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12 Jul 2021
by Debi O'Donovan

Focusing on sustainability can transform organisational culture

CEOs of listed companies are under increasing pressure to meet environmental, social and governance (ESG) measures within their organisations, or risk seeing shareholders invest elsewhere. New research from REBA, together with Mercer Marsh Benefits, demonstrates the critical importance of aligning corporate culture with human values.

This report is the second in the three-part Transforming Engagement series giving context and practical steps to support businesses in transforming organisational culture, so that it engages employees and reduces people risks.

 

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In 2020, according to asset manager Natixis, ESG investments took in a record $152 billion to reach $1.6 trillion in total assets across the US, Europe and Asia, while the percentage of institutional investors that implement ESG approaches rose by 18% from 2019 to 2021.

If this shift is not enough to make CEOs and boards think hard about their organisation’s purpose, responsibility and long-term wellbeing, then pulling the executive compensation lever could focus minds. A 2021 report from Mercer, Environmental, Social and Governance (ESG), Issues and Organisational Priorities in 2021, shows that whilst ESG targets are now more common, UK companies lag behind European counterparts with a lower proportion incorporating ESG metrics into annual bonus or imposing commitments on suppliers or contractors. But it is not just organisations in the private sector that are under pressure to meet ESG targets. To win government tenders or simply do business with large public sector bodies, suppliers must also meet ESG or ESG-related criteria.

To meet ESG measures ranging from environmental targets and workforce diversity goals, through to corporate purpose and having a wellbeing culture for employees, CEOs need the experience, insights and skills of their HR teams.

Our research shows that many HR and reward teams are increasing their focus on the ‘S’ within ESG, primarily through employee wellbeing, while a healthy (albeit lesser) number are raising their focus on the ‘E’ for environmental goals.

But to really change the dial on organisational culture and avoid lip service, changes in behaviours need to cascade throughout workforces in a fully embedded manner. Our research tested this by checking out how a variety of ESG-related behaviours were playing out in practice among line managers.

The results, although not unexpected, show line managers lag far behind their HR leaders, who in turn are not quite catching up to board-stated objectives. To be fair, this is a relatively new area (ESG as a concept has been around for fewer than 20 years) and HR has the heavy-lifting end of the bargain: from changing employment and workplace policies to reviewing employee benefits and shifting behaviours through reward and development.

In this research, REBA, together with Mercer Marsh Benefits, explores the relationship between environmental factors, responsible business and organisational purpose, at board, HR, line manager and supply chain level. We break down the drivers that are defining the shifting relationship between business and purpose, and provide practical insights into how organisations are aligning human values with HR practices and cultural change.  

Download your copy of the Transforming Engagement Series: Report Two. Aligning corporate culture and human values.

The author is Debi O’Donovan, director of REBA.

In partnership with Mercer

At Mercer, we believe in building brighter futures.

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