Why companies are falling short on social impact – and how to fix it
Research from the UNSW Centre for Social Impact reveals a blind spot in corporate sustainability: the ‘S’ in ESG
By 2030, global environmental, social, and governance (ESG) assets could reach $40 trillion. However, within this ESG triad, the 'S' or social dimension often receives less attention than its environmental counterpart.
With mandatory climate-related disclosures now in full swing in Australia, a new report by the UNSW Centre for Social Impact reveals a critical gap in corporate sustainability reporting: the under-reporting of social factors, or the “S” in ESG.
Despite widespread uptake of sustainability frameworks, the researchers were inspired to examine social topics due to claims that were being made that companies were more focused on climate and environment topics. If this were the case, they could be missing crucial opportunities to deliver just transitions and long-term value to society, investors, and their own business performance.
“There were concerns about ‘corporate myopia’,” explained Associate Professor Melissa Edwards, Research and Innovation Director at the Centre for Social Impact, and a lead author of the report. “Everyone’s been overly focused on the ‘E’ in ESG, and while it's important to focus on climate and environment, this should not be at the expense of important social and governance issues.”
What companies are reporting (and what they’re not)
The report, The state of ‘S’ reporting in ESG: Locating opportunities for unlocking corporate social impact, analysed the 2023 sustainability disclosures of ASX100 companies and a sample of 19 large private firms, benchmarking their reporting against the Global Reporting Initiative (GRI) social indicators.
While 97% of ASX100 companies reported on sustainability in some form, and 67% sought external assurance, the study found that only 55.4% of social disclosure topics were addressed on average. Most reporting skewed heavily towards internal workplace topics such as employee diversity, training programs, and occupational health and safety, all relatively easy to track.
What companies were not reporting, however, was even more telling. Just 11.83% disclosed incidents of non-compliance concerning product and service labelling, 22.58% reported on human rights screening in procurement, and a mere 13.98% disclosed socio-economic legal non-compliance.
“It is surprising that compliance with laws and regulations in social and economic areas remains underreported,” said Prof. Edwards. “Especially given it’s now a material consideration for all companies applying the GRI standards.”
Learn more: The 'S' in ESG and what it truly means for corporate sustainability
Why the avoidance? For one, these external, value-chain-oriented topics – often referred to as Scope 3 social factors – are more difficult to quantify and control. “It’s not that companies don’t care,” explained Prof. Edwards. “But Scope 3 issues are more difficult to measure, more likely to attract scrutiny, and may expose vulnerabilities.”
The lack of transparency also carries risk. Prof. Edwards warned of growing concerns around “purpose washing”, the social counterpart to greenwashing. “You might have a company saying they give back to their local communities, but it might only be a very small proportion of their overall profit,” she said. “Or they stand up publicly on certain social causes, but internally, staff don’t feel protected by those same standards. Eventually, that’s going to catch up with you.”
Rethinking social impact reporting in business
To help companies overcome these barriers, the report puts forward several strategies for expanding and improving social reporting.
1. Go beyond the basics with scope 1, 2, and 3 frameworks. Borrowing from the Greenhouse Gas Protocol Protocol, the researchers propose a new typology for social impact reporting that categorises activities as:
- Scope 1: Internal practices (e.g., workplace safety, DEI programs)
- Scope 2: Supplier interface (e.g., labour rights in procurement)
- Scope 3: Broader value chain (e.g., community impact, product harm)
“Where you invest is where you report,” said Prof. Edwards. “If you're keeping your workforce safe but not looking at the wellbeing of the communities you operate in, then you're missing the bigger picture. These things are interconnected.”
2. Learn from nonprofits. For organisations unsure how to begin quantifying social outcomes, Prof. Edwards suggested looking to the nonprofit sector, where such measurement is often tied to funding. “Nonprofit organisations have had to report on that component for a long time,” she explained. “They’ve got very different ways of measuring the impact of their programs on specific communities from a baseline, and then how that improves over time.”
She also spoke about Australia’s emerging Social Impact Standard, which uses wellbeing as a core, quantifiable metric. “You can apply the same models to the kinds of community contribution programs that corporations are engaged in,” she said.
3. Use technology to make it easier. The real cost of social reporting often lies in data collection, not disclosure. But that’s changing with advances in digital sustainability tools. “Technology can help companies take the burden out of reporting,” Prof. Edwards said. “You used to have to interview people to get social feedback. Now it’s much easier to get a sentiment pulse or track outcomes digitally in real time.”
For example, the UNSW Digital Sustainability Hub is exploring ways to integrate such systems into corporate ESG workflows. “We’re seeing uptake in how you report on social impact – not just through manual processes, but with real-time tracking tools,” said Prof. Edwards.
Accountability, capability, and what comes next
Despite clear solutions, several barriers remain. For example, as of January 2025, Australia now mandates climate-related financial disclosures under AASB S2. Social reporting, however, remains voluntary, though momentum is building.
“The government’s approach is ‘climate first, but not only’,” said Prof. Edwards. “We expect there will be future movement towards broadening mandated criteria beyond environmental disclosures.”
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At the same time, similar efforts to introduce a 'social taxonomy' have stalled in Europe. “There’s no global IFRS-style standard for social metrics yet,” she said. “So without consistent benchmarks, it’s harder for companies to know what good looks like.”
Another barrier is businesses capacity to act. “It’s tough,” admitted Prof. Edwards. “In large, complex, potentially multinational organisations, there are a lot of priorities. And some really technical areas of reporting you can’t compromise on – like workplace safety.”
She acknowledged that social topics can feel like ‘nice-to-haves’ in times of economic pressure – but stressed that they are often key to long-term business health. “If you’re investing in community wellbeing, you’re not just helping others – you’re improving your own workforce conditions,” she said. “It’s not an additional cost. It’s part of doing good business.”
Ultimately, Prof. Edwards believes better reporting will come from building internal capability, not just responding to regulation. “Regulatory drivers don’t always change practice,” she said. “Accountability is important, but so is capability. You can’t report what you don’t understand. Sometimes people genuinely don’t know what’s happening up and down their supply chain. But if they know it’s important to their business, they’ll start to put systems in place to measure and improve it.”
That’s why she sees the social reporting journey as not just about compliance, but culture, too. “It’s about showing that your business impacts people’s lives, and using that understanding to build something better.”
UNSW researchers plan to repeat the study at the end of 2025, after the first full year of mandatory climate disclosures. The goal? To see whether a broader ESG culture has begun to take hold.
Prof. Edwards remains cautiously optimistic: “The companies that have been heavily invested in sustainability reporting for some time will continue to report. They’ve seen improved performance. There’s opportunity cost in retracting from what works.”
But for companies playing catch-up, the message is clear: ignoring the “S” in ESG is no longer an option, not just for reputational risk, but for business resilience. “Your products are sold in a community,” concluded Prof. Edwards. “Your people live and work in communities. So it only makes sense that your impact on those communities is something you should be measuring.”