The Inner Voice for ESG

The inner voice for ESG

Over the last few years, shareholders have ratcheted up the pressure on financial services companies to become more eco-friendly and sustainable.

Environmental, Social and Governance (ESG) activists have pressured boards to move away from investments linked to carbon-based fuels and have also encouraged companies to cut carbon emissions and set net-zero goals.

Two activist-related events in May 2021 set a growing trend. A court case in the Netherlands, Europe, asked Royal Dutch Shell to strengthen its efforts to cut carbon emissions by 2030. The other, in Texas, USA, Exxon Mobil, saw small investors obtain three seats on the board after a proxy fight to further incorporate climate change measures in its business strategy.

But as well as action from outsiders for businesses to become more sustainable and promote diversity, there is also an inner voice for ESG, an iResearch Services survey of 550 industry professionals suggests.

Nearly half (48%) of business leaders questioned in the Sustainability Snapshots: How Sustainable Is Financial Services? report said their employees would work harder for a business if they thought it was operating sustainably.

It is recognised that well-integrated and engaged employees are more productive and loyal than others – and sustainability is a key issue for some of the workforce. Employees want to work for companies that mirror their values and who are ‘doing good’ in ESG issues. Major companies, including Google, Walmart and Marks and Spencer, have run employee sustainability schemes where workers can choose who they want to help. Other companies run education programmes to help employees understand the importance of ESG.

The World Economic Forum says a new era is emerging, where Sustainability has become a key source of competitive advantage in business.

“Success will be determined by the ability of leadership teams to transform their organizations via the twin engines of technology and sustainability. This change demands a new set of individual and organizational capabilities that fuse environmental and social impact with shareholder value.”

The bonds between sustainability and financial performance are strengthening, it adds. “Leadership teams see revenues growing where they build products and services to address social challenges. They see costs falling when they increase employee engagement and use resources more efficiently. Their organizations thrive in environments which foster compassion, loyalty and trust.”

In the current employment market, where it is increasingly difficult to find appropriately skilled and qualified staff, companies who pursue ESG goals are at a clear advantage, the Sustainability Snapshots survey suggests.

One in three (35%) said being sustainable was also likely to attract more candidates for jobs. This figure rose to around 50% in respondents from the UK, India, China and Australia.

Business leaders taking part in the Sustainability Survey mentioned other benefits that sustainability can bring including:

• Improved profitability
• Additional customers
• More favourable marketing and media coverage
• ‘Future proofing’ – -minimising shocks of future events.

Antonia Blackwell, a professional support lawyer at UK law firm, Shoosmiths, says employers will need to address ESG to attract and retain the best talent in the future. Employers will look to gain more benefits from ESG initiatives both in and outside of work, she tells the employeebenefits website.

“Will we see employers contributing to the cost of solar panels on an employee’s home, for instance? There is a growing drive towards ‘green incentives’ such as cycle-to-work, e-vehicle schemes and workplace charging points for e-vehicles, and such benefits will only increase in popularity.

“Employers also need to consider how they source tools and resources for their employees; how uniforms are made and with what materials will be important aspects of any sustainability strategy.” This support will need to go beyond work and some employers are already providing mental health training and resilience workshops as part of their ESG initiatives.

To address inequalities and sustainability issues in India, where iResearch has a large presence, we launched the Giving for Good Foundation (GfG) in 2021. Read some of the stories of communities benefiting from the foundation’s work and how it’s inspiring employees to make a difference.