How can the human security approach help in better measurement of social impacts of companies? Most companies have little or no knowledge about the impact of their activities outside the corporate performance targets. While companies increasingly engage in ESG (Environmental Social and Governance) reporting, this is usually based on high level indicators that do not necessarily correspond to bottom-up data from the local communities in which the company operates.
In order to help address this challenge, LSE IDEAS has been looking at the use of Human Security as a holistic approach to address multidimensional risks for businesses operating in fragile and conflict-affected settings, where fragility, human rights and sustainable development are brought together, offering a basis for identifying thresholds of people’s resilience. During phase one of the Human Security & Business initiative, our researchers looked at how to actually define and measure the social impacts of companies by using the concepts of Human Security and Positive Peace. The idea is to look at ways in which we could improve ESG standards and frameworks so that they become more focused on local realities, so that an understanding of the risks companies are facing is based on the reality of the local context, and that not just the risks to the companies themselves are considered but also the risks to communities as well, something also referred to as the double or dual materiality perspective.
From a measurement angle, Human Security can bring interrelated material ESG issues under one umbrella with indicators covering sustainable development, security, and human rights dimensions. In rethinking how to measure social impact, the concept of double materiality, meaning that companies have to report about how sustainability issues affect their business and about their own impact on people and the environment, and linking different dimensions into a holistic framework, is key to developing a new approach.
In Phase 2 of the Human Security & Business initiative, an improved ESG and SDG impact measurement method will be developed and tested, using the concepts of human security and positive peace. As a first step, a mapping will be carried out of existing ESG and SDG standards and guidelines, including an analysis of the extent of how human security principles and processes are included, and the identification of specific fragility, conflict and peacebuilding practices. The value creation criteria should reflect the goals and interests of companies and investors that use the standards and guidelines as part of their engagement on ESG risks and SDG impacts. This step will be followed by the development of specific, HS informed operational impact management and measurement methods that could strengthen the engagement on existing frameworks. Part of these methods will then be tested in one or more field applications, while at the same time, as part of the policy influencing component, entry points will be identified to introduce the new method and approach into criteria in policy-oriented ESG and SDG measurement frameworks. The seven steps of setting up the HSBP framework will be used as an example to showcase how a human security approach can help establish the new criteria that enhance the successful engagement on ESG risks and SDG impact management standards.
You can read the policy brief here.