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Mar 16, 2023

Corporate Social Responsibility – what used to be know as CSR (an area well and truly the domain of HRDs), has evolved.

Today, the acronym that everyone is using is ESG – or Environmental Social Governance. If CSR was about developing a strong company culture that empowers employees to do social good, ESG takes things to the next level – comprising as it does a measurable set of propositions that external partners and investors look at in their evaluation of a company. ESG illustrates a company’s identification and quantification of its risks and opportunities, as well as highlights the ethics of a company.

You only have to look at recent trends to see why ESG is creating waves.

Research by PricewaterhouseCoopers (2021), revealed that 80% of the public are more likely to buy from a company that has a strong reputation for environmental protection and governance. Not surprisingly, Gartner notes 85% of investors now consider ESG when investing. All told, global sustainability investment has increased tenfold since 2004, up to $35 trillion as of 2020.

Why HRDs can’t forget ESG is also about ‘people’

The one thing HRDs cannot forget though, is that for all its focus on demonstrating environmental, social, and governance initiatives to investors, ESG (and accompanying sustainability reports), is also about people.

Yet despite reports typically being constructed under the three pillars of people, communities, and the planet, many organizations are still ignoring the most important stakeholder of all – their own people.

Instead of being front and center, employees are frequently invisible and overlooked stakeholders. Yet, the irony is that the outcome of having an employee-centered ESG strategy, fuelled by employee recognition, is not just a more favorable rating, but greater profitability, agility in the face of challenges, and a culture of innovation.

So what do HRDs need to do?

I believe three key approaches need to be taken to ensure employees are not only valued stakeholders in your overall ESG strategy, but create impact which can have long-term business success:

Make sure the whole organization understands the importance of ESG

It’s vital, in developing any ESG strategy, that the knowledge-base of employees is built up. HRDs cannot assume that everyone has the same understanding of ESG as you do.

Sustainability may mean something entirely different from one person or organization to another. ESG goals cover a lot of ground, including employee well-being, social impact, environmental footprint, and DE&I.

So, think about which goals you’re driving toward; to whom they would directly benefit, and what would fire up your employees to care deeply.

There are often multiple departments involved in ESG efforts, which makes it all the more important to break down silos with a similar understanding of the goals.

Helping create a better future for the world may be a strong uniting factor to get people to work together, but providing multiple opportunities to affect demonstrable change in the community (big or small) along with a continued appreciation of these efforts will help sustain the efforts for the long haul.

Appreciation plays a big role here. Research shows that employees are motivated by the greater good.

When people receive recognition for their efforts that serve a genuine social purpose, it makes them more motivated at work. The side effects of achieving ESG targets are transformational in other important areas of the company as well – including higher employee engagement and an increase in retention by as much as 37%.

Have a values-driven ESG strategy that creates defining moments

The practices of lip service and greenwashing are coming under more scrutiny by a more connected-than-ever-world – one that can catch and convey the validity of corporate pledges via social media, online reviews, and government-mandated rules.

And that’s a good thing for everyone involved, from the company to the community it serves. ESG efforts, when done sincerely – and backed with values and a genuine buy-in from stakeholders – can be transformative to a company’s long-term health, the employee experience it creates, and its bottom line.

But a lot of company efforts fall flat because they are driven by short-term or half-baked intentions. Companies that make their core values known across (and beyond) the organization are in a much better position to tie them to the ESG initiatives and engage employees in a sense of purpose that benefits not just the company, but the larger community.

Employees remain inspired when companies recognize them for living up to these values.

These moments of recognition help create a positive employee experience, which gives them the confidence to innovate more defining moments for the company and the community. For instance, if your company’s core values are to “Think Beyond Yourself” or “Be Creative,” there’s an opportunity to make a clear connection they have with ESG goals.

Create a cohesive work culture with the power of recognition

The best ideas in an organization can come from anywhere. They just need an avenue to be heard. Companies often struggle with having a pulse on employee sentiment, which can lead to top-down decisions that fall flat in the eyes of employees.

In order for ESG efforts to be successful, they need buy-in from everybody within the company.

A mandate from senior leadership around ESG efforts will not reach its full potential if employees are concerned about issues like burnout or general job dissatisfaction.

To demonstrate the relationship between ESG and employee experience, the Academy of Management Proceedings found that “employees with high corporate ESG evaluation experienced less psychological stress during the COVID-19 crisis, and as a result, they put more effort into workplace innovation.” It also found that working in cohesive teams lowered employee stress.

Employees that are able to innovate in moments of uncertainty, or economic downturns, are a company’s most vital asset. And they need to be treated as such. With a ratio of 2 job openings per 1 unemployed person in the US, the talent shortage is not gone. Retention of top talent is an ongoing top priority for HR leaders. Creating an inimitable work culture makes it that much more likely that employees will prefer to stay rather than jump ship.

An everyday practice that helps create a positive work culture and drives ESG goals forward is recognition – not just on special occasions and not just from managers to employees, but from anyone, to anyone.

Eighty-three percent of HR leaders say that recognition programs positively impacted work culture. It’s a key element in keeping employees inspired and showing them the impact they have on the world around them. Reporting on the impact of recognition programs, with metrics such as turnover rate, and engagement and eNPS scores within the Social Pillar of your ESG report demonstrates your commitment to your people and the impact that has on your business.

Moving beyond “just good enough”

There’s increasing pressure on companies to do the right thing, not just for their employees, but for the community.

With the world as interconnected as it is, going the extra mile is an unwritten expectation, especially if a company wants to be seen in a good light by the general public.

The uplifting news is that in a business world filled with zero-sum games and a finite share of market that one company can gain, the potential to do good with ESG goals has no such limit. And when companies start to give employees a real role as stakeholders in these goals, they reap the benefits of increased profitability, higher retention, and an inspired, purpose-driven workforce.

Research: Why good ESG matters

Potential employees are assessing their careers and making decisions based on how leaders address a whole variety of particular issues, according to newly-published (October) research by Catalyst.

It finds nearly one in three employees (30%) are considering leaving their jobs due to their employer’s response to the US Supreme Court decision to overturn Roe v. Wade.

It also found that nearly half (46%) of employees aged 18-34 said they were concerned they won’t have the career they planned because Roe v. Wade has been overturned. Two-fifths (44%) of employees said their organizations and leaders are not doing enough to ensure abortion access. More than half (59%) of employees want more clarity and transparency about their organization’s policies on reproductive healthcare.