ESG QUICK TAKES

Cartica's perspective on ESG in Emerging Markets

DO YOU HAVE THE RIGHT ESG PERSONNEL?

(3.5-minute read)

Companies face growing pressure from customers and investors to address environmental, social, and governance (ESG) issues. Having a strong ESG team is vital to creating high-quality ESG policies and practices. Here are the necessary staff needed to effectively carry out an ESG strategy:

1. Senior leadership that aligns ESG goals with business objectives

C-Suite leadership is necessary to achieve ESG goals. Top-level buy-in ensures resources and time are committed to ESG initiatives. Building an ESG strategy is a long-term task that can face many challenges. Having the CEO, CFO, and other senior leaders committed to ESG reassures the rest of the company that integrating these factors is a priority even when obstacles arise.

2. Board Directors with ESG responsibilities 

Board Directors are long-term stewards of the business. It is their responsibility to make sure companies are attentive to ESG risks and opportunities. Companies should nominate one or more Board Directors with previous ESG experience, or someone eager to learn and lead on ESG. Cartica recommends companies create a Sustainability or ESG Committee so Board Directors can organize ESG efforts.

3. A committed ESG leader

Having a dedicated ESG staff member is key. A committed ESG professional can monitor progress on ESG goals and can be a source of ESG knowledge for their colleagues and for customers. They can also help the IR team answer ESG questions from investors. Companies should hire a leader with experience in the specific ESG areas that are material to the company, or with other broad ESG expertise. Ideally, this role will report to a senior leader such as a CEO, COO, or CSO. While there may be subject-matter experts across the business on different areas of ESG (such as supply chain or cyber security), the ESG lead should be able to coordinate all ESG activities across the company and drive overall strategy. Interested in a Director of Sustainability job description? Email Kate Ahern for a sample TOR that can be applied across industries. 

4. Human Resources (HR) leader driving change on labor-management

ESG values need to be socialized through the entire organization. Issues like corporate culture, employee wellness, learning and development programs, and retention strategies are a key part of implementing ESG best practices. Companies should hire HR leaders who can develop programs around employee well-being and monitor data around retention and morale. Appointing an HR leader who has ESG-specific responsibilities is another way to show investors that a company is committed to material ESG factors.

5. Investor Relations (IR) with strong ESG knowledge

In today’s market, having an IR representative who understands ESG is imperative to remain competitive. Investors often look to IR to gain a better understanding of a company’s approach to ESG and field any questions about new ESG risks. Cartica finds an IR team lacking ESG knowledge can often give the impression the company does not take ESG seriously. To avoid this perception, Cartica recommends ensuring that a company’s head of IR is capable of explaining a company’s ESG initiatives or articulating future plans to improve.

6. Employees prepared and incentivized to become part of the ESG strategy

Advancing ESG goals cannot solely be a top-down affair. Like any other business objective, ESG goals cannot be achieved without the participation of the company’s workers. Companies serious about ESG should build incentive structures such as bonuses tied to sustainability KPIs or to metrics like retention rates. Cartica finds companies with strong ESG credentials are transparent about their ESG goals with their employees. They also integrate these factors into their culture. Companies should educate staff about the importance of ESG factors and the role of every employee in helping the company achieve its ESG goals. Many firms find that applicants are already passionate about ESG. This energy can be harnessed through good practices and incentives.

ESG INCREASINGLY IMPORTANT TO HIRING

A 2021 Robert Walters report on labor trends related to ESG found that job candidates reported a willingness to decline a job offer if the company's values on environmental issues and diversity & inclusion did not align with their own, highlighting the importance of clearly articulating ESG values to both internal and external stakeholders. 

Source: Robert Walters. Data based on survey responses from UK professionals. 

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