Why Investing In Social Sustainability Is Key To Business Success
How businesses are doing well by doing good—increasing revenue, productivity and more
By Vito Mabrucco; NTT Global Chief Marketing Officer
As the world slowly recovered from the aftermath of the 2007-2008 global financial crisis, businesses found themselves questioning a long-perceived tension many believe incumbent to a capitalist society: prioritize profits in a vacuum, or weigh the benefits of operating ethically and for the betterment of the many?
Surprisingly to some, modern research shows such a tension does not exist inherently. Instead, The Business Case for Social Sustainability from NTT Corporation (NTT) and ThoughtLab [disclosure: I am an employee of NTT] underscores that dedicating resources to corporate social sustainability not only leads to significant financial advantages for companies but also fosters positive outcomes for all individuals across the value chain.
What is Social Sustainability?
In the current global landscape, the emphasis on sustainability has predominantly revolved around the environmental facet of the Environmental, Social and Governance (ESG) paradigm. But, business leaders must take a holistic look at sustainability beyond going green.
Social sustainability is defined by the United Nations as, “identifying and managing business impacts, both positive and negative, on people. Directly or indirectly, companies affect what happens to employees, workers in the value chain, customers and local communities and it is important to manage impacts proactively.”
As the report finds, this holism exists but is still only present among a minority of top-level executives: a bit more than one-third, acknowledge that their organizations must take a stance on social sustainability and communicate it in a manner that aligns with their brand identity.
Social sustainability should be progressively assuming greater importance for executives, given that the absence of equal opportunities and deeply ingrained inequalities can result in significant costs, both to individuals and the overall economy. According to data from the World Bank, gender inequality alone leads to an estimated loss of $160.2 trillion in human capital wealth. Social sustainability not only opens doors to new market opportunities but also aids in attracting and retaining businesses while fostering innovation. Moreover, a steadfast commitment to social sustainability cultivates trust in the brand and enhances overall credibility, according to the NTT study.
What is Driving Social Sustainability Today?
The current drive for social sustainability varies across different industries and global regions due to evolving customer behaviors in different industries. In the automotive industry, for example, ESG raters are a critical driving force behind this investment. However, Asia Pacific organizations feel the pressure from their board of directors whereas healthcare workers may notice it from regulators. And the retail industry says that 42% of their customers are the ones leading the charge when it comes to requesting actionable change.
But as additional research is published, it can be expected that new major drivers of change will take shape. The Business Case for Social Sustainability, comprising the insights of 250 senior executives from global organizations earning over $1 billion in revenue, found that significant social sustainability investment boosts enterprise revenue an average of $710 Million.
The Benefits of Social Sustainability
The report honed in on three primary advantages of business investment in social sustainability. Firstly, it noted a significant boost in employee productivity, with leading companies in social sustainability investment and practices reporting an impressive 11.4% increase.
Secondly, the report highlighted that companies with the most substantial investments in social sustainability reported a notable 9.6% rise in their revenue.
Thirdly, it highlighted the substantial economic impact of social sustainability initiatives, revealing that they unlock nearly $675 billion in Gross Domestic Product (GDP) for the nations of the entities surveyed.
Other findings from the report were equally stark:
- 40% of companies integrate social sustainability goals and enforce supplier compliance.
- All categories of companies surveyed report an average 8% revenue increase and 10% productivity increase from social sustainability initiatives.
- Advanced social sustainability leaders experience nearly a 10% revenue increase.
- Over 50% of social sustainability leaders expect increased revenue and profitability in the next two years.
- 62% of companies plan to increase social sustainability spending by an average of 6%.
The benefits of corporate social sustainability investment go beyond financial statements. The study revealed on-the-ground benefits for various business areas such as operations; the supply chain; diversity, equity and inclusion (DEI); technology and more.
Operational and Supply Chain Benefits
Companies gain operational advantages from social sustainability, especially better product and service quality, stronger teamwork and corporate culture, and more effective regulatory compliance.
The toughest pillar to address in social sustainability is the supply chain where monitoring can add disruption and complexity. Leaders are successfully tracking social sustainability risks of companies in their supply chains through monitoring compliance with supplier codes of conduct. One of the most effective strategies for achieving business objectives is the ongoing monitoring of supplier adherence to human rights and business conduct standards. This approach significantly decreases instances of human rights violations and various other unethical practices.
Workforce and Diversity Benefits
Investment in social sustainability including training and development delivers better talent attraction and retention as the company’s market reputation strengthens. Businesses reported employee investments strengthened teamwork and improved the corporate culture. It’s important to have open communication channels for employees to share ideas with management. Digital wellness apps, virtual collaboration tools, online learning platforms are all technologies being used by companies to support employee wellbeing.
For leaders, DEI is a top priority in social sustainability, second only to a strong and enforced code of Ethics. Talent acquisition is a crucial element of diversity programs and digital tools are often used to help with candidate sourcing and selection. In order to monitor progress in DEI most leaders are using data analytics technology with some implementing augmented intelligence to support disabled employees.
Technological Benefits
Cloud, smart sensors, advanced analytics are just some of the digital tools being used by leading corporate investors in social sustainability, as well as advanced analytics to identify hazards, diversity data analytics, ERP and augmented intelligence—creating a multiplier effect that has the greatest impact on the company’s overall results. Leaders in social sustainability are more likely to use digital assistants to support customer engagement and create a more personalized customer experience using omnichannel integration software and customer sentiment analysis.
That corporate social sustainability investment is good for business and good for society is more clear today than ever before. So what comes next? The development of a roadmap for socially sustainable investment that begins with boards and executives setting a clear vision, strategy, policies and procedures around social sustainability. Then, extend social sustainability across the supply chain to monitor supplier compliance with human rights and business-conduct standards. Finally, partnering with technology companies, governments, academic institutions and others to build a holistic ecosystem committed to maintaining and advancing social sustainability goals—ultimately creating a better future not just for shareholders, but every single stakeholder worldwide.
