When most people think about ESG, they often focus on environmental issues like carbon emissions and climate risk. But the "S" in ESG, the social pillar, is just as important. It reflects how a company interacts with people, communities, and society at large. And in today’s interconnected world, the ability to manage social impact is becoming a core measure of business success.

This article explores what social criteria in ESG really means, why it matters, how it is measured, and how companies are turning the social pillar into a strategic advantage.

What are social criteria in ESG?

Social criteria refer to the ways a business manages relationships with employees, suppliers, customers, and communities. It includes both internal practices, such as fair labor conditions and employee well-being and external impacts, such as community engagement and human rights in supply chains.

The social pillar answers the question: How does this company treat people?

Where the environmental pillar focuses on the planet and the governance pillar focuses on leadership and accountability, the social pillar is all about people. That includes the workforce, the wider society, and often those indirectly impacted through business operations.

What are the key areas covered by the social pillar of ESG?

Social performance is a broad area, but here are some of the most common and material factors considered under the social pillar:

Labor practices and employee well-being

This includes how companies treat their workers, including:

Fair wages and benefits
Safe and healthy working conditions
Diversity, equity, and inclusion (DEI)
Employee engagement and satisfaction
Access to training and development

A strong focus on workforce well-being leads to better retention, productivity, and brand reputation.

Human rights and ethical sourcing

Many businesses source products or services through complex global supply chains. ESG social criteria evaluate:

Whether suppliers uphold human rights
Risks of child labor or forced labor
Fair working hours and labor protections
Ethical procurement practices

Failing to manage these risks can lead to reputational damage and regulatory penalties.

Customer responsibility

Social criteria also include how companies treat customers. This covers:

Product safety and quality
Data privacy and digital ethics
Transparent marketing and labeling
Accessibility and inclusivity in product design

Building trust with customers is a key part of long-term brand value.

Community engagement and impact

How a company contributes to the communities where it operates is a key ESG factor. This may involve:

Supporting local economies and small businesses
Investing in infrastructure or public services
Collaborating with community leaders
Engaging in meaningful philanthropy or volunteerism

Strong community relations help build social license to operate.

Why is the social pillar important in ESG?

The social pillar plays a critical role in long-term business resilience. Here are a few reasons why it matters more than ever:

Social risks are business risks
Labor strikes, supply chain scandals, or public backlash can have immediate financial consequences. Managing social performance is part of managing risk.
Investors are paying attention
ESG-focused investors increasingly assess social metrics as part of their investment decisions. This includes workforce diversity, supplier audits, and employee turnover rates.
Employees want purpose and equity
Today’s workforce expects more than a paycheck. Social responsibility, inclusive cultures, and clear values are key to attracting and retaining talent.
Consumers support values-driven brands
Studies show that customers are more loyal to companies that support human rights, fairness, and social equity.
Regulators are expanding social reporting
Standards such as the Global Reporting Initiative (GRI), ISSB, and EU CSRD are all elevating expectations around social data and transparency.

How is social performance measured in ESG?

Unlike carbon emissions, which can be measured in tonnes, social performance is often more qualitative. However, ESG frameworks offer clear indicators and benchmarks to track and disclose progress.

Common metrics include:

Gender and ethnic diversity across leadership and workforce
Employee turnover and satisfaction rates
Health and safety incident rates
Human rights due diligence in supply chains
Percentage of suppliers audited for ethical standards
Community investment or volunteer hours

Companies often report these metrics through standards such as GRI, SASB, and now through the International Sustainability Standards Board (ISSB) frameworks.

What are some examples of strong ESG social practices?

Here are real-world examples of how companies are bringing the ESG social pillar to life:

A technology firm implements pay equity audits and publishes gender and ethnicity breakdowns across all levels of the business
A consumer goods brand partners with local nonprofits to support education and clean water access in manufacturing communities
A retail company trains all suppliers in labor rights and conducts third-party audits to ensure fair working conditions
A financial institution provides mental health benefits, flexible work arrangements, and career coaching to support employee well-being
A pharmaceutical company works with governments to expand access to essential medicines in underserved regions

These examples show that the social pillar is not about charity. It is about building strong, sustainable systems that serve people and business together.

What challenges do companies face with the social pillar?

Measuring and improving social impact is not always straightforward. Common challenges include:

Inconsistent data across countries and suppliers
Difficulty quantifying qualitative issues like culture or community trust
Balancing short-term cost with long-term social value
Managing social risks in complex supply chains

Despite these challenges, more companies are investing in social governance teams, tools, and partnerships to improve performance and disclosure.

How does the social pillar connect with environmental and governance topics?

ESG is most powerful when its three pillars work together. For example:

Climate resilience efforts often rely on protecting vulnerable communities
Ethical governance supports anti-discrimination, fair wages, and labor protections
Social justice is key to a just transition to a low-carbon economy

A company cannot be truly sustainable if it ignores the people who power its products, supply chains, and communities. That is why the social pillar is central to ESG strategy.

Final thoughts on the social criteria in ESG

The social pillar of ESG is about much more than compliance or reputation management. It is about creating value through people, your employees, your customers, your partners, and your communities.

In a world where trust, transparency, and equity are becoming business essentials, strong social performance is no longer optional. It is a signal of leadership, resilience, and long-term vision.

Companies that prioritize people will lead the next era of sustainable growth.

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