With concerns about climate change and the urgent need to build more diverse and inclusive workforces at the forefront of many business leaders’ minds, an increasing number of firms are moving past the once widely held notion that making money is the “one and only” social responsibility they have.

These days, driven in part by rising interest in sustainable investing, companies are increasingly pledging to take action on climate, social and other issues by following recently established Environmental, Social and Governance (ESG) standards. 

You may have heard buzz in recent years about ESG. But what exactly is it? And why should ESG matter to HR and talent acquisition professionals? In this post, Indeed’s Senior Vice President of HR Paul E. Wolfe, Group Vice President of ESG LaFawn Davis, and Global Head of Social Impact Abbey Carlton, share their insights on these and other ESG questions.

What is ESG?

In 2005, the then United Nations’ Secretary-General Kofi Annan invited a group of large institutional investors to help develop the Principles for Responsible Investment (PRI). PRI led to the U.N.’s 2030 Agenda for Sustainable Development in 2015, which detailed 17 Sustainable Development Goals (SDGs) to help organizations play their part in ending poverty and hunger; achieving gender equality; and combating climate change, among other goals. 

Thus Kofi Annan is often considered the father of ESG. But how does it play out in business?

“ESG is a set of criteria that investors use to evaluate and assess how a company’s environmental, social and governance performance will affect its financial performance,” Davis explains.

The ‘E’ (environmental) pillar represents sustainability, which is about making the world and our environment better through a company’s actions, business procedures and products. 

The ‘S’ (social) pillar is about the work a company does in the areas of diversity, inclusion, belonging, social impact and, in some cases, in artificial intelligence (AI) ethics. 

Last, the ‘G’ (governance) pillar reflects how an organization operationalizes and measures the work it does within the other two pillars. 

Why is ESG important for talent attraction and retention?

According to global management consulting firm McKinsey, “a strong ESG proposition” helps attract and retain quality employees.

But why? 

“Employees place much more importance on environmental and social concerns than previous generations have,” says Wolfe. “They expect more from employers on these issues. And they're going to hold you accountable for what you’re doing or not doing in these areas.” Therefore, if your organization isn’t taking measurable action on environmental and social issues, it risks alienating valuable employees and job seekers, he adds.

For example, one study estimates that by 2029, millennial and Gen Z employees will comprise 72% of the world’s workforce versus 52% in 2019. Another study finds that 93% of corporate employees under 30 believe that the more environmentally responsible their employers are, the more loyal they’ll be as employees. 

Diversity and inclusion are also key values for many in today’s labor market. A September 2020 Glassdoor survey finds that 76% of employees and job seekers believe diversity is an important factor when evaluating companies and job offers. Consequently, 97% of enterprise employers say they plan to focus on diversity, inclusion and equity in 2021, according to Indeed research.

How does ESG differ from corporate social responsibility?

Corporate social responsibility (CSR) programs haven’t always been tied to a company’s core mission and business operations or had clearly defined, measurable goals, Carlton says. Also, there’s been a great deal of variation among company CSR programs. “That’s made it hard to compare CSR programs to get a uniform understanding of what’s happening overall,” she explains.

In contrast, Carlton says ESG programs are usually tied to a company’s core mission and business practices; contain clearly defined and measurable goals; and are easier to compare across companies and industries because they’re often based on widely accepted ESG standards, such as those set forth by the U.N.

What are some examples of company ESG goals?

At the recent Indeed Interactive 2021 conference, Davis formally unveiled Indeed’s ESG goals, which include helping 100M job seekers get hired and shortening the duration of the job search by 50%.

A few examples of other companies with publicly shared ESG goals include:

Dell Technologies. The U.S.-based technology leader vows that by 2030, 50% of its global workforce and 40% of its global people leaders will be women and 75% of its electricity usage will come from renewable sources.

Vodafone Group. The U.K. telecom giant pledges to cut in half its environmental impact by 2025 and connect over 250 million people to “next-generation networks” by 2025.

Volkswagen Group. The German automaker plans to seek shareholder approval this year to link top executives’ bonuses to its ESG targets, among other initiatives.

What are some ESG best practices?

The following recommendations from Davis can help you achieve success with ESG goals, strategy, communications and reporting.

  • ESG goals should be quantitative and linked to baseline and target dates, be measurable and have a clear deadline by which the goal should be achieved.

ESG goals should be big, ambitious and bold — think aspirational versus incremental. They should be unique and not easily replicated. And they should be connected to your business goals as well as to societal needs.

  • ESG strategy should be embedded in your company’s overall strategy and operations and be related to initiatives throughout the entire company rather than being a standalone set of goals. Your strategy should also clearly establish actionable milestone metrics. 
  • ESG communications are most successful when seamlessly integrated into your narrative across all company communications platforms. You don’t want to just shove something about ESG in the bottom of your emails.
  • ESG reporting should measure value creation and return on investment, be reliable and be subject to auditing.

“Remember, ESG goals are public-facing goals,” Davis says. “So make sure the process for reviewing progress towards your goals is rigorous so you can ensure your reporting is transparent, accurate, reliable, complete and timely.”

The time for action is now

“The time for leaders to simply acknowledge and accept their organization’s social responsibilities has come and gone,” Davis says. “Now is the time for action.”

All of us, as individuals, as employers and employees, and as HR and TA leaders, have some significant challenges ahead. ESG initiatives can help us face them. 

But more than anything, Davis suggests keeping in mind the following words from Kofi Annan, spoken in 2006 in his last days as U.N. Secretary-General — words that helped inspire the ESG movement:

“We are not only all responsible for each other’s security. We are also, in some measure, responsible for each other’s welfare. Global solidarity is both necessary and possible.”

(Editor’s note: This article was inspired by a Leadership Connect session on ESG at Indeed Interactive 2021. Learn more about the Leadership Connect program for VP+ executives in HR and TA.)