With a Taskforce on Inequality and Social-related Financial Disclosures in the pipeline, Beth Knight talks to Chris Seekings about increased recognition of social sustainability
The term ‘sustainability’ has evolved over hundreds of years, with countless definitions still being disputed.
Derived from sustinere, Latin for ‘to sustain’, the term was made popular by the Saxon accountant Hans Carl von Carlowitz in 1713 when he wrote about forestry management and the need for a balance between harvesting old trees and ensuring enough new trees replace them.
Today, sustainability is broadly defined as encompassing three pillars – social, economic and environmental – with the UN Brundtland Commission in 1987 describing sustainable development as “meeting the needs of the present without compromising the ability of future generations to meet their own needs”.
Over the past decade, there has been significant focus on the environmental pillar, and poverty rates have significantly declined at a macro-economic level, but the social pillar has been less prevalent in sustainability dialogues.
There is, however, growing recognition that the climate and environmental crises cannot be tackled without social justice, as regulatory pressures and public opinion force many organisations to rethink what it means to be truly sustainable.
Putting the ‘S’ in ESG
Beth Knight has been at the forefront of this trend, driving social sustainability and transformational change in large multinationals including Amazon, Accenture and EY for almost 20 years.
The IEMA Fellow, and winner of Great British Businesswoman of the Year in 2022, says that the term ‘social sustainability’ has only really gained traction in the past 18 months.
“If you use the word ‘sustainability’, people often assume you are referring to environmental issues – particularly in Western discourse. But, as we face the stark reality of overshooting planetary boundaries, it’s increasingly understood that we need to expand the conversation. Equity, climate privilege and social justice are all fundamental to sustainability.”
Since this interview, Knight has joined Lloyds Banking Group as head of social sustainability for business and commercial banking, where her remit involves “breaking down socioeconomic barriers impacting the UK’s under-served business communities”.
Organisations are now evolving their sustainability teams to strengthen their impact in addressing social inequalities, she says. “A licence to operate in today’s society demands more than just managing internal business practices. Organisations have a role to play in tackling systemic inequalities that disadvantage certain communities and inhibit social mobility. By amplifying the voices of under-represented groups and fostering economic inclusion in underserved communities, businesses can create a more resilient and equitable future for all.”
Social disclosures
The growing focus on social sustainability is driven by several factors, including professional standards and regulation. Following the groundbreaking progress of the Taskforce on Climate-related Financial Disclosures (TCFD) and the Taskforce on Nature-related Financial Disclosures (TNFD), the Taskforce on Inequality and Social-related Financial Disclosures (TISFD) has formed. This initiative is aimed at establishing a global framework through which organisations can understand and disclose their inequality and social-related impacts.
“When you compare materiality assessments, there is stronger alignment across organisations on environmental concerns compared to social ones. This is partly because environmental data is more readily available and quantifiable compared to social data. But it is also because environmental regulations and frameworks are more standardised,” Knight explains.
“Organisations have typically started exploring social impact issues through the lens of human rights and labour rights, health and safety, and internal diversity and inclusion practices. A more holistic approach, however, includes the social impact of an organisation’s products and services on all stakeholders – including their supply chain and affected communities. This requires a sophisticated level of community engagement that is context-specific and necessitates a sometimes uncomfortable unpacking of ‘privilege’.”
“Organisations have a role to play in tackling systemic inequalities that disadvantage certain communities”
Knight believes that the formation of TISFD is a positive step forward in that ‘unpacking’. “There were two entities, one focused on inequality and one on broader social issues, that have now merged and are taking an extremely thoughtful approach to co-creating the next set of standards. They are a phenomenal group of people whose goal is to lessen societal inequality, strengthen financial systems and ultimately improve everyone’s wellbeing. Who wouldn’t feel inspired and want to help accelerate that mission?” Knight says. “And, there’s a very real opportunity to engage with TISFD’s work as the group is seeking open feedback on their governance structure and technical scope right now.”
Where to draw the line?
Some might argue that making businesses responsible for social issues is a step too far, and that sustainability professionals should focus all their efforts on environmental and economic factors. “But these topics are inextricably linked,” Knight counters. “Climate change isn’t felt equally. Factors such as location, wealth and race all have a bearing on your lived experience of climate change – and whether you have the resources to adapt.”
It also raises the question of how far-reaching social sustainability should be, and whether businesses should be getting more involved in politics or taking a position on conflicts, for example.
“It’s a very good question, and the simplest way I can answer it is from a data perspective and looking at materiality assessments around social indicators,” Knight says. “Labour rights, health and safety, and diversity, equity and inclusion (DEI) have already been driven by regulation, but now we are going to be looking at community development and impact, consumer wellbeing and product impact, and social dialogue and community engagement.”
Measuring the materiality of these indicators is a daunting challenge for ESG teams, with the term ‘ESG’ already having suffered a fall in popularity in the US, particularly in finance.
Knight suggests that they view their social impacts as a “portfolio of activities”.
“It’s a really interesting lens through which organisations should be viewing their impact on companies and groups, either through their supply chains, products or investments,” she says. “The TISFD is seeking to standardise how businesses articulate their impact relative to system-level inequality and socially related metrics. The taxonomy will make things less muddy, providing a framework for a starting point.”
Closing the value-action gap
Despite good intentions, most of us can be guilty of failing to act on our beliefs at all times – often referred to as the ‘value-action gap’. While good intentions pave the way to sustainability, many businesses struggle to bridge the gap between stated goals and everyday actions. This is despite a global study in 2021 by consultancy firm Simon-Kucher finding that 50% of consumers, especially millennials, rank sustainability within their top five drivers of value for money.
“Over the past five years, we’ve seen people using the word ‘purposewash’,” Knight says. “It’s when what we say we stand for as a company is not manifesting in the lived reality of our employees or customers. This has led to a rise in internal activism, where employees are pressuring their companies to take a more proactive stance on environmental and social issues.” She points to Google, Amazon and BlackRock as examples of large organisations whose employees are not “passive passengers” on sustainability, and believes this is a positive development. “Employees and customers are not shying away from holding companies to account, and quite right. Checks and balances are a fundamental way of moving us forward and holding us to our commitments.”
A new era
Although it is mostly larger organisations that have a renewed focus on social sustainability via formal, technical roles – and the resources to upskill staff – Knight says that smaller organisations are also building their expertise on this topic.
For instance, rather than employing experts full time, some businesses are turning to “fractional roles”. “We are seeing examples of middle-market businesses creating roles such as ‘fractional environmental and social impact leaders’ because they might not be sufficiently large in terms of revenue or employee size to warrant a full-time role,” she says. “There is also a rise in social enterprises and B Corps who are building social sustainability into the DNA of their organisations from day one.”
“Employees and customers are not shying away from holding companies to account, and quite right”
It seems there is no escaping the fact that businesses will increasingly need to take responsibility for their impact on society, in what could be a new era for many sustainability professionals. This is reflected in IEMA’s launch of a social sustainability steering group last year.
Knight says they should embrace this new reality, as she did many years ago. “I’ve evolved my skills and become somewhat of a polymath, working across strategy and delivery, organisational psychology and technology adoption and so on, because it is increasingly evident we need diverse skills as sustainability professionals navigating the polycrisis.
“The skills required mean that we need to be developing all the time in this sort of work, but it’s the most important work there is because it’s about how our society operates and the problem-solving needed to deliver complex systems change. Social sustainability is the next big point of acceleration for our profession, and I’m choosing to focus my efforts there.”
You can provide feedback to the TISFD at www.tisfd.org/provide-feedback
