Succession planning is the latest aspect of business life where the ESG agenda is having a profound impact. Handled correctly, it could resolve many of the thorny issues company owners face in attracting talented young staff and promoting leaders of the future.
In the emerging post-Covid economy, labour shortages are endemic. Around four million people a month are quitting their jobs in the US, according to the Bureau of Labor Statistics. The so-called Great Resignation now covers nearly one-fifth of the nation's entire workforce, so finding replacements to fill the gaps has proved to be a struggle.
A common theme at every company I talk to is that workers now want more than the traditional nine-to-five. It is not necessarily about more money but often a desire for a greater say in the future direction of the company. Study after study shows that workers favour employers who address the environmental and social challenges of their communities and they want their own efforts to make a positive impact.
Of course, this is not always easy to hear for the baby boomers and Generation X-ers in charge who hail from a different era. Some business owners feel they are often being interviewed by candidates who are emboldened by the knowledge they have attractive offers waiting for them elsewhere.
They may be right. Jobvite, an online talent tracker, found 44% of employment candidates turned down an interview or job offer due to lack of diversity at a company while WeSpire, an employee engagement consultancy, reported 36% identify equality as the main cause they want their employers to support.
Workers and business leaders often share the same ultimate goals - prosperity for all, making society fairer and a more fulfilling work-life balance - but may use different language to describe them and how to get there. The ESG (Environmental, Social and Governance) movement can provide the bridge from one generation to the next.
The majority of today's business owners are nearing the end of their careers and want the organisations they have spent their careers nurturing to prosper after they have gone. These days, many are more preoccupied by succession planning and their legacy than the monthly management accounts.
If business owners double down on the value of embedding ESG into their strategic plans, they will realise benefits in empowering their next generation leaders. Diversity in corporate leadership creates diversity of thought - and that has been noted to increase an organisation's ability to respond more quickly to market forces.
Those who set aside ESG as a "fad" run the risk of becoming irrelevant through perpetuating unconscious bias that dictates we promote people who look and act in the same way we do. However, they may not accurately represent our customers, our investors, our communities and our workers.
Much of the focus around ESG revolves around the environment and how companies impact the planet. The 'S' and 'G' rarely get the headlines but they are crucial in dictating what an organisation stands for and how it conducts itself. Companies that embed these principles in their DNA will differentiate themselves as employers of choice.
Business owners need to make the right decisions to address market trends and take advantage of the new opportunities out there, so they desperately need to encourage diversity of thought. By implementing an ESG strategy they are creating the space for that diversity of thinking to flourish and make a meaningful impact.
For those company founders that want their legacy to continue, this is the only way forward. Retaining and engaging employees now means more than offering a retirement plan. Today, it is about creating opportunities for workers to make an impact outside the walls of the business.
Tomorrow's successful leaders will seek to authentically
engage with investors, customers, vendors and the community through
an ESG strategy woven inextricably into their organisation's
growth strategy.
This article is issued as general commentary - please contact us about your specific circumstances.