CSR to ESG – a shift away from HR?

Where does ESG sit within the business and what is HR’s role and level of involvement? Is it about the numbers and the metrics or the people and the culture? 

It’s an important question and one that is covered by HR Magazine in their article ‘CSR vs ESG – a battle between FDs and HR?’ They interviewed Helen Corden and we’ll hear from Helen shortly.

The basic premise of the article is that ESG is overtaking CSR as a measure of sustainability in the corporate world and that risks leaving HR behind. So, whereas CSR leans towards a more qualitative measure, used as an internal framework, ESG provides a measure of assessment for investors. As the article points out, it was precisely because investors increasingly demanded a more global measure for ESG that COP26 saw the creation of the International Sustainability Standards Board, which was itself set up by the International Financial Reporting Standards Foundation. So, for HR directors used to leading CSR, the move to ESG reporting has a distinctly financial narrative which is why the image below the title shows a tug of war between the HRD and the FD.

The risk, as we see it, with the shift from HR to finance is it becomes too much about numbers and targets and it’s a point. As Helen says: ‘The worst thing for ESG is that it becomes a formulaic compliance area. The issue that’s still key is how to bring it to life as a people and culture issue.’

So let’s hear more on that point. Earlier Helen joined me by video-link from Birmingham. I asked her about that quote:

Helen Corden: “Well, the way that the question was phrased was, in relation to is ESG, does it now sit within finance, rather than HR, and what we were talking about was the fact that it if it was sitting within finance, and it's very investor driven and investors looking at targets, what you don't want it to become is just a tick box exercise and HR has an incredibly important role. ESG within an organisation is all about its people and its culture because if you look at each of the component parts, so the environmental part, for example, a company reducing its carbon footprint, the way that it does that is by the policies that it implements in relation to its people, its travel policies, its flexible working policies, for example, If you look at the ‘S’ of the ESG, the social impact in terms of diversity and inclusion, again, it's very much driven by the culture of an organisation and the people within it. Then finally, the governance and, again, that's got a real people element, so if you're looking at the gender pay gap reporting, it's all around, the people and the metrics within the organisation. So, what I was trying to portray is that this shouldn't become a tick box exercise that is driven just by what targets you have in place, it has really got to be embedded within the organisation and people have got to be on board with it.”

Joe Glavina: “A point they make in the article is that ESG involves all areas of the business and increasingly we are seeing businesses appoint someone in a dedicated role to make sense of it and make sure everyone is aligned when it comes to reporting on ESG. Are you finding that?”

Helen Corden: “Absolutely. I think more and more clients are appointing, for want of a better term, a head of ESG, and that's to make sure that all the component parts are brought together and that a holistic approach can be taken into how an organisation moves forward with its ESG agenda because it is broad and it does bring in many functions of an organisation. So, we've already talked about the finance function, the HR function, it also brings in, for example, the procurement function and how an organisation deals with its supply chains, and the modern slavery act, for example. So you need to have someone who has a holistic overview of all of those parts and they can bring that together into a comprehensive report because what we're also seeing is that many of our clients are now producing just one report on their ESG agenda and component parts. So, rather than have, for example, a separate pay gap report, or a separate health and safety report, for example, it will all form part of one report that satisfies all of the requirements.”

Helen has written about this is more detail in her Outlaw article Out-Law article: ‘How HR can shape and deliver the ESG agenda’. We have put a link to it in the transcript of this programme.

LINKS
- Link to Out-Law article: ‘How HR can shape and deliver the ESG agenda’