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CC ESG Blog 2

As Scotland rebuilds from the pandemic and since hosting the historic COP26 climate conference, the importance of principled business practices can hardly be overstated. Corporate social responsibility and ESG (Environmental, Social, and Governance) evaluations have never been so central to the way in which businesses are perceived. There remains a strong emphasis around procurement and supply chains.

Social enterprises represent an entrepreneurial solution for organisations looking to improve their supply chains and procurement practices. As businesses with a social mission at their core, social enterprises maintain a commercial focus whilst serving communities across Scotland and beyond. Last September, Social Enterprise Scotland launched the Corporate Challenge, asking businesses to bring social enterprises into their supply chains. For those who take it up, the challenge offers an increased spotlight on procurement, as well as a series of commercial advantages

Great Expectations - Investors and Popular Perception

As evidence of its commercial advantages mounts up, exemplary ESG is increasingly becoming identified with good business strategy. As George Serafeim reports in the Harvard Business Review, investors will now ‘seek out high ESG performers’ and, conversely, ‘screen out poor ESG performers, assuming that … low ESG ratings will result in weak financial results’. He argues that in the long term, these types of considerations will take centre stage and that ‘companies will be under growing pressure to improve their performance’.

Paul Polizzotto, writing in Forbes, agrees with Serafeim, explaining that these expectations are also growing rapidly amongst employees and consumers. He emphasises the role that social enterprises could and should play in the process of reforming supply chains (a pivotal component of ESG) and insists ‘we need to scale social enterprises’.

At Social Enterprise Scotland we agree with Polizzotto and believe social enterprises are uniquely placed to assist companies in this way. Indeed, the events of recent years have shown that the social aspect is at the root of improving business practices as a whole. In their recent report, KPMG also noted a renewed focus on ‘the S of ESG’. Business leaders have noticed: KPMG reported that nearly two-thirds of CEOs are now focussing heavily on boosting the social component of their ESG. These insights were corroborated by a McKinsey report, which concluded that companies with ‘social-engagement activities … achieved demonstrably higher valuations than competitors’.

CC ESG Blog quote 01

These reports underline the important role Scotland's social enterprises have to play in helping companies to pivot to new demands and expectations. And those companies who have already worked with us to collaborate with social enterprises strongly recommend the experience. For instance, Dan Leather from Nationwide remarked on the ease of the collaboration, ‘it’s fantastic to know that you can positively impact society just by doing your job’.

And the importance of these partnerships is just as clear from the social enterprise perspective. Elaine Brown, CEO at Edinburgh Remakery, an organisation which combats waste and works to upskill members of the local community by refurbishing goods, spoke to us about what the success of collaboration can mean:

We have loved seeing our small social enterprise grow and develop thanks to the overwhelming support of the communities around us. Services that invest in sustainability and that encourage ways of life that are both environmentally and socially beneficial are of utmost importance right now.
Elaine Brown - Edinburgh Remakery
New Priorities - Retention and acquisition within a changing workforce

The advantages of working with social enterprises are not limited to investment. As Greenbiz has reported, ‘employees should be added to the list of stakeholders scrutinizing ESG performance’ and Corporate Challenge partner PwC, have talked about about how they use their work with social enterprises and the Corporate Challenge to communicate their ESG commitment to their staff. Progressive ESG practices can boost staff morale by building a sense of purpose and pride. At the same time, talent increasingly factors ESG into decision making around new roles. Mercer’s report, ESG as a Workforce Strategy concludes with this dual insight: ‘ESG performance can help companies both improve employee satisfaction and attract prospective employees.’

This trend is accelerating as younger workers enter the market and current employees respond to the political landscape. The Mercer report highlights that by 2029, the Millennial and Gen Z generations will make up 72% of the workforce (compared with 52% in 2019). Given, as the report insists, that ‘these generations place greater importance on environmental and social concerns than their predecessors’, this shows that workforce is yet another front on which ESG will take centre stage.

Irrespective of generation, employees really engage when companies commit to ESG. Willis Towers Watson’s report summarises the importance of this:

Companies that truly embrace their ESG strategy and meaningfully embed it into the foundations and culture of their organisation are those that reap the rewards of greater employee engagement and, ultimately, improved financial success.

Indeed, the companies we work with have already capitalised on these benefits. Nic Oldham from Crieff Hydro explained its participation in our Corporate Challenge as an example of the way in which the company places ‘the welfare and experiences of staff at its core’. This reflects research from Longitude which stresses the importance of communication: ‘interest and engagement are crucial for company culture but their communication of this really matters’.

Working with social enterprises allows organisations to send a clear signal to their employees about their commitments, because they are associated with a clear mission and brand. The opportunities for crossworking and real collaboration between social enterprise suppliers and their partners means that staff can see the social and environmental impact they’re making firsthand, which deepens their engagement and understanding.

Join Social Enterprise Scotland’s Corporate Challenge Today!

From every perspective, ESG standards are set to play a major role in the future of business. As the sector which exists to combine business and progressive ESG, social enterprise represents a major opportunity for organisations to deepen their commitments. Moreover, social enterprises are deeply rooted in Scotland’s communities and play a major role in people’s lives. To be identified with their work and image is a great way to be identified with supporting the people of Scotland.

The Corporate Challenge allows us to support firms in this process, and offers a major platform through which they can communicate their good work. While obstacles remain, companies which make major efforts to work with social enterprises today will stand to gain the most in the months and years ahead as ESG comes to dominate matters of talent acquisition, staff culture, and commercial performance. Join the Corporate Challenge today, and get ahead of the curve. Email buysocial@socialenterprise.scot to find out more.