Nasdaq
reported that investments in environmental, social, and governance (ESG) strategies rose 42% between 2018 to 2020. As of November 2021, one of every three dollars of assets under management has invested in ESG strategies. Although
experts predict global ESG assets under leadership management will top $50 trillion by 2025, perception gaps in these three categories still exist. Human resources (HR) leaders play a role in ensuring ESG pillars are robust and well-accounted for within their organization. However, many chief human resource officers (CHROs) lack adequate resources to meet ESG responsibilities.
Ed O’Boyle, Global Practice Leader, Gallup, explained the critical role human resources (HR) plays in creating and implementing sustainability strategies for their organizations, specifically around setting clear expectations about what behaviors to celebrate and encourage inside the organization. O’Boyle also shared how HR leaders can reduce what he calls ‘noise in the machine’ around ESG initiatives within an organization, plus the significance of having a purposeful strategy and articulating that strategy clearly.
Responses have been edited for conciseness and clarity.
What role does human resources (HR) play in creating and implementing sustainability strategies for their organizations?
HR has some specific things for which they’re responsible. When thinking about environmental, social, and governance (ESG) initiatives at a macro level, the leadership of the organization—including the CHRO or chief people officer (CPO)—must set the agenda for the culture you want to have to live out the values of the organization through environmental, social, and governance.
If [the leadership team] is responsible for those [agenda items], then the HR department is responsible for being the keepers of those, which means a couple of things. One is HR has set clear expectations throughout the organization about what behaviors to celebrate and encourage inside the organization. HR has also set managers on the right path—regarding how to coach [leadership] when they aren’t seeing those behaviors and recognize some things going on. Also, how to put that into their performance orientation (reflects how much a community promotes and rewards innovation, high standards, excellence, and performance improvement) of the organization.
[Performance orientation] could show up in a job review and things like that. More importantly, how does it show up in [strategies around] the way we work, why this is important to the way we work, and what we're going to do?
How can HR leaders position its sustainability into its own activities, policies, and processes as a competitive advantage for its organization in the market?
One way to become competitively advantaged in your employee value proposition is by clearly defining those [ESG values], talking about your current state vs. your aspirational state, and finishing with the conversation around what activities you’re putting in place to sustain [that ESG strategy]. When employees are looking for another job opportunity, and they read that, connect with that, and know you’re serious about it, you’ll have an advantage in the world of recruiting employees.
Also, the business results Gallup has seen for organizations investing in their people strategy to deliver on their ESG strategy are clear. Once you have your people strategy right and you’re measuring things you know your employees need, that’s when you can unleash the potential of their talent and your engagement to modify what needs to change from an ESG standpoint.
You tell an engaged employee there’s a problem with what we have here, and we need to figure out how to get our emissions down—they’ll rally a team and figure out how to make that happen within your organization.
That’s where I think the competitive advantages come through—having a purposeful strategy and articulating that strategy clearly so you can bring it to light.
How do DEI policies relate to sustainability initiatives? In what ways do the two efforts impact one another?
When discussing the social component of ESG—diversity, equity, and inclusion are foundational elements of how an organization’s social efforts bring to bear the challenges. It links back to sustainability like this—the more diverse your organization is, the more you’re celebrating differences of thoughts, ideas, and opinions through our cultural backgrounds we’re bringing together in the organization.
These elements are uniquely connected in the sense that not only does your organization require a diverse demographic profile, but also that bringing those various experiences and life events together is where your best thinking and better ideas come from.
What initiatives must be fostered by the c-level management team to move an organization toward better sustainable practices?
[The c-level management team] must decide what their goals are and make those goals achievable in the short, medium, and long term.
One of the tools Gallup uses is three categorizations around initiatives you believe are important to your business. One categorization is: we’re properly invested [in our sustainability strategy], and we’re progressing as we’d like to. It doesn’t mean the problem has been solved. It means the leaders believe the proper attention is being paid [to our strategy].
Second, [some initiatives] will be void. [Managers] don’t have a plan or don’t have an operating producer—and that’s where leaders must make difficult choices. In a world where there’s not unlimited resources, how are we making sure we’re focusing on the things we need to do across those three domains?
Lastly, there are many things you could take on as an organization, and sometimes the noise can get heavy. Leaders are responsible for communicating with their ecosystem, including employees, customers, shareholders, and suppliers. [You must identify] what your organization is passionate about in which you’re going to invest. Here are the things we’re concerned about—but within our budget and our constraints, we can’t do them.
It’s essential for workplace leaders to perform that exercise. I expect them to model behaviors that they expect the rest of the organization to do concerning ESG or environmental concerns. These could be small things like making sure you recycle and using less plastic—things of that nature. You won’t be surprised, but when leaders start doing the little things, people notice, then want to mirror that behavior and know [the organization] takes this seriously.
Which sustainability initiatives can workplace leaders see the greatest return on time and resources?
That’s a great question but almost impossible to answer. Because depending on the industry you’re in, your focus might be completely different. All organizations should determine [what resources] they believe are the best ones, what resources will lead to the business outcomes for which they are looking.
Doing [these initiatives] without customer growth in mind makes any sense. [My clients] are many for-profit organizations passionate about serving their customers and delivering on the return to the business. These initiatives should not be solely punitive actions they feel compelled to take to drive something that someone with an agenda desires. It should be part of a successful company's daily operations.
How can workplace leaders place sustainability initiatives within a business-first context so they're part of the company's bottom line?
The bottom line of the organization is driven by per-person productivity. If these initiatives are inspiring employees to put their talent to the challenges of the organization in a unique and additive way—meaning employees are engaged in their work because of the organization’s standards being put into place, it should lead to the kind of business outcomes you want.
Doing this as a side project is a drain on time and resources. Executing these initiatives in the operations of who you are and where you want to go as a company should lead to the kind of sustainable growth you're looking for as an organization.
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