What does purposeful business mean for HR?

Research shows that employees seek out organisations that value purpose over profit. But what role does HR have in mobilising action on environmental and social governance? An increasingly important one, discovers Jo Faragher. 

When the bosses of 14 major companies agreed to join a pledge to put the wellbeing of their staff, local communities and broader society higher up the boardroom agenda, it had the markings of just another corporate social responsibility initiative.

The Purposeful Company, co-chaired by Acas chief executive Clare Chapman, includes commitments from organisations such as PwC, Unilever and Capita who collectively employ more than 2 million people. The aim is to create a list of agreed criteria on which companies’ statements on “purpose” can be measured, incentivising them to move beyond empty promises and onto tangible results.

But its formation also marks an evolution in how organisations approach issues such as community interaction, reducing carbon emissions and ensuring activities in their supply chain are ethical. This is no longer a nice-to-have initiative manned by volunteers – investors, customers and employees are demanding more.

A recent survey by professional services company GHD found that 22% of workers thought a company’s environmental credentials were “very or extremely influential” when deciding whether to accept a job, with 19% saying they would consider changing an employer on the grounds another had a better record on the environment.

Measurable action

Investors and employees alike are pushing for companies to evidence what they’re doing on environmental, social and corporate governance (ESG) issues too.

Asset management company Standard Life Aberdeen (soon to be “Abrdn”) has recently partnered with an eco-tech company to monitor homeworkers’ carbon emissions, for example, citing that employees “all had a responsibility” to meet sustainability goals.

Fashion retailer Boohoo has also come under scrutiny for issues in its supply chain, and has now accepted the recommendations of an independent review that any bonuses its top executives receive should be linked to ESG goals.

Annual general meetings increasingly feature demands from “activist” investors who want more accountability on executive pay or working conditions, and recently institutional investors spoke out about exploitative employment practices at food delivery company Deliveroo as it was due to go public on the stock exchange.

“The intellectual argument for [ESG] has long been won,” says Richard Tyrie, co-founder of Good People, which focuses on social impact recruitment. “Now the focus is on what we need to do and how we do it.” The pandemic has intensified an already growing shift towards demanding more purpose from employers, he adds.

“Increasingly, for the younger generation this stuff is not just important, it’s what gets them into your business and keeps them there. People have watched what’s happened during the pandemic, the Black Lives Matter movement and action on free school meals and they’ve had enough,” says Tyrie. “They want to do more and if their employers aren’t, then that throws their relationship into question.”

Empowering employees

David Logan, author of Companies for Good, sees this as a progression from what many organisations historically badged as corporate social responsibility. “There are two dimensions to this: the behaviour of companies as institutions and the behaviour of companies in helping their stakeholders to be good citizens themselves,” he explains. “They’re under pressure from their employees to cut their environmental impact, to make a contribution to society – what’s new and developing rapidly is their role in empowering employees to help them do that.”

How organisations respond to this pressure is as varied as the businesses themselves. What comes under the ESG banner also depends on each employer and their priorities, and can range from diversity and inclusion initiatives to environmental volunteering days and policies on modern slavery.

“We have a mix of topics we’re strong on, topics we want to develop, future-looking projects and what we call housekeeping,” says Olivia Whitlam, head of sustainability at Siemens. “As a responsible business we make sure we pay our tax and we’re transparent about it, then there are our supply chain processes, our business ethics, our code of conduct that influence how we conduct ourselves.”

Sustainability at Siemens comes under three strands: environment (ensuring manufacture is as carbon efficient as possible but also focusing on internal green projects); people (diversity, modern slavery, wellbeing and human rights); and responsible business practices (including supply chain oversight, tax, volunteering and how it works with schools).

Whittam says it’s crucial that none of these exist in a vacuum. “It needs to be joined up,” she adds. “One example is our real living wage accreditation: this helps with inclusion, our business ethics, we expect our suppliers to pay it, and there’s a knock-on effect to all of those employees because they don’t have to resort to food banks. You change one thing in the system and there’s a knock-on effect.”

Transparency

Executive recruitment company Heidrick & Struggles sees sustainability as part of a broader drive to ensure good governance on behalf of clients, and recently published its first ESG report. Claire Skinner, regional leader, Europe says transparency and measurement has to be at the centre of organisations’ commitments.

“Sustainability and climate interest has been growing since the [2016] Paris Agreement but there’s been a real shift in the last year,” she says. “There’s a growing sense of ownership and individual accountability, and then linking that to company purpose and what we can contribute collectively.”

The firm reports on diversity and inclusion, philanthropy and charitable giving, and environmental sustainability. It also has a partnership with Indigo Ag, a company that offsets carbon emissions by providing farmers with agricultural ‘credits’.

HR professionals have a key role in driving change in these areas, argues Skinner. “There are many similarities here to the capabilities needed for digital transformation – how leaders ensure that leaders know what to prioritise so they can deliver change at pace,” she says.

As a board-level recruiter, the company is seeing heightened interest in environmental and sustainability capabilities from clients, too. “We recruit a lot of chief sustainability officers, so there is a real ambition for change,” she adds.

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