Your company’s human resources department may not seem like a natural driver of ESG, but it does play a significant role in preventing ESG risks from happening.
Human resources (HR) departments are essential to all companies. Many people only interact with their HR team on a few occasions each year – to sign a contract for a new job or a promotion offer, check leave entitlements or complete training or performance reviews. However, HR teams are also doing a vast amount of essential work to keep employees safe. Much of this behind-the-scenes HR work is a direct connection to ESG and helps develop ESG policy across the company.
While the definition of ESG is ever-changing, what is very clear is that it includes three broad categories: environmental risks, social risks and governance risks. These three categories consist of many areas, and it is within the detail of these areas that HR departments can really help to manage ESG risks.
Engaging HR as part of the E in ESG: environmental
Environmental risks relate to those elements that a company interacts with in its environment. That interaction can happen directly, through the company’s physical attachment to land and its local environment, or indirectly, through a partner or supplier having an interaction with the environment.
HR resources are typically engaged with employees and contractors and managing the workplace. As that workplace involves people and their property operating within an ecosystem, it also means that HR teams are engaged with the environment in which they work and interact.
In many companies, environment is the most urgent of all ESG matters to consider. HR can build employee awareness, collect information, coach employees on their behaviours and build a better culture to drive an environmental focus for the company.
Engaging HR as part of the S in ESG: social
The social part of ESG is where HR professionals can really show their talents engaging with people and put their extensive change-management skills into practice. HR professionals have been the leaders of the ‘S’ in ‘ESG’ while carrying out their roles for a long time.
At Speeki, we think of ‘social’ as including:
- human capital management
- diversity and inclusion
- value chain
- human rights and modern-day slavery
- data protection
- health and safety.
The G in ESG is applicable to every executive, including HR executives
Governance was once thought to be the responsibility of legal or compliance, or perhaps the board members. However, modern definitions of what is included in governance are much broader, encompassing everything from how you run a company to transparency and taxation. A lot of governance is about running an organisation in a structured way, and in a way that is open, transparent, fair, ethical and compliant with both regulatory expectations and the expectations of the community in which the company operates.
Companies don’t operate themselves; they are operated by people. Leaders, managers and employees operate companies under an arrangement of command and control. The structure of the company is often designed to facilitate a governance model with a board (typically leadership), executives (typically the managers) and employees.
HR departments are involved with all levels of leadership, management and employees. They oversee hiring, performance and exits. They are also responsible for the culture of the organisation and the way it behaves internally and in the broader ecosystem in which it operates.
ESG is constantly evolving. One thing is clear, however: it is not going away and must be operationalised across an entire company. HR professionals have the skills and remit to make them an essential part of building strong ESG practices for their companies.
Download our paper and learn more about the role of HR in each of the key areas of the ESG risk model by clicking here: