ESG (environmental, social, and governance) initiatives should be a “win” for all concerned. Communities see benefits like improved infrastructure, more job opportunities, and increased support for local charities; customers and investors know they are backing a sustainable business; and organisations enjoy enhanced brand equity and stakeholder trust.
Or at least, that’s the idea. As we’ll explain in this article, things aren’t so simple in reality – to the extent that so-called “social washing”, and indeed, just the perceived risk of it, now represents a major threat to businesses.
💡 Learn: What is ESG?
Consumers are no longer content to take brands at their word on ESG, with 54% prepared to stop buying from a company found to have made misleading sustainability claims.
This ties into a broader issue around consumer trust. Globally, research from Havas reveals that just 47% of brands are seen as trustworthy, and 71% of consumers say they have little faith that brands will deliver on their promises.
Evidence also indicates that consumers are rejecting global, broad-brush sustainability messaging. Research produced by the Brand Experience Group and Social Value Portal, shows a marked preference for locally relevant messaging around causes and charities like Fairtrade, the Red Tractor Standard, and the RSPCA:
If your ESG messaging is telling the wrong story, it’s never going to land. And with a steady stream of climate crises and corporate scandals pushed to our smartphones daily, the bar for what feels like ‘enough’ action keeps rising, leaving brands under ever-greater scrutiny.
But, to be clear, this isn’t just a consumer issue.
Investors are becoming increasingly cynical, with an EY-commissioned survey discovering that 85% believe greenwashing – along with similarly misleading statements about companies’ sustainability performance – is a greater problem now than it was five years ago.
It’s hardly surprising that consumers and investors alike have such little faith in businesses. In separate EY research, 55% of finance leaders accepted that sustainability reporting in their industry risks being seen as greenwashing, while only 47% thought it “very likely” that their organisation will deliver on its major sustainability priorities and meet stated targets – such as achieving net zero on time.
Regulators are banging the anti-greenwashing gong, too. For instance, in the UK, the Competition and Markets Authority has been granted new powers to fine businesses up to 10% of their worldwide turnover for breaches of consumer law, including inaccurate messaging around environmental policies.
Of course, the onus isn’t on consumers, investors, and regulators to automatically believe an organisation’s ESG claims – it’s on the organisation itself to present information in a credible way.
Unfortunately, in our post-truth age, even genuine stories are being dismissed as spin. So what can business leaders and communications professionals do about it?
Organisations are rightly terrified of being called out for social washing or greenwashing. Falling foul of the climate of cynicism can lead to lost sales, declining investor faith, and increased regulatory scrutiny, while the reputational damage can take years to repair.
But every challenge presents an opportunity, and the corporate risk of social washing is no different. Consumers will invest in businesses with credible, validated impact evidence, not “feel-good” messaging.
What’s needed is a way of showing the good you’re doing that doesn’t feel like a compliance exercise, but instead resonates with the public, reassures consumers, and convinces stakeholders in the boardroom.
That standard exists in the form of Social Value.
Social Value takes a different approach to conventional ESG or Corporate Social Responsibility. It reflects an organisation’s positive impact on society, beyond what’s displayed on the balance sheet. Whereas profit is measured in accounting terms, Social Value is a sum of the actions taken by an organisation to improve the world around them.
Because it’s reinforced by real numbers, Social Value is meaningful and trustworthy, empowering organisations to craft watertight narratives around ESG that communications leaders can share with confidence.
The Global TOM (Themes, Outcomes, Measures) System is the leading tool for measuring Social Value. It measures Social Value in both units of delivery per initiative (such unemployed people hired) and through monestised Social Value proxies: an international Social Value dollar.
Here are a couple of the major brands using the TOM System to enrich their impact reporting:
Recruitment leader Hays has partnered with EveryYouth to support young people experiencing homelessness through Project Flourish, which provides pro bono consultancy, employer education, and direct bursary funding for those at risk.
The project has delivered £60,000 in bursary funding, meaningful employment opportunities for young people – and, as measured by the TOM System, £166,000 of validated Social Value.
The TOM System has enabled us to measure and report our social impact with unprecedented transparency and accuracy. This level of insight has helped us focus on what local people, businesses and communities require to thrive – and how we’re able to continue delivering on these unique needs.
Karen Young, Director and Social & Environmental Purpose Lead, Hays UK&I
ISS World is one of the businesses applying the TOM System on a global scale, embedding consistent Social Value measurement into its operations worldwide. This enables the business to compare impact on a like-for-like basis across borders.
The social sustainability agenda is rapidly gaining momentum, prompting many of our global customers to prioritise social actions in their strategies and concrete tenders ... By translating Social Value into monetary terms, we believe we can bring social sustainability even more to the forefront of global business.
Margot Slattery, Global Head of Social Sustainability and Inclusion, ISS
In Spain alone, they’ve generated over $1.2 billion in Social Value through local employment, local procurement, and inclusive workplaces. They have also employed nearly 2,500 people with disabilities – double the legal requirement.
📚 More reading: Measuring Social Value: Social impact, SROI, and the TOM System™ explained
The opportunity is clear: companies that embrace transparency and evidence are well placed to win credit with today’s cynical consumers and investors. Meanwhile, those that fail to back up their words with credible data will face ever-greater scepticism – and pretty soon, they’ll start to feel the impact on their bottom line.
Yes, we live in a cynical world. But many organisations are making a real difference in their communities. If your business has committed to impact yet hesitates to tell its story, now is the time for a bolder, more confident approach. That’s exactly what Social Value enables: leading the conversation with credibility, backed by data.
Want to understand how Social Value can protect your reputation and prove your impact?
👉 Download our report - Global Social Value: A new approach to social impact in business.