Treating employees well hasn’t always been a priority for organizations, but that’s changing. Investors and prospective employees alike are increasingly interested in how organizations work with staff to maximize professional benefits and embrace a “future-proofed” workplace designed to welcome new technology rather than hide from it. Adapting to the global COVID-19 pandemic accelerated the need for change as workers and investors around the world wonder what the future of work looks like—and how today’s employees will react to the coming changes.
Related: What the growing focus on ESG issues means for CHROs
One of the most striking reasons that focusing on ESG issues and metrics is important, then, is the potential for increased stock market performance. At the same time, prospective and current employees are interested in businesses focused on addressing ESG issues within their workforces. Recent research from PwC found that 86% of employees consider ESG matters important when deciding where to work or which businesses to support. And as talent continues to look to a business’s values and mission to determine whether to join and/or stay, the well-being of organizations—based on their ability to recruit and retain top talent—will become more ESG policy-dependent.
Implementing ESG initiatives
The social aspects of ESG are often overlooked. In truth, they are some of the most important and most challenging ESG elements that corporations can implement.
To put it succinctly, human capital must be considered a benefit. Corporations should strive to craft excellent employee experiences that attract and retain talent. In tandem, they should create programs to weigh the associated metrics accordingly. Willis Towers Watson writes that “human capital accounting” can be measured just like financial capital with the right framework. Finding one that works for your business can help convey new or updated human capital policies to stakeholders via measurement dashboards. Perhaps more importantly, closely measuring human capital social metrics can provide insight into falling morale or a shift in how the workforce perceives their corporate environment.
Detailed data points about ESG initiatives also include human rights policies, which lay the groundwork regarding respecting both indirect and direct employees, as well as diversity, inclusion, and equity policies to ensure businesses have a diverse workforce with adequate representation for underrepresented and disadvantaged populations.
It’s also important to note that ESG policy can take time to implement. That’s why it is important to set clear goals with institutionalized oversight. This ensures that even when the executive team responsible for setting goals leaves, ESG remains a priority. Beyond this, setting the right goals is crucial. Research from the McKinsey Institute has also found that well-defined and outcome-oriented ESG initiatives can lower costs and boost employee productivity and satisfaction, further improving business success and bottom lines.
As the SEC, prospective employees and corporate boards turn their attention more squarely to social responsibility in business, it is never too soon to begin implementing ESG policies or forming an ESG Committee in the workplace—with human capital professionals and the management team taking a leading role. From revenue benefits to improved public perception, the stakes involved in portraying authentic, socially focused corporate values should be at the top of business and human capital priority lists. Because work environments continue to change, it is worth getting in early by creating an ESG strategy now. As global frameworks and standards become more well-defined in the future, these strategies will become critical to corporate success.
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