Every so often, a new white-hot theme emerges in the human capital management (HCM) space like artificial intelligence, machine learning or employee experience. After much debate, we start to see frameworks from analysts and thought-leader communities, as well as examples from organizations, that help us reach a place where common understandings prevail around these complex concepts. Today, the big idea emerging in organizations, particularly human resources (HR) or HCM circles, is the concept of environmental, social, and governance (ESG).
It’s too early to determine how ESG strategy will apply to business imperatives, best practice considerations and technology tools to help the cause, but theories are beginning to sprout. The biggest takeaway from this concept? ESG is here to stay and organizations that are slow to react will find it hard to remain relevant. Boom. Mic drop.
What Is ESG and Why Is It Linked to HR?
The origins of the use of ESG as a phrase can be traced back to a report by the United Nations Environment Program Initiative (UNEP) in 2005. It was initially coined GES due to a belief that governance overruled environmental and social considerations. However, the belief is now that each component holds equal weight in terms of business priorities. To sum it up, ESG represents the commitment to environmental responsibility, commitment to people and social issues and commitment to responsible corporate governance and accountability.
Over the last few years, ESG has become a top-tier boardroom topic due to the integral role it plays in ensuring business sustainability. The way in which it intersects with HR and HCM initiatives and strategic priorities like recruiting and retaining top talent, are of huge interest among key stakeholders and investors. Securing the engagement and commitment of employees will be linked to it for the foreseeable future. Leaders in this space see adopting ESG strategy as a lens for decision-making through which organizations can build trust, reduce risk and create long-term value in ways that benefit all stakeholders.
Why Having an ESG Strategy Is Beneficial
The goal of ESG is to make environmental, social and governance systems sustainable. This relates to everything from health and welfare, to values, to behavior and conduct (of businesses) and even the future of the planet. It’s hard to overstate the importance of ESG in this regard. In today’s job market, it’s safe to assume that candidates who are deciding which employers to engage with (and potentially spend years of their life working for), will want some sort of sustainability lens in their search process.
Circling back to employee experience, many employers are leading with people-focused values and the virtues and benefits of an employee-centered corporate culture. Offering tangible, auditable and relatable programs that translate into better workforce-related outcomes are a key way to retain top talent and “keep the keepers.” These programs often range from a noticeably improved ability to recruit and retain top talent, to having employees function as if they are true owners of the business, arguably the pinnacle of employee engagement and commitment. This is exactly why organizations should prioritize ESG and adopt its principles into strategic HR agendas and related priorities.
The 3 Factors of ESG Strategy Explained
- Environmental: Renewable energy and related business practices extend to waste management as well as employee, vendor and partner awareness programs. These programs can prove tangible, represented in codes of conduct for different stakeholder and constituent groups, as an example.
Social: The values and culture an organization wants to be identified with or have as hallmarks of their employer brand. It spans areas such as ensuring a minimally acceptable level of health and safety for all and whatever else it takes for a very heterogeneous society to live and work together in relative peace (think DEI efforts).
- Governance: Beyond legal and regulatory concerns, governance encompasses core elements of the ESG pillar like business ethics and organizational accountabilities. It is an attempt to make ethical business practices tangible in the eyes of all who have any relationship with the business and provide relative examples of company ethics.
ESG in a Nutshell
To fully enable and strengthen the foundation of an organization’s ESG strategy, we need to leverage tools designed for surveying workforce attitudes and perceptions or even use AI-powered sentiment analysis for the same purpose (think speed of analyzing results and patterns). HCM technology is at the heart of delivering a great employee experience. In general, technology plays a pivotal role in the ability to demonstrate fairness and equity in terms of compensation, learning and career growth opportunities. It also helps organizations take steps to correct anomalies and mistakes. To put it plainly, it is technology that allows the aspirational culture, values and behaviors to scale within the organization and beyond. Embracing ESG is a leading driver of that success.
If you’re looking for assistance with improving corporate culture within your organization, or simply can’t find the time to focus on employee engagement due to tedious administrative tasks, Quanta can help. Contact us or book a meeting today and get a free personalized demo of our HCM platform to tie technology and ESG strategy into the way you do business.