Social Impact Statement

What Is a Social Impact Statement?

A social impact statement—also known as corporate social responsibility (CSR) statement—is a report or press release issued by a company that outlines the steps it has taken to improve the social and environmental standards of its business operations. Many companies will issue these statements once per year, releasing them alongside their annual reports to shareholders.

How Social Impact Statements Work

Social impact statements have become more popular in recent years, as investors increasingly look for companies with high environmental, social, and governance (ESG) ratings.

This trend has been driven in part by the leadership of initiatives such as the United Nations Principles for Responsible Investing (PRI), which had secured support from over 3,000 financial institutions as of January 2020—collectively responsible for over $100 trillion in assets under management (AUM).

Typically, social impact statements will include qualitative commitments such as the firm’s stated values and priorities, alongside various facts and figures concerning their progress so far. Of course, the actual results obtained can vary substantially from one firm to the next, leading some to argue that social impact statements are for the most part simply marketing exercises without serious on-the-ground commitments.

Criticisms of Social Impact Statements

In a similar vein, a common criticism of social impact statements, and the movement toward socially conscious investing more generally, is that it tends to favor large firms which are already dominant in their respective industries. After all, many ESG initiatives are likely to require additional overhead costs, at least in the medium term.

For small and medium-sized companies, many of whom are already struggling to compete with larger competitors in their industries, these additional costs might mean the difference between financial viability and failure. Large companies, on the other hand, can absorb these added costs and potentially transform the resulting marketing benefits into an even greater advantage over their smaller competitors.

Example of a Social Impact Statement

Nevertheless, it is hard to deny that some companies have made substantial progress. In its 2018 Global Social Impact Report, for example, Starbucks (SBUX) reported that it had committed over $140 million between 2016 and 2018 on the development of renewable energy sources. The goal of this ongoing project is to power 100% of the company’s 9,000 United States stores or over 75% of its global store footprint.

Similarly, the consumer products giant Procter & Gamble (PG) has a stated mission of powering all of its factories with 100% renewable energy sources, along with a slate of other ambitious environmental goals. Perhaps the most impressive of these goals is the company’s stated goal of delivering 15 billion liters of clean drinking water through its non-profit organization, Children’s Safe Drinking Water.

This program, which was sparked by an invention by a Procter & Gamble research and development (R&D) scientist which allows used laundry water to be rapidly converted into clean drinking water, initially set out to deliver 15 billion liters by 2020. However, the program met its 2020 target one year in advance, causing the company to raise its target to 25 billion liters by 2025.