Today’s environmentally and socially aware world is forcing firms worldwide to publish their standards and methods for achieving sustainability.
According to Gallup, 48% of investors have at least some interest in sustainable investing, though only ten percent do it. However, many shareholders are activists with a very loud voice.
Moreover, customers prefer to do business with sustainable firms.
Nielsen recently reported that corporations with “legitimate sustainability claims” do better than their competitors. In addition, we have evidence that job applicants prefer sustainable companies.
What is ESG, and Why Does it Matter to HR?
ESG is the globally recognized shorthand for environmental, social, and governance concerns.
With environmental and social concerns at an all-time high, we hold corporations accountable for sustainable governance,
- Environmental performance measures are about the impact on climate change, carbon emissions, pollution levels, and the natural world.
- Social measures social responsibility toward workers and communities, including diversity and inclusion, modern slavery, mental health, and employee rights.
- Governance gauges how responsibly the board runs the business.
Investors, employees, and communities want to see an organization’s ESG report card.
They want firms to think about how their actions affect the communities that support them.
In fact, how they deal with social issues has put executives on the hot seat, causing them to look at their communication and action plans. The way they run the business gets a lot of attention.
For example, the current shortage of cobalt for EV batteries is under scrutiny. Most of the supply comes from the Democratic Republic of the Congo, where children seven years old mine cobalt with their hands. If you’re using EVs, where does the cobalt come from?
How Can Human Resources Help?
Because HR has a critical role in the programs and how the company measures them, it should be a member of the ESG executive team. For example, diversity, equity, inclusion, mental health, and employee rights are topics HR deals with every day.
Global warming, climate change, emissions, and pollution have changed how we do business. As a result, how an organization affects the natural world demands changes in how they operate. For example, to avoid environmental consequences and raise sustainability, corporations use electric vehicles, rely on renewable energy sources, reduce paper usage, and recycle.
This changing reality demands a shift to new competencies and skills. Pay, bonuses and perks should match this need, and Human Resources will have to advise the organization.
Making the change will take a cultural shift affecting every HR function.
Diversity and Inclusion
You can’t just intend to be a diverse and inclusive workplace. You need policies, procedures, and controls that put action behind your goals. Look at the data regularly to ensure your plan is on track and act quickly when issues arise and keep the organization informed on its progress.
Equity
HR must help the organization create a strategic approach to equity, teach the organization what it means, and report on equity efforts and their impact.
Wellbeing
Mental health has been a focus during the pandemic, but firms find it challenging to create a climate where people can feel comfortable discussing their challenges.
If you are not already doing so, we recommend a “whole organization” approach, where change efforts address every person and leaders model the right behaviors.
Employee Feedback
Human Resources teams have a role in achieving, measuring, and reporting on ESG goals.
Develop a culture that values honest feedback. HR can create results by starting the conversation, leading the projects, and influencing people to speak up.
Training
The quality and effectiveness of training can make or break your ESG hopes. You will need to measure training’s impact, and your incentives must apply to business goals.
Measurement
Your measure needs to be more than numbers on a page. Use supporting data to tell your story in terms your people, communities, and job candidates will understand.
We recommend downloading the current SASB Human Capital Bulletin, implementation guides, and industry reports from the Value Reporting Foundation to review the current standards.
To make it happen, work with your ESG Executive Team to align your efforts, measurement, and reporting.
Conclusion
There are many challenges ahead, both in gaining results and managing expectations. HR can help create extraordinary results by encouraging conversation, leading change, and influencing people to prioritize ESG.
Human Resources can help your firm become more environmentally conscious, more socially responsible, and help govern appropriately.
Phenom eCloud is a comprehensive technology solutions provider committed to empowering businesses to overcome challenges, enhance their workforce capabilities, and achieve superior outcomes.
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