3 Reasons Why Companies are Incorporating ESG in their HR strategy
75% of South African corporates report ESG is a focus for 2021
The COVID-19 pandemic has resulted in companies facing increasing expectations to operate in a socially conscious way. According to the Mercer Global Talent Trends Survey, 75% of organisations in South Africa reported environmental, social and governance (ESG) practices as a crucial focus for 2021. Employees want to work for companies that care, and companies want to partner with ethical suppliers.
Mercer’s Global Talent Trends 2020–2021 highlights the importance of including ESG practices in business models to ensure organisations’ sustainability. South African companies are acknowledging that the post-pandemic period requires new thinking on talent and skills retention, embracing technology, incorporating sustainability in business models, and investing more in employee well-being, benefits and engagement.
An organisation’s sustainability is linked to sustainability in the wider world. Companies that demonstrate their commitment to advancing ESG practices are likely to experience a variety of benefits, including:
- Adding value and reducing risk
Evaluating the sustainability of an organisation using ESG factors encourages it to take a long-term view of its business to assess the risks and opportunities. The ability to manage change contributes significantly to effective risk management. Mercer’s Talent Trends survey showed that 72% of CEOs with ESG responsibility believe their organisation is change-agile. Survey results also indicated that CEOs who have ESG metrics on their business performance dashboard tend to lead companies with higher revenue growth. In fact, 75% of companies that have ESG metrics embedded into the CEO’s agenda, report revenue growth rates of more than 6%, whereas only 35% of companies that have not assigned ESG metrics to their CEO reported the same growth. This highlights the relationship between the integration of ESG factors in the C-suite agenda and company performance.
- Bolstering a company’s reputation
By adopting an ESG framework, organisations can evaluate how related factors align with their mission and values. Ensuring consistency between corporate values and actions is critical to building a reputation with customers, employees and other stakeholders. Interestingly, the C-suite sees the need for ESG integration. According to the Mercer Talent Trends Survey, 66% of South African executives say they need to make better progress on ESG, but boards have yet to mandate targets for most executives. ESG-related metrics need to be crafted in line with a company’s mission, and it is vital that executives are held accountable for the company’s mission and values.
- Attracting diverse talent
Gen Zs and Millennials make up the overwhelming majority of South Africa’s workforce. These younger generations place even greater importance on environmental and social concerns than their predecessors, and they will expect more from employers on ESG issues. Exceptional performance in this area will play a key role in attracting and retaining talent.
As overwhelming as it was, COVID-19 was just one of the important developments of the past year. The Black Lives Matter movement catalysed the diversity, equity and inclusion (DEI) agenda, and shone a light on already widening gaps in society. Now everything from access to the internet, medical care, vaccines to the rising cost of healthcare are all playing into this agenda. In 2021, getting beyond the surface level on sustainability and diversity, equity and inclusion will be crucial in attracting talent. It will also be vital for growth.