December 19, 2023

Social Aspect of ESG: Social Factors and KPIs Shaping a More Sustainable Future

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  • In our previous series of articles, we reported on the increasing social responsibility required for sustainability management, along with the concept of human capital and human rights due diligence (HRDD). Nowadays, all stakeholders of a company, including investors, management, and employees, are under pressure to be more aware than ever of the impact of their business on local communities. The social aspects of ESG are wide-ranging, including the nature of labor in a company, respect for human rights throughout the supply chain, and involvement in local communities.

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    KPIs include not only the elimination of risk factors such as human rights abuses and illegal working conditions, but also the extent to which the company adds value to its stakeholders and local communities. KPIs include not only the elimination of risk factors such as human rights violations and illegal working conditions, but also how much value is being added to stakeholders and communities. In this issue, we will discuss three major themes in the social aspects of labor relations and working environment, DEIB (Diversity, Equity, Inclusion and Belonging), and HRDD, based on examples from leading companies in the Philippines.

    Labor Relations 

    Labor or employee relations emphasize the importance of providing a safe, healthy, and respectful working environment for employees. This includes factors such as ensuring fair wages, reasonable working hours, access to healthcare, and adequate rest periods. Moreover, addressing issues like mental health support, work-life balance, and career growth opportunities demonstrates a commitment to fostering employee well-being and satisfaction.

    SM Life Integration Program, covering overall well-being (e.g. Get Up and Move exercises, online mental health counseling, and financial health courses) is an example. Others, such as Ayala, BDO and Aboitiz Equity Ventures have focused on taking care of employees’ mental health through partnerships with 24/7 psychotherapy support.

    Ensuring proper safety measures, training programs, and protocols for workplace hazards demonstrate commitment to employee welfare. These efforts not only prevent accidents and injuries but also foster a culture of care and respect. Meralco’s “Target Zero” program aims to reduce the number of accidents down through their Annual First Working Day Safety Campaigns and Safety Innovation Program and Exhibition. Meanwhile, Ayala has developed a mobile app (with ASSIST feature) designed to support and track employees and key stakeholders who may need help at the time of a disaster. This is on top of their routine assessments of business-related risks for clear and early identification of work-related hazards.

    Respecting and upholding labor rights is another crucial aspect. Companies are encouraged to support workers’ rights and voice their concerns without fear of retaliation. Major companies in the PH have introduced new policies in their Code of Conduct related to Whistleblowing and Retaliation Protection (e.g. Meralco, BDO, Metro-Pacific Investment Corp.), while some have strengthened their Grievance Mechanisms and handling (e.g. Ayala Corp., Aboitiz Ventures, etc.)

    Most common KPIs under this theme are:

    • Employee Turnover / Attrition Rate

    • Reduced number of Fatalities / Accidents; Reduced number of Lost Time due to Accidents

    • Training Hours devoted to ESG, Digitalization, etc.

    Diversity, Equity, Inclusion and Belonging (DEIB)

    Companies are expected to promote a diverse workforce not only to create a more vibrant and creative culture but also recognize the inherent value of equality and non-discrimination. Ensuring equal opportunities and addressing biases in hiring, promotions, and compensation are critical steps toward achieving these goals.

    Most notable is Meralco’s #Mbrace Program, with the objective of increasing women representation to 40% by 2030, hereby promoting a gender-balanced workplace. This is aligned with the United Nation’s Sustainable Development Goal (UN SDG) 5 on Gender Equality and UN SDG 10 on Reduced Inequalities. Nestle and Ayala have also demonstrated their commitment to equality and diversity by expanding their benefits to cover same-sex and domestic partnerships, interest-free education loans and paternity leaves beyond what is mandated by law. In fact, other companies such as Aboitiz Ventures have extended this standard and expectation even to partner suppliers as a testament to their support and advocacy for DEIB.

    Most common KPIs under this theme are:

    • Percentage of women, minorities, and other underrepresented groups in executive / leadership positions

    • Average salary ratio (average salary of male to female)

    • Succession planning and promotions based on diversity and inclusion goals (e.g. meritocracy, equal and fair treatment and assessment, etc.)

    Human Rights Due Diligence

    Effective human rights due diligence contributes to the creation of long-term value by minimizing risks to the company, enhancing brand reputation, and cultivating positive relationships with its stakeholders, investors, employees, and the community at large.

    At the forefront of institutionalizing HRDD are the following countries who have required businesses to conduct extensive due diligence processes: France, Germany, Norway; followed by USA, Australia and growing number of countries in Europe. While initiatives on Human Rights Due Diligence (HRDD) are still quite few in the Philippines, it is seen to grow traction as global policies and international standards are established.

    Metro Pacific Investment Corp. (MPIC) has extensive policies related to Human Rights protection such as Prevention of Child Labor, Forced Labor and Human Trafficking, where especially in their Tollways business they have embedded child rights principles into business practices through the Child Safeguarding Policy. Most companies such as Ayala, Meralco and Aboitiz are seen to be on their way to strengthening their Human Rights due diligence by holding not just their employees and leaders accountable but also partner suppliers and agencies who are bound by business conduct policies that aim to protect the environment, as well as the safety and well-being of all players in their entire value chain.

    Most common KPIs under this theme are:

    • Frequency of human rights risk assessments conducted in the organization and across the supply chain
    • Supply chain transparency (i.e. percentage of suppliers audited, identified to be high risk, and % of those that adhere to human rights standards)
    • Number of reported grievances related to (and time to resolve) human rights violations.

    Initiatives and KPIs in the social domain are the compass for pursuing sustainability management. Beyond regulatory compliance and risk mitigation, we find that leading companies are promoting initiatives focused on building long-term relationships and creating value by attracting employees, conscious consumers, and ethical investors. As the interrelationship between business and society deepens, such efforts by corporations will become indispensable for the realization of a sustainable society.

    *****

    NRI Manila supports companies in the area of Sustainability and ESG through our sustainability consulting services. We support companies in developing their sustainability strategies in terms of corporate culture, structure, assessment, and reporting to achieve a more sustainable future.

    About the Contributor

    Dianne Cordova is the Head of the HR Sector at Nomura Research Institute Singapore Pte. Ltd. Manila branch. She has over a decade of experience in Human Resources and Organization Development helping organizations in their organizational transformation journeys. She is also a recipient of the prestigious Australia Awards Scholarship, where she earned her master’s degree in Human Resource Management and Industrial Relations from The University of Sydney.

    REFERENCES

    2022 integrated report. Ayala Land Investor Relations. (2023, May 31). https://ir.ayalaland.com.ph/2022-integrated-report/

    2022 Meralco combined Annual and Sustainability Report. Meralco. (n.d.). https://company.meralco.com.ph/node/10257

    Annual reports – SM prime holdings, Inc.. SM Prime Holdings, Inc. – One of the largest integrated property developers in Southeast Asia that offers innovative and sustainable lifestyle cities. (2023, April 26). https://www.smprime.com/annual-reports

    BDO Sustainable Finance Framework. (n.d.). https://www.bdo.com.ph/content/dam/bdounibank/en-ph/about-bdo/sustainability/pdf/sustainable-finance/BDO-Sustainable-Finance-Framework-Second-Party-May2022.pdf

    Company policies. Metro Pacific Investments Corporation. (n.d.). https://www.mpic.com.ph/corporate-governance/company-policies/#:~:text=MPIC%20Policy%20on%20the%20Respect%20for%20and%20Protection,approved%20by%20the%20Board%20on%20November%207%2C%202018.

    Meralco grants financial support to Aspiring Women Electrical Engineers. Manila Bulletin. (n.d.). https://mb.com.ph/2022/12/30/meralco-grants-financial-support-to-aspiring-women-electrical-engineers/

               
               
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