Environmental, social, and governance plan: Do you need an ESG strategy ?
ESG: It's not just another three-letter acronym to add to your list of business vocabulary alongside DEI. More importantly, having an ESG (environmental, social, governance) strategy is integral for all businesses as it's becoming increasingly essential for investors, current workers, and job candidates. So much so that ESG is being named a top hiring trend for 2023 by our workforce experts.
In our latest study, Future of Talent in the Logistics & Supply Chain, our research revealed that 91% of leaders, 86% of workers, and 83% of consumers believe businesses have an obligation to act on ESG issues. If your company doesn’t already have a plan in place to take ESG initiatives, you’ll soon fall out of favor with both current and prospective employees.
Here's everything you need to know about forming an ESG strategy:
What is an ESG policy?
Environmental criteria: How is your business addressing environmental concerns? What are your strategies for reducing the energy you take in and the waste you put out? This section is crucial as Americans are becoming increasingly more sustainable and expect businesses to be as well.
Social criteria: What relationships does your company have with both workers and consumers? What is your business doing to foster diversity and inclusion in the workplace? Expand your DEI (diversity, equity, and inclusion) strategy to include plans to tackle broader social issues like fair wages. You’ll appeal to more inclusive consumers and attract an engaged workforce.
Governance criteria: How is your organization implementing procedures to govern itself? Are executives making effective decisions that comply with the law while also pleasing stakeholders? Every company needs to have a plan in place to run effectively (and legally) while also being transparent with the public about its way of working.
These three separate elements can also intertwine. For example, as the US government passes more legislation surrounding climate change, including the recent Inflation Reduction Act, businesses will need to shift their governance strategy to include laws pertaining to environmental issues.
Why do you need an ESG strategy?
ESG initiatives are key to helping your business meet and exceed growth and financial goals. Both investors and workers value companies who value environmental and social change, making an ESG policy imperative for business success. Here’s how an ESG strategy can benefit your business:
Compete with top companies
As of 2022, more than 90% of S&P 500 companies publish ESG reports. By not prioritizing ESG you risk falling behind your competitors. In order to attract top investors and top talent, you’ll need to keep up with current ESG standards.
Gain valuable investments
Sustainable investments grew to $35.3 trillion in 2020, making up more than 1/3 of business investments for that year. By developing an ESG strategy that includes annual reporting, you’ll be able to show investors and stakeholders measured improvements toward ESG goals. These reports will show investors they’ve put their money in the right company (and convince them to invest more).
Plan for the long run
Legislation surrounding environmental and social issues will continue to be drafted – and continue to impact the global workforce. By putting a plan in place now to tackle any governance issues you’ll set your company up for success when new policies need to be implemented.
Why combine green initiatives with social initiatives?
In a recent survey, 62% of American consumers reported a desire for companies to take a stand on current issues including sustainability, transparency, and unfair labor practices. Notice how the majority of Americans lumped climate issues with social issues like fair employment?
Since the 2020 pandemic, consumers in the United States have become more conscious of how companies stand on a variety of issues, not just singular initiatives. Would the average consumer support a company that has a recycling program when they know it doesn’t pay its workers fair wages? Probably not.
By combining green initiatives with social progress, your company will demonstrate to the public that you take all issues seriously. And by combining your initiatives into one ESG policy that includes reporting, the people won’t be left to wonder if you’re leaving any important issues out.
Why ESG initiatives matter to workers
For workers, purpose matters. Employees want to take pride in the place they work, with more than half saying company culture is more important than salary when it comes to satisfaction. Shalini Prasad, Global HR Lead for Integration Management Office at Maersk, has found that ESG is linked strongly to employee attraction. She stated in Adecco’s most recent logistics webinar that: “from a talent perspective, ESG is one of the elements that we see is relevant in the context of them finding a purpose-driven organization.”
And having an ESG policy isn’t just necessary for employee attraction – it’s also essential for retention. Global management firm McKinsey & Company found that organizations that make positive social impacts through their ESG strategy have employees who are more satisfied with their jobs. Companies that don’t value positive social change, however, risk employee strikes and slowdowns due to disengaged workers.