Gone are the days when corporate social responsibility (CSR) centred primarily on philanthropy, and decisions were hidden away in companies’ charitable donations committees. As demands and activism for social justice, environmentalism and empowerment grow, so will the need for responsible environmental, social and governance (ESG) actions among businesses.
ESG has become CSR 2.0. And family businesses will need to step up to the plate. With the families’ purpose and values embedded in the business, such companies have an opportunity to make important contributions to the community of global leaders who are setting out new paths to do what’s good for business and for the world.
Focusing on financial performance is no longer enough
Operating responsibly includes reporting on the company’s environmental and social performance.
There is no right or wrong approach to developing a social responsibility strategy. These are key factors that family businesses can consider in developing a plan of action for lasting impact.
The global pandemic and geopolitical in eastern Europe reinforces the need for agility and rapid-response capabilities that should be taken into account in the development of social responsibility strategies of family businesses, as well as the need for connectivity with their family offices and foundations.
Measuring what matters
Focusing almost exclusively on financial performance is no longer sufficient, given the accelerated public interest and attention on the impact that each company has on the environment, society and its own workforce. Investors and financial institutions are also assessing companies’ ESG risk levels as a broad measure of business performance.
A new commercial imperative for growth
Increasingly, gamily businesses are undertaking the equivalent of an “ESG Pulse” exercise, which is a benchmarking and accreditation process that helps them win more project tenders by demonstrating their leading operations and ESG progress. This goes beyond compliance or regulatory reporting and is becoming a commercial imperative for growth.
From ‘doing good’ to ‘creating value’
For some, social responsibility has been a ‘feel-good’ endeavour without much focus or planning. But there are positive changes in the wind, particularly with the rapid increase in next-generation engagement. This is an opportunity for families to be very deliberate and strategic in their actions.
Building a strategic framework
The opportunity to weave together a cohesive social responsibility strategy with a specific outcome in mind often starts with a flexible framework that helps businesses to adapt as external and internal factors change. For family businesses, this framework has the added advantage of being built on an unshakeable foundation of the family’s purpose and values
In our experience, framing the strategy around the ‘four Ps of value creation’ — planet, people, prosperity and principles — is an excellent starting point. It inspires action in targeted areas that have been identified as high priorities for the company’s most important stakeholders and the business, while also leaving room for change when new environmental and societal challenges and opportunities emerge in each of the four value areas.