Where do your company’s customers stand on climate change? What policies do you have on navigating net zero? How do your employees feel about energy efficiency?
Environmental, societal, and governance (ESG) issues have made their way onto HR’s agenda thanks to consumer pressure, employee expectations, and the introduction of reporting standards in equal measure.
The three pillars of ESG comprise the standards that determine an organisation’s impact on the environment and society, alongside transparency and accountability around financial performance, executive pay, and diversity of leadership.
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HR leaders, naturally, have a role to play in reporting on ESG criteria. By doing so, they can contribute to the myriad benefits of ESG including improved financial performance through cost reduction and topline growth and attracting talent that prioritise sustainability.
Liz Noble, VP of DHL Express, UK, argues this involves a cultural approach. “Beyond our environmental commitments and helping our customers achieve their sustainability goals,” she argues, “we believe that true sustainability relies on embedding a culture of responsibility across the organisation.”
The extent of the overlap between ESG standards and HR policy demands people leaders to play a deeper, cultural role in the pursuit of responsible business practices.
The rise of ESG at work
Just as climate change anxiety can keep people up at night, ESG strategy and reporting presents a daunting and overwhelming challenge to businesses.
ESG regulation has increased by 155% over the past ten years, according to a 2023 ESG Book study. For companies in the UK, ESG disclosure includes requirements from the Taskforce on Climate-related Financial Disclosures (TFCD) among other regulations including from the Companies Act.
The encouraging news for businesses is that whilst the regulatory landscape becomes more convoluted, the demand for sustainability professionals has also risen. A 2023 Hays study found that 27% of respondents have a main board director solely focused on sustainability.
True sustainability relies on embedding a culture of responsibility across the organisation
Moreover, a 2023 Open University study found that 77% of businesses agree that ESG factors impact their organisation’s brand or reputation.
However, there is plenty of work for HR to do. Hays’ study also found that 29% of respondents had no current department dedicated to sustainability, and a higher proportion ranked HR (10%) as having board-level accountability for ESG compared to compliance (8%) or finance (4%).
Breaking down HR’s responsibility even further, the Open University found that less only 8% of companies have a fully realised ESG strategy, with 80% of businesses who engage in ESG citing a lack of proper skills to address each pillar, namely waste reduction (27%), data analysis (25%), energy tracking or usage (24%), training & development (24%), and carbon accounting (23%).