ESG on the HR agenda

Environmental, Social and Corporate Governance (ESG) performance is a key measure of a business' sustainability.   Investors, customers and prospective hires are increasingly looking at the business' ESG performance to inform their decisions.  COVID has sharpened the focus for many, with controversy over use of government funds and treatment of staff during the pandemic impacting consumer and investor behaviour.   HR have a crucial role to play in creating ESG policies and targets for the business, as well as getting staff to play their part.    But it can be difficult to know where to start with such a wide-ranging project.   We've put together some ideas to help. 

Environmental

• Do you have policies on recycling and carbon neutrality?   It should be relatively straightforward to introduce these, but you will need to think about how such policies may impact on disabled staff and other groups - e.g. a policy on using public transport and avoiding taxis may have to be modified for disabled staff or those who feel vulnerable travelling alone late at night.
• Likewise, it's worth looking at policies on business travel, procurement and similar to ensure that the business' environmental goals are reflected in those. 

Social

• Equality and diversity is an obvious area to target.   Employers should consider putting in place an equality action plan with goals and regular reviews. 
• Businesses should look outwards as well as inwards - does the business contribute positively to the local community, and can staff be empowered to do so (e.g. volunteering leave)?

Corporate Governance

• The UK Corporate Governance Code identifies the following core aspects of good corporate governance:  leadership and company purpose; division of responsibilities; composition, succession and evaluation; audit, risk and internal control; and remuneration.  HR have an important role to play in each of those.
• For example, HR should review remuneration policies to ensure that directors and senior staff are incentivised to achieve sustainable success for the business.   Clear job descriptions and reporting lines are also critical to effective governance. 
• Effective whistleblowing procedures should also be seen as an aspect of good corporate governance - HR should review these to ensure that staff are encouraged to raise concerns (and not penalised for doing so). 

General

• Consider whether staff development plans or appraisal criteria should include ESG goals. 
• Look at incentive plans and assess whether these could be modified to further the business' ESG objectives.  For example, as well as profitability criteria, payouts under employee share schemes could possibly be made dependent upon the business achieving particular environmental goals. 

There won't be a one-size-fits-all solution, because effective ESG policies need to be tailored to the organisation.   We're hosting an ESG event for senior HR professionals on 13 May 2021 - please contact us if you're interested in attending.