Why ESG goals matter for attracting and retaining talent
What are an organisation’s ESG goals? Now more than ever, key stakeholders want a clear answer. And an HR team should be at the frontline of communicating and upholding them.
Yugi the Giraffe - 4 August 2022
According to a report from Aon, when it comes to ESG topics, HR teams can be powerful drivers of change.
A company’s approach to ESG (environmental, social and governance) topics can have a profound impact on how successfully you attract, develop and retain talent. The link is obvious for the “social” part of ESG, which relates to a company’s relationship with its employees. But Aon points out that all three areas have an impact.
So why does ESG matter from a business perspective? And why should HR teams in particular make time to think about it?
ESG matters to employees
The bottom line is simple: ESG matters to employees. So if you want to attract and retain top talent, you need to care about it too.
According to a Cone Communications study cited in the Aon report, 64% of Millennials won’t take a job if their potential employer doesn’t demonstrate strong CSR (corporate social responsibility) values. And with Millennials currently the largest generation in the workforce, businesses need to be paying attention to this.
It’s not only Millennials, either. The proportion of Gen Z employees is only growing, and ESG is also a top priority for them. Looking at both generations, the Deloitte Global 2022 Gen Z and Millennial Survey notes:
“Nearly two in five say they have rejected a job or assignment because it did not align with their values. Meanwhile, those who are satisfied with their employers’ societal and environmental impact, and their efforts to create a diverse and inclusive culture, are more likely to want to stay with their employer for more than five years.”
64% of Millennials won’t take a job if their potential employer doesn’t demonstrate strong corporate social responsibility values.
Customers care about ESG
Of course, it’s not only the attitudes of prospective employees which matter. Other key stakeholders like investors, regulators and consumers are placing increased importance on ESG, too.
Aon cites research by Accenture which finds that “more than half of consumers in the UK want companies to take a stand on issues they care about such as sustainability, transparency and fair employment practices.” On top of this, “younger consumers, particularly Gen Z (75 percent), are driving this trend.”
Again, Deloitte backs this up:
“The vast majority of Gen Zs and millennials (90%) are making at least some effort to reduce their own impact on the environment. Many are willing to pay more to make sustainable choices. 64% of Gen Zs would pay more to purchase an environmentally sustainable product.”
Developing the ESG ecosystem
No company exists in a vacuum. And as scrutiny on ESG practices increases, it matters more than ever who you’re doing business with – and how. Where do you invest your pension funds? What are your ESG standards for suppliers? How do you enforce those standards?
By working with other organisations where ESG standards are high, you can amplify the impact of your own ESG policies. As the UK’s fourth-most inclusive employer in 2021/22, the FSCS cares a lot about DE&I – which is part of why they established a partnership with YuLife. As Chief People Officer David Blackburn explained, YuLife’s “distinct value proposition” was a key factor in the decision, building on the FSCS’s existing investment in employee wellbeing.
Developing your ESG policies not only makes your company a more appealing partner for other forward-looking organisations, but also contributes to the ecosystem of socially and environmentally responsible businesses – a win for everyone.
Almost half of Gen Zs and Millennials say they have put some pressure on their employer to take action.
A focus on people
HR teams are invaluable when it comes to developing and implementing ESG policies. As Aon puts it, they’re “uniquely placed to transform corporate ESG goals into actions and results,” and “have the power to embed ESG across [the organisation’s] people agenda and to activate the workforce in pursuit of those goals.”
Recruitment is an obvious area where HR teams are vital for the social part of ESG. As an HR professional, you need to be asking questions like:
- Are we recruiting a diverse workforce?
- Have we created an inclusive environment where everyone can contribute freely?
- Do our pre-hire assessments and onboarding processes support our DE&I values?
- Do our policies on flexible working, mental health, family leave etc support our ESG goals?
As Aon points out, HR teams don’t only head up high-level policies like these, though. They also have an important role to play when it comes to creating a culture of active listening. With ESG topics of such concern to so many employees, inviting input on your organisation’s approach can lead to some great conversations. As well as helping to develop more robust policies aligned with your ESG goals, these exchanges can build a sense of community and loyalty. As Deloitte puts it:
“Almost half of Gen Zs (48%) and Millennials (43%) say they have put some pressure on their employer to take action. Those who are the most vocal on this issue, and feel their employers are listening and incorporating their feedback, are also more loyal. This suggests there is mutual long-term benefit for employers to listen and act.”
ESG and resilience
Many sectors are operating under VUCA (volatile, uncertain, complex and ambiguous) conditions at the moment. And when things are unpredictable, it’s even more important than usual to pay attention to your employees’ wellbeing and resilience.
As Aon puts it, “ESG topics are important to employees and the talent pipeline, and for building a healthy, resilient workforce.” As we’ve seen with the Great Resignation, more and more people are feeling disillusioned and burned out. In fact, burnout was one of the top three reasons why Gen-Z and Millennial employees changed organisations in the last two years.
Having meaningful environmental policies in place can help ease your employees’ personal climate anxiety. Investing in their wellbeing will ensure employees can bring their best to their jobs. Inviting input and listening to comments on ESG topics will give your people a sense of purpose, and show they’re valued. And being transparent about areas like investments and executive pay will build trust.
All of these approaches help prevent burnout and develop the loyalty and trust which is key to long-term employee retention. By embedding ESG in the organisation’s people agenda, the HR team can meaningfully contribute to building resilience even in complex times.