Behind ESG - Part 2: "S" - Social

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June 2023

Three letters have long been widely known in the real estate industry: ESG. This abbreviation stands for Environmental, Social and Governance. By now, they should also be familiar to private real estate owners, as they are already of great relevance to them as well. What is hidden behind this abbreviation? Translated somewhat loosely into German, it refers to environmental and social aspects as well as issues of responsible corporate governance. Or, to put it another way, ecological, economic and social sustainability. In this blog post, we will take a closer look at the "S" in ESG, which, like the "G" ("Governance"), is more often relegated to the background compared to the ecological aspects that we have already highlighted in the previous post.

Focus on social sustainability

In addition to environmental sustainability, social sustainability is also becoming increasingly important for companies. Younger people in particular, for example, are not only attaching ever greater importance to environmental friendliness, but also to companies acting responsibly in a social sense. Companies that want to continue to attract employees in the future must therefore also address this issue. For private owners, social aspects are less of a focus unless, for example, they own several condominiums that they rent out. In that case, social aspects such as proximity to facilities like schools and daycare centers as well as shopping facilities can increase the value of a property. If new apartments are built, the construction of so-called social spaces - places for people to meet, also for generations to get together - can be planned in at the same time.

Social action is increasingly important for companies

Taking social sustainability into account in one's own decisions - that's what the "S" for Social in ESG is all about. This refers to the social impact of business activities. These are often less tangible and not as easy to define as, for example, ecological impacts and measures. Nevertheless, companies, especially if they are concerned about their external impact, can no longer ignore these aspects.

When it comes to complying with social aspects, for companies this includes, for example, dealing with employees, customers and suppliers, but also with people outside the structures and activities of the company. Respect for human dignity is the top priority. Apart from possible damage to the company's reputation, national and international law should be observed along the supply chain, especially with regard to human rights and occupational safety. Efforts to keep employees in the company for as long as possible are also part of this. Not least because the constant search for new employees can incur high costs and also takes up additional time.

Responsible interaction with employees

With regard to the company's own personnel, the diversity of its own workforce also plays a role under social aspects. The decisive question is, for example, whether there is equal opportunity between men and women, whether people of different ethnic origins are not treated less favorably, and whether minorities such as people with impairments are also welcome. In other words, no one should be discriminated against anymore. Social aspects with regard to the company's own employees also include compliance with employee rights, fair payment also from all suppliers and service providers, and respect for health protection.

Compliance with these, as well as a social commitment that goes beyond them, for example to charitable causes, can be an important prerequisite for companies to work with certain business partners. More and more companies find it important to consider the social impact of a company's activities and products not only on the environment, but also on society and consumers.

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