May 2021 – Workplace ESG: How purpose in the workplace drives performance

It sounds too good to be true, but there’s a proven way to improve employee engagement, lift financial performance and help save the world all at the same time.

Focusing on your workplace ESG, which stands for the Environmental, Social and Governance impacts of an organisation’s activities, is the key to delivering all three of these goals.

The concepts of ESG are mostly spoken about at a boardroom, shareholder and global level.

And it is big business.

The United Nations estimates that the annual global spending by governments and the private sector needed to deliver the world’s ESG-related goals is around $5 trillion a year, or more than 6 per cent of world GDP.

But by focusing on ESG in the workplace, organisations can do their part for the planet while also delivering improvements to employee engagement, innovation and productivity and driving business success.

Giving employees a clear connection to something important – a purpose that is bigger than an individual role – is an important factor in an organisation’s success.

Research from Great Place to Work® shows that when employees say their work has “special meaning,” rather than being “just a job,” they are 56 per cent more likely to experience innovation opportunities. 

So, how are organisations using ESG principles in the workplace?

Can you improve your workplace ESG?

And why does it matter?

We spoke to three Australian business leaders – each of them Best Workplaces™ winners and Great Place To Work-Certified™ – and an expert in the field to answer these questions and find out how the principles of ESG are being used by the Best Workplaces to drive employee satisfaction, engagement and performance.

Workplace ESG

But first, a quick refresher on the underlying concepts of ESG.

ESG had its genesis as a framework to help investors use criteria other than simply financial return in choosing their investments.

The problem investors were trying to solve was that they had no way to account for externalities — the things that did not cost an organisation anything (such as dumping rubbish) but had a cost to others (who had to clean it up).

Three central factors emerged:

• Environment – how does an action or choice by an organisation use energy and other resources and in what ways does it create waste?
• Social – how does an action affect people in the broadest, most diverse sense?
• Governance – how are decisions made and are they honest, ethical and fair?

This three-part framework has been extended beyond its original investment roots and now describes much of how society expects its companies, not-for-profit organisations and governments to operate.

Catherine Maxwell, general manager of policy and advocacy at the Governance Institute of Australia and a leading authority on governance and risk management, tells Great Place to Work that workplace ESG is deeply connected with corporate purpose.

 “The better organisations are starting to ask questions like ‘what is our purpose?’ and ‘how is that purpose connected to what we actually do?” says Maxwell.

“And they are asking some quite hard questions: How do we treat people? How do we interact with our stakeholders? What’s our culture? And how does our culture fit with our purpose?”

Employees are fast becoming sensitive to discrepancies between what a company says and the way it acts.

“That’s the really interesting piece,” says Maxwell. “How does what we say about ourselves match up match up with who we are?”

The benefits of committed workplace ESG practice show up directly in results.

“It’s kind of intuitive – more satisfied employees work harder, stay longer, produce better results and are more committed to an organisation,” says Maxwell.

“And there’s a halo effect – people who work there and leave there speak well of it, so it becomes a self-perpetuating thing.”

ESG and employee engagement

ESG performance as a driver of employee satisfaction is an important piece of what makes a company a great place to work.

A Marsh & McLennan study found that employers that have high employee satisfaction and are attractive employment destinations for university graduates tend to have lower carbon emissions, make a greater effort to understand employee feelings and be more diverse.

This is making ESG performance a competitive advantage for engaging and attracting employees.

Bruce McFarlane, CEO of fast-growing Melbourne professional services firm BlueRock, says purpose is one of the key reasons that employees join his firm.

“Our purpose statement is ‘do the things you love with people you care about and great things will happen’,” he says.

“That’s morphed into our vision.

“People join BlueRock for a number of reasons but one of the keys is to give back and be part of a community that cares about our clients and the environment.”

BlueRock is a certified B Corporation, meaning it has been independently assessed as making decisions that benefit not only employees and clients, but also the wider community and the environment.

“One of the changes we’ve just made is changing our purpose under the Constitution. The change –which sounds subtle – is that the business is now operating for the benefit of the stakeholders,” says McFarlane.

“The stakeholders are not just the people that own the business.”

This means BlueRock has taken some practical steps like mandating that people issues are always the first item on any meeting agenda.

It also runs an annual capital raising process to give all employees the chance to buy in to the business, driving engagement and allowing them to participate in profit growth.

And unlike many professional services firms, BlueRock prizes transparency.

“There’s not a lot that we discuss behind closed doors. We’re very transparent in all these things we’re doing – financial decisions, people decisions, investment decisions,” says McFarlane, adding that a monthly employee survey quickly catches any deviation from the firm’s values.

BlueRock’s purpose-led culture shows up its employee survey results.

“The thing that stands out for me and makes me love coming to work here is that our people are genuinely friends and spend a lot of time together outside of work,” says a BlueRock employee when asked what makes the company great place to work.

“That involves social events, charitable or volunteer work etc. For me that is unique and shows that people aren’t just coming in to do a job, it’s creating a lifestyle.”

 

Governance in the workplace 

Sam Riley, CEO of Ansarada, an Australian tech success story that provides AI tools and virtual data rooms for the investment banking industry, says ESG is baked into Ansarada’s policies, procedures and systems, partly because helping clients with governance is precisely what the business sells.

He says aligning behind this purpose is critical to employee engagement.

“Our purpose is to see that anyone with a passion and a purpose is able to grow a business,” he says.

“We want to give them the tools and the capability and the resources. The same technology that Goldman Sachs would exploit to optimize a multi-billion-dollar deal – that same content, functionality and support should be available to a startup.”

Riley says Ansarada would like nothing more than to align all staff to purpose and do away with traditional hierarchies.

“Our organisational design should be structured totally around priorities and objectives and cross functional teams,” he says.

“Can we put departments to death?”

Riley says that, like many technology companies, Ansarada can struggle to attract women.

“It is a big challenge and needs to be a constant focus. If you look at the number of students that do computer science, there’s already a lack of female participants… it’s very small pool.”

Gender diversity is an important predictor of employee satisfaction and company performance.

Great Place to Work research shows that inclusive workplaces experience average annual revenue gains 24 percent higher than their peer companies.

Riley tells the story of Ansarada re-writing its job ads after finding the way they were written was discouraging women to apply.

“Psychologically there’s a difference between how men and women react to job ads,” he says, noting that men are more likely than women to apply for a job for which they meet some but not all the criteria.

“If you have 10 ‘must have’ requirements you can filter out some women. So, we modified the ads to have less and less requirements.”

Four steps towards authentic workplace ESG

At the Green Building Council of Australia, the member organisation that administers the building Green Star ratings system, the chance for employees to have a real environmental impact is baked into the mission statement.

“All the studies show that organisations that are purpose-led with people aligned for that purpose are more successful and their people live more engaged and happier lives,” says GBCA’s CEO Davina Rooney.

“Our purpose is to transform the built environment for the sustainable future.

“People spend 90 per cent of their time indoors… so if we’re going to win the war on climate change, buildings are essential.

“Unsurprisingly, a large number of the people who work for us are enormously driven by their passion for sustainability and their drive to see change.”

Rooney advises organisations to take four steps to authentically implement workplace ESG.

“First, Australians are highly educated on these issues. If you say ‘we are highly engaged with ESG and we’re sponsoring an initiative’ but you’re not doing anything about testing renewable power or the efficiency of your own office, your employees will catch you out pretty quickly.

“Two, we also say set a leadership vision – a lighthouse on the hill – but also be clear on what you’re going to do tomorrow, because that’s what creates engagement: a vision for the future and immediate action towards it.

“Three, make sure it’s not greenwash. It is important people know that it does what it says on the tin.

“Fourth, have fun with it. You don’t need to ask your employees to keep up – they are probably three steps ahead of you.

“Your next generation of ideas will come from your employee base.

“If they see their ideas as part of your strategy, and part of building a future with them, this will mean that your environmental goals progress, but you’ll also have better employee engagement.

“And then after that you won’t have to worry about your employee engagement proposition, your employees will manage that for you.”

Sources:

Bush, Michael C 2018, A Great Place to Work For All: Better for Business, Better for People, Better for the World, Great Place to Work®, Berrett-Koehler Publishers

Hastwell, Claire 2021 ‘Corporate Giving Is Top Driver of Employee Experience at the Best Companies to Work For – Especially Now’, Great Place to Work®

Jiang, Lingjun., Ferguson, Angela, Yeo, Jaclyn., Bailey, Rob 2020, ESG as a workforce strategy, Marsh & McLennan