Social sustainability has become increasingly important for organizations and investors in recent years. Social sustainability involves a comprehensive understanding of how corporations impact people and society as a whole. It includes factors such as the treatment of employees, the impact of the company culture on its employees and their social environments, and the company’s relationships with the communities in which it operates.
Attention to social sustainability has been shown to have significant impact on business performance. Employee centric companies have long outperformed on the S&P500, bringing 13% higher shareholder value, 26% higher revenues per employee and 4% higher profits [1],[2],[3],[4].
Research shows that sustainable business performance is closely linked to the sociopsychological environment that a company fosters. Companies prioritizing social sustainability are better positioned to attract and retain top talent, build strong relationships with customers and communities, and mitigate risks related to social issues.
Why is it then, that crises associated with human rights, treatment of employees and sexual harassment still often come ‘out of the blue’, and issues of unequal pay and obstacles for minorities’ and women’s career advancement persist?
As it turns out, two out of three companies are struggling to act on social sustainability. Looking closer on average only about 30% of listed companies (combining the FTSE100, Helsinki Large Cap and S&P500) have incentivized their executive leadership with targets associated with people & HR and less than 20% with targets for Diversity & Inclusion [5],[6].
It also comes down to what companies measure and gather data on. Current measures are primarily based on various questionnaires touching the tip of the iceberg. Visibility to the real state of things is limited.
Is social sustainability incentivized in the first place?
Although social sustainability is of concern, companies seem to have limited motivation to address the issues. You usually get what you measure and it may be worthwhile to take a look at how your company’s executives are incentivised. According to Mandatum’s report from 2021 Europe has long been leading in environmental sustainability but there is clearly room to improve when it comes to social sustainability[5],[6]. What was striking in the study was the role of social sustainability targets in Finnish companies. Out of the 30 Helsinki large cap companies included in the study, topics associated with People & HR were reported by only 21% of the companies and diversity and inclusion by only 7%. Of the FTSE100 companies People & HR topics were reported by 33% and Diversity & Inclusion by 27%.
While Europe is leading in incentivising ESG, Finland is clearly lagging in terms of social sustainability that exceeds the conventional health and safety scheme. The emphasis on basic health and safety targets is likely associated with the larger proportion of manufacturing and retail companies characterizing the Finnish economy. These, however, have little to do with the broader definition of social sustainability, let alone address the challenges in the knowledge industry. It’s not enough to just prevent people from being critically injured or dying at work. To have a real impact on business performance, we need to focus on the upside of human capability and support psychologically and socially thriving work communities.
How do we increase behavioral transparency?
Topics associated with social sustainability, are often assessed in annual or quarterly employee engagement surveys, health surveys or weekly pulses. A few weeks back we wrote about the caveats associated with these traditional metrics. The main challenge is that the data are based on limited subjective interpretations and only scratch the surface of issues. Also, if on top of that, the company leadership is incentivised based on the survey results, outcomes may be easily manipulated.
There is a dire need for objective data and increased transparency into how companies are being led and what kinds of behaviors and cultures they foster. Ironically, no factory is run without objective information about engine health, consumption or lifespan but people are lead in the dark.
The starting point for change is to increase behavioral transparency and awareness. With behavioral analytics, you will be able to:
- Gain awareness of what really happens in the organization. As humans we have a tendency to develop blind spots to our own and others’ behaviors. Having objective data on personal and team behaviors can be highly valuable when deciding which behaviors are actually useful for everyday collaboration and high performance.
- Reveal unconscious biases and cultural differences. When the data is based on real life daily interactions, it can reveal unconscious biases and situations where cultural differences are at play. Gaining awareness over one’s unconscious biases and culturally nuanced behaviors is known to be very challenging, but like using fitness trackers to train more effectively, behavioral analytics can provide a path to improving one’s personal impact on the social dynamics of the team.
- Provide tools to develop and shape behaviors. In order to make sustainable changes, it’s crucial to gain thorough understanding about the current state of affairs. Timely and continuous behavioral data is the foundation for actionable guidance and development targets for every leader and individual in an organization to strengthen behaviors that contribute to social sustainability.
There are multiple tools and modern measures of organizational dynamics and team performance, but make sure they’re not solely relying on questionnaires but also apply behavioral analytics providing objective data for interpretation and decision making.
Can behavioral transparency strengthen social sustainability?
Behavioral analytics is the most powerful tool for gaining visibility into the leadership and collaboration behaviors that make up the daily organisational culture. These everyday behaviors have a significant impact on talent retention, mental health, and team performance in organizations. Objective behavioral data will be an invaluable asset in the near future for organisations wanting to show their strength and value in these areas.
Organizations and leaders who are currently rewarded by traditional survey based employee engagement or satisfaction scores may in some cases (especially when results lean in with false positives) be hesitant to adopt new, more transparent measures to assess the real behaviors taking place in their organizations. Also, having gender quotas or inclusive recruitment practices do not ensure social sustainability, if behaviors in the everyday work environment tolerate toxic leadership and discrimination.
You can do a lot to strengthen your organization’s commitment to social sustainability, but it all comes down to how people actually behave in everyday work – and this is what you need to be able to measure in the future. Organizations taking action to nurture humane and inclusive leadership with zero tolerance for toxicity are winners in the talent driven economy.
[1] Taleo Research (2009). Alignment Drives Employee Engagement and Productivity.
[2] Towers Perrin (2003). Working Today: Understanding What Drives Employee Engagement. The 2003 Towers Perrin Talent Report.
[3] Harter, J. K., Schmidt, F. L., Killham, E. A. & Agrawal, S., T. L. (2009). Q12® Meta-Analysis: The Relationship Between Engagement at Work and Organisational Outcomes
[4] Forrester report, TEI of Virgin Pulse (2020).
[5] Mandatum Incentives ESG Performance Measurement & Executive’s Variable Pay 29.9.2021
[6] Willis Towers Watson ESG Incentive Metrics S&P 500 Highlights March 2020
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