Society Watch: Can a focus on education save the S in ESG?

By Mark Hillsdon; reuters.com

Published January 19, 2023

Sandwiched between the reporting behemoths of environment and governance, the social pillar of an organisation’s ESG strategy has always proved something of an enigma. Important yes, but what does it actually stand for, and how can companies demonstrate they are making measurable progress towards social goals?

But amid greater scrutiny of the claims they make, and the fear of being smeared by greenwash, companies are looking for new ways to back up their statements around social progress with hard, quantifiable evidence.

“Grey and murky,” is how Justin van Fleet , executive director of the Global Business Coalition for Education, describes the social element of ESG. But he believes that greater investment in education can finally bring some clarity.

A report last year, Unlocking Potential and Performance: Recognizing Education’s Position at the Core of ESG received the backing of a raft of major companies, including American Express, beauty brand Estee Lauder and Apple. It presents a new approach to corporate investment in education by offering a blueprint that can bring benefits for companies and investors through a stronger intersection of education and ESG, from driving economic growth to curbing climate change.

While environmental progress can be measured through solid metrics around emissions and waste, and governance is dealt with in the boardroom, it’s easy for a company to stall when it comes to the social pillar. They are often left casting around for success stories, pulling together details about charitable work or employee volunteering; short-term contributions where nothing really adds ups, says van Fleet.

“There are no metrics around how they (businesses) are making a systemic contribution to society,” he continues. “We think you can add some rigour to that, and use education as the key social issue to underpin the S, which would help drive broader ESG priorities.”

Directly linking education and ESG would produce more definitive methods for measuring social progress he says, and in turn provide more depth for those looking to evaluate corporate ESG efforts, with appropriate metrics to ensure investments have the intended impacts.

According to the Global Business Coalition for Education a quarter of a billion young people are out of school and another 600 million are in school, but barely learning the basics, undermining efforts to achieve Sustainable Development Goal 4, quality and inclusive education for all.

William Emtage is an associate director of sustainable business and ESG at RPS Consulting. He agrees that quantifying social progress can be hard, leading to difficulties that may even dissuade businesses from exploring that part of their ESG strategy. “If you can’t show that you’re making a clear impact, you’re then open to the accusation of making claims that can’t really be defended,” he says.

However, things are changing, and consultancies are receiving more queries from businesses about how they both target social progress and measure it. Educational attainment, he explains, along with other socio-economic indicators such as income inequality, unemployment rates and home ownership, offer new ways for organisations to measure social impact.

The concept of investing in education has its roots in altruism and philanthropy, he says, but “the investment in education that drives socio-economic outcomes is being done because it also has reflective advantage and benefits for business itself. The better you can educate your workforce... the more productive and innovative they are likely to be.”

Estee Lauder has long recognised the value of education, using it as a lever to drive progress on ESG goals around equity and diversity. “We don’t think of it as philanthropy. This is citizenship,” says Sara Moss, vice chair at the company. "We see education as a clear business imperative, as well as a moral imperative.”

The business has a workforce that is 84% female, and as a result has focussed much of its social impact activity on the education of girls and women, with the Estée Lauder Charitable Foundation investing nearly $25 million since 2016 in a variety of programmes.

These include the Open Doors Women’s Leadership Programme, a collaborative learning initiative that is helping mid-career women advance in the business across 15 countries. The company is also working with author and activist Amanda Gorman (who delivered her poem “The Hill We Climb” at President Biden’s inauguration) on its Writing Change programme, which is advancing literacy as a pathway to equality for American women.

Results are assiduously tracked, says Moss, from the progress of young girls taking part in the company’s inner city coding courses, to the career destination of black women who take part in the company’s professional development programme, From Every Chair.

Education can also get to the nub of another huge issue for business: the search for talent. One study of 20 economies by Korn Ferry found that more than 85 million jobs could go unfilled by 2030 because there aren’t enough skilled people to take them. Yet for many businesses this is yet to register as a material issue. Investing in education can address this risk, create a talent pool for the future and at the same offer a strong societal impact that can be measured.

Estee Lauder is also involved in several global programmes, including a partnership with the Indian activist and Nobel Laureate Kailash Satyarthi. The project protects children from labour exploitation in mica mines by providing them with local educational opportunities. Mica is a key ingredient for many makeup products.

The positive effect that investing in education can have on ending child labour in the supply chain is likely to resonate with many organisations, says van Fleet. Just one year of early childhood education can dramatically increase the chance of a child moving into primary school rather than child labour, he adds. By mixing support for schools with incentives for the families that ensure children attend, such as food or money, companies can create social impact that again can be measured and recorded.

So, what needs to happen to push education into the ESG mainstream? While it is important to avoid creating a box-ticking exercise, says van Fleet, companies need clear and consistent metrics to be able to measure education’s impact on their ESG priorities. This would support more consistent reporting and more complete data and risk analysis for investors.

He wants to see consultants, businesses and the ratings agencies coming together to map out solutions and set new standards. There needs to be incentives too, he says, such as education bonds, which would operate like green bonds and offer the opportunity to invest in SDG 4.

For Emtage, the next step is to capture this value. “By forging the link between social value and business value, you create something which is scalable and likely to attract repeat investment, and that's really the key,” he says.