Measuring ‘S’ in ESG: Recent Episodes
Freddie McMahon
Rule-based knowledge impacts decisions, outcomes, and the data collected. Interactions with rule-based knowledge is still problematic for every organisation and every industry. Old concepts prevail. Egyptians found it slow to update instructions for farmers, but that was 6,000 years ago when the rules were carved in stone. We need new concepts for a more considered, measured and dynamic approach. The socioeconomic benefits have the potential to drive real change. Let the journey begin.
Policies and their extensions into procedures and other content contain a rich repository of rules for social risk assessment in the workplace. Yet overwhelming evidence shows that written policies and the way in which they are enacted in practice, are not fit for purpose. But, why have organisations found it difficult to change when mounting evidence accumulates over time that conventional approaches are not effective?
Music byAlexiAction through Pixabay
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AlexiAction through Pixabay
(3) Freddie McMahon | LinkedIn
The current state of reporting ESG social risks is embryonic. Social Key Risk Indicators are substandard or missing across every sector.
80% of social risks identified from numerous investigations involve Bullying, Abuse, and Discrimination (aka BAD). Yet we all know harming people is unacceptable. Productivity is impaired. Reputation and value destruction can occur at any time through media exposure.
It is clear that a new way of thinking is required.
Music byAlexiAction through Pixabay
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AlexiAction through Pixabay
(3) Freddie McMahon | LinkedIn
Across every sector, it is a credible argument that the leadership framework for making decisions is compromised. Their reliance upon data they receive to mitigate against social risks in the workplace is bias, distorted and mostly missing compared to reality. Until leadership accept their data is not fit for purpose then the door remains firmly closed for fresh, innovative thinking. However, the pressure from stakeholders, regulators, and media exposures means a tipping point is much closer.
Music byAlexiAction through Pixabay
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AlexiAction through Pixabay
(3) Freddie McMahon | LinkedIn
In the workplace, Social Key Risk Indicators across every sector are substandard or missing. Abuse, discrimination, bullying, and harassment persist. Harming people is unacceptable. Productivity is impaired. Reputation and value destruction can occur at any time. But whilst leadership is disconnected and in denial, the door remains firmly closed for fresh, innovative thinking.
Music byAlexiAction through Pixabay
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AlexiAction through Pixabay
(3) Freddie McMahon | LinkedIn
Recently there has been several cases of reputation and value destruction. This is because leadership underestimated social risks and their adverse effects upon stakeholders.
Music byAlexiAction through Pixabay
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AlexiAction through Pixabay
(3) Freddie McMahon | LinkedIn
The gap between policy intent and practice for social factors is poorly measured as most of the data needed to find risks does not exist. The missing risk data is the causality to many socioeconomic problems within organisations. The momentum to embrace reporting non-financial data is being led by ESG (Environment, Social, and Governance) and regulatory change. The time has come for a new way of thinking to address the missing data, especially to measure the S in ESG.
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(3) Freddie McMahon | LinkedIn
Imagine a scenario whereby the trust in a well-known international brand is eroded within twenty-five days, because they had mismanaged ESG social risk within their organisation. This scenario became a reality during April 2023. Why does this matter?
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AlexiAction through Pixabay
(3) Freddie McMahon | LinkedIn
It comes as no surprise that the traditional providers of financial data have all extended their services to include ESG ratings. Other companies have also emerged to produce ESG data. Invariably attention turns to the quality of the data as the investment market become more reliant upon these ESG Benchmark Compilers.
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AlexiAction through Pixabay
(3) Freddie McMahon | LinkedIn
The systems for the identification of social risks within the public sector workforce do not work. In a matter of nine days, three reports covering the police, NHS and fire brigade all detailed systemic social risks within the workforce. Around five hundred pages of content spread across three reports are saying the same thing. The substance of these reports like so many that have been written over the past few decades have become commoditised.
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AlexiAction through Pixabay
(3) Freddie McMahon | LinkedIn
On the 21st March 2023, Baroness Casey published a 363-page report that was a comprehensive review aimed at investigating the culture of the UK’s largest police force. The Metropolitan Police force, like the other parts of the UK public sector has not embraced ESG reporting and benchmarking. The Casey report offers powerful insights to the need for measuring the social factors in ESG.
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AlexiAction through Pixabay
(3) Freddie McMahon | LinkedIn
Understanding and applying policy rules in practice is highly problematic. As a consequence, rule-based decision-making is prone to distortions, mistakes, and prejudices. The gap between policy intent and reality has never been wider.
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AlexiAction through Pixabay
(3) Freddie McMahon | LinkedIn
The appalling state of fragmented rules means there is a material skills deficiency.
Music byAlexiAction through Pixabay
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AlexiAction through Pixabay
(3) Freddie McMahon | LinkedIn
Fragmented rule-based knowledge affects every public and private organisation. Evidence of fragmentation is everywhere.
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AlexiAction through Pixabay
(3) Freddie McMahon | LinkedIn
Evidence shows that rule-based knowledge covering what is written down and the way in which it is enacted in practice, is not fit for purpose. The fragmented state of rule-based knowledge nurtures systemic weaknesses.
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AlexiAction through Pixabay
(3) Freddie McMahon | LinkedIn
There is no doubt that there is a lack of suitable data for measuring the S in ESG. Conventional thinking is that the lack of data means measuring the S in ESG data is a non-starter. Some have gone further to say that the S should be dropped from ESG.
It is an imperative that the S should not be dropped in ESG just because conventional thinking believes it is too difficult to measure.
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(3) Freddie McMahon | LinkedIn
Until human resources become proficient in managing the diverse range of social risks within their organisations then victim-related issues will prevail.
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(3) Freddie McMahon | LinkedIn
There is a growing market momentum to measure the social impact of ESG. To measure social impact requires a blended approach of using knowledge and data. The question is which comes first, the knowledge or the data?
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(3) Freddie McMahon | LinkedIn
In Chapter 4 , we showed that child abuse is under-identified and under-reported, in the same way as for misogyny and violence against women. It is clear that under-reporting means there is inadequate data available. Yet to get sufficient data one needs to first tackle the issue of under-identification.
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(3) Freddie McMahon | LinkedIn
Previously, in Chapter 3 we explained why Britain’s military need a sense and respond capability to stop misogyny and violence against women personnel. It would require the digitalisation of rule-based knowledge that traditionally is found in documents and the heads of subject matter experts. The same weaknesses concerning rule-based knowledge apply to children being abused across the sporting industry.
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(3) Freddie McMahon | LinkedIn
During 2022, there has been widespread press coverage of Britain’s military being accused of misogyny and violence against women personnel. Clearly, something is missing from Britain’s world-class military capabilities.
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(3) Freddie McMahon | LinkedIn
The purpose is to show that rule-based knowledge needed for decisions, actions and generating timely, accurate data is not working. As a consequence, the impact is deep systemic risks everywhere. For example, it applies to child abuse. Sadly, child abuse is only one entry across a very wide spectrum.
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(3) Freddie McMahon | LinkedIn
It is time to think differently about how best to harmonise rule-based knowledge and its decision data to manage the ever-increasing complexity, volatility, and pace of change.
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(3) Freddie McMahon | LinkedIn