Environmental, social, and governance (ESG) factors have become a key concern for consumers, lawmakers, and the wider community. Social issues such as human rights and diversity and inclusion have made headlines when companies get them wrong, with social movements such as #MeToo and Black Lives Matter throwing light on any indiscretions. As ESG becomes increasingly important to consumers, companies will be scrutinized for better or worse. However, companies now have more ways than ever to assess their ESG performance, says GlobalData, a leading data and analytics company.

GlobalData’s latest report, “ESG – Social Factors,” reveals that companies can no longer do the bare minimum by complying with relevant laws and guidelines regarding social sustainability. They can and will be assessed against their peers by neutral third parties, allowing them to understand their shortcomings and work to improve their practices.

Aisha U-K Umaru, Analyst, Thematic Intelligence team at GlobalData, comments: “Annual reports, certifications such as B Corp, and lists such as the Corporate Human Rights Benchmark (CHRB) serve as a makeshift report card for companies. It’s their opportunity to highlight all the good they are doing regarding the social factors of ESG. Conversely, these will also identify any negative practices or weaknesses, forcing companies to do better or face the judgment of consumers.”

A society’s views on social issues can shape and influence that society’s laws. As we update our views on issues such as human rights, new legislation will come into force to mirror our stance on these issues.

U-K Umaru continues: “Integrating social considerations into a company’s policies and operations is a dynamic process. What holds true today regarding a social issue may not be true tomorrow. As laws and regulations are updated based on our moral progress, companies must stay abreast of change to ensure they are not left behind.”

Much work must be done to make ESG a central concern for decision-makers. Despite shortcomings in areas regarding human rights, diversity and inclusion, health and safety, and community impact, some companies still exhibit strong financial performance, with scandals having little to no long-term impact on their share price.

U-K Umaru concludes: “Some companies may not be incentivized to adopt better ESG practices without financial consequences. Companies must adopt a truly altruistic viewpoint to ensure that ESG remains a focal point in decision-making, regardless of financial performance.”