ESG - An Essential Business Strategy

Author: Laci Loew

The visibility of and organizational investment in an environmental, social and governance (ESG) plan is rising steadily. The environmental component has led in terms of attention, but other components are rapidly gaining in importance, particularly the social dimension - which puts people first in just about everything. Social authority includes people dimensions like pay equity, inclusive culture, holistic well-being, employment brand, flexible working, community support, human rights, board diversity, talent democracy and employee voice - factors for which Human Resources has direct responsibility and influence. As ESG goes mainstream, HR and other business leaders are interested in knowing the business-rooted, strategic justification for ESG, its role in organizational decision-making, and how to get started with an effective strategy.

The strong foundation for effective ESG strategy is stakeholders' belief that an organization is acting in ways that are fair, reasonable, sustainable, and trustworthy. Reaching that level of maturity is a journey, and leaders should expect to face trials along the way. By getting ahead of issues and building social authority into business and people processes, organizations mitigate operational risks, build in financial benefits, and create long-term value for all stakeholders, with a special focus on the workforce first. See Figure 1.