By Jane Randel
EESG. Nope that’s not a typo. It’s an expansion of ESG (Environment, Social, Governance) – the criteria investors use to find companies with values that match their own – not only to include Employees, but to put them first.
Coined by the chief justice of the Delaware Supreme Court, the Honorable Judge Leo Strine in a piece he wrote for the Financial Times, the concept is simple: Employees – the people that make businesses run – must be at the heart of a company’s priorities. This can manifest in any number of ways – from pay parity to work/life balance to engaging in issues employees care about.
Corporate America is starting to realize this as well. Investing in employees was one of the five tenets in the Business Roundtable’s recent Statement on the Purpose of a Corporation, the somewhat controversial announcement signed by more than 180 CEOs of some of the world’s largest companies. But we live in a time of “don’t tell me, show me,” which resulted in the BRT’s effort falling on skeptical ears.
Judge Strine put it best: “We need a new system that supports sustainable and fair wealth creation within a system of enlightened capitalism. It should align the interests of institutional investors and corporations with those of the workers whose capital they control.”
Sounds good on paper, but we wanted to test it out, so we asked a few executives their thoughts on “EESG.”
Richard Branson, Founder of Virgin Group, has long maintained that for long-term commercial success companies should focus on employees. For him it’s a virtuous circle based on a simple formula – happy employees mean happy customers which in turn leads to happy shareholders. Brigitte Trafford, until recently Chief Corporate Affairs Officer at Virgin Media, expanded on this sentiment saying: “Employees represent your business and if they are happy, they are more likely to ensure your customers get a positive experience, every time. Likewise, a disengaged employee is more likely to give a negative experience and representation of your brand. In many ways, one could argue that corporations that do not focus on the environment, social good, governance and employees will not have sustainable growth.”
Trafford continued, “Increasingly employees want to be proud of the company they work for. They want to identify with and understand what role or contribution their employer makes, not just to the economy, but to the communities they serve. We are seeing many more, younger people today making decisions on who they work for based on what a company stands for, not simply how generous the financial package is. At Virgin Media, for example, I was struck by how many young people at the graduate assessment center cited Virgin Media’s work using digital technology to help disabled people reach their full potential as one of the main reasons why they wanted to work for the company. Attractive brands have greater choice when recruiting. Case in point, in 2019 Virgin Media received 10,000 applications for 76 graduate trainee roles.”
According to Steve Presley, Chairman and CEO of Nestle USA, there are few things more important than employees and culture. “The way we win is through our people, that’s our point of differentiation – creating the kind of organization and culture that unlocks the power and potential of our people. When people aren’t afraid of failing, unconventional solutions are created, driving growth for our brands. That same risk-taking, innovative culture translates directly into business achievement. We’ve created a workforce that thinks like entrepreneurs, putting their own skin in the game, and that drives business success.”
When asked if focusing on employees as a moral imperative is enough incentive, or there has to be measurable value in order to justify the effort, Catherine Blades, SVP, Chief ESG and Communications Officer at Aflac noted, “What gets measured gets done. The key is to measure the outcomes that are of value – not actions but results. Holding leadership accountable will ensure results. A lot can be accomplished by incentivizing the right behaviors, but there must always be a balance. If corporations can’t make money, they can’t pay shareholders; they can’t pay employees; and they will not be able to fulfill the “S” in ESG and do the social good that fills gaps that aren’t filled anywhere else.”
Judge Strine argues that this issue is so intertwined with an organization’s success, that companies should appoint board committees focused on fair treatment of employees – a view that is supported by the EY Center for Board Matters (CBM)’s Top Priorities for Boards in 2019:
Talent is playing a much greater role in driving value, and talent strategy is taking a front seat as human capital becomes increasingly critical to competitive strength. Boards understand the need to oversee talent and culture more closely to boost the company’s performance and enhance its reputation…Research shows that today’s talent, from top executives to early career professionals, seek to work for companies that have a clear purpose, strong culture and respected reputation. They prefer organizations that at least consider and address environmental and social issues and those that provide learning and growth opportunities. It is critical that boards investigate and understand these evolving talent trends.
Some companies fully incorporate employees into their ESG work already, so there is no need to add another “E.” According to Bank of America’s ESG statement, for example, “The Global ESG Committee, comprised of senior leaders from across Bank of America and led by Vice Chairman, Anne Finucane, meets regularly to identify and discuss issues central to the company’s ESG focus – including human capital management practices, product and service offerings, and investments in creating a sustainable global economy.” BofA employees are already a core factor in the bank’s ESG work.
Craig Buchholz, Chief Communications Officer at Procter & Gamble has a similar point-of-view, saying, “Our Citizenship agenda helps to enable enterprise growth. In fact, we talk about being ‘a force for good and a force for growth.’”
Summing it up for P&G and perhaps for many other companies as well, he continued, “I think the best approach is not to consider this work in the context of trade-offs, but as an integrated set of choices that can serve the varied needs of a broad portfolio of stakeholders – and that most certainly includes our employees. For us, Citizenship is built in, not bolted on, and that makes a marked difference.”