Increasingly, companies have adopted Corporate Social Responsibility (CSR) and Environmental, Social, and Governance (ESG) strategies, and especially in recent years, CSR ideologies have helped organizations move toward linking their business to ways to improve the environment, corporate governance, and the communities they serve. But in the last five years, the focus has shifted to ESG strategies, which are metrics-driven goals. While CSR and ESG work in tandem, they serve different functions: CSR sets out the parameters for making a business socially and environmentally conscious; ESG is how CSR efforts are effectively measured.
This is important because ESG is emerging as an essential counterpart to DEI goals and because ESG is falling more and more under the purview of the Chief Diversity Officer and the DEI team. It’s also making headlines as Republicans in Congress vow to scrutinize the social and climate goals of banks and asset managers. Companies must remember that ESG can attract talent and investors, build a loyal customer base, and develop brand integrity. Here are its components:
- Environmental: Measures how well a company is able to mitigate the negative effects of their business operations on environmental issues. For example, a company can track resource depletion, waste, water usage, or treatment of animals.
- Social: Measures the way an organization operates with consumers, suppliers, the external community, and talent. Examples of measurements include representation, pay equity, supplier diversity, and learning and development opportunities.
- Governance: Assesses a company’s leadership and takes issues such as executive pay, board diversity, and stakeholder engagement into account.
In 2022, Seramount examined how ESG initiatives can aid in measuring employee and stakeholder satisfaction. We explored this topic further during a webinar with MGM Resorts and gave real-world examples of the impact ESG can have internally and externally.
Here are our findings:
The Evolution of ESG
To understand how ESG and DEI connect, we first talked about Corporate Social Responsibility (CSR). Historically, CSR was used within corporations to promote sustainability and philanthropic efforts. This initiative was a step in the right direction and was made up of four strategic pillars: environmental impact, philanthropic giving, ethical business practices, and having an economic first mindset in hopes of making a positive difference in the world. However, CSR lacks metrics for holding leaders accountable for results. Not being held accountable in the actual implementation of these pillars long-term can lead to a practice known as “greenwashing,” when a corporation misleads the public about how “green” their product actually is.
CSR is important because it got us to where we are now; the shift to ESG strategies will fill the missing piece by having metrics in place to implement purposeful campaigns. “ESG is quickly becoming an important tool in an organization’s ability to attract talent and investors, especially younger generations, and to build a loyal consumer base,” says Barbara Frankel, Senior Director of Insights at Seramount.
It’s important to note “that especially in supplier diversity, a lot of B2B companies are noting that their clients are demanding to see their own results in terms of whom they are hiring as their suppliers. They want to see that they’re meeting ESG goals in that area,” says Frankel.
What Gets Measured Gets Done
With the components of ESG in place, organizations can create tangible results that become essential to talent acquisition and retention. Why? Because today’s talent, especially Gen Z, want to work where leaders are actively making the world a better place while showing genuine interest in employees’ health and well-being, as well as increasing the representation of historically excluded talent. ESG allows for companies to be held publicly accountable for their socioeconomic commitments, on a global scale if needed, creating transparency that makes people feel proud to support the overall mission(s) of the company. Too, the public is now expecting a certain level of transparency.
“Everybody is under the microscope. You have to back up what you’re saying with metrics and facts. And if you don’t, you’re going to lose employees, you’re going to lose the public space, and you’re going to lose clients,” warns Frankel.
Long-Term Commitments = Long-Term Results
In 2021, MGM Resorts publicly released their Social Impact & Sustainability Report, showcasing the goals MGM wanted to achieve by 2025. These goals included (but are not limited to) training employees on social impact and sustainability policies, access to leadership opportunities for all employees, expanding their supplier diversity program, and investing in local communities. MGM is also creating a sustainable supply chain through setting the following goals: Reducing water/sq ft by 30%, reducing carbon/sq ft by 45%, reducing energy/sq ft by 25%, and spending at least 10% with diverse suppliers.
“Commitment starts from the top,” says Tony Gladney, Vice President, Diversity, Equity and Inclusion, MGM Resorts International. MGM’s ESG task force was comprised of executives from strategy, investor relations, risk, finance, purchasing, and other functions, and they were able to prioritize their focus based on input from employees, customers, communities, and shareholders. “You have to know where you’re at, in order to know where you need to go,” he goes on to say.
MGM’s ESG strategy is integral to their recruitment, sales, and customer operations. “Our HR team will tell you it is a very competitive market out there. There is a battle for talent. They are looking at ESG issues. They are looking at how they treat their employees, how they treat their customers,” says Gladney. The topic of ESG is also brought up by potential clients. “We partner with our global sales team to talk to them about where we are from an ESG perspective, what our commitments are from a DEI perspective. Are we reaching our goals? And you will actually lose customers as well, because they want to do business with individuals that are really practicing being responsible citizens in the communities where they operate. It just makes good business,” he adds.
Read more about how ESG and DEI work together by downloading ESG and DEI: The New Indicator of Employee, Stakeholder Satisfaction, or contact us to speak to an expert about strengthening your organization’s ESG strategy for 2023.