ESG…and the recruitment struggle

Totum director Deborah Gray looks at ways in which professional services firms are approaching ESG. How can firms tackle the complexities of ESG to excel both as advisors and employers of choice?

Deborah Gray, Director,

Totum

deborah.gray@totumpartners.com

Environment, social and governance (ESG) has become one of the most pressing considerations for business today. The pandemic’s transformation of the workplace, together with critical climate-change issues highlighted by COP26, plus the Black Lives Matter and #MeToo movements, has resulted in a powerful sense that we are entering a new era – one in which ESG will be of paramount importance to business survival and growth.

Recent global research with 480 senior business executives across eight sectors, conducted by business services provider DWF, found that 59% of businesses think they have already lost work as a result of ESG issues within their businesses. This makes ESG a top priority for business, including professional services firms whose clients are increasingly likely to scrutinise their approach to ESG.

As recruiters, we have also noticed how candidates are increasingly prioritising firms that have good sustainability, social equity and environmental credentials. It’s no surprise to us that 40% of businesses are struggling to recruit talent because of an external perception that their ESG policies are weak, according to the same DWF research. A firm’s culture and values are pivotal to how our candidates choose one job offer over another (and they often outweigh salary considerations).

Millennials will make up three-quarters of the global working population by 2025. This most socially conscious generation will vote with their feet, creating a talent crisis for those firms that fail to meet their high expectations as to how a firm should behave in the world. This is a massive opportunity for progressive firms to embrace ESG and thereby secure the best work and talent long into the future. But it should be seen as a warning shot for those that think ESG is another tick-box exercise.

Now is the time to put ESG principles into action – the question is, how?

How to approach ESG

At Totum, we’re having a lot more conversations with our professional services firms clients about ESG. Firms are interested in securing advice from consultants who can give the right guidance on the best approach – and we have been able to refer a growing number of clients to ESG experts. A lot more firms are also thinking about recruitment strategies that can help drive the many different strands of ESG as well as bring them all together.

Roles in diversity and inclusivity (D&I) have grown massively both in number and seniority across the sector. True diversity remains a work in progress – in law firms, for instance, there remain too few women and black lawyers at partnership level. But we have been delighted to support equality in recruitment and to see first-hand improvements here, particularly across business services functions, where many women now hold leadership roles across BD and marketing, HR, finance, and IT.

Similarly, in the real estate sector there has been considerable focus and headway made on the environmental side with many firms here focusing on sustainability. Underpinning this are green supply chain charters providing strict rules around how teams deliver services and work alongside clients – and we know firms that are going beyond this to make sustainability and good governance a core business practice.

Firms struggle, however, with aligning the many complex and disparate areas of ESG to ensure an integrated approach. Few firms get it right across the many issues pertaining to ESG, including environmental impact, waste management, employee relations, diversity and pay equity, as well as ownership transparency, leadership remuneration, etc. Even if successful in some areas, perception of performance might be skewed by struggles in others.

“As recruiters, we have noticed how candidates are increasingly prioritising firms that have good sustainability, social equity, and environmental credentials. It’s no surprise to us that 40% of businesses are struggling to recruit talent because of an external perception that their ESG policies are weak.”

Recruiting expertise

Not surprisingly, therefore, we have started to work with more firms recruiting senior people to head up ESG. They may have titles such as head of ESG or head of purpose, but whatever the specific title choice, their remit is to bring together ESG’s many strands to give it a coherent structure and meaning that can align with a firm’s values and objectives.

In our view, these should be board-level roles. As more firms acknowledge that ESG is vital to the future of business, it should be reflected in the seniority of the placement made to oversee it.

Interestingly, recent research from Russell Reynolds has shown that 70% of recently appointed senior ESG leaders are female – with appointments overwhelmingly hired from outside the company (versus promotion), and with such leaders bringing cross-functional expertise to the position. Not only could these hires improve ESG performance across their firms, but their presence will, in itself, improve leadership diversity – a true win-win situation.

Seize the day

There is another reason why professional services firms should want to embrace the opportunities of ESG. According to DWF’s research cited above, 68% of businesses are looking for help to navigate the complexities of ESG, stating they “want to collaborate with professional advisors in sharing best practice.”

This is a significant opening for those across the professional services sector – to provide expertise to support clients across this huge field of development. But it means firms must get their own houses in order too.

Many professional services firms are enjoying some success on specific areas of ESG; few are bringing together all the fragments in a meaningful way. Securing good leadership to bring together people, policies and procedures will be the next important step to connect up ESG and make it the positive force for change it could be in the months and years to come.

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