The connection between purpose; environmental, social, and governance (ESG) factors; employee engagement; and business results.
It may sound almost too good to believe, but there's a well-established path to enhance employee engagement, elevate financial performance, and contribute positively to our world, all at once.
The cornerstone of achieving these remarkable outcomes lies in directing your attention toward your workplace's environmental, social, and governance (ESG) factors. ESG represents the environmental, social, and governance impacts stemming from your organization's activities. Embracing and optimizing ESG practices is the key to realizing these three interconnected objectives.
Table of contents
- Understanding ESG: An environmental, social, and governance primer
- ESG in the workplace: More than just compliance
- Emerging trends: How ESG is shaping the future of work
- Assessing environmental, social, and governance (ESG) performance in the workplace
- Spotlight on ESG: How leading companies are paving the way
- ESG Trends
- Challenges and opportunities: the road ahead for ESG in the workplace
- ESG – A necessity in the evolving work landscape
- Unlock the power of ESG in the workplace with Great Place To Work Certification
Understanding ESG: An environmental, social, and governance primer
Investors created the ESG framework as a way to consider factors other than financial return when evaluating potential investments.
Before the creation of ESG, investors had no way to account for externalities — the things that did not cost an organization anything, but had a cost to others. For example, a company’s pollution might not negatively impact its bottom line, but would harm the local community.
Defining the 3 pillars of ESG
From those investing origins, three central factors emerged:
- Environmental– How does an action or choice by an organization use energy and other resources, and in what ways does it create waste?
- Social– How does an action affect people in the broadest, most diverse sense?
- Governance– How are decisions made? Are those decisions honest, ethical, and fair?
As ESG has grown in popularity, this framework has come to describe much of how society expects its companies, non-profit organizations, and governments to operate.
Why ESG matters in today’s business world
ESG is big business. The United Nations estimates that the annual global spending by governments and the private sector needed to deliver the world’s ESG-related goals is around $5 trillion a year, or more than 6% of world GDP.
ESG is also a consumer expectation. A study by the IBM Institute for Business Value (IBV) and the National Retail Federation found that purpose-driven consumers (those who choose products and brands based on their alignment to their values) represent the largest segment of consumers, at 44%.
And a Business of Sustainability study by PDI Technologies found that 78% of consumers want to buy from environmentally-friendly companies — but don’t know how to identify them.
ESG also impacts employee behavior. Research by IBM also found that 67% of survey respondents were more willing to apply for jobs with environmentally sustainable companies, and among those who had changed jobs in the past year, roughly one in three had accepted a lower salary to work for a socially responsible or sustainable organization.
ESG in the workplace: More than just compliance
At Great Place to Work®, the ethos of ESG transcends compliance; it's embedded in the organizational fabric.
According to Tony Bond, chief diversity & innovation officer, “Our employees themselves, through employee resource groups (ERGs), are spontaneously responding to crises, like the Maui wildfires, without any directive from leadership. It’s a testament to the organic culture of community support and engagement with ESG values that exist within our workplace.”
This proactive engagement is a direct result of fostering a workplace where the mission and values are clear, and employees are deeply connected to them.
Building a sustainable workforce strategy
A sustainable workforce strategy must go beyond mere compliance and should involve all stakeholders, as Tony advises. This means the entire spectrum of individuals who impact and are impacted by the business — from employees at every level to customers, suppliers, and the broader community.
“Listen and be curious,” Tony suggests. “Understand potential risks through a systematic and continuous way of hearing from people, such as employee surveys.”
Setting a vision and gaining commitment from all levels are critical steps to moving beyond greenwashing.
Greenwashing is a bit like putting a fresh coat of green paint on something that’s not so environmentally friendly at its core. Imagine a company that's more interested in looking eco-friendly than actually being eco-friendly. They might launch big advertising campaigns highlighting their small green initiatives, but behind the scenes, they’re not making significant changes to reduce their environmental impact.
Instead, there are ways to authentically implement workplace ESG, without greenwashing:
- Set a vision. Be clear on what you’re trying to achieve. Vague statements or targets will be called out. It won’t be possible to do everything, so focus on factors you can control.
- Get commitment. From all From the C-suite through to departments, ensure everyone knows what the mission is and how their role fits into it.
- Measure and report regularly. Assess where you’re starting and measure along the way. Set measurable, science-based targets so that you can draw a line between your efforts and results.
- Solicit feedback. Your employees will have opinions and ideas. As will the communities where you operate. Ensure your efforts are making a difference by checking in with those most impacted.
The role of ESG in employee experience and engagement
The correlation between ESG and employee experience is undeniable. “Employees engaged with ESG initiatives feel a sense of purpose that transcends their day-to-day tasks,” Tony observes.
This sense of purpose was clearly demonstrated when Great Place To Work's ERGs mobilized support for the Maui fire crisis, leading to a significant contribution to the relief efforts without a formal prompt from the company’s leadership.
This organic response illustrates the intrinsic value of ESG in fostering a culture of proactive community support and underscores its importance in shaping a company's long-term sustainability and reputation.
Giving employees a clear connection to something important — a purpose that is bigger than an individual role — is an important factor in an organization’s success. In fact, our research shows that when employees say their work has “special meaning,” rather than being “just a job,” they are 56% more likely to experience innovation opportunities.
Emerging trends: How ESG is shaping the future of work
ESG isn’t just about attracting sustainability-savvy consumers — it’s also about securing an employee base that is passionate about the work. ESG is a competitive advantage for both attracting and engaging employees.
The rising significance of social impact
ESG performance is a driver of employee satisfaction and an important piece of what makes a company a great place to work.
A Marsh McLennan study found that employers that have high employee satisfaction and are attractive employment destinations for university graduates tend to have lower carbon emissions, have more diversity, and make a greater effort to understand employee feelings.
Our own research has reported similar results. For example, we’ve found that people who feel their employers make a positive impact on the world are 11 times more likely to say they plan to stay with their organizations for the long haul and 14 times more likely to say they look forward to coming to work.
Assessing environmental, social, and governance (ESG) performance in the workplace
Measuring ESG performance within the workplace involves evaluating how a company manages and addresses various workplace-related factors. Here are key ways companies can measure ESG in the workplace:.
Diversity and inclusion metrics:
- Demographic diversity: Track workforce composition, including gender, race, ethnicity, age, and other pertinent factors
- Pay equity: Examine gender and racial pay gaps to ensure equitable compensation
- Leadership diversity: Gauge the representation of diverse groups in leadership roles and on the board of directors
- Employee resource groups: Monitor the presence and engagement of employee resource groups supporting underrepresented employees
Employee engagement:
- Conduct periodic employee engagement surveys to measure job satisfaction, morale, and a sense of belonging
- Analyze turnover rates and reasons for departures to identify areas for improvement
Health and Well-being:
- Evaluate and track the 5 dimensions of employee well-being with data and benchmarks such as Great Place To Work Certification™
- Assess employee access to health and wellness programs, including mental health support
- Monitor absenteeism rates and employee health outcomes
Training and development:
- Track investments in employee training and development programs
- Measure the effectiveness of diversity and inclusion training and other educational initiatives
Workplace flexibility:
- Evaluate policies and practices concerning remote work, flexible hours, and work-life balance
- Solicit feedback from employees regarding the effectiveness of these policies
Workplace ethics and conduct:
- Monitor the volume and resolution of ethics-related complaints and concerns
- Assess the effectiveness of whistleblowing mechanisms and their usage
Supply chain labor practices:
- Evaluate labor conditions in the company’s supply chain, including suppliers and subcontractors
- Ensure that suppliers adhere to fair labor practices and ethical treatment of workers
Health and safety compliance:
- Ensure compliance with workplace safety regulations and standards
- Implement safety training and reporting systems to prevent accidents and incidents
Employee benefits and perks:
- Evaluate the comprehensiveness and equity of employee benefit packages, including healthcare, retirement plans, and other perks
Workplace sustainability:
- Measure and reduce the company’s environmental impact within the workplace, such as energy consumption, waste generation, and water use
- Promote sustainable commuting options and eco-friendly office practices
Community engagement:
- Track the company's involvement in local communities and charitable initiatives
- Measure the positive social impact generated by workplace-related community programs
Employee rights and labor relations:
- Assess the strength of employee rights protections, union relations, and collective bargaining agreements where applicable
This comprehensive approach allows organizations to measure their ESG performance holistically within the workplace.
Spotlight on ESG: How leading companies are paving the way
Looking for some ESG inspiration? These three companies are taking steps to ensure their actions match their words, by setting measurable ESG targets and implementing ESG-focused procedures and policies.
Deloitte: Setting the bar for sustainable business practices
Tax consulting and advisory firm Deloitte has a three-pronged approach to ESG: actions the company takes, actions it inspires its people to take, and the actions it takes with clients and other stakeholders.
The company says it embeds sustainability into its policies and practices, and measures performance against its ESG goals. For example, as part of its commitment to achieving net-zero emissions, 91% of the energy Deloitte purchased in 2022 was renewable.
Along with its own operations, Deloitte is also reviewing its global supply chains to ensure procurement sustainability and minimize its carbon footprint. Improvements to date include introducing science-based targets and requirements such as recycling and electricity-use standards within its requests for proposals and contracts.
Finally, Deloitte works with Indigenous peoples in Australia, Asia, Canada, and elsewhere to advance nature-based climate solutions and provide insights into environmental issues impacting Indigenous peoples.
An the proof is in the pudding: 91% of Deloitte’s employees say they feel good about how their organization gives back.
Stryker: Championing governance and environmental sustainability
In 2022, Stryker, a medical technology company headquartered in Michigan, announced a new business goal: to engage 85% of its direct suppliers on ESG performance assessments by the end of 2027. As of its 2022 report, it has achieved 47% progress towards this target.
The company also encourages employees to participate in ESG efforts by crowdsourcing ideas for sustainability opportunities. Its CR Champion program recruits influential leaders within the business to share industry learnings and best practices, so that safe, responsible, and sustainable practices are represented in each division’s business plan.
In 2022, Stryker’s sustainability team worked with more than 3,700 hospitals in the U.S. and Canada on reprocessing programs, which resulted in 11.2 million pounds of waste being diverted from landfills.
And the evidence is crystal clear: A remarkable 91% of Stryker's employees express genuine satisfaction with their organization’s commitment to making a positive impact
The Hershey Company: Fusing business with environmental activism
While the cocoa industry is rarely associated with environmentalism, sweets and snacks manufacturer Hershey is looking to change that. Its Cocoa For Good strategy is designed to address social and environmental challenges in cocoa communities.
With a 12-year, $500-million commitment to the strategy, Hershey has stated its commitment to supporting rural livelihoods and community development, including the elimination of child labor and deforestation. As of December 2022, Hershey has invested 40% of its original commitment.
An impressive 86% of The Hershey Company's employees affirm their genuine satisfaction with their organization's commitment to making a positive impact. This serves as compelling evidence of their dedication.
ESG trends
ESG has become a growing focus for companies, as business has become more globalized, consumers demand more from where they purchase goods, and employers demand more from who they work for.
Our research into workplace ESG initiatives has revealed six common themes:
- Carbon footprint: Climate change will continue to be a priority focus. Companies are examining their renewable energy usage and supply chain impact and setting net-zero emissions goals.
- DEIB initiatives: Diversity, equity, inclusion & belonging (DEIB) efforts are being embedded into companies’ talent strategies, from hiring through to promotion paths.
- Interconnected approach: Rather than a top-down approach, companies are seeking ESG engagement and input from employees and stakeholders.
- Community investment: From farming families within the supply chain to Indigenous peoples impacted by development, companies say they are investing back into local communities.
- Infrastructure focus: Companies are examining where they operate and whether their facilities and materials meet sustainability standards.
- Measurement: To avoid greenwashing, companies are putting more focus on tangible tracking and reporting and seeking sustainability certifications.
The impact of ESG on employee satisfaction and retention
When it comes to employee satisfaction and retention, two elements of company culture stand out most: purpose and pride. In fact, Great Place To Work research has found that when employees feel proud to work at a company, they are:
- 6 times more likely to endorsetheir workplace to others
- 2 times more likely to want to staywith the company for a long time
- 1 time more likely to say it’s a great place to work
And when employees feel like they have a sense of purpose at work, or that their work is more than “just a job,” they are two to six times more likely to stay with their company long-term.
Overall, our 2023 Drivers of Retention survey found that finding “meaning” in your work is the biggest predictor of retention, across generations — more than promotions, recognition, or even wages.
How Do You Involve Employees in ESG?
- Foster a culture of trust: Start by building a solid foundation of trust within the organization. When employees feel trusted, they are more likely to take ownership of their roles and the company's goals. Trust is the catalyst that transforms compliance into commitment.
- Empower grassroots movements: Encourage and support the formation of Employee Resource Groups (ERGs) and committees that are passionate about various ESG aspects. These groups often become the driving force for change, as seen in the proactive response to the Maui fires.
- Communicate and educate: Regularly communicate the importance of ESG goals and how they align with the company’s mission. Provide education and resources to help employees understand ESG principles and their impact on the business and society.
- Enable autonomy and leadership: Give employees the autonomy to lead initiatives and make decisions relevant to ESG. When employees feel their actions can lead to real change, engagement increases significantly.
- Recognize and reward: Acknowledge and reward the efforts of employees and teams who contribute to ESG initiatives. This recognition can take many forms, from company-wide shout-outs to financial incentives.
- Provide meaningful opportunities: Create opportunities for employees to participate in ESG activities that have a tangible impact, whether it’s community service, environmental projects, or diversity and inclusion programs.
- Lead by example: Leadership should exemplify ESG values in decision-making and everyday business operations. When employees see their leaders committed to ESG, they are more likely to follow suit.
- Measure and share success: Regularly measure the impact of ESG initiatives on employee experience, such as Great Place To Work Certification data, and share these successes with the team. Use stories and data to show how their contributions are making a difference.
By integrating these practices, companies can engage employees in ESG in a meaningful way, leading to a more motivated workforce and a stronger, more sustainable organization.
Challenges and opportunities: The road ahead for ESG in the workplace
By focusing on ESG in the workplace, organizations can do their part for the planet while also delivering improvements to employee engagement, innovation and productivity, and driving business success. But it’s not easy, and you’ll need to make sure everyone is up to the challenge.
Overcoming common obstacles in ESG implementation
Here are just some of the common obstacles that companies encounter when striving to integrate ESG practices — and that your own business will likely need to address along the way:
- Lack of clear ESG strategy: Without a clear plan, it's challenging to set meaningful goals and track progress.
- Data and metrics challenges: You may face difficulties in sourcing, measuring, and reporting ESG metrics, which are essential for transparency and accountability.
- Integration into business operations: You may encounter resistance to change or difficulty aligning ESG goals with existing processes.
- Regulatory and reporting complexity: Navigating the evolving landscape of ESG regulations and reporting standards is a significant challenge.
- Resource constraints: Implementing ESG initiatives often requires significant investments of time and resources. Smaller companies, in particular, may find it challenging to allocate the necessary funds and personnel for ESG efforts.
- Stakeholder engagement: Engagement with investors, customers, employees, and communities is crucial for ESG success. You may need to address varying stakeholder expectations and concerns.
Leveraging ESG for competitive advantage
In spite of the challenges it presents, embracing an ESG-centric approach to business can bestow a lasting competitive edge. As previously mentioned, today’s consumers increasingly insist that the products and services they engage with adhere to rigorous sustainability standards. Enterprises failing to meet this rising demand will inevitably lag behind.
However, differentiation lies in transparency, reliance on science-backed metrics, and an authentic, vulnerable approach to ESG initiatives. By doing so, your company will distinguish itself from the multitude of organizations resorting to greenwashing in their pursuit of outperforming competitors.
Your brand and business will gain more credibility by admitting, “We may not have all the solutions, but here’s what we intend to explore,” rather than presenting convoluted data and making dubious commitments.
ESG – A necessity in the evolving work landscape
ESG principles aren’t just buzzwords, they are a necessity. ESG efforts go beyond corporate responsibility — they’re a potent tool for boosting employee engagement, attracting top talent, and winning over consumers. And when ESG initiatives align with business goals, it’s a win-win scenario that ensures long-term relevance and resilience.
Unlock the power of ESG in the workplace with Great Place To Work Certification
Great Place To Work® Certification™ isn’t just a badge; it's a testament to your commitment to ESG (environmental, social, governance) values in the workplace. It’s a proven way for employers to measure how employees feel about corporate social responsibility (CSR) initiatives.
By earning Great Place To Work Certified status, you demonstrate to stakeholders — be they investors, job seekers, or employees — that your organization places the well-being of its people at the forefront. This prestigious Certification is grounded in confidential survey feedback from your employees and follows the Great Place To Work Model — trusted by the Fortune 100 Best Companies to Work For® for over 30 years.
Stakeholders can place their trust in your company's dedication to ESG values, making it an appealing choice for investment. Discover how to achieve workplace Certification today and showcase your commitment to a sustainable and inclusive workplace.
