There’s been an unexpected and recurring theme of late as I’ve been sitting on round tables throughout the East Midlands.
Leaders of our region’s businesses are, of course, currently talking a lot about the cost of doing business, challenges in recruitment, and risks of inflation.
But the subject of ESG has also been cropping up - and I think I know why.
Directors are increasingly aware that organisational progress in environmental, social, and governance standards is becoming increasingly important.
This is not just to customers but to investors and other stakeholders. Importantly, it’s also a really important consideration for a lot of staff members as well.
Organisational benefits of ESG
Businesses building ESG into their organisations are opening up a whole range of opportunities - not just in new markets but in avenues for funding bids and other support too.
For example, ESG covers three areas that investors consider when assessing a company’s long-term prospects. They are benchmarks for progress in improved profitability, mitigation of risk, and promotion of positive social and environmental impact.
However, many companies are finding that their ESG progress is stalling - and board engagement is one reason why.
People benefits of ESG
There’s sometimes a perception that ESG is concerned with community outreach and external-facing projects, but it’s clearly also very relevant to people within organisations.
For that reason, it’s natural in the recruitment market to think about what candidates are going to perceive about the company they are reading about in vacancy adverts and job descriptions.
Employers may talk about how much they value people - but how are they putting their money where their mouth is?
One way of measuring ESG is through the six broad metrics identified by the CIPD. These are of interest to firms wanting to get the best selection of prospective employees in a candidate-led market:
Diversity and equality. As well as providing good environments and training for existing staff, effective recruitment can be used to address diversity challenges.
Human rights. Businesses have a responsibility to respect human rights in their operations and business relationships.
Fair wages. Candidates will be looking closely at this - not just to see how competitive wages are but also if there are gaps in gender pay.
Health and wellbeing. Businesses are expected to protect both the physical and mental health of employees. This is why wellbeing-based benefits programmes are increasingly important component of remuneration packages.
Training. The best employers invest in the development of their own people.
Stakeholder engagement. Are you acting upon feedback through staff surveys, effective whistleblowing policies, and other mechanisms?
The role of Board members in ESG
Boards of directors are charged with overseeing the direction and management of a company. As such, they are responsible for guiding strategy and ensuring that risks and opportunities are identified and managed effectively.
As people are such a fundamental part of any organisation, this means that clear focus ought to be on their performance and development. Good internal ESG policy supports this.
Board engagement plays a critical role in a company's ESG progress. Without active support from influential Directors companies will likely struggle to achieve ESG goals.
Strategic delivery of any agenda requires a Boardroom champion. Without it, any plan will lack the necessary resources, buy-in, and direction.
Boards that are truly engaged in ESG efforts can help companies identify and capitalise on ESG-related opportunities, mitigate risks, and promote sustainable and responsible practices throughout the company.
By setting clear, realistic goals, allocating resources and budget, and tracking and reporting on ESG performance, you will foster a people-led culture in your company which translates into how you are perceived externally - not least in the jobs market.
All of which leaves me again asking one of my favourite questions - who do you have sitting round your Boardroom table?
