Every one of my female friends has the same configuration in her kitchen. The top drawer holds the day-to-day cutlery. The third drawer has tea towels and place mats. It’s so commonplace there’s even a shop in Melbourne called Third Drawer Down. In the second drawer, however, it’s barely contained chaos. It’s full of all those kitchen utensils that are really useful, but they‘re odd shapes and sizes and don’t fit neatly together no matter how many natty IKEA storage hacks you buy. It really is the messy middle.
When I talk to corporates they have the same experience of a messy middle, which is the S for Social in their ESG frameworks. The E for Environment fits easily into the financial models that CFOs and analysts adore; carbon can be quantified, measured and compared. The G for Governance is often prescribed by legislation, with common standards across sectors. Social impact is a slippery beast. People are not more or less important than the environment, it’s just that the latter is much easier to measure.
How can we navigate the messy middle that is social impact?
Corporates typically look to the UN’s Sustainable Development Goals for guidance. But the SDGs are focused on the highest priority global issues such as clean water, universal education and poverty reduction. They were not designed to measure discrete social programs. Although it is helpful for corporates to reference SDGs as the global context for their interventions, it doesn’t help to understand which of their social impact activities is working best.
Reviewing which of the social factors pose a risk to financial performance is a useful start. However, corporates need to be aware that their actions should not just mitigate risk but create positive impact on the lives of the community. Non-profits are well placed to be part of the solution and effective collaboration will take a program from box ticking to meaningful social impact.
Addressing workforce needs
There is a scarcity of skills and a workforce shortage everywhere you turn. Increased wages will not help if the talent isn’t there in the first place. Non-profits can help with workforces development by tapping into hidden pools of labour that are not currently active or who face barriers to participation. Examples include the great work done by Beacon Foundation in helping kids stay in school and transition to employment; by Fitted for Success who help women experiencing disadvantage get back into the workforce; and by the numerous non-profits helping people with a disability access meaningful work. Workforce needs can be overcome if corporates are prepared to look beyond the traditional pool of candidates. Body Shop took major steps towards this through their open hiring program that breaks down the discrimination experienced by certain societal groups.
Consumer protests or boycotts
Every corporate is running scared of being cancelled or called out for campaigns or actions that hit the wrong note with consumers. Whilst trust in corporates is currently running high, it can be lost in a moment with an ill-judged campaign or poor choices. Examples include H&M using labour from Xinjiang province in China to make their clothing, Rio Tinto and its destruction of Aboriginal cultural heritage or banks funding fossil fuel projects. Meaningful partnerships with non-profits can help a corporate navigate the risk of consumer backlash and help to build trust with their brand. For example Coles is working with Second Bite to reduce food waste and support Australians experiencing food insecurity.
Demographic and cultural changes to markets
We are now living in a world where Millennials and Gen Z dominate the workforce and are the main decision makers. These are the generations that grew up with online news and are both sceptical and quick to respond to social media trends. What was normal for older generations is being challenged by the younger ones. This has meant shifts in cultural approaches to things like marriage equality, transgender rights and gender equality. Non-profits are usually at the forefront of cultural shifts and are often trying to accelerate them. There is a unique opportunity for corporates to tap into their years of experience, community networks and research to inform their business’s policies, practices and responses to demographic and cultural changes.
The S in the middle is never going to be completely tidy. When you’re dealing with people, they come in odd shapes and sizes just like those kitchen utensils and things never fit together neatly. But there is an opportunity to elevate the S in ESG through meaningful collaboration between corporates and non-profits. In doing so, we’ll all achieve the lasting social impact that benefits everyone.