Social sustainability is just as important as environmental sustainability

Definition ESG

ESG means Environment, Social and Governance and represents the three pillars of sustainability. In order to enable sustainable management, social aspects must be considered in addition to environmental factors and good corporate governance. It is therefore important to consider diversity and employee satisfaction when investing.

Social sustainability – S in ESG

The following key questions should be answered when addressing the "S" in ESG investing: How can a company manage its relationships with its employees, the society in which they operate, and the political environment? In other words, the main focus is on creating societal benefits.

A mature consideration of social factors has a direct impact on employee recruitment, engagement and retention, and leads to higher productivity and performance, which has a positive impact on the bottom line. On the other hand, if insufficient attention is paid to employee well-being, this can lead to significant losses.

Social sustainability is a way of managing and recognizing the impact of companies on their employees, value chain workers, customers, and local communities. Companies that proactively address social sustainability recognize the importance of their relationships with people, communities, and society. So, when talking about social sustainability, the focus is on people and society. The goal is to enable all people to live with dignity. 

Social sustainability – an example

An example could be: Emma is worried because she is expecting her second child. After her first child was born, she received little to no support from her employer. Her current job is different from her previous one because her new employer is now family-friendly - in addition to fully paid parental leave, they also provide her with company childcare and flexible working from home. Her new company is characterized by the fact that 100% of employees return to work even after parental leave.

Social Sustainability – equal opportunities

The example shows that social sustainability is not yet firmly anchored in our society. Many working mothers are unconsciously penalized for being mothers. Their chances for promotions and salary increases decrease, and they are often seen as “unprofessional” as soon as they show their children – even though their professional skills have not changed in the slightest. Further training opportunities are usually no longer made possible for mothers. This usually does not happen with male.

This increasingly leads to a kind of self-censorship on the part of mothers, because they basically act as if the family and the associated obligations are non-existent or completely under control, even though they are still the ones primarily responsible for housework and raising children at home. This can quickly lead to immense emotional stress and burnout.

Financial challenges keep mothers from taking time off

Often when people talk about mothers taking a career break, they talk about a "choice." But many working mothers emphasize that they are not given a "choice." Financial aspects keep them from taking time off.

Nearly half of all working mothers take an extended break after giving birth. Even though these breaks are common, many mothers face significant challenges when they want to return to work. Financial issues represent the primary reason working parents do not take time off. Further, many are afraid of the challenges of returning. Their fear is that they are not up to speed and lack competencies and skills, so they would not be able to successfully handle professional tasks. The working parents would like to have a new orientation after the break so that everyone in the company is on the same level.

As an example, you have been shown here how the "S" in "ESG" defines itself, among other things. Having children should not be an occupational risk, but reality is still different. The so-called "Motherhood Wage Penalty" prevails.

Why is social sustainability important?

Maternity leave, childcare and flexible working hours should be integrated into companies as a good social standard. Employee fear leads to lower motivation, whereas employee engagement and retention result in higher productivity and performance in the long run, and this in turn has a positive impact on the bottom line. Research shows that engaged employees lead to 21% higher profitability on average, while disengaged employees cost companies between €380 and €480 billion annually due to absenteeism, burnout and negative health outcomes.

A greater emphasis on working conditions ensures that these issues are not just good business practice, but become a business requirement.