Stakeholders are becoming increasingly interested in companies that value ethical business practices. From employees to investors, people are looking for businesses that adhere to strict environmental, social, and governance (ESG) criteria. In the following, we will explore the importance of an ESG program as well as how to strengthen your program with the help of your employee hotline.
Third party agencies provide ESG ratings to businesses based on their own strictly defined ESG criteria. The Balance article, “What are Environmental, Social, and Governance (ESG) Criteria?” by Paul Nolan explains, “The ESG screening process identifies companies that have built sound environmental practices, strong social responsibility tenets, and ethical governance initiatives into their corporate policies and everyday operations.” Let’s examine the primary considerations for each of the three components of ESG.
Environmental Considerations are focused on a company’s impact on the natural environment. Does the company use sustainable practices? Does it implement practices that will reduce waste and conserve natural resources? Does the company pose any specific threats to the environment such as the release of toxic emissions? As we become increasingly aware of how human activity harms the environment, stakeholders are holding businesses accountable for adopting eco-friendly practices.
Social Considerations include a company’s business relationships and treatment of its employees, customers, investors, and community. Does the company partner with suppliers who also have high ESG standards? For example, if the company claims to value equitable practices, do they partner with suppliers who pay their employees fairly? Does the company promote employee health and safety? How does the company promote diversity and inclusion? People want to support companies whose social practices align with their values.
Governance Considerations are focused on how a company is lead. Does the company promote transparency and take preventative measures to combat unethical/illegal practices? Is there a diverse board of directors, and are there any conflicts of interest? Are shareholders able to vote on important issues? Stakeholders look for companies whose commitment to doing what is right starts at the top.
Benefits of ESG
Having a strong ESG program comes with benefits beyond ensuring that your company handles environmental, social, and governance matters ethically. In fact, adhering to ESG criteria can help your company gain investors and high-quality employees.
The Investopedia news article, “Demand for ESG Investments Soars Emerging From COVID-19 Pandemic,” by Kara Greenberg reports that in a survey conducted by Investopedia and Treehugger, 67% of respondents claimed that they plan to invest more in companies with strong ESG initiatives over the next five years. In the same survey, 72% of respondents indicated that they would like to invest in ways that align with their values.
According to the 2020 Marsh & McLennan Advantage Insights report, “ESG as a Workforce Strategy,” employers with the highest employee satisfaction and attractiveness to talent ratings had significantly higher ESG scores than their peers, which indicates that a commitment to ESG criteria may help businesses recruit and retain talented employees.
ESG and Your Hotline
Given the numerous benefits of following ESG criteria, how can you use your employee hotline to strengthen your ESG program? Simply put, ESG programs and employee hotlines serve a common purpose: to promote ethical workplace practices. Employees who value working for companies with high ESG rankings can play a critical role in strengthening your ESG programs. Once your company launches initiatives to improve your environmental, social, and governance practices, it is up to all members of your organization to follow through and ensure compliance. Having a well-publicized hotline in place empowers employees to speak up against noncompliant and unethical behaviors, ensuring that your company achieves its ESG goals. In turn, this increases stakeholder interest in your company.
Want to know more about encouraging people to speak-up? See our article here.