ESG’s Pertinence for the HR Function By Chris Davis

ESG focused squarely on the financial investment environment in the past. Nowadays, employees, job seekers, and a wider range of stakeholders form an increasingly important audience for ESG issues. So what does this mean for the HR function? As organisations look to translate their ESG vision into tangible strategies, they are also depending on the HR function to communicate their initiatives to job seekers and employees, who expect the companies to perform a more meaningful part in society.

For the Q2 2022 issue’s Spotlight cover story, we have invited organisations from different industries to share their insights on which aspects of ESG hold the most relevance for the HR function, how ESG strategies can be implemented effectively, and the various ways that ESG practices can be leveraged to establish a talent recruitment advantage amid keen competition and brain drain.

When it comes to identifying and setting ESG strategies, Honnus Cheung, Co-founder and Chief Strategy Officer of fintech voucher solution and incentive marketing platform Mojodomo Group (Mojodomo), recommends clarifying some key concepts first. The starting point, Cheung suggested, should focus on identifying what ESG means to the organisation, which can differ widely across sectors and even among corporations within the same industry. “ESG is a broad concept and organisations need to decide which ESG themes should be prioritised, what results are being targeted, and what outcomes to expect,” she said. Taken together, E, S, and G are the three central pillars used as a barometer to measure the way a company approaches and handles sustainability, ethical issues, and employee relations.

Under the ESG umbrella, it is mainly the “S” or “social” topics that fit in the HR function’s operational landscape. ESG HR social topics comprise a broad range of people issues that cut across talent acquisition and retention, employee engagement and wellbeing, as well as diversity, equity, and inclusion. With the COVID-19 pandemic altering the notion of “workplaces” and how people work, hybrid and work from home arrangements have evolved to become a part of the social aspect of ESG.

According to Cheung, as the direct interface between management and staff, the HR function is essential in getting across the organisation’s ESG narrative and ensuring the “right” ESG talent-related policies are put in place. “ESG-focused work practices are no longer just a ‘nice-to-have’. They are fast becoming a fundamental part of an organisation’s employee proposition brand,” she said. As such, Cheung noted with companies being scrutinised by employees and society at large, businesses which adopt ESG principles to benefit their workforce will be better positioned to attract and retain a talent pool which stands out for its diversity.

Strengthening the HR function’s ESG capabilities

As ESG cements its place on the corporate agenda, to ensure HR practitioners are kept in the know of its practices, Cheung suggested they could join seminars, webinars, and training programmes offered by ESG specialists. The HR function could also encourage and facilitate interdepartmental exchange of ESG knowledge and experiences. By deepening their ESG understanding and capabilities, Cheung believes that working with senior management put HR practitioners in a stronger position to develop tangible ESG concepts with measurable key performance indicators.

“ESG planning and implementation is a co-creation process,” Cheung said. The aim is to holistically embed ESG into corporate strategy and daily practices. “When you build up ESG knowledge and connections with employees, you can inspire them to think about how the organisation can operate more efficiently, which fosters workforce morale as well,” she said. This comes at a time when it has become apparent that people are passionate about working for a company that is purpose-led and pays close attention to the evolution of ESG concepts.

In a Q3 2021 Mojodomo white paper survey titled Asia’s Workforce Awakens to ESG, more than 90% of the respondents stated how it is important that the ESG values of the organisation they work for are relevant to their own values. Research indicated that millennials and the Gen Z populace — who will comprise the majority of the workforce by 2030 — are often willing to accept a relatively lower salary to join a company that demonstrates a clear ESG vision. “The younger generation want to work for companies with strong ESG values where they can feel that they are contributing to the greater good,” Cheung noted.

Where to start on the ESG journey

Effective ESG human capital planning begins with focusing on workforce issues as a part of the long-term business strategy. As the adoption of ESG factors gathers momentum, the demand for talent with ESG expertise, such as analysts and strategists, has never been higher. Furthermore, while Hong Kong’s borders remain tightly controlled due to the relentless COVID-19 pandemic which has lasted for over two years, talent acquisition teams can no longer rely on hiring candidates from overseas. To tackle talent shortage, Cheung pinpointed that the HR function needs to be innovative and resourceful. For example, building the organisation’s ESG talent pool internally could centre on personal potential and suitability, instead of focusing on specific experience and qualifications.

To accelerate ESG learning, digital platforms can serve as a useful resource in enabling existent talent to boost their ESG knowledge and capabilities. Digital solutions can be particularly helpful for organisations that operate with a hybrid or remote working model, Cheung noted. Employee networks also provide a useful tool for elevating employees’ sense of inclusion. Importantly, she pinpointed, feedback and data collected as a part of an ESG initiative can be harnessed to enhance corporate culture and employee engagement.

Meanwhile, to encourage employee participation and interaction, gamification can inject an element of fun in ESG-related training. A virtual world setting can also allow employees to visualise the company’ ESG targets and simulate making progress and creating impact. Another approach could include leveraging existing communication channels to develop an ESG knowledge baseline and invite employees to choose learning plans based on organisational goals and personal interests. While these may seem like insignificant steps, Cheung pointed out that they can help to build an ESG-conscious workforce, and lay the groundwork for future ESG objectives in the process. “An engaged workforce is critical to turning corporate ESG pledges into focused, sustained action,” said Cheung.

Third party expertise

For organisations seeking help for their ESG objectives, Cheung advised working with a consultancy company equipped with expert knowledge in the specific ESG areas on which they wish to work. Furthermore, to ensure an alignment of values and a healthy working relationship, the companies should treat the consultancy firm as a part of the ESG team. Significantly, Cheung stressed that clear, concise, and measurable project goals with milestones should be put in place.

As ESG continues to grow as a cornerstone for business success in the long run, there has never been a more crucial time for the HR function to chart a pathway with ESG as a value driver of talent development.