Social-Impact Efforts That Create Real Value

George  Serafeim

Article | Harvard Business Review | September–October 2020

Social-Impact Efforts That Create Real Value

Abstract

Until the mid-2010s few investors paid attention to environmental, social, and governance (ESG) data—information about companies’ carbon footprints, labor policies, board makeup, and so forth. Today the data is widely used by investors. How can organizations create real value and impact from their ESG efforts? Too many companies have embraced a "box-ticking" culture and fail to see any value from their ESG efforts. I describe a five-pronged approach for companies to better manage and govern resources allocated to ESG issues.
1) Think ESG as competitive advantage
2) Create accountability for ESG throughout the organisation
3) Identify a corporate purpose and build a culture around it
4) Give ESG responsibilities to core business leaders
5) Commit to transparency to ensure learning and continuous improvement

Keywords: sustainability; Sustainability Management; ESG; ESG (environmental, social, governance) performance; ESG (environmental, social, governance) performance; ESG disclosure; ESG disclosure metrics; ESG ratings; ESG reporting; social impact; impact measurement; social innovation; purpose; corporate purpose; corporate social responsibility; Strategy; Social Enterprise; Society; Accounting; Investment; Environmental Sustainability; Climate Change; Corporate Strategy; Mission and Purpose; Corporate Social Responsibility and Impact; Financial Services Industry; Chemical Industry; Technology Industry; Consumer Products Industry; Pharmaceutical Industry; North America; Europe; Japan; Australia;

Format: Print

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Citation:

Serafeim, George. "Social-Impact Efforts That Create Real Value." Harvard Business Review 98, no. 5 (September–October 2020): 38–48.

Organizations create significant positive and negative impacts through their employment practices. This paper builds on the substantial body of research regarding job quality and impact measurement to present a framework for monetized analysis of employment impact. We identify and propose a framework for measuring the four most salient dimensions of impact for employees, including wage quality, career advancement, opportunity, and health and wellbeing, as well as two principle impacts, diversity and employment location, for the broader labor community. The framework and methodology for calculating employment impact-weighted accounting figures is applied to several large corporations, resulting in positive impacts that range between 25 and 249% of their EBITDA suggesting significant heterogeneity in employment practices across organizations. These results demonstrate the feasibility of calculating employment impact in monetary terms, and provide a foundation for future application across additional geographies and contexts.

We apply the product impact measurement framework of the Impact-Weighted Accounts Initiative (IWAI) in two competitor companies within the consumer-packaged goods industry. We design a methodology that allows us to calculate monetary impact estimates on customer health, access and affordability of products and recyclability, among other factors. Our results indicate substantial differences in the impact that competitors have through their products. These differences demonstrate how impact measures reflect business strategy choices and informs decision-making on industry-specific areas, including food reformulation and product placement.

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Social-Impact Efforts That Create Real Value

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