Accredited Practitioner Conversation - the key takeaways
On March 17th, Social Value International and Social Value UK co-delivered the first Accredited Practitioner Community Discussion of 2022, as part of #BeyondESGMonth.
In this interactive session, hosted by SVI CEO Ben Carpenter and SVUK Private Sector Lead Charlotte Österman, we invited our global community of Accredited Practitioners (APs) to have a conversation on the rise of ESG and its impact on their work. We sought to explore how APs have responded to ESG, the challenges they may have faced, and what more SVI can do to support the AP Community in this boom of ESG investing and reporting.
Charlotte opened the session by sharing useful insights and key takeaways from Social Value UK’s Sectoral Conference, “ESG and Social Value – are we trying to achieve the same thing?”, which took place in January 2022. Similarly to Social Value International, Social Value UK has had a growing number of questions from members and practitioners on how to understand ESG in the context of the social value movement.
The aim of SVUK’s conference was to look at ESG and social value and try to understand whether these concepts are trying to achieve the same thing. Some of the key points made during the conference were the need to think of E, S and G as interlinked and the importance of different sustainability-focused movements to come together. Differences between ESG reporting on the one hand, and social value and impact management on the other, were also highlighted, including ESG’s focus on outputs rather than outcomes, the need for stakeholder engagement and double materiality in ESG, and the importance of external verification of the results. You can read more insights from SVUK’s conference here.
Many of these same sentiments were echoed throughout this AP Community Discussion. After Charlotte’s opening, the APs were divided into two breakout rooms to reflect on two pertinent questions:
What are the challenges/opportunities that you have when dealing with the rise in ESG?
What can SVI provide to help you with these challenges/opportunities?
One the key challenges that was highlighted by the APs was the tendency to think of E, S and G in three separate silos rather than seeing ESG as a cohesive whole. This one- or two-dimensional thinking and lack of understanding around the interconnectivity between environmental, social and governance issues has led to the focus often being placed on just ‘E’, with the dangerous omission of ‘S’ and ‘G’.
It was also noted that this tendency to not see the interconnectivity between environmental, economic, social, and governance issues is also a challenge when we talk about social impact, as many interpret social impact as strictly measuring effects on people and not taking into consideration any environmental or financial impacts – despite how closely connected inequality, climate change and the financial risks to a company, for example, are. In both ESG and the social value movement, this way of thinking undermines progress – it is vital that we recognise that everything is connected and move towards more cohesive, three-dimensional decision-making processes.
With the rise of consumer and investor interest in ESG has also come the rise in greenwashing and impact washing – another challenge discussed by the APs. It was noted that ESG often seems to “get stuck” on the external reporting part without going further to actually implement the management systems needed to optimise the impact companies create. In other words, ESG seems to sometimes be used as nothing more than a reporting mechanism intended for marketing purposes – companies simply report figures and stop at the output level without any consideration of how to better themselves and their impact on people and the planet.
The solutions suggested by the APs to tackle the problem of impact washing and to make ESG more than just a PR exercise was, firstly and unsurprisingly, the need for assurance. External verification of ESG reporting will help bring confidence to the impact and sustainability claims companies are making and thus drive forward the ESG and sustainability agendas. It was also noted that to avoid ESG inadvertently contributing to impact washing and for it to actually transform our systems to be more equitable and sustainable, it needed to go much further than it currently is and integrate three vital elements into the process: awareness, commitment and responsibility.
The importance of an organisational culture shift was also highlighted as a solution to impact washing. It was noted that the effectiveness of ESG largely depended on the culture of the company – if there was a willingness within the organisation to change the culture and see ESG as more than just a marketing strategy and to rather have it embedded into the wider strategy of the company and used as a tool to optimise the company’s impact, then ESG in itself could be much more helpful than it currently is.
Closely related to these points, there was also some discussion around the purpose of ESG. ESG was originally designed around the risks to the financial success of an organisation, not on social or environmental impact. In other words, it was intended as a tool to help sustain companies, not people and the planet. In recent years, however, ESG has evolved so much that its purpose has become increasingly unclear. Has it evolved to a stage where it is now more than just a reporting mechanism and is actually pushing companies to deliver more social value? And if not, can it evolve to this stage fast enough or do we need to replace ESG with something else entirely, namely an impact management approach?
Despite these challenges, many APs saw ESG as an opportunity too. It was noted that ESG is helping to provide a space for people wanting to make a difference to come together and have a discussion. It was also noted that in the housing association setting, for example, the rise in ESG was proving quite helpful as it was allowing the work of social value practitioners to be brought into a wider conversation within the company.
This useful function of ESG as a stepping stone to social value and impact management was echoed by several others during the discussion. Many agreed that ESG could help open the doors for subsequent conversations on social value and thus help companies evolve their practice and move deeper towards an impact management approach. In other words, when organisations get weaved into ESG reporting, it is an opportunity for us, the social value practitioner community, to later work on social value and impact management with those organisations.
Fortunately, this session was only the first one in a series of AP Community Discussions to be held throughout this year. The next task for our global community of Accredited Practitioners will be to reflect on how exactly the social value movement can help evolve ESG and lead this transition towards an impact management approach.