ESG, or environmental, social, and governance initiatives, is gaining momentum. But what are HR ESG initiatives, and how are HR professionals associated with them? The HR department must know the meaning and importance of ESG initiatives as they can impact employee retention, talent attraction, and the company’s overall reputation.
HR’s role in promoting these values is crucial since ESG practices influence employee engagement and corporate culture. Let’s understand why ESG initiatives are essential for HR and how the team can lead them.
Index
What is ESG?
ESG means environmental, social, and governance criteria that companies use to run responsibly by themselves. Some ESG-related issues include employment and workplace practices, sustainability, diversity, leadership, social good, equality, and missing out on environmental governance.
ESG considers the non-financial factors of an organization along with financial factors in the decision-making process. Investors today consider ESG performance to be a unique criterion for decision-making.
Investors now evaluate companies based on a wide range of ESG performance data, from reducing carbon emissions to paying equity and the gender and ethnic balance in the boardroom.
Previously, they would screen out socially unfavorable stocks like tobacco or weapons. Companies that acknowledge the beneficial relationship between financial performance and ESG performance are aware that they must provide proof of the following:
- Leadership quality
- Supply chain transparency
- Impact and carbon footprint on the environment
- Community contribution in which they work
- Recruitment practices fairness
- Workforce diversity
Why is ESG Relevant to HR?
ESG is vital for the stakeholders to analyze and understand how a company manages opportunities and risks primarily related to the environment, ethical issues, and human capital management.
Environmental problems are how the company analyzes climate-related opportunities and risks, safeguards biodiversity, and addresses circularity issues.
Social examines how the company manages its relationship with suppliers, employees, communities, and customers. Governance is understanding a company’s compensation, leadership, corporate ethics, internal controls, and shareholder’s rights.
Post-COVID-19, social issues, such as the #MeTeo movement or black lives matter, have taken a lot of importance. As a result, such problems and more have forced companies to disclose their social responsibility in HR regarding practices and policies.
The Role of HR in Leading ESG Practices
HR people don’t realize that they deal with ESG issues daily at work and that HR practices are already addressing them. Let’s look at how.
| Category | Practices |
| E – Environmental | Managing climate sustainability training and practices and carbon footprints. Implementing climate adaptive practices. Promoting responsible resource management and operations. Designing eco-friendly spaces and workplaces. |
| S – Social | Ensuring fair access to work opportunities. Promoting work-life balance and employee wellbeing. Championing inclusion initiatives and diversity. Upholding labor standards and human rights. Addressing social problems impacting communities. |
| G – Governance | Developing and enforcing a strong code of conduct. Promoting ethical decision-making within the company. Establishing a whistleblowing mechanism for ethical reasons. Ensuring transparency in executing compensation. Practicing good board governance. Maintaining strong compliance reporting practices. |
How Can HR Managers Get Started?
HR managers play a vital role in developing and following sustainable HR practices. It includes the creation of a solid and inclusive culture in which the employees feel respected, valued, and connected with their companies. Some ideas to incorporate are:
- The HR team must collaborate with the risk and investor relations team and executive leadership to understand ESG criteria and standards against which the company is measured and how to support the efforts.
- They must assess the workforce data to report the company’s efforts to hire and manage a diverse, global, and skilled workforce. Use this information to track and measure the company’s human capital metrics.
- The team must inventory its initiatives for creating an engaged and inclusive workforce and share a report with internal and external stakeholders.
- They must also work closely with the ESG reporting teams to correctly share the ‘S’ story with the outside world. Also, ensure that the team members have decision-making powers and add to the narratives if required.
Conclusion
Companies must adapt to the changing environment and focus on creating a balanced relationship between business goals and ESG practices. It will help them shape their vision, purpose, and sustainable culture.
HR plays a vital role in fostering and achieving business sustainability. The HR team can focus on the abovementioned things and drive effective ESG initiatives.