Meeting benchmarks for environmental, social, and governance standards can be a gateway to success, rather than a barrier, if approached with a strategy thoughtful to employees.
That was the consensus during a virtual preview event on Monday leading up to Fortune’s Most Powerful Women summit next week. A handful of Fortune 500 leaders discussed how their companies are forging ahead to meet these standards and use them as opportunities for growth.
“ESG is supposed to be the intersection of profit and purpose, right? So not only is it supposed to be doing good for the world, for the planet, and for society, but it’s also supposed to make you a better business,” said LaFawn Davis, senior vice president for environmental, social, and governance at Indeed.
ESG goals are relatively new at job listings hub Indeed. The company just announced its ESG goals last year, but Davis said employees have already adopted and integrated those goals into their daily work.
“Every single employee is a shareholder,” Davis said, adding it helps those employees to see the value in meeting benchmarks that will satisfy investors. “It all just kind of paints the picture for them that it’s not just about the fact that there’s honor in this work, and they feel connected to the mission, but there’s also that shareholder value that they now understand because they are [shareholders].”
One way to look at it, Davis suggested, is to say that these are not just ESG goals—they are Indeed’s ESG goals.
Another way to elicit employee buy-in is to tie those goals to employee compensation. That’s what Mastercard did recently. Shamina Singh, executive vice president of sustainability and president of Mastercard Center for Inclusive Growth, said they piloted the program with senior executives last year before rolling it out for all employees.
“Anecdotally, it’s been really well received. It wasn’t a surprise to anybody, so we didn’t introduce topics that our colleagues were unfamiliar with,” Singh said. “It wasn’t as much of a leap for them to understand that now, we were actually connecting it more to the compensation. But the one thing we have done a lot more of is we’ve gotten a lot more rigorous around the measurement and the metrics, and communicating those and then…around the education and awareness for how those things relate to your individual compensation.”
Another way to digest ESG goals is to reframe the approach and the reasons for setting them. At Citi, chief sustainability officer Val Smith said the push to commit to ESG goals came from a variety of directions.
“We made the commitment because our investors were asking us to,” she said. “We made the commitment because we were seeing these trends among our client segments that they were making the commitment to drive their emissions down to net zero by 2050. And we saw a business opportunity.”
Smith said Citi has restructured parts of corporate and investment banks to respond to help clients transition to low- and no-carbon business models by 2050.
Lisa Edwards, president and COO at Diligent, said there’s been a groundswell of companies adopting these goals over the course of the pandemic. In a recent survey, Edwards said, the number of respondents who reported never discussing ESG goals went from 20% pre-pandemic to 4% post-pandemic.
“My question on that is always like, who are these 4%, and what rock are they under?” she said. “Because it does feel like most boards are now, ‘This is a standing board issue to talk about.’”
Part of that adoption, Edwards said, is how businesses bake those goals into daily operations versus having goals as benchmarks that don’t relate to the company’s mission.
One way to incorporate those goals is to do what Mastercard did by creating its Mastercard Center for Inclusive Growth. Singh explained that the center leverages the company’s assets for social and environmental impact.
“It’s all of our people, and it’s our capital, to figure out how we were ensuring that our products, our services, our access were being turned toward environmental and social impact considerations,” she said.
Edwards had a pragmatic take on incorporating ESG goals within companies that might be resistant just because it’s considered the right thing to do for the greater good.
“If you can’t get there, do it because it’s the right thing for the business, and it is strategically aligned,” she said. “And you do need to think about the risk factors around not doing it, both for the long-term sustainability of the business, as well as some of the shorter-term risk management.”
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