New data from the Institute for Corporate Productivity (i4cp) shows that companies’ environmental, social, and governance (ESG) commitments have positive impact on business outcomes, but only when progress is being made on those goals. To ensure progress on ESG goals, organizations need the right structure and oversight of sustainability agendas, and HR should be strongly involved to help embed ESG into talent practices.
Where does ESG reside?
Data from i4cp’s research shows that organizations that have made progress on ESG goals have dedicated cross-functional teams or a single office to drive strategy—beyond the board of directors’ role.
In fact, high-performance organizations are nearly 7X more likely than lower-performing organizations to rely on cross-functional teams dedicated to ESG strategy.
Among just those organizations that have made major progress on ESG commitments in the past two years, the following functions are represented on the majority of cross-functional teams:
- 80% included HR as part of that team
- 70% included sustainability
- 60% included legal and public/corporate affairs
HR plays a strategic role
i4cp’s data shows that the more involved HR is in designing strategy in environmental, social, and governance areas, the more likely organizations are to have also made significant progress on their ESG commitments over the past two years. Among organizations that are making major progress on ESG goals, 79% said HR is highly involved in designing strategy for social goals and programs, 29% reported HR is highly involved in governance goals and programs, and 18% said HR is highly involved in environmental goals and programs.
ESG and workforce strategy
HR plays an important role in ESG progress because it is uniquely positioned to embed ESG programs into talent practices and track and measure the outcomes of those strategies. Survey respondents from organizations that purposefully factor ESG goals into their workforce strategies are statistically more likely to report making major progress than those that didn’t.
i4cp’s study also included dozens of interviews with leading HR and sustainability leaders, many of whom underscored the importance of aligning ESG goals to organizational purpose and values as a means of making progress on those commitments. Such alignment drives strategy and helps explain why an organization has identified specific commitments over others. Embedding descriptions about ESG goals, and activities to support them, throughout the employee lifecycle can then make enterprise-wide environmental and social goals tangible and top-of-mind for employees.
More ESG research
i4cp members: read the full ESG Brief for more detail on how organizations are pursuing their ESG goals, recommendations to embed ESG in talent practices, and additional insights from Katheryn Brekken.