This is an op-ed by Jim Kelly, founder and general counsel of Georgia GOAL and Georgia HEART. He is one of two US experts serving on the European Commission for Democracy through Law.

As C-level executives, boards, investors, regulators and the public focus on the environmental, social and governance (ESG) performance of businesses, companies are appreciating the enhanced K-12 educational options and rural health care produced by the Georgia Education Expense Tax credit program and the Georgia Rural Hospital Organization tax credit program.

By investing in these Georgia income tax credit programs, businesses have the opportunity to directly advance the “S,” or social aspect of their ESG undertakings at the community and individual level.

Corporate citizenship has evolved from a philanthropic-centered corporate social responsibility (CSR) model to the ESG model, which creates shared and, theoretically, increased, value by engaging a broader range of internal and external stakeholders into all aspects of the organization.

The three ESG factors are used to measure the sustainability and societal impact of an investment in a company or business. In 2019, the Global Reporting Initiative (GRI) revealed that 93% of the world’s largest companies by revenue report on their ESG performance. Despite the progressive increase in emphasis on ESG in recent years, supporters and critics of the movement have struggled to define what role the “S” should play in company frameworks and investor decisions. The social element of ESG is the most difficult of the three components to assess, as social issues are less tangible and provide less data to evidence how addressing them may impact a company’s performance.

Yet, company stakeholders and society-at-large are increasingly emphasizing the “S” factor. A 2019 Agility PR Solutions survey found that 92% of consumers wanted companies to fully incorporate socially responsible practices – such as protecting the elderly, eradicating diseases and increasing access to quality education – into their business identity. Undoubtedly, since the outbreak of the COVID-19 pandemic, this significant public support for integrating social considerations into their businesses has only increased.

Historically, though, when it comes to the ‘S’ factor, companies have focused on internal social practices, emphasizing non-discrimination, gender equity, family leave and childcare, workplace safety, and corporate culture. However, the devastating impact of the COVID-19 pandemic on society is causing businesses to examine their external social role, particularly in the hard struck areas of K-12 education and access to health care.

This growing corporate concern about external social conditions increases the need for businesses to identify, and invest in, partnerships that can yield immediate, as well as systemic, results. One national example includes the Collaboration Vector’s Transformative Community Involvement Framework, which helps support companies in developing their social pillar by engaging employee leaders at the grassroots level with their counterparts in non-profit organizations in building long-term partnerships designed to solve social problems. Such collaborative initiatives enable businesses to advance the “S” factor at the community level with the involvement of their employees, while avoiding the red-tape and inefficiencies associated with many government programs.

But, following the subsidiarity principle, companies can go beyond community collaborations to more directly meet the urgent needs of individuals during a crisis. In the field of K-12 education, public school administrators, teachers, parents and students are grappling with the pandemic-related challenges of delivering a quality education, including confusing and potentially harmful school closings, mask mandates and social distancing practices and online learning environments .

Using funds raised through the Georgia Education Expense tax credit, the Georgia GOAL Scholarship Program, the state’s largest K-12 student scholarship organization, provides scholarships to low and middle-income students seeking alternatives to local public schools their parents feel may not be adequately addressing learning needs during the pandemic. Perhaps, sensing the need to directly help families during an epic learning crisis, in 2021, businesses contributed to Georgia GOAL at a higher rate than in 2020. Together, business and individual taxpayers helped reach the $100 million annual cap on available credits.

Meanwhile, the COVID-19 pandemic has severely impacted access to health care in rural communities, with enormous pressure being placed on already over-burdened rural hospitals. Businesses in Georgia are answering the call to help address this health crisis through their contributions to the Georgia HEART Hospital Program, which, on behalf of 54 eligible rural hospitals, helps administer and market the Georgia Rural Hospital tax credit. In 2021, businesses contributed to rural hospitals at a higher rate than in 2020, helping Georgia HEART meet the $60 million annual cap on available rural hospital tax credits in mid-September.

Jim Kelly is the Founder and General Counsel of Georgia GOAL and Georgia HEART.

During this year’s legislative session, Georgia lawmakers will consider raising the annual cap on Georgia Education Expense tax credits from $100 million to up to $200 million and the cap on Georgia Rural Hospital tax credits from $60 million to at least $100 million. Due to favorable changes in Georgia and federal tax law, when contributing to these two programs, most businesses are now able to take both a Georgia income tax credit and federal business expense deduction.

In addition to their social impacts, unlike some other income tax credit programs, the Georgia Education Expense and Georgia Rural Hospital programs have a clear financial upside, with the former annually yielding millions in fiscal and economic benefits, and the latter saving rural communities from the economic and business development losses associated with the closing of their rural hospitals.

As companies increasingly emphasize the “S” factor in their ESG strategies, they can look to Georgia’s two innovative income tax credit programs as examples of the type of direct action that, during and after the pandemic, businesses can take to alleviate long-term, systemic inefficiencies and inequities that exist in the K-12 education and rural health care sectors.