Social factors now ‘inextricable’ from commercial decisions

The ‘triple bottom line’ is replacing the bottom line as social factors are factored into commercial decisions for businesses.

Kris Cooper August 16 2024

Companies are increasingly prioritising social factors in commercial decisions due to rising consumer pressure and legal standards, according to a report.

GlobalData’s ESG – Social Factors report found that the social impact of decisions must now be taken into account instead of solely maximising shareholder value, with an expectation from consumers of going above and beyond mere compliance.

The report, which explores why companies need to invest in social responsibility, considers the four key elements of social sustainability, diversity and inclusion, health and safety and community impact.

‘Triple bottom line’ replacing the bottom line

The broadening considerations of stakeholders when assessing how a company is being run have seen a focus on the bottom line – profitability – increasingly superseded with the concept of the ‘triple bottom line’: people, planet and profit.

This contends that a business should positively impact society and operate in an environmentally sustainable manner while still turning a profit.   

To demonstrate their commitment to these three areas, companies are using designations like the B Corp Certification, which measures a company’s impact on the community, employees and the environment.

Other lists like the Corporate Human Rights Benchmark and the FTSE Diversity and Inclusion Index have emerged so businesses can assess where they are up to and where they need to improve.

Just as financial reporting emerged to keep businesses in check, reporting for sustainability, whether that be environmental or social, has become widespread and helps to assist those hoping to make ethical investment and purchasing decisions.

Consumers expect more progressive social practices

According to the report, the #MeToo and Black Lives Matter movements, which gained traction on social media, highlighted the consequences of unsustainable societal practices for businesses.

Consumers more than ever now expect companies to protect and uplift vulnerable, marginalised and minority groups not just through performative statements but through accountable and tangible actions that make a difference to communities.

For example, the report highlights how the Black Lives Matter movement boosted the 15 Percent Pledge, which calls for retailers to commit 15% or more of their shelf space to black-owned businesses. High-profile retailers such as Sephora and Nordstrom took the pledge following the campaign gaining traction.

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