Leaving a Legacy: Preparing for the Future With a Social Impact Strategy

Executed well, social impact programs can transform how people live. Essentially the result of a wider planned environmental, social and governance (ESG) strategy, they can bring constructive and lasting social change in communities.

Social impact policies and programs might target housing and community services, health and wellbeing, the environment, or civil liberties. All aim to make society more equitable, sustainable, and secure.

Success means measurement

As discussed in our article on Taking a Strategic Approach to the ‘S’ in ESG, a successful social impact strategy should be aligned with an organization’s business strategy.

This means it should address the needs of key stakeholder groups over the long-term. If properly measured, it will allow companies to identify and manage the impact of their operations on employees, workers across their value chain, customers, and communities. 

The ability to measure social impact is fundamental to success. It involves the use of both qualitative and quantitative data, with the timing of data collection and the use of tools for data evaluation playing a significant role.

Engaging stakeholders in the process, building their trust and putting a value on social impact programs are also important aspects of social impact measurement.

Also, as we highlight in our article on Measuring what matters - Navigating the path to meaningful social impact, the measurement of social impact is not just a means of assessing past performance. It should also be a forward-looking tool that empowers organizations to continuously learn, adapt, and innovate.

Benefits of a social impact strategy

High performing organizations align their social impact strategies with the United Nations Sustainable Development Goals (UNSDGs) which were set up to address numerous global issues including climate change, poverty, hunger, clean water, and gender inequality^[1].

These challenges can affect economic growth and business value. A failure to address them can limit productivity, constrain consumer spending and growth, destabilize supply chains and trigger political instability. It can also jeopardize a company’s social license to operate.

Some social development issues have been exacerbated by global trends including geopolitics and pandemics. For example, global inequality has been accelerated by the COVID-19 pandemic. It has widened the equality gap, leading to greater structural inequalities, and setting back decades of social and economic progress. Poorer nations have suffered disproportionately, as their governments lacked the resources to provide extensive social safety nets.

A strong social impact strategy can not only contribute to organizational success but also help ensure both short-term and long-term benefits which can alleviate hardships and drive real-world change.

Organizational benefits

As social challenges increase globally, a social impact strategy becomes essential for organizations aiming to make a positive societal impact. It advances an organization’s ESG agenda and transforms operations. By evolving relationships with the workforce, suppliers, communities, and customers, organizations can gain competitive advantage and build trust, thereby safeguarding their license to operate and long-term value. Potential benefits include:

• New profits streams: Organizations can unlock new revenue streams through partnerships, collaborations, and developing products or services that address social issues and generate profits.
• Reputational benefits through increased transparency and accountability: Demonstrating progress allows organizations to build trust with their stakeholders, which is essential to the success of any social transformation. It also enhances accountability. Organizations that are transparent about their social impact initiatives often see a 4-6 percent increase in their market value^[2].
• Trust engages customers and improves employee performance: These practices are increasingly important to consumers and enable deeper consumer engagement. 65 percent of customers^[3] will switch brands if they do not trust the brand image, highlighting that trust directly impacts customer loyalty and sales. Additionally, workers who trust their employers report 50 percent greater productivity at work^[4], leading to higher efficiency and better business performance, driving financial success.
• Attracting and retaining talent: A commitment to social change and tangible results from initiatives attracts high-quality talent and improves employee engagement. Research has found that 76 percent of millennials now consider a company's social and environmental commitments before joining a company^[5], important as millennials constitute over a third of the global workforce^[6].
• Operational efficiencies: More sustainable practices can lead to greater efficiency and cost savings, such as reduced energy consumption, less waste. They can also contribute to the long-term resilience of businesses, ensuring they can thrive in a rapidly changing global environment.

Focus areas

Addressing social impact also involves a change in mindset, as organizations are often not used to thinking in this way. Employing a defined strategy forces a shift based on new perspectives, new definitions, and new tools.

While the practice of understanding, measuring, and managing natural capital is gaining traction, a consolidated understanding of social capital, i.e., the value of resources and relationships provided by people and society, is in its infancy.

By focusing on clear objectives, aligning with business strategy, engaging stakeholders, and leveraging data for continuous improvement, organizations can develop a more mature approach and achieve significant outcomes.

Risk management

One key focus area for a successful social impact strategy is addressing and factoring in risk. Failure to provide evidence of ESG performance and falling short of key ESG targets and expected standards escalates reputational risk and may harm investment, sales, and recruitment.

If an organization does not understand and measure the full range of social risks within their supply chains, project, or products, it is likely that these risks are not being responsibly managed.

Case Studies

Journey Towards Enhancing Reputation & Futureproofing: Swedish Multinational Conglomerate

Risk was top of mind for a Swedish multinational conglomerate which has embarked on a journey to future-proof its operations by initiating a 10-year strategy for social sustainability.

Aiming to mitigate potential supply chain risk in the fact of an increasingly uncertain global operating environment, they aimed to identify human rights, working conditions, and environmental risks in their processing and raw material value chain.

The company undertook a comprehensive risk assessment, identifying the most common risks globally. By adopting a more proactive approach to risk management, they achieved a better understanding of their current operating environment and also the ability to make more informed decisions on future priorities for risk mitigation.

Approach

For each risk, the company identified geographic hotspots and category-specific risks. They then categorized these risks into those which were “inbound,” i.e., potential threats within the organization's supply chain, and “outbound”, defined as potential threats that could impact the company's customers or affect stakeholders. The identified risks were then prioritized based on their likelihood of happening and continuously monitored using a tracking and monitoring system.

The benefits of this strategic approach were:

• By proactively identifying and addressing potential risks, the company demonstrated its commitment to social sustainability and reduced the chance of reputational damage that could occur if these risks had not been addressed.
• This approach has increased accountability within the organization as processes and standards are now much clearer. By setting clear goals and tracking progress, the company is holding itself accountable for its social impact.
• By its long-term commitment to social sustainability, the company has positioned itself favorably in the eyes of potential partners and customers who value corporate social responsibility, potentially opening up new business opportunities.

This case study demonstrates how aligning social impact strategies with global trends can mitigate risks, enhance reputation, drive accountability, and support long-term business success.

Supply chain and procurement

ESG issues in an organization’s supply chain can be one of the easiest to identify but the hardest to address. With ongoing disruption facing global supply chains, transforming them, and adapting procurement processes should be central to any social impact strategy.

Typical focus areas should include increasing supplier inclusion and diversity, gender equality and supporting minorities in business, and protecting human rights including addressing modern slavery risks.

Embedding more ethical and sustainable thinking and processes into procurement so that it becomes business as usual should also be a priority and can support with regulatory compliance and due diligence.

Transforming Procurement for SMEs to Boost Economic Development and Business Opportunities

A municipal government in Taiwan sought to enhance procurement opportunities and industry competitiveness for SMEs and startups. This initiative was driven by the need to promote economic development and create a more inclusive market environment. Recognizing the potential impact on local businesses and the broader community, the government aimed to establish a strategic plan that would connect stakeholders and foster sustainable growth.

To achieve this, they collaborated with experts to design a comprehensive action plan. The plan involved establishing a procurement task force to oversee the initiative, developing a policy brand to promote the program’s objectives, capacity building for SMEs, and consolidating procurement data to ensure transparency and efficiency. Leveraging expertise in impact assessment and stakeholder engagement, the initiative shaped the strategy and its implementation.

The initiative yielded significant positive outcomes:

1. By creating new procurement opportunities for SMEs and startups, the program stimulated local economic growth and enhanced industry competitiveness.
2. The strengthened policy and cooperation platforms fostered a more collaborative environment, enabling businesses to thrive, improving the business skills and building sustainable business models.
3. The initiative’s success enhanced the reputation of the municipal government as a proactive supporter of local business development.
4. The collaborative approach built stronger relationships between the government and the local business community, promoting ongoing dialogue and cooperation.
5. Additionally, the demonstrated success of the initiative attracted attention from other municipalities and organizations interested in replicating the model, highlighting its potential for scalability and long-term impact.

This case illustrates how a strategic procurement initiative can stimulate economic development and create business opportunities, demonstrating the far-reaching benefits of integrating social impact strategies into public sector projects.

Conclusion

Embracing social sustainability is not just a moral imperative; it is a strategic business opportunity that creates value for both society and the organization. A strong social impact strategy can drive positive change and secure long-term success.

Social impact initiatives allow companies to build on existing strengths and address particular strategic and operational gaps. Measurement tools will ensure that the strategy remains effective and relevant over time.

Important steps might include:

• Identifying internal and external drivers. Impact efforts need to align with broader business goals and address key market and regulatory influences. This enhances accountability and builds trust with stakeholders, leading to long-term value creation.
• Engaging with stakeholders. Impact initiatives need to be adapted to address real-world challenges and a better understanding of community needs. This approach leads to improved collaboration, enhanced reputation, and brings partnership opportunities.
• Adopting a long-term, data-driven approach. Regular data collection and analysis is crucial and will enable more informed decision-making and continuous improvement.

It has been shown that better business values driven by ESG initiatives such as social impact, builds trust and loyalty in organizations, improves employee morale, and creates a culture of positivity – all are not easy to achieve. Social impact goals not only drive business growth, but they make the organization feel good too.

Appendix

KMPG firms have numerous case studies which demonstrate the tangible benefits of social impact strategies when social impact strategies are employed. These examples demonstrate how organizations have addressed the diverse challenges faced by many societies today, which strategic approach to social impact was adopted and the main result achieved. They also highlight just how diverse and significant and effective social impact strategies can be.

^References

^{[1] United Nation Sustainable Development Goals}

^{[2] “The value of Corporate Social Responsibility (CSR) – and how to get it right” Rice, L, Qualtrics, January 23, 2020}

^{[3] Brand Trust: What It Is and Why It is Important. Qualtrics (2023)}

^{[4] “The Neuroscience of Trust”, Harvard Business Review, February 2017}

^{[5] “The value of Corporate Social Responsibility (CSR) – and how to get it right” Rice, L, Qualtrics, January 23, 2020}

^{[6] United Nation Sustainable Development Goals}