What’s Next? is back! Our team is so excited to roll out season two of our online roundtable where we talk to corporate and nonprofit changemakers who are partnering in innovative ways to fuel social good. This week, Josh and I are back with a season intro.

As we mention in the video, it has been nearly a year since the publication of the Profit & Purpose report and the amount of changes that have happened in the social good space this year are staggering! We believe that there is a major paradigm shift happening and that the pace of these changes are going to continue at a rapid pace (Josh will talk about this paradigm shift in next week’s blog, so stay tuned!).

In the meantime, we’re talking about four trends that we’re seeing in the social good sector. For Next Stage, the last eleven months have brought their own kind of paradigm shift. In addition to the incredible work that we continue to do with nonprofits, we’ve begun working with private sector businesses to build out their own social impact work. The trends we’re seeing have major implications for private sector businesses and nonprofits alike.

The Rise of ESG

When we published Profit & Purpose in May 2021, we used the word ESG exactly five times – and all five were in the Sustainability section. One year later we’re seeing ‘ESG’ everywhere, across a range of social good contexts. We’ve talked about the rise of ESG on the blog before – the acronym stands for Environmental, Social, Governance. ESG typically has a large scope that includes the environmental impact of the company’s operations, social impacts both charitable and through the lens of its day-to-day activities and governance, including internal controls, representative leadership and shareholder rights.

What to Watch: ESG isn’t a construct that’s going away anytime soon. In fact, we anticipate even more conversation about company efforts and how their social strategies are fitting in with the larger ESG picture.

A Focus on the ‘S’

Now that ESG is a construct that companies are embracing, the ‘S’ is taking its place in a larger narrative. Environmental and governance – the ‘E’ and ‘G’ parts of ESG have been on private sector minds for a while now and in many cases have defined measurements and strategies. But Social – the ‘S’ in ESG – is forcing companies to think about impact in ways they haven’t before.

Next Stage has recently begun working with several private sector clients to establish a Theory of Change, a way of thinking previously embraced primarily by nonprofits. This method helps organizations map out the challenges they want to help address, the resources they can provide and the expected impact they hope to achieve. It has been an ‘aha’ moment for our own team. Clarifying this theory of change has helped more clearly map a company’s overall strategy and align it with the business’ own values and goals. It also helps employees understand the impact that company hopes to make and how to engage with those efforts.

What to Watch: Over the next year we anticipate this trend to only increase. Expect to hear a lot more businesses defining their social strategy and aligning those efforts with their brand.

The Shift for CSR Leaders

After another year of rapid social change, many CSR leaders find themselves in a strange place. Companies are placing more importance on social good than ever before. In fact, companies like Chipotle and Salesforce are even tying portions of their executive compensation to ESG goals. A lot is expected of CSR leaders today and many find themselves at new tables within the company. These roles are being pulled into conversations not only about impact, but about overall ESG efforts, DEI and more.

But while many CSR leaders face increased responsibilities, the investment into these goals often lags. They are part of more conversations, but in most cases have not been given additional decision-making power and are limited in their ability to be an agent of change within the company.

What to Watch: We expect to see this change over the coming years, as the ‘S’ continues to increase in importance. Look for larger teams, repositioning of those teams within companies and even ‘Chief Impact Officers’ to start emerging as companies build more robust social strategies.

An Eye on Measurement

With the increased focus on the Social part of ESG comes an increased focus on how to measure impact. Environmental and governance have metrics that are already clearly defined. While they aren’t necessarily easy to measure, companies largely use the same set of metrics, such as carbon footprint or emissions. When it comes to ‘S,’ these metrics are almost entirely undefined – and different for every company.

Because every company focuses on a different set of impact issues, impact measurement can look drastically different from company to company. And since social efforts can also impact companies internally, there are both internal and external metrics to consider. For example – if a company is focused on education issues, they may choose to track how their efforts are helping kids gain access to college. Internally, they may want to track volunteer hours or the impact of those volunteer hours on employee engagement. In every case, these metrics are harder to define because they aren’t clear cut in every organization and they require significant collaboration with nonprofit organizations.

What to Watch: We expect to hear a lot more about this over the coming year, as companies further define their social impact strategies. Savvy companies will partner even more closely with their funded organizations and may include the support of academic institutions to create methodology that better defines the effectiveness of their social investments.

Check out the episode, where we discuss these trends in more detail – and let us know what you expect to see this year in ESG!