Workers, now more than ever, are attuned to environmental, social, and governance (ESG) issues, focused on how businesses approach them, and interested in companies that embrace these values. Not only that, it is estimated that, by 2029, millennials and Gen Z – who place greater importance on ESG issues – will make up 72 percent of the world’s workforce. That is a massive increase from 2019, when these generations comprised 52 percent of the workforce. Coupled with a large talent scarcity, this has massive implications for employers of all types.
It is therefore vital for complex manufacturers to understand the importance of ESG, not just in terms of hot-topic issues like the climate, but in its entirety. Additionally, employee engagement, including turnover rates, is an ESG issue. As such, an ESG program for complex manufacturers would, by default, include employee engagement as a material issue.
These are not issues that can only be solved within your organization’s four walls. By also addressing their supply chain impacts, companies can create trustworthy and green-washing- proof communications and disclosures that both attract and retain top talent in the worldwide employment market.
What Is ESG?
Very simply, ESG encompasses environmental, social, and governance issues.
Environmental issues can include everything from the energy your company consumes and the waste your suppliers discharge. Climate change and carbon emissions fall under this banner.
Social issues cover the impacts of companies on their employees, supply chain workers, customers, the communities in which they operate, and society at large. It includes topics like diversity and inclusion and child labor in the supply chain.
Governance issues encompass the internal mechanisms an organization uses to govern itself. How a company makes decisions, complies with the law, and meets stakeholder needs are important aspects of these issues, too.
The Modern Worker – Attracting and Retaining Top Talent
Top talent is very focused on ESG issues, particularly millennials and Gen Z. Considering their increasing annual growth in the global workforce, it is important to understand what these workers are looking for, what they value, and how that affects their employment decisions.
For instance, according to the World Economic Forum’s 2020 Global Risks Report, respondents cited extreme heatwaves and the destruction of natural ecosystems as clear concerns. Additionally, for the first time in the survey’s history, climate issues dominated the 10-year outlook, with issues such as extreme weather, climate action failure, and natural disasters being listed as likely risks.
Given these concerns, top talent wants to work with organizations that are both cognizant of these issues and actively working to address them. That can take the form of lowering energy consumption, attracting customers with sustainable products, and avoiding investments that may have long-term environmental drawbacks.
That’s just one piece of the puzzle, though. Top talent also wants to work for companies that embrace diversity and value team contributions. Important factors can include the racial and gender balance within a workplace, particularly in terms of leadership. Furthermore, companies that look for inclusion gaps can address these concerns on a dynamic basis, benefiting not just talent recruitment, but also employee satisfaction.
Employee satisfaction naturally encompasses both governmental and social issues. In fact, studies have shown that employees who perceive the impact of their work on its beneficiaries have more motivation to act in a “prosocial” way. In a recent study, an Australian bank found employees who were randomly given bonuses in the form of charitable donations from the company expressed greater job satisfaction than those not selected.
Additionally, a 100-person U.S. organization that pays an average salary of $50,000 could spend anywhere from $600,000 to $2.6 million on turnover and replacement costs. In other words, retaining employees is good both for company morale and for business.
Business Benefits of Supporting ESG Issues
Since both recruitable talent and active employees are focused on ESG issues, the business as a whole benefits from programs that address these concerns. Not only can certain actions – like reducing emissions and attracting customers with sustainable products – affect both cost reductions and top-line growth respectively, but it’s more cost-effective to retain productive employees than to hire new talent.
How To Create Good ESG Programs
Good ESG programs show not just support for these issues, but also a company’s actionable efforts to retain market growth.
When recruiting talent, a potential employee may be interested in a company that is attracting business and customers who have more sustainable products. Conversely, existing employees may balk at a company that loses customers due to poor sustainability practices – especially with respect to the environment, human rights, and other pertinent issues.
What Greenwashing Is & How To Avoid It
Greenwashing, put simply, is a deceptive marketing tactic that makes unsubstantiated claims about environmentally-friendly products or a company’s environmental performance. It is generally used to trick a customer into believing that a product, service, or mission has more of a positive environmental impact than it actually does.
Not only is greenwashing bad for customers, but it can also devastate an employee’s perception of their company. Employees are not fooled by greenwashing and the tactic can lead to decreased morale and increased turnover, thus eventually costing companies more in the long run as they are forced to recruit new talent. It can also damage a company’s employment brand, as bad business practices can become fodder for discussion among disgruntled employees.
One of the simplest ways to avoid greenwashing is to use hard data instead of broad language. For example, instead of saying your company is “green”, utilize data to show reduced carbon emissions.
Accidental greenwashing affects both employee morale and public perception. Learn how to avoid it in our guide.
The Bottom Line
Modern talent is highly attuned to ESG issues, both on a personal and professional level. Therefore, recruiting and retaining quality employees, especially considering the current talent scarcity, requires manufacturers to be cognizant of ESG issues and to be proactive in creating programs that are transparent and actionable.
Studies have also shown that companies with higher ESG scores also have higher employee satisfaction and attractiveness. Moreover, satisfied employees tend to be more productive, work harder, and stay with their employers longer. They can also solidify the talent pipeline.
High performing workers are indispensable to any company, and successful ESG programs can be a key factor in attaining and retaining those workers.
Since the majority of a manufacturer’s ESG footprint is hidden in its supply chain, a deep, comprehensive view is needed – both to identify potential ESG issues and to create impactful solutions. If you would like to learn more about how Assent can help you attain a deep view into your supply chain, contact us at info@assent.com.
