Why an ESG Program Is Critical to the New Social Contract With Your Employees

By Stephanie Dolmat on August 31, 2022 at 3:00pm

This post is the third installment of a three-part series on the topic of Environmental, Social and Corporate Governance (ESG), authored by Robert Half’s Senior Director of ESG, Stephanie Dolmat.

Environmental, social and governance (ESG), initially viewed as a grassroots issue led by social activists, is now a hot topic in the boardrooms, C-suites and strategic plans of many leading companies around the world. ESG provides a framework for measuring and reporting a company’s social and environmental policies and practices — all of which are being scrutinized by investors, employees, potential hires, consumers and others like never before.

But why are some industry experts calling ESG the new social contract with employees — and why is it so important to companies now?

What does ESG mean?

Think of ESG as the way your company is run to have positive sustainability and societal impact, including a broad range of concerns from carbon emissions to human rights to board structure and executive compensation.

Here’s a quick look at ESG, also known as sustainability, corporate social responsibility and plain-old being a good ethical company:

  • Environmental is increasingly a focus as businesses pledge commitments to net-zero carbon emissions and consumers turn to more ethical and sustainable products.
     
  • Social encompasses issues that impact employees, customers and consumers, plus the broader community. They include diversity, equity and inclusion (DEI), organizational culture, fair treatment across your company’s value chain, and how your company gives and interacts with the community.
     
  • Governance looks inwards to the practices and controls your company uses to comply with the law and make effective and ethical decisions.

These principles are inherently intertwined. If, for example, you’re looking to address consumer concerns about sustainability, you will also need to consider your supply chain (social) and shareholder issues (governance). While your company’s size and business imperatives will inform which topics under ESG are most relevant, all three components are equally important. Let’s turn to the social element and learn more.

The new social contract

The last two years have seen significant disruption and change. The global pandemic and movements like Black Lives Matter and #StopAsianHate have highlighted what many people regard as long-standing social injustices and inequalities.

These events prompted many employees to reevaluate their personal values and those of the companies they work for. Research for Robert Half’s Salary Guide found that 71% of employees would leave a company whose values don’t align with their own. This puts the onus on organizations to embody principles like fairness and inclusion in how they operate.

Think of it as a new kind of social contract. Businesses want employees to work hard and add value. In return, workers want their employers to prioritize social issues and demonstrate accountability. Here are some tips to turn those aspirations into reality.

Make your workers feel valued

Employees need to feel fairly compensated for the value they add to the company. And it’s not just about salary. It’s also about:

  • Working arrangements — Research for our Salary Guide found that 66% of workers want flexible work schedules, and 56% want remote work options. Giving employees this kind of autonomy builds trust and loyalty, and it can be particularly important for groups such as working parents.
     
  • Mental wellness programs — The anxiety and uncertainty of the last two years, plus heavier workloads and domestic stresses, have eroded many employees’ sense of wellness. Company-provided support such as stress-reduction programs or counseling can make a difference. Corporate culture matters, too — setting up a work culture that allows employees work-life balance contributes to overall wellness.

Nurture in-demand skills

With new technologies, trade opportunities and consumer demands, business needs are evolving faster than ever. This means that workers need more diverse skill sets. Companies that actively encourage and provide skill-building will be ahead of the curve in addressing the new social contract.

Why? Upskilling leads to career progression for employees and increases their loyalty to the company because they feel supported and engaged. Tracking and benchmarking your employees’ skills will also help you anticipate future skills requirements, particularly if you’re restructuring or expanding.

Set visible targets

Statements about a company’s ESG plans need to be followed by action. Your firm needs to add ESG targets to your traditional organizational metrics to truly be accountable.

Identify the top two or three issues that align with your business strategy and matter most to your employees, then set a timeline and measurable targets. Regarding diversity and inclusion, for example, you could partner with employee groups to find new hires, provide awareness training or take a public stance on diversity issues.

Create ethical products

Today’s consumers expect high ethical and green standards. They’re willing to pay more for products and services from companies that care, whether that’s manifest through a sustainable supply chain, a minimal environmental footprint or a strong stance on social issues.

You might need to reevaluate your products and services to meet these standards. Rather than seeing this process as a cost, take it as a way to find new business opportunities and enhance your company’s reputation as a brand worth supporting.

Encourage volunteerism

Volunteering and philanthropy programs can benefit both your employees and the organization. Finding a cause that aligns with your company’s core business and values is key to success. Tech firms, for example, could partner with digital literacy nonprofits, while accounting firms could offer financial mentoring for households in disadvantaged communities.

Supporting the communities where your business operates helps drive employee engagement by creating a shared sense of purpose and increasing morale. It also integrates ESG principles into your organizational culture — particularly if company leaders roll up their sleeves alongside employees.

Creating an ESG mindset in your company can take time and effort, but the new social contract requires it. The pay-off will be a motivated, value-driven workforce that feels personally invested in your organization’s success.

Follow Stephanie Dolmat on LinkedIn.

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