ESG S-factors in Practice: Strategic Tool or By-Product of Business Operations?

Abstract

The role of Environmental, Social and Governance (ESG) factors has increased significantly in recent years in corporate sustainability and investor communication, reflecting companies’ extensive role in today’s society. The social dimension (“S”) remains less standardized and more difficult to define and measure compared to the other two dimensions, which have already established a more consistent role in research and corporate reporting. At the same time, companies are still increasingly expected to recognize and communicate their broad social impacts.

The purpose of this study is to examine how ESG S-factors are understood, measured and utilized within a corporate context. The study focuses on interpretations of social impact and explores whether S-factors are primarily recognized as reporting elements or by-products of business operations, and whether they have a role in supporting strategic business objectives.

This study is conducted as a qualitative single case study focusing on Investors House Oyj, a Finnish listed real estate investment company. Primary data consists of a semi-structured interview with the company’s CEO, supported by secondary material including annual and sustainability reports. The collected data is analyzed using a qualitative content analysis.

The key findings of the study suggest that ESG S-factors are highly context-dependent and difficult to standardize. Within a case company’s context, social impact is understood broadly through economic and societal contributions, including shareholder value, tax contributions, employment and stakeholder relationships. In addition, the findings indicate that S-factors have a supportive role connected to existing business operations rather than as separate strategic drivers. The findings further suggest that recognized social impacts may be utilized opportunistically when aligned with business objectives and stakeholder communications.

The study contributes to the growing ESG research by providing a practical corporate perspective, examining the multidimensional nature of ESG S-factors. The findings suggest that ESG S-factors may function not only as sustainability indicators, but also strategically relevant outcomes of business operations.