The landscape of the Australian workplace is ever evolving to keep up with global changes, with candidates now taking a more "values-driven" approach to their career choices.
They're already paying attention to ESGs. As an employer, are you?
You've probably heard the term "ESG" by now, but you may still be wondering what really is ESG and why is it important.
This article explores the multi-layered concept that is ESG and why your organisation needs to get serious about it to secure the best talent.
Understanding ESG
ESG is the acronym for "environmental, social, and governance".
It is a holistic concept that speaks about a company's ability to create and sustain long-term value in our rapidly changing world.
Let's break down the acronym:
E - Environmental Factors
The environmental dimension of ESG is vital in Australia. At an alarming rate, our country is experiencing droughts, floods, higher temperatures, and longer fire seasons - all due to climate change. As such, businesses need to be aware of their:
- Carbon footprint
- Contribution to pollution (both air and water)
- Introduction of harmful materials into the environment
- Energy efficiency
- Contribution to deforestation
- Water management
When Australian organisations do not address these concerns as part of their business model, they risk considerable harm to their reputation and ability to attract the high quality talent.
S - Social Factors
Movements such as #MeToo have exposed companies' insufficient policies to protect their employees from discrimination, harassment, and abuse. The social dimension of ESG considers human rights due diligence reporting, and prioritises:
- Gender pay equality
- Diversity of employees including age, gender, ability, and cultural background
- Fair wages across every level of employment
It also considers customer satisfaction and innovation into better products and services.
Finally, the social aspect of ESG considers company culture, employee health and safety (including ongoing training opportunities), injury and absentee rates, and community engagement.
Related: 5 tips to improve mental health in the workplace.
G - Governance Factors
The governance dimension of ESG refers to an organisation's leadership and structure, focusing on leadership and management philosophy, policies, and practices. Organisations are encouraged to question:
- The number of significant positions held by minority or underrepresented groups
- Stakeholder representation and engagement
- Internal and external means of reporting concerns about unethical behaviour or organisational integrity
- Anti-corruption policies;
- Executive compensation and how it reflects the benefit of shareholders
In short, when a company questions what is ESG and why is it important, they are called to answer three simple questions:
- How does the company consider the environment?
- How does the organisation consider its people?
- How is the company run?
The metrics and reporting factors of determining ESG efforts
ESG metrics are not part of mandatory reporting in Australia. However, more businesses are making the decision to disclose their ESG metrics.
While presenting ESG matters is becoming increasingly valuable to job seekers, it can also directly impact share price by mitigating reputational and litigation risk. Other benefits include:
- Attracts jobseekers
- Impact company market value
- Mitigate reputation and litigation risk
- Develops customer loyalty
- Long-term sustainability and growth
- Better integrates the brand into the community
- Financial growth and cost reduction
- Enhanced staff productivity
Essentially, the ESG framework allows investors to assess how well a company performs on these metrics compared to its peers. In addition, comparing data on ESG issues helps investors determine whether or not a company is worth the outlay.
How to develop an ESG strategy
The truth is that business survival depends on responding to change. So, when you begin to as questions about what is ESG and why is it important, you need to develop an ESG strategy that methodically and successfully answers these questions.
You can follow this framework to build and sustain economic growth to create a foundation for positive long-term results , helping you attract the best candidates in your industry.
Step 1: Determine which ESG metrics to measure
Your first step is determining which ESG metrics are important for your business and stakeholders. Consider:
- Policies
- Accounting practices
- Data systems
- Board diversity
- Employee pay
- Water usage
- Carbon emissions
- Waste management
Step 2: Establish your baseline
You need to know where you've started to prove how far you've come, so it's essential to report an honest baseline.
Gather information from data systems and reports, working closely with stakeholders with the most expertise in each of your priority areas.
Conducting this assessment will give you an overview of your company's current situation. Just remember that some of your ESG metrics might not look good. But it's okay to admit where you have room to improve.
By continually reporting on the changes you make, you'll establish a reputation for continual improvement, assuring candidates that you are committed to change.
Step 3: Set ESG goals
Once you have your baseline metrics, it's time to set ESG goals for the organisation.
The goals might be to maintain areas of good performance or improve and optimise your practices in weak areas.
Step 4: Create an ESG plan
This is where you can create a roadmap for ESG growth, including immediate and long-term goals.
Including large ESG goals into actionable steps with realistic outcomes can lead to lasting organisational change.
Step 5: Implement the plan and measure key performance indicators (KPI)
Successful ESG strategies will define measurable targets, which you can then report on.
Regular monitoring and updates are essential. Using a centralised management system or data software to track KPIs will make assessing goals easier.
Satisfied employees stay longer at a company and work harder towards a common goal. When a business adheres to the principles of ESG, candidates know that you are conscious of managing the risks and opportunities created by continuously changing global conditions, and that you place moral values above other gains.
To attract the best candidates in a competitive hiring market , companies need to prioritise the development of ESG strategies.
Related: Making a diversity and inclusion strategy meaningful to your workplace.
Your ESG journey starts now
For companies delving into what is ESG and why is it important to their future hiring plans, it is important to identify what are the major priorities of the organisation, set realistic and achievable goals, and consistently monitor the company's performance.
Whether your journey starts as a response to a new reporting requirement or reflects the need to keep up with global changes, implementing ESG strategies will lead to a widespread revamp of operations, activities, and (especially) outcomes throughout your company.
At Robert Half, we're working on implementing several strategies in line with ESG values; you can read more about our efforts here.
