The perils of ‘social washing’: Four practical tips to avoid it

Post Date
15 May 2024
Author
Rayan Chahin
Read Time
4 minutes
  • ESG advisory

In an era where (double) materiality is a buzzword, a company’s brand reputation is more valuable than ever. As non-financial reporting requirements widen in scope, companies wishing to maintain their ‘social license to operate’ face risks in reporting claims that lack authenticity.

Social washing, what is it?

Like its environmental counterpart – greenwashing – social washing is the act of presenting a façade of social responsibility and positive impact with unsubstantiated claims. The emphasis here is in the ability to substantiate and evidence your claims – it need not be as overt as the act of concealing operations in faraway sweat shops; any company can face the risks associated with social washing with claims that lack rigour.

Standardised non-financial reporting as an answer

As scrutiny of businesses' social actions intensifies, non-financial reporting regulations have followed suit. Organisations are being called upon to quantify their impact on society. For instance, in S&P’s Corporate Sustainability Assessment (CSA),[1] community investment activities are now linked to materiality, while emphasising the importance of articulating impact, not just expenditures. In this context, impact has become the currency of credibility.

Within the European Union, the European Financial Reporting Advisory Group (EFRAG) and the Corporate Sustainability Reporting Directive (CSRD) are driving efforts to enhance credible social reporting. The focus here is on a double materiality matrix, encompassing both environmental and social factors, along with governance (ESG). Specific social issues must be examined and again, with disclosures increasingly centred around impact rather than spending.

Four steps to genuine social impact reporting

To combat the risks of social washing, organisations need to embrace a comprehensive approach. Here are some examples of how companies can take on this challenge:

  1. Clear communication of change: Articulating change alongside contributions allows companies to paint a cohesive story that demonstrates their commitment to social impact; from what they contributed, to what has happened as a result, to finally the change / impact they created in society.
  2. Risk mitigation through assured data: Businesses are now working towards ensuring the credibility of their data through third party assurances to comply with new regulatory requirements. Such independent assessments help verify the accuracy and completeness of data while clarifying actionable areas for improvement.
  3. Authentic integration into material risks:A good way to start a conversation on the social impacts of a company’s activities is by undertaking – and regularly updating – materiality assessments. Identifying social issues as being materially important acknowledges the significance of these factors play in shaping their business landscape and can leverage greater resources towards addressing them.
  4. A whole business approach: Companies should look to adopt a holistic approach towards generating lasting impact, leveraging their entire asset base to address social issues. This not only includes community investment, but also the integration of social products and services into their core business operations, demonstrating their commitment as a whole to social responsibility.

The landscape of social responsibility reporting is evolving rapidly and Business for Societal Impact (B4SI), supported by SLR, is well positioned to help companies respond and articulate their impact in this space. As a global network of over 150 companies [2], B4SI offers a common language and robust standard for businesses to measure and manage their social impact across community investments, social procurement initiatives, and business innovation projects.

To learn more about how network members are guided and supported by the B4SI team to create social impact and articulate metrics rigorously, please do get in touch.

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References

[1] https://www.spglobal.com/esg/csa

[2] https://b4si.net/framework/network

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