and implementation. Some view ESG as a crucial tool for promotingcorporate responsibility and addressing global challenges like climate changeand social inequality, while others see it as an unnecessary regulatory burdenthat can stifle economic growth and innovation.

All the same,the current ESG reporting rate among the world's top 250 companies remains highat 96%.

South Africa isaligning its sustainability reporting frameworks with global initiatives andcan expect mandatory ESG disclosures for public and state-owned enterprises tobe introduced from 2025 by the Companies and Intellectual Property Commission (CIPC),in addition to increasing regulations abroad. While South African companies tendto be ahead of the global curve due to the systems in place for BBBEE reporting,compliance is still the dominant mindset.

Impact on business

Companies now facethe challenge of determining the relevance and comprehensiveness ofnon-financial disclosures in their sustainability reporting and balancing thedemands of stakeholders who prioritisesustainability versus those who view ESG as a distraction from core business. Itis therefore not surprising that ESG is one of the fastest growing areas ofprofessional advisory services, with sustainability reporting making up a largeportion of this growth. As mandated disclosures increase worldwide and standardsevolve, companies can expect ESG reporting to become more resource intensive.

A furthercomplication is the lack of standardised ESG metrics. Without comparablemetrics, companies and stakeholders are unable to effectively assess andbenchmark performance within industries and against peers. In addition tocreating a “comparison barrier”, diverse and disparate metrics are open tovaried interpretations and potential misrepresentations, most commonly seen ingreenwashing. Within this context, social impact measurement has beenespecially challenging given the complexity of quantifying largely qualitativesocial outcomes. And, without generally accepted measurement frameworks andstandards, “social washing” will emerge as a potential reputational risk.

Finding commonground

Given thesecomplexities, companies need to adopt a proactive approach to shaping conversationswith their stakeholders and building a broader consensus on the importance of sustainabilityfor long-term business success. As this new era of corporate stewardship begins,it presents an opportunity for companies to demonstrate leadership by workingwith their peers on cooperative initiatives to set relevant ESG standards fortheir respective industries.

Solving for ‘S’

Social transformation is at the core ofachieving both ESG ambitions and the UN’s Sustainable Development Goals (SDG2030). Significant progress will be hampered if we do not prioritise humanadvancement by supporting basic rights, enabling people to reach their fullpotential, and empowering them to access and pursue the opportunities thatmatter most to them.

Public-private partnerships offerpotential to unlock meaningful progress in this regard by mobilising resources,expertise, and innovation from both sectors, and enable the implementation of sustainableinitiatives at scale. By working closely with governments and civil society, corporatescan help address global challenges and promote greater transparency andaccountability, and they play a pivotal role by contributing executionknow-how, driving job creation, investing in sustainable technologies, and promotingethical practices within supply chains.

Within this context, however, companiesstill struggle to effectively measure and track sustainable social impact progressin a holistic manner. Unlike the generallyaccepted accounting principles used in finance, or environmental reporting'squantifiable metrics like carbon emissions, assessing social impact requiresevaluating a wider range of diverse and often intangible factors.

In ImpactInstitute’s research, many C-suite leaders expressed frustration that theirsocial impact reports tell a fragmented, and often incomplete, story. This canbe due to the fact that different pieces of the social impact puzzle aremanaged separately at an operational level. What this means is that despitetheir best efforts, many companies’ social impact reports are disconnected fromtheir strategies to differentiate products or services, attract top talent,engage employees, and build a trusted brand, among other business objectives.

To solve some ofthese issues, we believe there is an opportunity for leaders to adopt a freshperspective on sustainable social impact reporting that elevates their existingnarratives and unlocks untapped value. Using a multi-disciplinary lens, companiescan connect their internal operations, practices and culture with the externaltouchpoints they have with customers, talent, communities, beneficiaries, andsuppliers. Approaching it in this way provides scope for more meaningful reportingon a company’s universal social impact footprint and not just stand-alonemetrics.

As ESG reporting continuesto evolve and sustainability practices become embedded, leaders willincreasingly find themselves at a crossroad. They have a choice: either tomerely tick boxes and meet minimum requirements with a reactive mindset, or tostep up as visionary leaders who redefine corporate stewardship for the nextgeneration. Which choice will you make?

Ends

Maharaj is CEOof Impact Institute, an independent advocate for corporate accountability insustainable social impact reporting and originator of the ImpactfulOrganization™ certification programme,which measures the social impact footprint of leading companies.

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