5 Steps for a company to invest in social impact

Social impact investment is an increasingly relevant and decisive practice for companies that want to reinforce a responsible image. According to a GIIN report, social impact investments totaled US$ 1.1 trillion around the world in 2022. Still, Alfi, an association of the Luxembourg funds industry, estimates that the demand for investments in assets with environmental, social and governance (ESG, for its acronym in English) among European investors should grow by 15.9 trillion euros $ 21 trillion 2026.

By the end of 2023, European institutional investors had already allocated a total of 3.7 trillion euros in ESG assets, and the forecast is that this amount will reach 19.6 trillion euros by 2026. The universe of startups aimed at entrepreneurs who develop businesses with social impact has achieved record growth in the investment market in the last year. According to data from Halcyon, American incubator, investments have surpassed the US$ 1 trillion mark, driven by a wide range of investors, such as venture capital funds, angels and foundations.

According to Karla Suarez, executive director of COletivA DELAS, Specialist in DEI, creative economy and fundraising, the benefits of private social investment go beyond the positive impact on the causes supported, also contributing to the construction of a positive corporate image, employee engagement and proximity to stakeholders. The problem is that many of these organizations do not know where to start. “Companies have a key role in social and environmental transformation. Investment in social impact is not only an ethical choice, but also a business strategy that adds value to the brand, strengthens the relationship with stakeholders and drives innovation and sustainability.

For organizations looking to initiate or enhance social responsibility initiatives, Karla Suarez lists five essential steps:

1. Creation of Private Social Investment (ISP) policies

“The first step to develop a social impact strategy is the creation of a private social investment policy.This, should establish clear guidelines that define the priority areas of action, such as education, environment or social inclusion, always aligned with the values and purpose of the company”, recalls Suarez. In addition, the expert reinforces that it is essential to determine a dedicated budget, covering both financial and human and material resources, to sustain the initiatives over time. It is also important to define clear criteria for the selection of projects and partners, ensuring that these choices are in line with the mission of the company, ensuring consistency and effectiveness in the implementation of the programs.

2. Development of Corporate Volunteering Program

A corporate volunteering project is essential to engage employees in the social causes supported by the company. “This program should offer several opportunities for employees to actively participate, from one-off actions to continuous volunteering activities”, says the expert.To foster this engagement, it is recommended that the company offer training and incentives, such as specific training and recognition for volunteer work, which may come in the form of hours off dedicated to volunteering or internal awards. 

3. Mobilization of the internal public for social causes

To ensure the involvement of all employees in social impact initiatives, it is important to mobilize the internal public through Campaigns focused on social impact, have the objective of raising awareness of employees about the importance of causes and encouraging them to actively participate in company actions. Creating spaces for dialogue and participation, such as forums or discussion groups, also allows employees to suggest projects more directly. This strengthens the sense of belonging and promotes a culture of social responsibility within the company, increasing engagement and adherence to initiatives.

4. Sponsorship of socio-environmental impact projects

Sponsoring projects with social and environmental impact is an effective way for the company to strengthen social performance. For this, it is crucial to identify projects that are aligned with the areas of interest of the company and that have the potential to generate a significant positive impact. Establishing strategic partnerships with organizations that already work in these areas can enhance the results. It is important to implement mechanisms for evaluating and monitoring sponsored projects, to ensure that the objectives are achieved and that the company's investments are generating the desired impact.

5. Communication

Transparency in the communication of the results of social actions is fundamental to strengthen the credibility of the company and amplify the scope of the initiatives. “It is recommended that companies disclose annual reports, newsletters or even use online platforms to share the results obtained”, or finalizes Suarez.