ESG is the new business must-have.
2020 was the key catalyst driving more corporate leaders to put Environmental, Social, and Governance (ESG) standards and certifications on the table. From COVID-19 and rising demands for racial equality to the constant reminders of the reality of Climate Change, executives spent 2020 responding with overt gestures – like pivoting their factories to manufacture medical devices or hand sanitizers.
Now ESG is emerging as a long-term enterprise strategy for growth and risk protection. Companies like Alibaba and Huawei are committed to socially responsible projects aligned with their core values such as rural development, or inclusive technology that connects people in remote areas.
ESG brings together leaders across every function to ultimately influence the opinions of external stakeholders like investors, customers, regulators, and communities.
However, as HR leaders know, the No. 1 stakeholder for any organization making major transformation investments in ESG must be their own people. Employees are at the core of every relationship that makes ESG a success – from connecting with suppliers to serving customers, from engaging with connections in the community to building a meaningful future for the organization.
As global consulting leaders in the people side of major business transformations, we offer 5 tips for ESG success that put employees at the centre:
1. Create an ESG “So What?” for the employees
ESG has gained a lot of traction over the last few months. With different regulations, such as SFDR, CSRD, and the green taxonomy coming out of the EU this year, the ESG landscape will continue to change. But one thing will remain constant for business leaders: the need to ensure their employees understand how it benefits customers, the brand, and communities, but also how it connects and supports the aspirations and purpose of employees at an individual level.
Leaders need to address the “So What?” for employees so that each of them can answer the question of what your ESG strategy means for them – and what they are responsible for to help make it happen. This includes helping to translate exactly what behaviors you expect of employees on a day-to-day basis. A good example here is Tencent’s latest “Value for Users, Tech for Good” because it serves to guide how employees should behave responsibly and with integrity.
2. Go beyond compliance – the ESG-centered culture change
If ESG is seen as simply requiring certification, compliance, and oversight it is more likely to fail. Ideally, leaders want employees to embrace ESG not because of the “rules” but because it is part of the daily culture – the very DNA – of the organization.
While the ‘Environmental’ and Governance’ pillars are top of mind for many organizations and progress has accelerated, the ‘Social’ pillar has been gaining much less attention — but those efforts are just as important, and need to be tied to all things people-related. As expectations of practices in ‘S’ continue to rise, companies will feel the need to shift from being reactive to proactive.
Take an important element of ‘S’ such as Diversity, Equity, and Inclusion, into consideration. Prioritizing DE&I will benefit work culture and a company’s ability to attract and retain top talent. But leaders will want to go beyond diversity as a hiring strategy, to strengthen the way the culture embraces diverse experiences and ideas – both in making and selling products and services AND in inviting employees to speak up with diverse perspectives and suggestions in areas such as sustainability and social justice.
3. Drive top-down and bottom-up behavior change
To mitigate change management failure for any transformation, top leaders and people managers should have the tools and training required to help every individual embrace new ways of thinking and working – until they become unconscious habits.
For ESG, that remains critical; but for it to truly be successful, people at all levels of the organization must be accountable for driving it forward. This includes getting front-line employees involved in generating ideas to bring ESG to life – which means they get to participate in helping to solve some of the most pressing challenges facing our society and our planet.
As rating agencies start focusing more on ‘S,’ organizations will need to start thinking about how they can measure – and then demonstrate – progress. ESG efforts don’t do much for employee satisfaction unless employees know about them, so communication and a compelling ESG narrative is critical to realizing the workforce benefits of ESG performance.
4. Make ESG meaningful in your Employer Value Proposition
In 2021 and beyond, finding and keeping the best talent is incredibly important. Customers often make brand choices based on an organization’s environmental and social policies – so do prospective and current employees. That is why the employee experience of your ESG strategy can be a boon for your talent attraction and retention goals.
In fact, multiple studies show employees prefer to work for purpose-led companies, and a majority would choose to work for a socially responsible organization even if the salary offered was lower. The key, therefore, is to clarify the ESG priorities your organization is committed to for environmental sustainability and social change, and exactly how individual employees get to play a role, be accountable, and share in the pride.
5. Leverage ESG to create resilience for the next disruptive crisis and beyond
As noted earlier, companies with strong ESG strategies in place – including people engagement across the enterprise – performed better during COVID-19 and attracted more investment. Companies are fast realizing ESG is a force that will help companies build resilience through better corporate decisions and add value in the long term.
Fully embedding ESG into purpose, culture, and ways of working does not just better prepare your people and organization for a future disruptive event such as another pandemic, financial crisis, or significant social shift, it also rallies your people into conscientiously embracing personal responsibility for high-impact areas such as climate change, racial divide, and responsible consumption.
Companies cannot afford to fail with ESG in today’s climate. They have to do change right the first time. So, by focusing on the most crucial part of any change – your people – HR leaders and executive teams can better ensure significant ESG change happens, and sticks.