The ‘S’ in ESG in action

The 'S' in ESG stands for Social. It concerns a company's relationships with its employees, the residents of its communities, and governments. A strong ESG (environmental, social, and governance) strategy also helps firms build and maintain a more engaged and sustainable workforce. The social side is about the impact a company has on various stakeholders. Some of the social factors of ESG include: Labour practices: This includes things like employee pay, benefits, working conditions, and discrimination. Human rights: This includes things like child labour, forced labour, and discrimination. Community relations: This includes environmental impact, charity donations, and local business support. Governance: This includes things like board diversity, executive compensation, and shareholder rights. Companies with strong social practices are more likely to be successful in the long run. They are also more likely to be resilient to shocks, such as changes in consumer preferences or government regulations. Here are some examples of how companies can improve their social performance: Pay their employees a living wage. Offer comprehensive benefits, such as health insurance and retirement plans. Provide safe and healthy working conditions. Prohibit discrimination and harassment in the workplace. Support local communities through donations and volunteerism. Adopt sustainable practices that protect the environment. Below are some examples of organisations that have embraced ESG as a principal to find and retain talented people. Microsoft Microsoft has over four decades of experience as a leading technology company, with over 180,000 employees worldwide. The global giant continues to spread its mission and vision of social responsibility alongside employee engagement and development. Microsoft has backed its stance with an official sustainability report created with Global Reporting Initiative (GRI) Sustainability Reporting Standards and approved by the United Nations. Nonprofits are a priority across Microsoft’s sustainability efforts, with multiple initiatives that facilitate the practice of “giving back.” These include a cloud system where users create and manage scalable missions that accelerate positive outcomes with industry-specific strategies. Nonprofits who benefitted from Microsoft’s cloud include the Arthritis Foundation and Team Rubicon (a natural disaster relief initiative). On employee engagement, Microsoft maintains an inclusive approach, providing talents with equal opportunities to succeed by addressing racial injustice, leveraging AI for accessibility, and providing skills training for continuous employability through the pandemic and beyond. Paypal Holdings, Inc. Global payment processor Paypal Holdings ramped up ESG initiatives during the initial pandemic wave in 2020. Dan Schulman, president and CEO of Paypal, wrote in the 2020 Global Impact Reports, “We must work together and develop new opportunities to collaborate across the public, private and nonprofit sectors to advance our shared ESG priorities. This sense of collaboration and purpose informs all of our actions at PayPal.” The company maintains a healthy connection between profit and purpose, with decentralised management of ESG matters. Paypal released 2021 materiality assessment updates, focusing on employee wellness support, data privacy, diversity, inclusion, equity, belonging, and climate change. Paypal joined the UNGC (United Nations Global Compact) initiative in 2020, encouraging businesses to adopt socially responsible and sustainable policies in line with the UN’s 17 SDGs. The company actively supports 11 of the 17 goals outlined with the SDGs, prioritising employee well-being in response to the pandemic’s current and future impacts on the workforce. Alphabet Inc. Google’s parent company maintains a vast ESG portfolio, spanning sustainability, data security, environment, supply chain, and work commitments. Google has retained leading positions in Fortune’s 100 Best Companies to Work For. The tech giant provides a safe and inclusive environment where employees may freely access a diverse range of facilities and services (i.e., gourmet catering, onsite childcare, health insurance for part-timers) while creating new opportunities for people worldwide. At the environment level, Google aims to go carbon-free by 2030 while managing a Google.org Impact Challenge that funds companies with innovative ideas toward sustainability and offers customised post-funding support. Additionally, Google maintains ongoing environmental initiatives such as measuring/studying the air quality in European countries and running an ongoing ecological resilience project to restore ecosystems affected by the construction of office parks. Google strives to give back to groups beyond the industry by collaborating with policymakers, community leaders, and educational institutions. Nvidia Graphics design company Nvidia features a highly innovative corporate responsibility program that extends to multiple sectors such as healthcare and emerging markets. The MNC takes on a people-first approach through the innovative advancements of AI. For example, Nvidia empowers employees to give back to communities via its Inspire 365 Initiative. The company matches employees’ personal gifts all year round and encourages staff to volunteer during off-hours. Additionally, Nvidia involves employees from the onboarding stage, presenting them with donation vouchers for a charity of their choice and monthly challenges for acts of kindness across various settings. Based on Nvidia’s 2021 Financial Year Report, the company has successfully contributed more than $25 million through its combined donation efforts, collaborating with over 5,000 nonprofits across 50 countries. Home Depot Home Depot is the largest home improvement retailer in the US, dealing with many wood-based products. The company practices a strict ESG policy, aiming to reduce carbon emission by 50% by 2025, according to Science-Based Targets initiatives (SBTis). Additionally, Home Depot prioritises people development and fostering a sense of community across all roles. The company aims to create additional career advancement opportunities for front-line staff by 2023 and launch a supplier program that encourages diverse resources. Strong ESG creates a happier workforce A strong ESG empowers workers to contribute beyond their scope of duties, leaving a lasting positive impact. Therefore ESG is an influential factor that improves overall employee satisfaction and retention. Companies with established ESG progress will likely attract prospective talents and an undisrupted flow/succession of talented people. While environmental initiatives serve as a crucial component in ESG policies, companies need to balance community and governance aspects. The competitive work landscape requires a holistic approach that engages employees across different prioritised responsibilities. ESG creates a happier workforce and companies need to embrace this idea. ESG policies will remain vital for an organisation’s success as governmental reforms (e.g., the American Job Plan) and outspoken social media outlets (e.g., Reddit communities) influence business decisions. According to Mercer, generational changes in the workforce will also account for greater priority in ESG strategies. Millennials and Generation Z will make up most of the workforce by 2029. These emerging demographics tend to have greater environmental and societal concerns than previous generations. Ultimately, adopting and improving ESG initiatives will keep people happy, and a more satisfied workforce will likely go the extra mile toward driving organisational success and excellence.

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ESG Strategy and Governance

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Overview of Corporate Governance

AI Governance

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The ‘S’ in ESG in action

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