Compelling Strategic Social Impact.
Compelling Strategic Social Impact.
Probability: High.
Financial Impact: Neutral to Some Profit Creation.
The social impact agenda is gaining momentum as leaders and organizations increasingly realize that our biggest societal and environmental challenges can’t be solved if people aren’t thriving1. There’s a growing emphasis on broader social impact strategies in addition to philanthropy, with companies reframing their approaches and linking them more closely to business strategies and operational models. This alignment allows for mitigating and transforming social risks into opportunities, such as talent shortage in the manufacturing industry, just transition and climate justice concerns in agribusiness, and diversity gaps on the board of directors through the social impact agenda.
Anticipated to launch in the first half of 2024, the Taskforce on Inequality and Social-related Financial Disclosures (TISFD) is a tool expected to contribute significantly to this realization. TISFD aims to assess material financial risks related to inequality and social issues2, catering to the needs of capital providers, companies, regulators, civil society, and labor organizations. We speculate that the International Financial Reporting Standards (IFRS) will potentially assume responsibilities for TISFD in the future, akin to its role with the Task Force on Climate-related Financial Disclosures (TCFD) and the anticipated announcement of incorporating Taskforce on Nature-related Financial Disclosures (TNFD) into its standard.
Companies should prepare for these changes by:
- Expanding beyond traditional philanthropy through assembling a strategy that encompasses both social risks and opportunities that have financial implications.
- Having an accurate picture of your organisation’s activity in the social sphere is a critical step in creating a comprehensive and effective social strategy.
- Understanding how social issues, inequality, community relations, and the wider ecosystem can impact the company’s long-term viability. Conduct thorough risk assessments and scenario analyses to identify potential social-related financial risks
- Developing relevant financial and non-financial key performance indicators (KPIs), and ensure appropriate framing from inputs, outputs, outcomes and impacts.
- Undertaking change management efforts to facilitate a cultural shift towards social impact. Engage employees at all levels in understanding the importance of social impact and empower them to contribute to initiatives that align with the company’s broader goals.
- Identifing and nurturing corporate changemakers at all levels within the organization. These individuals can champion social impact initiatives and create the enabling conditions for integrating social considerations into business practices.
- Staying informed about the development of tools like the Taskforce on Inequality and Social related Financial Disclosures (TISFD). As the initiative progresses and potential disclosure frameworks are introduced, be prepared to align your reporting practices accordingly. Keep abreast of any regulatory changes in the social impact reporting landscape.
Sources:
- https://www.fastcompany.com/91004700/what-to-expect-from-sustainability-and-social-impact-in-2024 ↩︎
- https://static1.squarespace.com/static/5eac34e7e4a3db64662f3134/t/64edf5c45536666c3d3a7fbb/1693316548549/TISFD+Provisional+Name+&+Purpose+Statement+-+August+2023.pdf ↩︎
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