Top 5 Tips for a Social Impact Risk Assessment

Conducting a thorough social impact risk assessment is crucial for businesses aiming to manage social risks within their operations and supply chains.

Addressing these risks proactively helps protect brand reputation, ensure compliance, and promote responsible practices across the board.

"Experts in the industry note that businesses often overlook essential indicators of social risk, from worker exploitation to human rights violations within supply chains. Early detection and preventive measures can avert legal issues and safeguard long-term reputation" - Bindi Jacob CIMA, Simplify Climate consultant.

Social impact risks in business

Social impact risks can span various areas, including working conditions, community engagement, and human rights concerns within the supply chain. Here are top five tips to structure an effective social impact risk assessment:

1. Conduct comprehensive stakeholder mapping

A robust risk assessment begins with identifying key stakeholders—this may include suppliers, employees, local communities, and customers. Stakeholder mapping helps to pinpoint the specific risks each group may encounter or bring to the business.

• Stakeholder mapping process: Identify, analyse, and prioritise stakeholder groups based on their influence, impact, and relevance to operations.

  
  

• Why it Matters: Understanding stakeholders enables companies to develop tailored risk management strategies that address each group’s specific needs and challenges.

  
  

2. Implement rigorous supplier due diligence

Suppliers are a critical component of your supply chain, and it is essential to assess them carefully, especially those operating in high-risk regions. Conducting due diligence can help identify potential social risks before they escalate.

• Due diligence actions: Review suppliers’ social responsibility policies, conduct regular audits, and assess their compliance with frameworks such as the Global Reporting Initiative (GRI).

• Why it matters: Targeted due diligence helps mitigate risks such as labour exploitation and poor working conditions, contributing to a more ethical supply chain.

3. Engage in community consultation

Social impact risks often extend beyond the company and into surrounding communities. Consultations with local communities where your business operates can provide valuable insights into potential risks or concerns that may otherwise go unnoticed.

• Community consultation process: Conduct regular discussions, surveys, and meetings to understand the impact of operations on the community.

• Why it matters: Community feedback allows companies to mitigate risks of local opposition and strengthens relationships that support long-term sustainability.

  
  

4. Monitor compliance with social standards

Standards like the GRI and BSI provide frameworks for tracking social risks. Monitoring compliance ensures that your operations and supply chain adhere to recognised practices for social responsibility.

• Key standards to consider:

  • GRI 414: Supplier Social Assessment, which focuses on evaluating suppliers for social risks.

  • BSI 30416: Guidelines on workplace wellbeing and support for women’s health, covering areas such as menstruation and menopause.

    
    

• Why it Matters: Adhering to social standards not only helps prevent legal issues but also encourages ethical business practices across supply chains.

  
  

5. Establish Transparent Reporting and Grievance Mechanisms

Transparent reporting and grievance mechanisms allow workers and stakeholders to report issues safely. Providing anonymous, accessible channels for reporting social concerns enhances accountability and transparency.

• Reporting mechanisms: Set up secure, anonymous reporting channels and promote their use across all operations.

  
  

• Why it matters: Creating an environment for reporting social risks prevents minor issues from escalating, supporting proactive risk management.

Integrating social impact assessments into corporate strategy

By embedding these practices, companies can manage social risks more effectively and encourage sustainable business practices.

How we can support you - Simplify Climate Diagnostic Assessment

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💡 Start taking action now! By integrating social impact considerations into your strategy, you can:

✔ Reduce risks.

✔ Control costs.

✔ Ensure accurate and reliable financial statements for your stakeholders.

📞 Is your business prepared? Visit our website to schedule a call today and take the first step towards future-proofing your financial strategy.

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Sources:

1. Global Reporting Initiative (GRI): Offers guidance on standards for assessing social risks, including GRI 414 for supplier evaluation. Available at: Global Reporting Initiative

2. British Standards Institution (BSI): Includes workplace well-being standards like BSI 30416, addressing social impacts on women’s health. Access at: British Standards Institution

3. OECD Due Diligence Guidance for Responsible Business Conduct: Provides due diligence guidelines for identifying social risks, particularly in high-risk sectors. Access at: OECD Due Diligence Guidance

4. International Labour Organization (ILO): Resources on workplace grievance mechanisms and labour rights. Available at: International Labour Organization

5. Ethical Trading Initiative (ETI): Guidance on setting up transparent and accessible grievance mechanisms, especially in supply chains. Visit: Ethical Trading Initiative