Environmental, Social, and Governance Policies: How Stakeholder Ethics Can Shape Business
Subscriber Benefit
As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe Now
The world in which we live and work has changed drastically in the last 24 months. An evaluation of today’s business landscape would be impossible to conduct without considering the extent to which increasing demands for improved conditions for workers, COVID-19, climate change, and consistent pushes for racial equity have impacted the way that we think about corporations and their responsibility to our global community. Indeed, a recent study showed that 83 percent of millennials (individuals currently aged 26 to 41) want companies to align with their personal values, and 76 percent want corporate leaders to speak out on issues that they care about. It is no coincidence, then, that this generation is also at the forefront of what has been termed the Great Resignation. That is, the subsection of the workforce that is most likely to be considering changing jobs today is also the group most concerned with prioritizing meaning in their work by choosing employers that align with their personal values.
Due to technology and shifting priorities, consumers, investors, and employees are increasingly applying pressure to organizations to address environmental, social, and governance (ESG) issues with transparency and a concrete plan for operationalizing values. Today, at a rate that has never been true before, this group of stakeholders is influencing some organizations to address ESG issues as part of their business.
- Consumers increasingly make purchasing decisions based on sustainability across the supply chain, and a recent report showed that certain categories of products with sustainability claims had twice the growth of traditional counterparts. [1]
- 30 percent of respondents in a 2021 survey said that they would consider switching jobs to work at a more sustainable company. [2]
- Seven in ten jobseekers in the United States reported in a 2021 Gallup poll that they care “at least somewhat” about a potential employer’s environmental record. [3]
Accordingly, companies must anticipate that meaningful commitments to ESG may be necessary to attract and retain talent. Those organizations that choose to address these issues often codify these commitments in a formal ESG policy, which serves to articulate the organization’s values and ethical standards in these three areas.
When considering the implementation of an ESG policy, an organization should reflect on the unique ways in which its operations and market presence affect employees, individuals, and the broader community. Below are some common questions addressed by an ESG policy.
Environmental ethics focused on the preservation of our planet and the natural world.
- What is our commitment to the use of renewable energy sources?
- What level of sustainability in our supply chain might we like to achieve?
- What climate agenda do we wish to support through our investments?
- What is our stance on corporate use of pollutants and harmful chemicals?
Social ethics focused on human beings and the interdependencies among our communities.
- How do we think about our impact on the communities in which we operate and/or serve?
- What is our approach to diversity, equity, inclusion, access, and belonging?
- What do our compensation policies, including executive compensation, signal about our values?
Governance considerations aimed at defining processes for ethical operations.
- What does the composition of our Board of Directors and/or C-Suite say about what we value as an organization?
- What do our political contributions and lobbying efforts communicate about our principles?
- How does the way we choose to operate today affect the health, prosperity, and wellbeing of future generations?
Consumers, employers, and investors are increasingly spending money and allocating resources in alignment with their values—and there is every reason to believe that this trend will continue to shape business going forward. Adopting an ESG policy can be an effective way for a company to address concerns raised by employees and consumers regarding these issues.
For more information about drafting and implementing effective Environmental, Social, and Governance policies, contact Sloan Holladay-Crawford or the Ice Miller Workplace Solutions or the attorney with whom you most frequently work.
[1] Katherine White, David J. Hardisty, and Rishad Habib, “The elusive green consumer,” Harvard Business Review, July–August 2019.
[2] Deloitte Global State of the Consumer Tracker, Wave 23, October 2021
[3] Gallup, “Gallup poll social series: Environment,” March 1–15, 2021.
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.