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Human Resources

How HR Is Leading the Charge on ESG and Social Impact

  • April 2023

As more consumers seek to support businesses with noble societal values, companies have put a heavier emphasis on their ESG agendas—promoting the environmental, social and governance goals that their audiences demand.

But this shift is not limited to external stakeholders. Companies are discovering that their own employees and job seekers also prioritize sustainability and social impact. They are seeking out employers who are not only forward-thinking but intentional about making a positive impact on the world. This trend has placed human resources departments at the forefront of communicating employees' perspectives on sustainability to employers and vice versa. Egon Zehnder recognized this new dynamic and conducted a series of discussions on HR's critical role in fulfilling these responsibilities. 

Adapting HR to a Rapidly Changing World and Common Set of Principles

The rise of ESG principles and stakeholder capitalism has caused a sea change in how many companies present themselves and their goals to the public. But it’s not just consumers who are looking to support businesses with admirable sustainability and social impact agendas. Current and potential employees of those businesses are also making career decisions based on employers’ ESG values. Employees often don’t want to work with organizations unless they know those organizations are looking toward the future and have the sustainability of the planet at the core of what they do. 

In this way, a new role for human resources is taking shape. In Egon Zehnder’s roundtables, HR leaders shared that as talent, investors and the general public increasingly value companies’ devotion to ESG principles, their departments are being tasked with developing the social aspect of those principles. This includes formal efforts around diversity, equity and inclusion (DEI) and sustainable practices, which can attract job seekers to their organizations. But it’s also about those less formal policies and daily interactions that create a welcoming and productive workplace culture for employees. HR leaders are thinking more about creating an optimal work/life balance for employees and building beneficial relationships with the local community. Like many aspects of ESG agendas, these can be immense, society-level issues—but HR leaders are in a position to address them on an individual level with their people.

This has prompted a bit of a flip in how HR has traditionally been viewed. While previously these departments’ role was to assess talent and decide if they are a good fit for the company, now that talent is assessing the company to see if it’s the right fit for themselves and their values. Consequently, HR has become a pivotal actor in communicating a corporate social and sustainability agenda that will appeal to a new generation of potential employees.

HR As the Vehicle for Systemic Change in Company Practices 

The surging importance of these principles has necessitated changes in how some HR departments operate. One HR professional explained that previously her company’s DEI, social impact and sustainability agendas all operated out of different departments and spaces. It took a structural rethinking to place these agendas under one umbrella: HR. And that new responsibility isn’t just about big-picture idealizing on these subjects, but granular examination on how to advance sustainability, such as studying the energy efficiency of company buildings.

These considerations were once the province of a company’s chief sustainability officer or similar role, another HR professional at the roundtable explained. But historically, this type of position hasn’t had extraordinary influence over corporate processes, which created a “check-the-box” approach to sustainability initiatives. Today, these issues have been elevated to the C-suite-level, as they tie into important businesses considerations around employee satisfaction, retention, and recruitment. These employees don’t want to see their employers “greenwashing,” or making insincere sustainability commitments.

Here, HR departments can have a leading role in organizing companies around such values. Because of their focus on people, human resources can be—in the words of one roundtable participant—an “integrating force” across all a company’s departments. This can create the system-wide change needed to reinvigorate an entire business for a new era of stakeholder commitments.

New Considerations for HR leaders in the Search for Talent

Employees’ and job seekers’ reevaluation of companies doesn’t end at ESG and sustainability commitments. The employee/employer relationship has changed more broadly, and now human resources departments need to navigate this shift.
It’s no understatement to say that the Covid-19 pandemic significantly altered many people’s work/life balance and their workplace dynamics. And three years after the pandemic began, a host of other societal disruptions and cultural transformations have continued to take us further from the former status quo.

With workplace burnout increasingly common among both employees and leaders, human resources departments have a vital mission in helping their people get through this unprecedented period. That means allowing people to “show up with their vulnerabilities,” in the words of one HR leader, which can create stronger bonds and build honesty and authenticity.
Honesty and authenticity were recurring concepts HR leaders brought up in our discussions, noting that HR leaders need to develop these values in themselves as well as foster them among employees. As leaders of the people agenda at a time when employees have become accustomed to interacting only via a computer screen, human resources leaders should take feedback from multiple stakeholders on how they can improve the employee experience and culture as the workplace ecosystem continues to shift.

Finally, HR leaders need to ensure that company executives understand the new world that employees are navigating. There is seismic change afoot, and if corporate leaders still interact with their workforces through a pre-pandemic lens, they may find that workforce unresponsive. In that way, human resources can be the mediator for a new era of workplace dynamics.

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