Last year in Davos, Shamina Singh, founder and president of the Mastercard Center for Inclusive Growth, shared a helpful framework with other business leaders for thinking about the ‘S’ in ESG, an acronym for environmental, social, and governance.

As they measure their environmental impact, many organizations track Scope One, Scope Two, and Scope Three emissions—this is a way of accounting for both the direct and indirect carbon produced, from the business itself, its employees, suppliers, and its customers.

Could—and should—you do the same thing for the social impact of a business? That was an idea that Singh proposed last year, and the top business leaders she was addressing said they thought it was worth building on.

Ahead of the World Economic Forum’s next annual meeting in Davos this week, we caught up with Singh to hear more. Here is a transcript of our conversation, edited for clarity:

What's the connection between ESG efforts and workplace challenges that organizations are dealing with?

It's a little bit about challenges, but it's mostly about opportunities. The social pillar of ESG is really expansive and varied, which is part of what makes standardized measurement difficult and important. Generally speaking, that 'S' category covers, right now at least, how a company is engaging with its employees and communities and society at large. But the thing that gets measured—at least in the context of ESG right now—is a very limited set of characteristics of a company that revolves around the worker component. So where we are in the conversation is the starting point, hopefully not the ending point. But the starting point for the S in ESG is around the workplace and the things that are uniform across companies that relate to work and workers.

What you're proposing is a more expansive assessment of the 'S' in ESG and measuring of it. Can you explain that?

Yes—so the 'S' doesn't stop there—certainly not for us, but I don't think for many companies who are thinking about how to recruit and retain quality talent and compete for quality talent in this competitive environment. Also, for companies who are in a place to bring a positive difference in the world. For us—and for companies like that—the conversation is a more expansive view of the 'S.' How are we using our assets as a company for impact? That's the shortest way to think about it. As Mastercard, we look at our assets like our network, our people, philanthropic capital, R&D, products, and technology. Thinking about how you use those things in service of people and the planet, one way of doing it is through the 'E.' And we've constructed that framework and followed that framework. What we're doing is expanding the 'S' to capture all of the work that we're doing.

For the environmental side of things, there's this concept of Scope One, Scope Two, and Scope Three impact. Scope One is directly controlled, and then Two and Three are less directly controlled, but they're influenced by the company. What could a similar framework for the 'S' side of things look like?

For us at least, we start with where we are. So right now, Scope One would look like what many of us measure with S, which is things like representation of different ethnic minorities across the organization, gender parity and human rights. Those are the types of things that are currently measured as part of the 'S.' What we would expand that to is, if you added a Scope Two, it might look like your investments in 'S.' It could be your philanthropic investments, it could be your research investments, it could be how you invest in products and services that also have an impact on society. So social impact for us, we have been as looking at financial inclusion for upwards of 10 years and it really has become part and parcel of our business

Our part of Scope Two might be the things that we're doing as a business that impact and expand financial inclusion and inclusive growth not only on the philanthropic side, but also the business side. And then Scope Three would then be, at least in our case, what's the impact of those investments? So if measuring what matters is the thing you're trying to figure out, then getting to the place that says what is the impact of that measurement would be the Scope Three of that work. For us, that might mean how many people have benefited from being financially included or what has been the benefit of being financially included, or what has been the impact of our work around constructing data science principles or AI responsibility principles, and what has been the impact of those investments and that perspective on our products and services. So Scope One is what you can control, Scope Two would be your investments both from a philanthropic perspective and from a business perspective. And then Scope Three might be the impact of those investments on humanity or on the world.

You talked about positive measurements, but part of the 'E' measurement is the emissions, which is the negative impact on the world. Is there a positive and a negative side of the ledger for 'S' as well?

I don't know that we have necessarily come up with a framework that says this is what it exactly would look like because unlike carbon emissions, which says, 'Okay, if people generally agree on 1.5 degrees and this is how much carbon you have to reduce in order to maintain the temperature.' Measuring an ultimate impact for social impact is going to be a harder thing to do. What we are proposing is not necessarily to come up with the outcome, but to incentivize the development of a process where companies are capturing their investments and their impact without necessarily pre-judging what the right answer would be.

The whole point of this is to engender a conversation. Other people might have ideas on what it might be for their organizations or negatives you are trying to reduce. You could reduce racism or discrimination in your Scope One and you could talk about the investments you're doing around that. For us, we have an initiative we call In Solidarity that we have been doing in the United States around closing the racial equity gap. So that would be an area for us to potentially look at and for others to potentially look at. But the larger point is making sure that we are constantly incentivizing a race to the top and ensuring that for companies who are purpose driven, who are in this space, that they have an ability to capture the good work that they are doing.

For the 'E' in ESG, companies are talking about net zero on Scope One and Scope Two and Scope Three, and they have plans and commitments around it. Is the idea that you could do something similar with this?

Exactly. So for us, it might be our financial inclusion commitment. We made a commitment pre-Covid to bring 500 million people into the financial system. At the height of Covid, we doubled down and said we want to bring a billion people into the digital economy. We have work that we're doing to capture that. We also have a set of metrics around gender that we're looking at. We also have a metric around racial equity that we're looking at. Those, combined with our net zero commitment and the other work we're doing in our environmental initiatives, help us actually create a framework that allows us to link this to compensation for everybody across the company. We started out with the executive vice presidents in year one, and then in the next year expanded to include everybody at the company. We have worked pretty hard to try to get some standardized metrics that we could actually talk about and measure and link to compensation. But that might look different for other companies. Other companies may say they have other kinds of commitments around their social impact.

In terms of what other organizations could be doing, one thing is to measure and track the social impact and another thing is potentially to tie compensation to specific goals. Are there other specific practical dimensions?

No, I think that's it. I don't think what we're describing is the silver bullet solution, but it's a way of framing something up so that we have a common language around how we're talking about the 'E' and the 'S.' I think about the Russian invasion of Ukraine and humanitarian aid—companies do so much in this space in terms of bringing their capital, bringing their expertise, or in our case, how do we keep commerce moving so that things can keep going even during a war situation. That requires really creative thinking. When we're thinking about Covid and about the pharmaceutical companies and the foundations and the race to a vaccine, a lot of companies were on the front lines of trying to figure this out.

Whether it's vaccines or Ukraine or tsunamis in the E conversation, none of that gets captured. So if you're trying to measure what matters, I just worry that if these types of things aren't being captured or measured., you run the risk of sidelining really important things that matter to all of us at really important times, really important moments. If you have a framework that looks at your assets as a company and can frame out what your Scope One might be, the things that you control, your critical core that you have to get done, the places where you invest from a commercial side and a philanthropic side, and then measuring the impact of those investments—it mainstreams that way of thinking into the business strategy conversation in a way that I don't think we do right now. Even while we are capturing all of these things in our sustainability reports and our corporate responsibility papers and our ratings and rankings, it gives us a way to talk about it and think about it. My one piece of advice would be for companies and other purpose driven leaders to think about their assets and how they create value not only for their shareholders, but for society and for their employees. And think about how those assets might translate into impact. And even as they align with business goals, how do they also align with environmental sustainability and social impact outcomes as well.

Not everyone agrees that these things matter. There's criticism of ESG efforts as 'woke capitalism.' For people who have to defend focusing on these areas, how would you respond to that critique?

Well, for us at least, our business depends on it. It is very much aligned authentically with how Mastercard creates value in the world. Those things are not mutually exclusive. When you think about financial inclusion or you think about a payments network or buying and exchanging things of value where trust is at the core, that's the whole point of what we do. So I don't know for us that these are mutually exclusive things. We stay authentic to what our brand is, what our assets are, what our purpose is. In the end, that benefits all of our shareholders to stakeholders. But we're not alone in that. And if companies who are staying true to their assets, through to their core competencies, and capabilities, and who want to compete for talent, this is a good way to figure it out.

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