But many of these issues elicit reactive responses from organizations. What firms need to do now is systematically identify and integrate proactive actions into their overall business and sustainability strategies beyond specific interventions that address the social topic du jour. Â
What is the problem? Â
There are multiple reasons for that lack of integration. One is that social issues have been seen as tangential to business, more sensitive, or politically controversial. Some CEOs find it harder to have conversations about S than E. While environmental issues can be addressed in technical terms, social issues are often discussed in terms of values, akin to a barometer of corporate culture. Â
Similarly, social issues have been perceived as less tangible â questions of perception rather than objective reality or technical challenge. The divergence of âSâ issues is highlighted by third-party rating agencies, such as FTSERussell, MSCI, ISS ESG, RobecoSAM, Refinitiv, and Sustainalytics and reporting frameworks and standards, such as GRI and SASB. Consistent with the views of the Sustainable Finance Disclosure Regulation (SFDR), rating agencies have been criticized for the lack of correlation between their respective ratings. And businesses have failed to develop the data capture processes that are increasingly common for environmental metrics. To some extent that has been encouraged by regulators and investors, who have also approached S and E differently. Â
In the EU, for instance, the SFDR has plenty to say about environmental issues. As regulatory requirements evolve, they have provided businesses with the basis for framing their E efforts. There has not been an equivalent drive behind S. For instance, while the European Commissionâs Green Taxonomy has been approved and in force since July 2020, the draft report for the Social Taxonomy has been under revision since summer 2021 with requests for feedback still pending. Â