Is your HR Team ready to take the lead on ESG?

Is your HR team ready to take the lead on ESG?

When it comes to Environmental, Social and Governance (ESG) issues, the strong focus on financial reporting may lead HR teams to assume this is the realm of investor relations, regulatory or reporting teams. But did you know that emerging ESG regulation has wide-reaching implications for organisational culture, workplace environments, health and safety and diversity and inclusion? 

Environmental, Social and Governance

In recent years ESG has come to the top of the organisational agenda. Companies worldwide hear from their customers, investors and staff that it’s not simply the products, services and profitability of their business that matters - but the way those products, services and profits are generated. 

This sentiment is shared by global regulators, informed by a range of factors. These include international climate change and human rights agreements and the 2030 Agenda for Sustainable Development adopted by all United Nations Members in 2015. While initial ESG regulation focused squarely on environmental financial reporting, contemporary regulation is much broader. For example, the European Union’s Corporate Sustainability Reporting Directive (CSRD) set to be implemented on 1 January 2024 specifically requires companies to make quantitative and qualitative disclosures about their culture, workforce, workers and communities. 

With regulation in markets such as the USA and Australia set to follow suit, it’s no surprise that KPMG’s 2023 survey of what keeps Australian CEOs awake at night showed that 35% list dealing with evolving regulatory processes, reporting changes and impacts as one of their top five concerns. 

Addressing CEDA’s State of the Nation conference in June 2023, ASIC Chair Joseph Longo said: “Our message is clear. Firms should be well advanced in embedding robust corporate governance practices ahead of more rigorous reporting requirements...Preparation for that should be starting now.”

It’s clear that HR Directors and their teams have a vital role to play in preparing Australian businesses and their people to meet – and exceed – emerging ESG standards. 

 How can HR functions embrace ESG?

So what are you noticing? Perhaps your organisation has appointed an ESG lead or team, or perhaps this work has already landed on your list of projects? Of course, there are many reasons why HR functions are incredibly well-credentialed to lead in the ESG space.

The social dimension of ESG sits squarely in HR’s sweet spot. Our teams are already implementing diversity equity and inclusion initiatives, taking the lead on employee and labour relations, managing executive compensation, and driving community initiatives. We are often the cultural carriers of our organisations, shaping and embedding the organisation’s approach to values-driven, transparent, and ethical behavior.

Further, ESG is a critical element of employee value propositions. Employees increasingly make career decisions based on an organisation’s ESG and DE&I frameworks and whether an organisation is a right fit with their values.

While HR is well placed to lead on aspects of ESG, we should also be guiding our organisations to strongly embed ESG changes into all aspects of business and people processes. 

Having our people understand the following ESG fundamentals creates enormous value for our organisations centered in:

Governance – Reporting standards continue to evolve at a rapid pace with Australian and international governance authorities focusing on areas of ESG with a view to tighter regulation and management. 

Investment – A recent McKinsey report found that ESG-oriented investing has experienced a meteoric rise. Global sustainable investment now tops $30 trillion—up 68 percent since 2014 and ratings agencies like Bloomberg and S&P give companies ESG scores all cement the thinking that ESG is more than just buzzwords.

Profit – Effective ESG initiatives can significantly impact the bottom line through elimination, recycling, reduction in raw materials and green technology.

Reputation – While getting ESG fundamentals right effectively enhances your EVP, one only has to look at recent years' reporting on businesses such as Volkswagen or Deutsche Bank to understand the impact on reputation that a serious ESG misstep can have on destroying company value.

Where to begin?

Talent Victoria’s recent report “Sustainability Awareness to Action” found that 44% of companies trying to achieve more in their ESG agenda said a lack of company-wide education around personal impact was the main challenge.

No matter where you are in your ESG journey, one easy thing to do is to align learning programs to your goals. Getting your team up to scratch on the fundamentals of ESG provides a level playing field for everyone to contribute and drive success in your ESG strategy through a short micro credential course like CEDA’s ESG fundamentals.

CEDA (Committee for Economic Development Australia) is an independent, membership-based think tank. As part of our mission to achieve sustainable long-term prosperity for all Australians we offer Learning courses that develop critical thinking, build leadership acumen and knowledge particularly in the space of public policy, economics and ESG. 

Upskill your entire team to learn ESG fundamentals. Talk to us today about bulk enrolment pricing offers. CEDA members receive additional discounts. 

Download the full course overview or contact CEDA’s Education Lead, Danielle Jones on 0405 429 355.