In recent years, ESG has gone from being a nice-to-have to a business-critical. And, increasingly, senior HR professionals are expected to promote and drive forward impactful, engaging, meaningful ESG strategies.
Surely HR leaders are well placed to play a pivotal role in enhancing the social element in ESG through strategic policy alignment, promoting employee engagement and creating diversity, equity and inclusion?
This is most certainly the case, but despite the news, senior HR professionals are playing a more prominent role in ESG, much remains up for grabs, with untapped potential yet to be truly utilised, as some companies are often said to be guilty of overlooking the ‘S’ in ESG.
As several academic papers have recently pointed out, there arguably needs to be more research on the link between HR and ESG, especially when the social factors are much harder to pin down compared to, say, the many steps a company can make in its journey to becoming environmentally sustainable or net-zero carbon.
So, as ESG continues to rise up the corporate agenda, how do we as senior HR professionals monitor and implement the social strategies in particular, and how do we proactively measure the effectiveness of our policies?
Let’s explore...
ESG stands for Environmental, Social and Governance, and it is being increasingly considered high on the agenda for stakeholders when considering potential businesses to invest in. As well as increasing stakeholder transparency by reducing risks and encouraging companies to act responsibly and ethically, it also offers companies the opportunity to focus on important issues and focus on improving their own standards where they deem it is needed.
With ‘S’ standing for ‘social’, this is a unique opportunity for HR leaders to take the reins and help drive people-focused company policies, such as gender equality, diversity, equity and inclusion (DEI), as well as community relations, working conditions, workplace safety, and many more important considerations.
Essentially, the ‘social’ aspect encompasses all aspects of a company’s impact on not only its staff members but also the wider community. Therefore, the ‘social’ aspect of ESG is of great importance because it comes at a time when society as a whole places such importance on companies that serve a social, ethical and community-driven focus. It is also hoped that this will not only help to attract exciting new talent to apply for job opportunities, but also retain them as the social aspect is an instrumental driving force for many who wish to work and remain at a conscious-led company.
On our upcoming webinar, we are delighted to host Darragh Gaffney, Director of Growth and Sustainability at the IRDG, to explore the new legislation and reporting requirements on ESG for business in Ireland.
With such a focus on ESG, the way companies record and relay such data is correspondingly becoming even more important as stakeholders seek to protect their investments and more stringent EU directives come into force.
Speaking on Newstalk last year, Conor Holland, Head of ESG Reporting and Assurance at KPMG, explained the importance of tracking and reporting, stating:
“One of the key consequences with the CSRD, is that it looks for a whole range of data across various aspects, whether it’s climate change, pollution, biodiversity, and social factors like your own workforce. There’s a quite significant consequence in identifying what data will you have to gather and ensuring you’re in a position to report on that in a relatively short time frame.”
Measurement serves as the foundation of ESG reporting, enabling companies to identify what metrics they track, understand their data, extract actionable insights, and identify gaps. These steps are crucial for making informed decisions that align with both company values and stakeholder expectations.
Holland advises, “Before making any substantial business changes, carry out a materiality analysis to identify the topics material to your business. This helps to ensure you can integrate ESG in a meaningful way.”
Focusing on the ‘social’ aspect of ESG, companies should pay attention to their relationships with people and the impact of their policies on areas like ethics, justice, and wellbeing. Important metrics to consider include hiring practices, employee retention rates, training opportunities, and performance management systems. Regularly reviewing these areas can provide critical insights into the company’s social footprint.
For ESG reporting to be effective, it should be conducted at least annually, though more frequent updates may be beneficial in certain areas. For example, human resources departments might benefit from quarterly reviews to make timely adjustments that reflect current data. This frequency ensures that the data remains actionable and that the company can promptly respond to new challenges and opportunities.
Dave Duffy penned a piece recently in which he championed the importance of EDI and employment engagement, writing:
“Equality, diversity and inclusion conversations are constantly evolving and have gained significant prominence in the public’s consciousness. From the suffragettes to the Civil Rights Act and the rise of the Black Lives Matter movement – EDI has provided the foundation for many of the civil liberties we enjoy today.”
Duffy refers to the #MeToo movement, which sadly highlights the fact that issues of sexual harassment and assault are still “all too common in the workplace.” Duffy argues it has, justifiably, led to renewed calls for increased attention to office culture and the need for accountability.
This comes as one recent study by Robert Bailey, Jaclyn Yeo, Lingjun Jiang, and Angela Ferguson found that top employers, as measured by employee satisfaction and attractiveness to talent, have significantly higher ESG scores than their peers. This pattern is partly due to these employers’ relatively strong environmental performance, though the trend is also evident across specific social and governance issues. This finding suggests that ESG performance can help companies both improve employee satisfaction and attract prospective employees.
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In terms of external demands, Chief Sustainability Officer and co-founder of ESG advisory firm 21C, Dave Stangis, says that both private and public companies are being asked for their position more and more on important policies such as diversity, equity and inclusion:
“How are you making sure your employees feel welcome and can bring their full selves to work? Prospective new talent will ask this as well as communities ensuring your company is going to be a good corporate citizen and give back to the community. In terms of risk, are you managing your resources (energy, water and waste), and do you have any issues in your supply chain that can harm you from a reputational standpoint and hurt a stakeholder’s investment?”
As senior HR leaders, it's important to consider the story we want to tell and what our customers are interested in.
HR professionals can help drive meaningful social sustainability by creating and promoting an inclusive workplace culture with a focus on diversity, equity and inclusion (DEI).
HR policies can also help to protect individuals by implementing health and safety programs, including mental health support and facilitating ergonomic workspaces, as well as ensuring adherence to important safety protocols.
When it comes to future talent attraction, HR leaders can also demonstrate their organisation’s ESG commitments as displayed through the company culture, recruitment listings, interviews and more to attract similarly value-aligned individuals.
The benefits of using skills-based volunteering as a strategic tool to get employees actively involved in ESG cannot be overstated.
Recent research found that when organisations embed volunteering programs that are aligned with strategic and ESG goals, they can reap benefits including a positive impact on skills development, improved performance, enhanced ethical culture and improved talent attraction.
Making sure volunteering programs and goals align with corporate strategy and are strategically driven drives benefits for both the organisation and the stakeholders.
HR leaders should therefore ensure volunteering programs are embedded through development and talent plans, ensuring skills are leveraged for maximum impact and building a culture of learning and innovation – as well as giving back.
Given the perception of CSR activities comes out as more important than the actual activities themselves, HR leaders should consider the role of internal communications monitoring and responding to employee feedback around CSR.
Commenting on findings from Gartner research, CHRO Patrice Graves wrote in Forbes back in 2022:
“Companies with a diverse workforce see employee performance improve by 12% and intent to stay rise by 20%. By starting with inclusion, HR leaders can recognise the benefit of their diverse workforce while also continuing to create an inclusive environment where everyone feels like they belong.”
Redefining the role of HR in advancing social sustainability
According to an article entitled ‘HR 2025: 7 Critical Strategies to Prepare for the Future of HR’ in the Society for Human Resource Management (SHRM), the role of the HR professional has changed dramatically along with the workforce and economy, and that evolution will continue.
It is certainly clear that senior HR professionals are extremely well placed in their people-focused and skilled positions to help shape a sustainable future by championing people-centric practices by fostering a workplace where the people in your organisation can truly thrive. Indeed, this is clearly why organisations are increasingly realising the important role HR plays in ESG strategy.
As stakeholders are increasingly seeking to ensure the businesses they are investing in are also fulfilling the ‘social’ aspect of ESG when it comes to their talented staff members, HR managers are playing a pivotal role in ensuring that companies are appreciating their staff by attracting new talent, retaining talented employees, investing in appropriate and adequate training and upskilling opportunities, as well as instilling a culture of diveristy, equity and inclusion – to name just a few.
This is a truly unique and important role that HR leaders continue to drive forward as ESG continues to rise up the agenda for stakeholders and staff seeking roles at organisations which reflect high morals and esteemed social responsibility.
With recent data revealing top employers’ ESG scores are 14% higher than the global average, the positive connection between employee satisfaction and employer ESG is clear to see.
As Patrice Graves added:
“There’s no question. It’s now up to HR leaders and teams to play a greater role in addressing ESG because these initiatives matter to all stakeholders—investors, boards of directors, employees, customers and communities alike.”