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The rise of social risk: from profit to prosperity

Companies in extractive industries disrupt the surrounding social environment as they engage in their business activities. It is imperative that organizations have a detailed understanding of this disruption, and how negative social impact can be mitigated.

The prevalence of strikes and protest action among communities is symptomatic of the disintegration of social trust. Sustainability stands on three, interdependent pillars: environmental, economic, and social. Social sustainability and its associated risks reflect a burgeoning awareness of the impact that industry has on the communities in which it operates.

Managing social sustainability is not a nice-to-have. Social instability as a threat to both political order and continued economic growth.

Social management is crucial to an organization’s long-term sustainability, explains Rigby Stott, IsoMetrix Director: North America. “The world we live in is currently facing a number of social challenges: social trust is at an all-time low, inequality is endemic and we struggle to distribute limited resources fairly among an exploding global population.”

The current global economic crisis and the ever-growing gap between the haves and the have-nots has created an atmosphere of public discontent. “People are demanding more collaborative, inclusive and sustainable ways of creating value,” explains Rigby. At the same time, the Internet and social media have facilitated mass public scrutiny and sounded the call for greater accountability by business, institutions and governments. It has become much easier to expose and share information on controversial, corrupt or unethical behaviour.

Radical transparency

“Empowered by this radical transparency, consumers increasingly expect social responsibility to be a core part of a company’s mission,” he says. “There is a growing demand for shared community prosperity, as opposed to simple corporate profit.”

The focus has shifted; from shareholder to stakeholder. A stakeholder economy includes the interests of everyone – workers, consumers, suppliers, future generations and the environment – in all economic calculations and decision making.

Purposeful companies, those that value more than just profit and employ the principle of a Triple Bottom-line – People, Planet, Profit – find it easier to recruit and retain staff, and, in the medium and long term, actually outperform businesses whose stated purpose is to maximize shareholder value.

“We stand at a scary social crossroads, but this risk also presents us with an enormous amount of opportunity. Especially for those who are passionate about enabling this transformation from profit to prosperity,” says Rigby.

Traditionally, social sustainability and stakeholder engagement have been managed using a variety of standalone or spreadsheet-based systems. Such environments do not provide visibility into an organisation’s social sustainability profiles, compromising efficiency and increasing the risk of community dissatisfaction and litigation. Growing social risk requires and effective, flexible and integrated management solutions, as organizations move from being reactive to social incidents to adopting a proactive, risk-based approach.