The ESG Criteria today and Social Value’s place, a reflective opinion piece
How does Social Value fit into the Environmental Social and Governance criteria? Is there a tension or competition between these frameworks or is their combination a natural/easy symbiosis? As a newcomer to Social Value over these last few months, I was curious to learn about how Social Value and social impact fit into the more widespread view of ESG as a rising concern and practice.
My questioning first started during my interview with Jonathan Choo from Social Value Malaysia where we discussed the awareness by their potential trainees of terms like social value or ESG, and how they are linked in term of the ‘S’ in ESG. Is the more mainstream knowledge of ESG creating a checkbox that pushes some compagnies to ignore the need for more specific training like SROI?
Additionally, the ESG label is also undergoing tensions. The Financial Times reported the distinctively ‘anti-sustainable’ mood over the start of the Trump 2.0 era, with US banks and investment firms dropping out of net zero alliances in what it characterised as a shrinking of sustainable investment space. There is also concern about the term ‘ESG’ itself due to its width of subject matter – there is such an array of ways of fitting the ESG criteria including board structure or wellbeing of employees that might otherwise not include for instance environmental sustainability. This divide over ESG also applies in different ways to Europe, where companies are increasingly (67% of private UK investors surveyed by the Association of Investment Companies) concerned about greenwashing and distinguish the use of ESG from what they consider more representative measures of sustainable practices.
In my research I have even found a paper by advocating for the disaggregation of the S category, citing it represents an incompatible set “ideological goals” and “non-financial criteria”. From this dissenting voice I think we can - after taking it with a grain of salt and a touch of discernment - wonder about the complementarity of such a large and encompassing framework like the ESG. Indeed, when we speak of concerns like greenwashing it does pose the question: can ESG which targets the environment the social aspect and reliable fair governance efficiently meet all three?
As proponents of social value, I think this is where do see the reaffirmed need for methodologies like SROI that specifically target the multi-faceted social impact. I think a lot is still gained from the insights of the widespread ESG criteria – gains like a new vocabulary, the evolution of accountability by the ‘stakeholder’ instead of just the ‘shareholder’ and the reaffirmation of goals beyond profit. Looking at the aforementioned tensions of the ESG also enables us to look at our priorities when trying to spread a unified framework, which include efficiency, specificity and consistency in our reporting.
Of course, many of the goals of the ESG are shared, but I feel that taking a look at the current debates the ESG criteria are subject to helps reclarify why social value and social impact require specific and targeted attention. Additionally, it reminds us that even more established and mainstream frameworks sustain their own levels of criticisms.
Here are some resources I mention throughout this piece:
Very much a dissenting voice to the consideration of Social Value