3 ways to engage employees as strategic ESG partners

Photo by Romain Tordo on Unsplash

The pressure is on for companies — pubic and private — to take environmental, social and governance (ESG) concerns seriously. Investors want to see it, customers want to know about it. No matter what their size, companies should take steps to begin encouraging, monitoring and reporting on ESG initiatives.

Employee engagement is essential to realizing ESG goals. While the sense of purpose, prioritization and oversight comes from the top, to integrate ESG companies need to work on employee buy-in. But efforts to engage employees shouldn’t stop there. Employees can also be leveraged as a key partner. Companies should ensure a culture of innovation, goal setting and decision-making responsibility in order to leverage employee engagement to reach their ESG goals.

ESG reporting: Don’t miss the boat

ESG reporting is now mandatory in several countries. The European Union is moving forward on mandatory disclosures for human rights and environmental due diligence and pay transparency requirements for private and public companies. Federally incorporated companies in Canada have limited requirements, but they now do need to disclose certain diversity information. If a company isn’t proactive with ESG reporting, ratings agencies may do the job instead and not always well.

Mandatory or not, it’s in a company’s best interest to invest in ESG reporting:

A few studies also shed light on how ESG interacts with employees. Employee satisfaction is linked to high ESG performers. High ESG efforts and ratings, along with high employee satisfaction, improve financial returns and engaging in ESG can help employees feel more engaged and satisfied. This should encourage companies to gain employee buy-in to make ESG initiatives work.

Opportunities for employee engagement in ESG

Whatever ESG frameworks and strategy a company chooses, employees should be seen as a driver of success. Here are a few ways companies can engage employees in their initiatives:

Environmental: Encourage sustainability through employee-driven innovation

Companies need to focus on long-term sustainability and decarbonization to help slow climate change. For this, piecemeal initiatives — like an employee-driven river clean-up — are not going to cut it. Research shows (1, 2) that companies need to move beyond expert-focused or top-down approaches to “eco-innovation” and engage employees because they pull on tacit knowledge (personal experience and insight) and practice- and consumer-based experiences that help them think creatively about solutions.

Companies can either create an environment where they are responsive to employee suggestions or build formal processes to stimulate employee innovation. Supporting creativity (1, 2), knowledge exchange and an innovative organizational culture are key. Employees that are invested, engaged and encouraged to support sustainability initiatives will help companies make strides towards their environmental goals.

Social: Give employee resource groups (ERGs) support

Employee resource groups (ERGs) are already established in 90% of Fortune 500 companies, many small to medium sized businesses and even non-profits. Many are already set up to support initiatives that help develop and support retention of staff, increase diversity in supply chains and markets and push for diversity, equity and inclusion.

ERGs are a valuable channel for promoting and integrating ESG initiatives. Ideally, ERGs should be measuring the impact of their work. Companies need to co-operate with ERGs to provide the data they need so they can create baselines, set goals and measure impact that will feed into company-wide strategy and reporting.

Governance: Provide board representation for employees

With the continued shift from shareholder to stakeholder capitalism, employees will require dedicated processes to help them engage in high-level company decisions. One common way, which is now gaining traction outside of Europe, is providing workers a portion of seats on the board of directors. This is called co-determination.

Studies show that employee representation is accompanied by higher productivity, profitability and capital investment and benefits a wide range of stakeholders at little or no cost to shareholders. Co-determination also encourages substantive CSR initiatives like emission reductions, job security and reporting. Worker representatives encourage companies to think of long-term needs and goals, which is the required mindset when tackling ESG initiatives.

Put the E-S-G together

Investment in ESG matters. ESG is a good workforce strategy because it can attract and retain talent. But providing the opportunities and culture where employees can be front and centre — having a say, adding to the goals and being creative — will elevate an ESG strategy. Doing ESG right will not only help our communities and provide well-being to employees, but also help to make companies stronger.

Further reading

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Amy Coulterman

Amy Coulterman

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Attempting to link a non-profit mindset to the corporate world. Corporate social responsibility | social impact | Toronto, Canada | https://amycoulterman.com