The Role of Social Criteria in ESG Evaluation

Evaluation of the social Criteria of ESG.

Let’s take a look at the evaluation of the social aspect of ESG.

The social factor talks about businesses and their dealings with people.
It is concerned with the consideration of people and relationships.
It involves companies’ impact and interaction with employees, customers, and society.
It tells how companies address social inequalities.
It is a process for creating a successful place that is sustainable and promotes wellbeing.
It combines both physical and social infrastructures to support social life and amenities, a space for development, and a place for people.

There are several parts involved in the social aspects of ESG. The following areas are commonly addressed.

Relationship:- This has to do with a company’s interaction with its employees, customers and suppliers, and society. It focuses mainly on:
- Companies’ wages considerations.
- Employees’ engagement and turnover.
- Customers’ and suppliers’ feedback and support.
Community relation:- This area is concerned with how a company impacts the community around it – how it benefits or harms the surrounding community.
Human rights:- Human rights are a very important aspect to be considered. The human rights violation should be properly investigated using the ESG strategies. Investors should endeavor to kick against a poor human rights record.
Workplace health and safety:- This pertains to the health and safety of employees and their working environment.
Diversity:- Diversity values increase productivity and impact business profitability. Proposal for diversity legislation has been considered by senate committees and the proposed legislation includes:
- Gender reporting.
- Ethnicity
- Models for the increment of employee diversity.
- Race
- Leadership status.
Political contribution and affiliation: – These two are important aspects identifiable in the evaluation of social factors. It deals with company’s intersect with political ties and evaluation of political risks and avoidance of conflict.

The following are ways through which social sustainability helps businesses.

Equity:- focuses on projects and its disadvantage to the target group.
Diversity:- concerned with identifying diverse groups and viewpoints within the target group.
Social cohesion:- concerned with target group participation in social activities.
Quality of life:- concerned with the improvement of health, education and skill development, and housing opportunities for the target group.

Social responsibly is also sometimes called corporate social responsibility CSR and it refers to:

Governments and organizations and the way they act towards disturbing social sustainability.
It comprises their roles to ensure steady strong values and moral characteristics.
It associates organizations including other entities which are deemed corporate citizens with accountability.
Primarily, the responsibility of an organization is to assure absolute financial returns for shareholders.

The responsibilities of business are grouped into four categories which are:

Philanthropic:- The contribution of good resources to the community and improvement of the quality of life by good corporate citizens.
Legal:- Obedience to the law and following the rules of the game.
Ethical:- Being careful and avoiding harm. Keeping to the obligation of doing what is right, decent, and just.
Economic:- Being profitable by providing the foundation upon which others can rest.

SRI is the acronym for Socially Responsible Investing.
It philosophically gave rise to ESG investing but has key differences with it.
Initial models use-value judgment and negative screening to choose companies to invest with.
On the other hand, ESG does not only support a set of values.
The analysis and investing on ESG focus more on searching for company value.