- There are a lot of compelling reasons to invest in ESG as a business owner, but you have to know what steps to take.
Sustainability is becoming a lot more important in the business world these days. One study found that 78% of customers prefer buying eco-friendly products. Green businesses have a better chance of retaining their business.
However, creating a green business is not easy. There are a lot of different factors to consider when you are trying to run an eco-friendly business. You obviously need to think about the benefits of green energy and creating a paperless office.
However, the focus on sustainability needs to go beyond these narrowly implemented tactics. Sustainability must also be at the core of the company’s philosophy. They need to identify the best investments for green businesses, as well as have standards that employees must follow.
This includes implementing a set of ESG guidelines.
Implementing ESG Guidelines is Essential for Small Businesses
ESG is a major buzzword in business today — but it’s currently facing a major backlash. Some say ESG standards are hypocritical because they’re inconsistently implemented. Others argue that they’re unrealistic. ESG is attracting a lot of young investors, but there are a lot of challenges on the horizon as well.
The World Economic Forum (WEF) maintains that ESG is what improves a business’ financial performance. It reported that 15 out of the 17 S&P 500 bankruptcies between 2005 and 2015 came out due to poor ESG standards. The WEF emphasizes that this is why implementing ESG is vital to running your own organization.
If you’re an HR professional, you may be wondering: what is ESG? Why does it matter in HR? And, more importantly — how can HR lend a hand in its implementation? We aim to answer these questions below.
Environmental, Social, and Governance (ESG) standards are also known as the 3 P’s — Planet, People, and Processes. The environmental factor concerns how a business impacts the environment and how it plans to reduce this impact. The social factor looks at a business’ relations with both its staff and its community. The governance factor tackles how a business is run. Put together, they establish how sustainable and ethical a company is.
Investors usually look at ESG when deciding whether to invest in a company. Other individuals or groups may also base decisions on ESG standards, such as job seekers determining whether or not they should apply for a role in a particular company. This is what makes ESG so crucial to a company’s financial performance.
Given the aforementioned “social” or “people” aspect, it’s clear that HR plays a significant role in ESG This is especially true today, with events like COVID-19 and the Great Resignation placing even more importance of social issues in business. There are many ESG-related HR issues to focus on.
There’s the matter of compensation, such as re-establishing the minimum wage as a living wage. Another is the expansion of benefits packages so they include mental healthcare coverage and flexible work options. We’ve also talked about workplace diversity as a way to broaden an organization’s perspective and improve its bottom line. There are therefore many ways for you to uplift ESG in your role as an HR professional. But how can you get started?
Reconsider compensation and benefits
The Pew Research Center’s report on the Great Resignation noted that 63% of employees quit due to low pay, while 43% quit due to lackluster benefits packages. Market research will help you determine which roles are experiencing the most pay compression so you can update employee compensation accordingly. You can also expand benefits to cover mental healthcare, flexible work options, and extended leaves for childcare.
Build a renewable workforce
Consider upskilling your workforce. Talent expert LHH found that 70% of employees have clear career development expectations and want employers to help them meet their career goals. Upskilling can thus increase job satisfaction and retention rates, so you avoid paying the high cost of replacing staff — and further prove to stakeholders that your company is worth investing in.
Measure diversity strategies
Leadership resource site Senior Executive recommends measuring the number of diverse individuals currently employed, how many are in leadership roles, and their average retention rate. You can also look at the effectiveness of any diversity training programs you’ve organized. Collecting feedback from diverse employees can further help you improve on these strategies.
ESG is vital to your company’s financial performance — and HR professionals play a significant role in helping implement it. Hopefully, this article gives you the knowledge and tips needed to get started.