Human capital and social sustainability move centre-stage

As IOSH launches a new campaign to place social issues – and safety and health in particular – at the heart of corporate sustainability measurement and reporting, we look at the place of human capital in managing businesses that are both profitable and sustainable.

The COVID-19 pandemic appears not to have dampened the public’s growing interest in sustainability, but the emphasis seems to be almost exclusively on its environmental aspects. The social pillar, which along with environmental and economic management makes up the tripartite structure of business sustainability, receives far less attention. Protecting and nurturing people, whether they are employed by a business or its suppliers – or are simply affected by its activities – seems to have ended up as a poor relation in a discourse dominated by decarbonisation and waste reduction.

But that could all be changing.

IOSH’s campaign Catch the Wave – launched in November – aims to press the reset button on sustainability and encourage businesses, governments, investors and other stakeholders to put people centre stage (see Catch the Wave, below). It aims to encourage businesses to explore ways they can enhance the stock of human capital, both in their own workforces and throughout their value chains, to ensure that they are not using resources today in a way that compromises future generations’ ability to do so – a key tenet of the common definition of sustainable development.

Reprioritising the human capital aspects of sustainability does not, however, mean there should be any less emphasis on corporate responsibility for limiting climate change or halting species loss.

‘These aren’t separate pillars, they are just different ways of thinking about sustainability,’ says Adrian Henriques, who has advised companies including Roche and Veolia on social sustainability. ‘The impacts on people and on the environment are interdependent. If we don’t have an environment we don’t have a society or any people in it.’

The interdependence between the social and economic pillars – the people and profit strands of the so-called triple bottom line – is equally strong. The Catch the Wave campaign will emphasise that protecting people is an integral part of business’s social licence to operate. It will also highlight how people-centred organisations enhance their profits, both through maximising the value of their human capital and through reputational gains that make them more attractive to business customers and consumers.

Investor interest

Larger organisations have found themselves under increasing pressure from institutional investors to improve their management of – and reporting on – human capital. These investors, who have already driven improved environmental measurement and performance in the past two decades, include church and local government pension funds. They have exerted pressure on businesses to drive improved social sustainability by managing labour rights and conditions in their supply chains, especially following major incidents that have highlighted poor or unsafe conditions, such as the Rana Plaza garment factory collapse in Dhaka, Bangladesh, in 2013.

But the interest in human capital management for directly employed workers has also come from major fund managers, who control trillions of pounds of investment capital. This interest ranges from recruitment, diversity standards and training and development, to health, safety and wellbeing. These fund managers, whose job is to put their clients’ money where it will produce most return, see as investment risks those organisations that do not look after their people and maximise their potential value.

As larger organisations are beginning to see increased interest in their social sustainability measures, they in turn demand more of their smaller suppliers. As discussed in the November/December 2021 issue of IOSH magazine, small- and medium-sized businesses are increasingly asked by their larger customers to demonstrate their sustainability credentials (see Resources, below).

‘Larger organisations already have sustainability teams,’ says Ruth Wilkinson, IOSH head of health and safety, ‘but we are also interested in the smaller and medium-sized organisations, who may be led by their stakeholders, and because they provide goods, services and products within supply chains.’

OSH in the middle

While social sustainability is an umbrella term for a whole range of impacts on the people an organisation affects, some issues must clearly have higher priority than others. Preventing modern slavery is one, OSH another. Considering issues such as workforce diversity or community engagement – however important they are – while tolerating high levels of workplace injury and ill health is clearly not a sustainable way to do business.

‘OSH is at the foundation of the whole social sustainability agenda,’ says Ruth. ‘If you get the foundation right, where you are looking after your people, preventing harm, protecting health, safety and wellbeing, providing safe workplaces, providing training, skills, awareness, opportunity for growth, preventing modern slavery, protecting human rights and so on, we can start to build sustainable workforces, sustainable organisations, which in turn support sustainable communities, sustainable societies and infrastructure. People aspects are at the heart of sustainability, and IOSH champions OSH and people in sustainability.’

Focusing on social sustainability for OSH practitioners need not require reinventing the wheel. In many cases it is a matter of recognising the work that the OSH function does in reducing accidents and ill health and promoting wellbeing in an organisation. ‘Part of the campaign is saying “You are already doing this”,’ says Ruth. ‘Although we are using the words sustainability and human capital, which we might not have used as part of our OSH management system, in effect what you are already supporting is social sustainability.’

The focus is on reframing those achievements as part of the sustainability narrative, and in planning to fill any important gaps in the social sustainability agenda. ‘Rather than having your health and safety report sitting on one side, your HR report over here and your sustainability report somewhere else, let’s look collectively at what’s going on and confirm to stakeholders how we are performing – not forgetting transparency within our supply chains. It is important OSH is considered along with other business risks, and is part of board and stakeholder performance management processes,’ says Ruth.

Working in tandem with other business functions is critical, Ruth says, adding that this dependence on joined-up working underlines the value of safety practitioners developing the so-called ‘soft skills’ of influencing and cooperation that are increasingly expected by employers. A third of IOSH’s competency framework is dedicated to these behavioural elements, including communication and working with others. The framework also includes sustainability in its set of technical competences that practitioners require to be effective.

Well framed

There are numerous standards and frameworks that organisations can use to guide their sustainability programmes. Those with a social sustainability component include the Global Reporting Initiative’s standards and the UN Global Compact, whose 10 principles aim to help businesses focus on achieving the Sustainable Development Goals (including Goal 8, which covers decent work and economic growth).

'Fund managers see as investment risks those organisations that do not look after their people and maximise their potential value'

The International Organization for Standardization has produced ISO 26000, a guidance document on social responsibility for business. It lists no fewer than 32 social issues under its core subjects, from avoiding discrimination and safeguarding vulnerable groups to protecting customer data, and from social dialogue with workers to customer service standards. 

As part of its Catch the Wave campaign, IOSH will issue an analysis of these different frameworks in the coming months. 

First things first

An organisation’s decisions about which aspects to prioritise will be partly dictated by regulatory requirements. One clear priority must be taking measures to ensure that supply chains are free of trafficked or exploited labour, as required by the Modern Slavery Act in the UK and similar legislation in other countries.

In its white paper Tackling modern slavery together, IOSH set out the steps businesses can take to ensure that they are not supporting a system that exploits an estimated 40.3 million people worldwide, including 13,000 in the UK. One of the first steps is to train employees to look out for and report any instances of possible slavery. In a YouGov survey of 2000 people commissioned by IOSH to accompany the paper, 83% of respondents said they believed employers should train their workers in preventing labour exploitation.

‘By investing in enhancing the knowledge of modern slavery among employees, a business can go a long way to reducing its risks,’ says the paper. ‘It also demonstrates how seriously [an employer] takes the issue, attracting the right kind of attention from investors and customers.’

Beyond such critical priorities, it is not always self-evident which elements of social sustainability an organisation should concentrate on first. Decisions made by management based on internal discussions risk under- or overestimating the importance of issues to other constituencies. The best way to find out what the various groups with an interest in the company’s sustainability want is to ask them.

Organisations with sustainability programmes often carry out engagement exercises with stakeholder groups: employees, investors, customers, suppliers and local communities. This process is known as ‘materiality assessment’, as it gives a rounded view of the issues that are most material to a business’s sustainable operation. 

A rounded view

The infrastructure services company Costain is currently finishing its two-yearly materiality assessment. It has surveyed or interviewed employees, corporate customers, suppliers and community stakeholders to gather their ratings of 40 different sustainability issues, from carbon emissions to local employment opportunities. The results from more than 50 organisations are then plotted on a graph: one axis measures Costain’s internal ranking of the issue as material to its business, and the other is the average of the other stakeholders’ ratings.

‘Anything that is high importance to both groups of stakeholders clearly is material to our business,’ says James York, Costain’s corporate responsibility and security director. 

In the 2019 matrix, the top seven priorities were all social, led by workforce safety, public safety, workforce diversity and gender pay gap, inclusive culture and employee health wellbeing. James says the top two will remain unchanged when the new assessment is published later in the year. ‘Health and wellbeing is much more prevalent than it was, and will probably be third,’ he notes. Climate change, ethical trading and creating skills have also moved up the graph. The final matrix will inform Costain’s sustainability work in the next two years. ‘To have that rigour, consulting the stakeholders, certainly helps from an engagement point of view, with our own people and our supply chain,’ says James.

His advice to anyone carrying out a materiality assessment is to choose sustainability measures that are relevant to the organisation and on which it can take effective action. Then, once the ranking exercise is finished, choose a realistic number of the material issues to act on
– Costain picks 10. He says it is important to spread responsibility for action among the various specialist departments.

James’s emphasis on distributing duties throughout the organisation and integrating sustainability management into day-to-day business practice brings us back to Ruth’s point about the need for OSH practitioners to help promote social sustainability as part of a cross-cutting team. 

‘The health and safety professional is clearly in a good place, with their knowledge, skills and competency,’ she says. ‘But there is a need for practitioners to work collaboratively in a cross-disciplinary team to support the social sustainability agenda. We are saying: let’s look at this collectively.’

Image Credit | Sam Falconer