Meeting benchmarks for environmental, social and governance standards can be a gateway to success rather than an impediment when approached with a people-friendly strategy.
That was the consensus during a virtual preview event Monday ahead wealth‘s Most Powerful Women Summit next week. A handful of Fortune 500 executives discussed how their companies are progressing to meet these standards and use them as growth opportunities.
“ESG is supposed to be the intersection of profit and purpose, right? So it’s not just about doing good for the world, planet and society, it’s about making you a better company,” said LaFawn Davis, senior vice president of environment, social and governance at Indeed.
ESG goals are relatively new to Indeed, the jobs hub. The company only announced its ESG goals last year, but Davis said employees have already adopted those goals and integrated them into their day-to-day work.
“Every single employee is a shareholder,” Davis said, adding that it helps those employees see the value in meeting benchmarks that keep investors happy. “It all just kind of paints the picture for them that it’s not just about the fact that there’s honor in this work and they feel connected to the mission, but there’s also this shareholder value that they understand now because they there are [shareholders].”
One way of looking at it, Davis says, is to say that these aren’t just ESG goals — they’re Indeed’s ESG goals.
Another way to gain employee buy-in is to tie those goals to employee compensation. Mastercard did just that recently. Shamina Singh, executive vice president of sustainability and president of the Mastercard Center for Inclusive Growth, said they piloted the program with executives last year before rolling it out to all employees.
“Anecdotally, it was really well received. It came as no surprise to anyone, so we didn’t introduce topics that our colleagues weren’t familiar with,” Singh said. “It wasn’t a huge leap for them to understand that now, we related it more to compensation. But the only thing we’ve done a lot more is we’ve gotten a lot more rigorous in terms of measurement and the metrics and communicating those and then… in terms of education and awareness of how those things affect yours receive individual remuneration.”
Another way to digest ESG goals is to redefine the approach and rationale for setting them. At Citi, Val Smith, chief sustainability officer, said the drive to commit to ESG goals came from multiple directions.
“We made the commitment because our investors asked us to,” she said. “We made a commitment, because we saw these trends among our customer segments, that they made a commitment to net-zero emissions by 2050. And we saw a business opportunity.”
Smith said Citi has restructured portions of corporate and investment banks to help clients transition to low-carbon and zero-carbon business models by 2050.
Lisa Edwards, Diligent’s President and COO, said there has been a wave of companies adopting these goals over the course of the pandemic. In a recent survey, Edwards said the number of respondents who said they had never discussed ESG goals rose from 20% before the pandemic to 4% after the pandemic.
“My question about this is always: who are these 4% and what brick are they under?” she said. “Because it feels like most boards are now saying, ‘This is a constant issue for boards to talk about.'”
Part of that adoption, Edwards said, is how organizations incorporate those goals into day-to-day operations, rather than having goals as benchmarks that aren’t related to the organization’s mission.
One way to integrate those goals is to do what Mastercard did by creating its Mastercard Center for Inclusive Growth. Singh explained that the center uses the company’s assets for social and environmental impact.
“It is up to all of our people and assets to figure out how to ensure our products, our services and our access are aligned with environmental and social impacts,” she said.
Edwards had a pragmatic approach to incorporating ESG goals into companies that might resist simply because it is seen as the right thing to do for the greater good.
“If you can’t do it, do it because it’s the right thing for the business and it’s strategic,” she said. “And you have to think about the risk factors if you don’t, both for the long-term sustainability of the business and for some of the short-term risk management measures.”
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