How Executive Search firms can support the ESG agenda
The concept of Environmental, Social, and Governance (ESG) has become an integral part of executive search as boards and CEOs state stewardship of one or more components of ESG as a requirement in the leaders they want to hire. Many companies are now prioritizing ESG principles, recognizing the importance of sustainable and responsible practices in achieving long-term success. Combining client priorities with insights from recent placements, executive search firms are now incorporating ESG criteria into their evaluation processes, looking for candidates who demonstrate strong leadership in environmental stewardship, social responsibility, and corporate governance.
‘When conducting executive searches with forefront companies, we prioritize ESG competency candidates, that is, executives who view ESG as an integrated component of the company's overall system and decision-making process. These executives have obviously shifted ESG from a margin of consideration to be central to all core strategic decisions. This way, they ensure that the company's actions align with its values and mission while driving long-term economic success,’ says Celine Chabee, Partner, Kestria Canada & USA.
On the other hand, candidates are evaluating multiple job offers and for them the prospective employer’s commitment to climate change, environmental protection, or reduction of carbon footprint is becoming increasingly important, in addition to providing an inclusive workplace.
Additionally, they consider the company's sustainability reporting and disclosures, track record in implementing ESG policies and how they measure their progress toward sustainability.
ESG as a norm for recruitment
ESG is a holistic approach to sustainable and responsible business practices that encompasses environmental, social, and governance factors. Companies that prioritize ESG recognize their broader impact on society beyond the bottom line. Environmental factors focus on reducing a company's carbon footprint and promoting sustainability, social factors address inclusivity and diversity, and governance factors ensure transparency and ethical behavior. In practice, ESG involves creating policies aligned with these principles and measuring and reporting on progress toward sustainability. This approach can lead to long-term business success, increased stakeholder trust and a positive impact on society and the environment.
Diversity, Equity and Inclusion form the “S” in ESG. Besides it increasingly having an importance in executive search methodology, it features as high priority for candidates who prioritize social responsibility over financial gain. Candidates are seeking for companies where their voice counts, where they are valued and they feel a strong sense of belonging. Therefore, ESG and DEI are likely to continue to influence executive search, particularly as companies recognize their importance in attracting top talent and promoting long-term success.
‘Nowadays, candidates are seeking purpose and they want to work in a meaningful work environment. It goes without saying that employers who do not care about ESG will not attract above-average talent. During interviews, candidates will typically quiz potential employers about ESG and if the answers from the companies are not satisfactory, candidates will drop out of the hiring process. And the very same goes for DEI – candidates simply require that their employers show obvious concern about diversity, equity and inclusion. In times of a widening talent gap, it will be a major threat to companies’ future if they don’t take ESG and DEI seriously,’ adds Mathias Friedrichs, Managing Director, Kestria Germany.
What steps do companies need to take to support and advance ESG to attract employees?
To support and advance ESG principles and attract employees, companies need to take several steps:
They need to be transparent and objective when developing clear policies and initiatives that align with ESG principles and prioritize sustainability and social responsibility.
They should establish metrics to measure their progress towards ESG goals and report their sustainability efforts regularly.
Companies should invest in employee training and education to build awareness and understanding of ESG issues.
They should foster a culture of inclusivity and diversity and ensure that their workforce reflects these values.
Companies should engage with stakeholders, including customers, suppliers, and local communities, to understand their needs and address their concerns.
They should seek out partnerships with organizations that share their ESG values and work collaboratively to advance sustainability.
Companies should be transparent and ethical in all their operations, promoting good governance and accountability at all levels of the organization.
‘DEI and ESG are reflections of a company’s culture & values and will benefit organizations. Making sure employees’ ( including new hires) & organization’s values are aligned will reflect on positive results,’ states Rania Abdalla, Founder & Managing Director, Kestria UAE & Egypt.
Do we understand how not supporting DEI in ESG poses critical risks to the business?
Failing to support DEI in ESG poses critical risks to businesses. Without diversity, equity, and inclusion in the workplace, companies are likely to struggle to attract and retain talent, resulting in a less innovative and less productive workforce.
Ignoring DEI principles also increases the risk of reputational damage and legal liability. Additionally, companies that lack diversity may struggle to understand and meet the needs of their diverse customer base, resulting in lost business opportunities. Finally, promoting DEI in ESG can lead to a more resilient and sustainable business model, as it promotes social responsibility and addresses the broader societal impact of business operations.
Overall, ESG has become a significant factor in executive search and is likely to continue to influence the recruitment process in the coming years. To attract top talent, companies need to develop clear policies and initiatives that align with ESG principles and prioritize sustainability and social responsibility.
‘We assess candidates for all leadership and managerial positions, for their appreciation of the strategic value of ESG and this will include their ability to assess ESG materiality and improving compliance as well as achieving targets set by the company accordingly,’ says Raj Kumar Paramanathan, Founding Partner, Kestria Malaysia.