Businesses that fail to convince workers they are serious about environmental, social and governance issues, are likely to suffer skills shortages and even fail completely, CIPD president Baroness Ruby McGregor-Smith has warned.
Speaking on the second day of the HR body’s annual Festival of Work conference, the former CEO of Mitie Group and Conservative peer said that the rising cost of living and risk of global recession had given organisations a real opportunity to focus more on responsible business.
“We don’t really get a choice – if we don’t do more on ESG, I genuinely think that businesses will start to fail in the long term. We should’ve been doing this 30, 40 years ago; not enough has been done and it’s time to really catch up,” she said.
McGregor-Smith said ESG should sit at the heart of the leadership agenda, particularly as many leaders were questioning why they couldn’t hire or why some staff had not returned after furlough.
“People are changing the way they work, and the talent and skills shortage means we’ve got to think very differently about how we hire people but also how we keep them.”
McGregor-Smith said organisations should care about ESG because the public – and therefore their job candidates, customers and shareholders – care about how businesses operate. However, the business community had built a world where organisations were driven mainly by profit, which was not an ethos she agreed with.
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“To me it’s always been clear that organisations need to play a much broader role in society and engage with broader environmental and societal goals. All of us believe we can have more of an impact than just ‘turning up’ and getting on with the day job,” she said.
There were signs that business leaders cared more about the environment, for example, than a decade ago, but there was more work to be done on the social element of ESG.
“The pandemic has exposed more inequality in our society than many of us had even realised,” she said. “We’ve going to see some real challenges economically for everybody… and we need to take more meaningful action.
“We all say we’re ‘equal opportunities employers’, but if so, why do we have big gender pay gaps? Why are there big ethnicity pay gaps? Let’s have action as opposed to words and reports.”
Wellbeing was a significant part of the ‘S’ in ESG, but ensuring people from all walks of life felt included in organisations was also important for retention.
“So many people leave organisations purely because they don’t think they fit, and we really need to [reverse that].
“I’ve always been passionate about D&I because I [spent some of my career] in workplaces that weren’t built for me – they weren’t built for mothers,” she said, suggesting that practices such as breakfast meetings and networking dinners were not suitable for parents with young children.
“I think the workplace needs to change and should be more accommodating of the people who work within it.”
McGregor-Smith said ESG initiatives should be driven by the people profession as they were “the only people who really care about these issues”.
“Every CHRO is part of a leadership team, and when I was a CEO I needed a lot of help to do this. CEOs and leadership teams need a lot of help to get it right and examples of best practice,” she said.
Data was important, even if the quality wasn’t perfect, as it helped organisations judge how they were performing on ESG measures.
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“I say to the critics who say that it’s unaffordable – actually there are a lot of things that are affordable within the ESG agenda and there are things we can do even when there’s not as much money around,” she said.
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