Since the United Nations first released its Principles for Responsible Investment in 2006, Environmental, Social and Governance (ESG) issues have had an increasingly influential role in shaping global economic policy and implementation.
In the MENA region, specifically, ESG is poised to have a transformative effect over the next 25 years. Fuelled by the UAE’s Net Zero by 2050 strategic initiative (“a national drive to achieve net-zero emissions by 2050”), Sunil Singh reports in Citywire Middle East that “a focus on ESG performance is becoming critical to successful investing in the GCC and the wider Middle East.”
This article explains the importance of ESG to company performance. It explains why ESG is becoming the new benchmark for competitiveness and future-readiness, and it outlines some key ESG focus areas for companies to consider. As Bon Education specializes in creating educational programs with real-world social impact, such as career coaching and workforce readiness initiatives, the article concludes by providing suggestions about how to boost your company’s ESG profile by investing in employability.
ESG: the new Gold Standard?
The old adage of “you can’t put a price on reputation” is increasingly untrue.
Just ask German car manufacturer Volkswagen. Their 2015 scandal – in which the company admitted to installing emissions test “defeat devices” in its diesel-powered vehicles – has cost the company an estimated $35 billion to date.
The set of socially responsible investment criteria collectively known as ESG (Environmental, Social and Governance) has provided a method of measuring corporate reputation. A company’s ESG score is “a numerical measure of how it is perceived to be performing on a wide range of environmental, social and governance (ESG) topics.”
- Environmental factors relate to the conservation of our planet, and include things like carbon emissions, use of resources and waste management.
- Social factors include labor and client relationships, community impact and product responsibility.
- Governance factors relate to the running of the company, including its CSR strategy, board structure/composition and accounting/auditing processes.
An ESG score typically includes more than 400 data-points across 70 key performance indicators, with a special set of 23 criteria measuring ESG scandals. The emergence of “ESG profiling” has created an environment where, to quote professional services giant Deloitte, “we are now increasingly demanding that companies should not only be good stewards of capital, but also of natural and social capital.”
Simply put, consumers and investors increasingly care about “more than just the bottom line” – and this paradigm shift can be observed in several different ways.
According to Morningstar (via CBC), ESG assets under fund management now exceed $1 trillion, with “91% of investors agreeing that non-financial performance is critical to decision making.” Volkswagen, meanwhile, are not alone in incurring costs because of an ESG scandal: an analysis by the Bank of America reveals that companies have lost more than $500 billion over the last five years by falling foul of ESG standards.
Betsy Atkins, writing for Forbes magazine, summarizes the situation as follows: “The data shows that companies embracing ESG criteria are performing better and safer for all stakeholders, investors, employees, customers and the community.”
Real-world impact
How can companies ensure they remain relevant and attractive to this new generation of ethical investors and consumers?
By taking tangible and visible ESG action.
ESG is not about ticking boxes or satisfying regulations. It is about safeguarding the future of your company by being seen to contribute to the long-term safety of the planet.
As the Harvard Business Review explains: “If any perception ever existed that environmental, social, and governance (ESG) efforts focused more on building public relations than on revenue, that perception is gone. Today, successful organizations see ESG not as a cost of doing business, but as a critical function of business strategy.”
In that same article, the HBR defines the goal of an effective ESG framework as to “set ambitious goals for both growth and enrichment of the world”, and outlines six critical ESG program factors. These factors helpfully form the acronym DEGREE:
- Decarbonization
- Ethics
- Governance
- Resource Efficiency
- Equity
- Employability
Employability and the future of job security
The stark reality – in the unfolding context of the Fourth Industrial Revolution, Artificial Intelligence and rising automation – is that job security is a critical concern for the workforce of the future.
The World Economic Forum’s The Future of Jobs Report (from October 2020) states the case plainly: “As the frontier between the work tasks performed by humans and those performed by machines and algorithms shifts, we have a short window of opportunity to ensure that these transformations lead to a new age of good work, good jobs and improved quality of life for all.”
It is against this backdrop that employability has emerged as a critical ESG factor.
In their seminal 1998 research, Jim Hillage and Emma Pollard define employability as the “the capability to move self-sufficiently within the labour market to realize potential through sustainable employment.”
The University of Plymouth Argyle unpacks this definition further, proposing that employability consists of four key elements:
- Employability assets (knowledge, skills, attitudes)
- Deployment (career management skills)
- Presentation (job-getting skills, CV, interview technique, etc.)
- Personal circumstances (who you are, responsibilities, labor market conditions, etc.)
Employability is, therefore, linked to having appropriate training and qualifications. But the concept is also broader than that, encompassing a wide range of important soft skills and aptitudes that can be developed at any age.
Employability is about self-awareness, confidence in one’s abilities and self-knowledge about where improvement is needed. It is about being able to integrate your personal strengths, skills and preferences with your livelihood in a long-term, sustainable fashion. It is about being informed about multiple industries and different job roles within these industries, and always being on the lookout for opportunities for personal and professional development.
How can we help?
To remain competitive and to grow your business in a sustainable way, you need to ensure that you are taking steps to train the workforce of tomorrow. Faced with an unstable future, where competition is the only certainty, the success of your organization depends – in the words of the International Labor Office – on “building the next generation of innovators by continually upskilling and reskilling your employees.”
At Bon Education, we build programs that empower people to create the future. This includes working closely with companies to upskill and inspire the workforces of the future. We nurture youths and junior members of the workforce and help them to problem-solve, sense patterns, spot opportunities and understand how having multiple options available to them represents their best chance of long-term job satisfaction and security.
We target the following key impact areas.
- We build programs that educate and inspire people about multiple fields of study and future career opportunities. Our programs are built with the principles of VUCA in mind. VUCA stands for volatility, uncertainty, complexity and ambiguity, accurately describing the situation of constant, unpredictable change facing many industries around the world.
- We focus on graduates, ensuring they have the chance to apply their skills to meaningful job responsibilities. Turning qualifications into work experience is a crucial factor in employability. Through our partner networks, we provide graduates with real-world, marketable work experience.
- We create opportunities for continuous learning. We understand that employability is about lifelong learning and constant improvement. Speaking about the future of work at the World Economic Forum’s Annual Meeting at Davos, Robert E. Moritz, Global Chairman of PwC, remarked: “The mindset of continuous learning is really important as the number one skillset for our teachers learning how to teach and for our students learning how to learn.”
Conclusion
We live in a world of constant flux and uncertainty.
Yet, these are also urgent times, in which we must act – and play our role in leaving a healthy, prosperous planet for future generations. There is no time for stasis, and the status quo must be overhauled.
With ESG issues set to shape the global economic climate for the next few decades, we have the mandate to develop policies and programs that embody responsible growth and sustainable development. We can, and we must, find ways to work towards a better tomorrow right now. After all, as Abraham Lincoln once said, “The best way to predict your future is to create it.”
The best way to predict your future is to create it.”
— Abraham Lincoln
