Bring together what is good for business with what is good for the world.
Today, people are increasingly considering how their decisions impact the world. They choose reusable bags over plastic ones (according to research, 72% of consumers say they now buy more eco-friendly products than they did five years ago), support ethical businesses (55% of consumers are willing to pay more for eco-friendly brands), and seek jobs at companies with a strong moral compass. As a result, environmental and social responsibility has become an integral part of brand identity – just as important as product or service quality. When choosing among numerous options, consumers don’t just look at the product itself but also evaluate whether the seller aligns with ESG principles.
ESG is a framework for sustainable business development that encompasses three key aspects. While it does not have strict regulations, it follows certain core standards:
- E for Environmental: Covers a company’s impact on the environment, including energy and water consumption, greenhouse gas emissions, waste management, and use of renewable resources.
- S for Social: Encompasses the company’s relationship with employees, suppliers, customers, and communities, focusing on working conditions, employee rights, inclusivity, equality, and product safety.
- G for Governance: Relates to corporate governance and ethics, including board structure, anti-corruption measures, transparency in reporting, and shareholder relations.
A company’s success is heavily influenced by its brand image – both externally (attracting consumers) and internally (appealing to potential employees and partners). A prime example is Patagonia, an outdoor clothing brand that has built its reputation on a commitment to environmental responsibility. Their motto, “Everything we do has an impact on the planet”, reflects their ESG-focused strategy. Patagonia donates a portion of its profits to environmental initiatives and encourages consumers to repair and reuse clothing rather than replace it. By emphasizing the “E” in ESG, Patagonia has gained strong customer loyalty and industry leadership.
How ESG and HR Are Connected: Navigators of Ethics
ESG defines how an organization interacts with the world, and today, HR managers are increasingly becoming ambassadors of this interaction – shifting from a reactive to a proactive role. HR is responsible for shaping a corporate culture that fosters social responsibility and encourages ethical behavior. Although it may seem that the HR department is mainly responsible for the Social (S) aspect of ESG it plays a key role in implementing all three components of this framework:
- Environmental: HR can promote eco-friendly habits among employees (such as energy-saving technologies and reducing plastic consumption) and organize corporate environmental initiatives (such as tree planting, volunteering, and participation in green projects).
- Social: HR specialists lead diversity, equity, and inclusion (DEI) programs and ensure compliance with employee rights and social benefits. HR professionals also support employee mental well-being through corporate wellness programs and 1-on-1 meetings.
- Governance: HR is often responsible for developing and implementing the corporate code of ethics and ensuring compliance with business conduct standards. Managers also promote transparency in decision-making by maintaining open communication with employees.
Currently, HR departments are often involved in the development of the company’s ESG culture only at a superficial level, integrating the concept as a way to react to potential issues. However, this approach is not suitable for today’s world, where sustainability and responsibility are key success factors for businesses.
ESG can be integrated into the HR strategy in two ways: as a separate aspect or as its foundation. In the first case, ESG is seen as a set of initiatives – such as launching inclusion programs, environmental measures, or corporate volunteering. This is important, but it doesn’t change the system as a whole. However, if ESG becomes the foundation of the HR strategy, it influences all processes: from recruiting (attracting candidates who share sustainability values) to the motivation system (rewarding social or environmental initiatives). This approach makes ESG not just a corporate policy but an intrinsic part of the company culture. The integration of ESG is much more effective if it is systematic – and solutions for automating HR processes, such as SMART HCM & LMS, can help with this. Clear reporting and transparency in key decisions will help develop the most relevant ESG strategy for the business.
Implementing ESG in HR: How to Become an Ambassador for Positive Change
Implementing ESG is a multi-stage and meticulous process. It doesn’t always involve radical changes in company processes or the introduction of new rules. More often than not, organizations already have established values, and ESG serves as a checklist to ensure alignment with current standards. The primary goal of ESG implementation is to systematize the company’s ethical principles and create sustainable, structured development strategies that can adapt to global changes. Here are the key stages of ESG implementation:
- Research and identification of relevant ESG standards
The first step is an in-depth study of international ESG standards (such as GRI, SASB, UNSDG, UN Global Compact, ) and their impact on HR. It is important to understand which ESG aspects are most relevant to the industry and company, as well as what practices market leaders are already using. - Analysis of current HR processes
The next stage is assessing existing HR procedures for compliance with ESG principles. For example, does the company support diversity and equality within the team? Are there programs for employee development? Is environmental responsibility considered in work processes? This analysis helps identify areas for growth and potential challenges. - Formation of an ESG committee
For effective implementation of changes, it is important to create a working group or committee responsible for the ESG direction. This may include representatives from HR, management, the legal department, and other key stakeholders. The committee discusses the key areas of the ESG strategy and proposes initiatives for implementation. - Defining the company’s clear ESG position
The final stage is developing an official ESG strategy that includes specific policies, goals, and performance evaluation metrics. For example, a company may commit to reducing CO₂ emissions, implementing mental health programs for employees, or increasing transparency in corporate governance.
Staying Ahead of the Curve: How to Quickly Adapt to Changes in Global ESG Standards
Implementing ESG is only the first step toward building a strong corporate image. Today, a company’s success in the market is also determined by how quickly it can respond to global changes. Challenges on a worldwide scale, new regulations, and shifting public sentiment all influence how a business is perceived by clients and partners. The ability to swiftly adapt ESG strategies is the key to maintaining trust and stability. Customer feedback plays a crucial role in this process. In the era of social media, this influence has only grown stronger, forcing companies to learn how to correct their mistakes in real time.
For example, in 2017, Uber found itself at the center of a major scandal involving allegations of sexual harassment and labor rights violations. The crisis began with a blog post by former Uber engineer Susan Fowler, who detailed systematic harassment by her supervisor and the HR department’s failure to act on her complaints. The post sparked a widespread public outcry. In response, Uber launched an internal investigation, which resulted in the dismissal of over 20 employees involved in misconduct. By June 2017, mounting public pressure led to the resignation of CEO Travis Kalanick. Following this, Uber shifted its focus toward improving corporate culture and rebuilding its reputation. Dara Khosrowshahi was appointed as the new CEO and initiated reforms aimed at increasing transparency, ethical standards, and accountability within the company. This decisive action and flexibility in ESG strategies ultimately gave Uber a chance to restore its reputation.
How to Quickly Adapt ESG Strategies
So how can a business ensure the ability to swiftly adapt its ESG strategies? There are several proven steps:
- Monitoring trends and conducting analytics,
- Ensuring fast and transparent communication,
- Implementing HR process automation systems,
- Maintaining reporting and transparency.
ESG Reporting as the Key to Effective Change
Effective change is impossible without clear reporting. A business cannot implement any initiative if it doesn’t know where it’s starting from. Analytics help determine which aspects of a company already align with ESG standards and where improvements are needed. High-quality ESG reports allow businesses to stay up to date and adjust strategies in response to modern challenges. To achieve this, it is crucial to implement HR process automation systems such as SMART HCM & LMS. This solution enables companies to create a unified HR ecosystem, offering the following advantages:
- HR Process Automation: The system covers all aspects of personnel management and training, ensuring the rapid implementation of changes in line with new social and environmental standards.
- Accurate HR Analytics with Power BI: The solution allows businesses to generate unlimited analytical reports of varying complexity using ready-made templates and any available business data within the system. Precise data analysis supports informed decision-making in the ESG domain.
- A Unified Corporate Communication Platform: A shared information hub keeps employees informed about company processes, decisions, and values. Transparency in ESG strategy changes and a team’s ability to respond quickly enhance trust both among consumers and employees.
- Employee Support Service: Through an integrated chatbot, the system provides support and continuous feedback within a single platform, enabling companies to respond promptly to employee needs and ESG-related suggestions.
HR is now one of the driving forces behind ESG transformation. It is through human capital management that companies can effectively implement environmental, social, and governance principles. If you, too, want to change the world through your ideas, submit a request, and SMART business experts will help you select the right system to bring your strategies to life.
