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Connecting ESG, DEI and risk

By John M. Bremen | May 4, 2022

Corporate risk managers underscore the need to step up corporate sustainability efforts across all areas of ESG.
Future of Work|Health and Benefits|Talent|Total Rewards
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John Bremen is a guest contributor for Forbes.com, writing on topics including the future of work, leadership strategy, compensation and benefits, and sustainable strategies that support productivity and business success.

During a recent conference, corporate risk managers underscored the need to step up corporate sustainability efforts. They articulated the importance for their organizations to identify and mitigate key areas of enterprise risk across all areas of ESG. This includes specifically looking at social factors of ESG through a lens that connects ESG, DEI and income.

The discussion aligned with findings from a sustainability leader survey that revealed six social-related risks showed large increases in urgency from 2019 to 2021:

  • Diversity/discrimination (+18 points)
  • Access to medicines/healthcare (+17 points)
  • Food insecurity (+12 points)
  • Access to quality education (+10 points)
  • Poverty (+9 points)
  • Economic inequality (+8 points)

Recent research also shows that while approximately 70% of employees rate their employers highly in term of an inclusive and diverse work environment, lower income employees report low scores on measures including wellbeing, fairness, career opportunity and dignity at work. Females, Black or African American, and lower income employees are more likely to be in a “high-risk” group that scores low in all areas of wellbeing. Lower income employees are much less likely to say their health and retirement benefits meet their needs.

These risks impact business performance in many ways, including worker availability and productivity, skill shortages, supply chain disruption, cost management and reputational damage. Yet most organizations (82%) only moderately assessed their reputation and ESG risks. What’s more, 40% of leaders believe their teams have only a slight or moderate understanding of the length, depth and lifecycle of a potential crisis.

Future-seeking leaders create more resilient organizations and sustainable growth by connecting current and future risks. These leaders include ESG social factors in their corporate risk portfolio and take the following actions that complement traditional risk mitigation and transfer strategies:

  1. 01

    Pay fairness and sustainable wages

    Because income drives outcomes across health, wealth, job security and wellbeing, future-seeking leaders strive to pay people fairly and sustainably. This includes setting pay positioning strategies to ensure wages allow employees to thrive and reduce such risks as poverty and food/medicine insecurity. These leaders start by understanding where they are through robust analytics to get the facts. They also interpret and communicate local requirements, building these into a broader company approach. They drive and sustain change by identifying the root causes of pay issues and the changes required to address them. They tell their story, developing a strategy for how and what they will communicate over a journey that often takes many years. Timing is imperative as governments implement new legislation, employees demand more transparency, and investors want reassurance and action.

  2. 02

    Inclusive benefits – access, flexibility and cost

    In recent years, the role of employee benefits – especially in the areas of health, savings and caregiving support – has leaped to the forefront of employee and organization resilience. As employers’ mindset around benefits evolves, future-seeking leaders aim to understand benefit preferences, usage and requirements for the entire workforce and key segments, including underrepresented and lower income employees. They recognize the link between income and outcomes, measuring health results and employees’ ability to save. They understand that lower income, front-line employees often have different needs than higher paid salaried workers. They maximize cost-effective access to medical and savings programs wherever possible. They incorporate choice and personalization wherever practical. To reduce gaps and risks, they build connections to purpose, healthy company culture, integrated wellbeing (physical, emotional, financial and social), and financial and health literacy.

  3. 03

    Inclusive careers – access and sponsorship

    As career progression and access to skilling opportunities drive income, future-seeking leaders are adopting a new mindset about careers. They work to create greater advancement opportunities for lower income workers. A recent survey shows more organizations are focusing on multi-skilling to enable employees to complete tasks from different jobs and drive change in their organizations. They also anticipate building talent ecosystems encompassing alternative work models, broadening approaches to talent sourcing, and building leader and manager capability. These actions reduce risks associated with income, education, employability as well as attrition and talent shortages.

  4. 04

    Flexible work – access

    Flexible work is no longer a differentiator – it is table stakes for all employee categories. Flexible work varies substantially by industry, country and job type, and is pervasive in the aggregate (while fewer than 10% of employees worked remotely or a mix of remotely and on-site three years ago, half of employees do so today). Research shows that remote work is highly skewed towards higher paid employees – often given the nature of their work and jobs – which further creates gaps between them and lower income workers. Work flexibility can increase wellbeing, resilience and sustainability for lower income on-site workers through flexible shift schedules, modified work weeks and enhanced leave programs. Supporting programs such as shift pay premiums, subsidized on-site or near-site meals, on-site or near-site health clinics and telehealth also move the needle and help mitigate ESG-related risks. They also help increase access to broader talent pools.

Future-seeking leaders manage risks through a focus on purpose and profit, understanding they are interdependent and essential for sustainable performance in the current environment and beyond.

A version of this article originally appeared on Forbes.com on April 21, 2022.

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