Companies have a wide array of social impacts, depending on their activities, such as through:
The finance of third party’s arms trade and supply to conflict-affected and high-risk nations. This hinders the life of civilians who have no other choice but to live in conflict areas, migrate, and endure human rights abuses and violations.
Tobacco companies receiving funds from the financial sector. The expansion of this industry encourages the utilization of cigarettes and tobacco-related products. Ultimately, this has a negative effect on people’s health. Tobacco products kill around 8 million people every year around the globe.
Forest-risk (palm oil, timber, pulp & paper) companies receiving funds from financial firms. To fall under this topic, it is not important to know about ecological & biodiversity impacts, rather to know how indigenous communities, vulnerable populations, minorities have been impacted by the companies’ actions. For instance, it would fall under this topic of discussion: the land-grabbing of indigenous people. Indigenous people rely on their lands and most of the time they do not have property rights over their lands.
Other subjects that might fall under this topic are:
Housing supports and construction for under-represented groups
Social enterprises’ funding that supports social/economic growth
Social projects/initiatives empowering/benefiting vulnerable/under-represented groups
Poverty alleviation funding and sponsorship
Investing in companies that engage in bad practices, such as negative labour practices.
Caution: If a firm is directly involved in social degradation and or empowerment, thus not financing rather supplying (i.e., an arms company supplying weapons to high-risk nations falling under Investments’ Social Impacts), then the note should fall under Human Rights & Community Relations (i.e., a company spending money on local public facilities in a low-income neighbourhood where their operations are located). Whenever we are dealing with a firm injecting money into a third party to have a financial return, even if the human rights’ sphere applies here as well, the note should fall under Investment’s Social Impacts.
Ideally, the introduction should try to capture:
Example: “Each year, about 63.5 Mn tonnes of palm oil is produced globally1. Millions of farmers rely upon palm oil for their livelihood1. However, palm oil plantations are notorious for workers’ abuse and violation of human rights2.”
Example: “These workers work long hours, get meager payment, and are exposed to chemicals2. Women workers are sexually abused on these plantations2.”
Example: “As of 2020, one billion small arms are in circulation around the world8.”
Note: Please note that all the above depends on data availability and retrievability.
Caution: Nuclear financing shall be tackled from a broader arms' perspective. A note exclusively on Nuclear weapons deals with future/potential impact.
If the company is financing the arms, tobacco, forest-risk groups known for human rights abuses, etc.:
The core analysis should capture the company’s impact in relation to the broader issue by providing the following information:
How much money did the company provide through funding, investment, loans, underwriting, and/or credit? (2018-onward amounts, even aggregated)
Both equity and debt financing can be considered as an investment, as long as the sum is over USD or EUR 100 million. Equity investments can be considered as long as it reaches a 5% holding.
What main company(s) received the funds? You may discuss the companies activities that received the largest sums or that have a large stake owned by the financial institution.
Who and in what form and how many were impacted by the company that received these funds?
What is the social impact of the activities that have taken place? How is the population/society affected? Are underserved groups/vulnerable communities empowered or degraded from such financial activities?
Try to be as specific as you can.
No matter what the company’s activities are, you may go back to the Logical Model if needed.
To help readers assess the impact scale and value, you should contextualise the impact. For instance:
How extensive is the bank’s funding compared to the industry it is part of? (Learn more about comparisons here.)
If evaluating the impact on people/society, how many people were affected and how?
Also, ask yourselves the following questions:
1/ The breadth of the impact
Is the impact local, national, or global?
How many people are concerned?
2/ The depth of the impact
Are the people concerned deeply affected, or does the issue just marginally impact them?
Are the changes brought by the issue profoundly changing society or the planet?
3/ The persistence of the impact
Find more about evaluating the scale of the impact in Step 5: Assess scale and value.