A post from our ESG Committee.

A seismic shift has occurred in the way companies view sustainability. In a 2022 WeWork study of 850 companies worldwide, 80% said they plan to increase their investments in sustainability. In large corporations, sustainability is no longer just about reducing carbon footprint or implementing environmentally friendly practices; sustainability is now being integrated into every aspect of business operations, including human resource management.

What is Sustainable HR Practice?

According to Robin Kramar, writing in the Asia Pacific Journal of Human Resources, Sustainable Human Resource Management (SHRM) has been developing for over 15 years, expanding on strategic HRM. It includes wide organizational objectives across various domains and is not restricted to only business aims. Most critically, SHRM connects HR and Talent Management with sustainability. This viewpoint acknowledges the significance of incorporating sustainability into organizations and strives to accomplish positive economic, social, human and environmental results in the long and short term.

A Shift in HR Practices

A 2023 study by Deloitte revealed that corporate sustainability efforts have evolved beyond public relations or brand defence. Companies now prioritize driving meaningful outcomes through a human-centred approach. This involves purpose-driven incentives across the organization, developing technical and soft skills, improving the employee experience, and designing for human sustainability. Sustainability is becoming ingrained in the cultural fabric of many enterprises.

Within this landscape, sustainable human resource management practices are vital to how companies treat employees fairly, ethically, and caringly. This covers critical areas like well-being, development, retention, and more. Leading organizations also extend their integrated HR and sustainability initiatives across their broader ecosystem - including partners, suppliers, clients, and local communities. The human element is essential for implementing corporate sustainability in a meaningful way.

Drivers for Sustainable HR Practices

Recent shifts in the global employment landscape have forced organizations to reevaluate how they approach human resources. Work-related stress continues to be high with The Business Times highlighting that 52% of Singaporeans feel “stress” from their work. According to SHRM, trends such as mental health concerns, employee burnout, disengagement, and the Great Resignation show the need for sustainable HR practices. According to Tech Target and The U.S. Bureau of Labor Statistics, between April 2021 and April 2022, 71.6 million people separated from their jobs, or an average of 3.98 million people quit each month in the US.

According to Deloitte’s 2021 survey, 44% of millennials and 49% of Gen Z rely on their ethics in determining the type of work and companies they would join. From Baby Boomers to Gen Z, today's workforce increasingly seeks meaningful work, collaboration, flexibility, diversity, equity, inclusion, and an open relationship with their managers. This also means that managers themselves must evolve into mentors and coaches. In addition, challenges such as ongoing talent wars and the rise of AI, are reshaping the skillsets needed in the workforce.

An article by McKinsey emphasizes the transformative role of HR in driving sustainable change in the workplace, especially in the wake of the COVID-19 pandemic. McKinsey highlights that traditional hierarchical and bureaucratic management systems are becoming obsolete. Newer practices involve a culture of being dynamic, flexible and responsive model of HR practices. Central to this transformation is the focus on three key areas: identity, agility, and scalability.

HR professionals are therefore central in shaping and delivering their organisations' ESG strategy. This can include developing practical environmental policies for employees, leading diversity and inclusion initiatives, and ensuring governance mechanisms are in place to drive accountability and transparency. HR's involvement is important for aligning the business with its purpose and values, leading to better investor and employee relations and reduced risk.

Increasing External Pressure on HR Practices

Broader factors beyond internal organizational dynamics increasingly influence the shifting HR landscape. Many multinational corporations (MNCs) are actively reshaping their corporate values to include ESG practices, a change partly driven by investor influence.

A significant example of this trend comes from Gartner's 2021 data, revealing that 85% of investors consider ESG factors in their capital allocation decisions. This data highlights MNCs' substantial pressure to satisfy investor demands and maintain an image aligned with sustainable practices.

These external pressures, coupled with internal trends like generational shifts in the workforce and a growing focus on mental health, are compelling companies to reassess and evolve their HR strategies. This evolution in HR is not solely a reaction to external demands but also part of a strategic response to changing global business, societal and more significantly, investor pressure.

Benefits of Sustainable HR Practices

Implementing sustainable or green HR practices involves both short-term and long-term considerations. The cost of doing nothing is high, as is the cost of burnout, a damaged reputation, lower productivity, accidents and sickness. By avoiding knowledge loss through high retention rates and nurturing a talent pool, businesses can reduce costs and enhance customer satisfaction, loyalty, engagement, and innovation. According to a study by McKinsey, sustainable HR practices can lower capital costs due to reduced turnover and mitigate environmental risks. The benefits of sustainable HR practices are multiple:

Adapted from: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7470767/

Implementing Changes for Sustainable HR

Implementing a sustainable HR strategy is more than a strategic shift. Sustainable HR practices are a series of steps towards aligning the organization with the evolving demands of the modern workforce and a broader societal push towards environmental and social responsibility. To navigate this transition successfully, a clear plan and defined steps can help meet these goals. Each planned stage should be measurable where possible and focused on specific outcomes.

To begin implementing changes for sustainable HR, it is important to first understand the company’s values and what is important as a company relating to the sustainability topic. Organizations may start by identifying key areas needing focus, such as mental health, recruitment practices, or rewards systems. 

Secondly, employee involvement and a phased plan with small initial steps are important to consider. Leading people compassionately through changes, considering risks and costs of non-implementation, focusing on the entire employee life cycle, and meeting evolving generational expectations are also significant.

Additional areas to address include enhancing employee engagement, communication, recognition, and celebrating progress. Organizations can lay the foundation for impactful and lasting adoption of sustainable HR practices by taking a phased approach with early wins.

Sustainable HR in Practice

An increasing number of companies are embracing the role of sustainable human resource (HR) practices in fostering an inclusive, productive, and environmentally conscious workplace. This trend is exemplified by the innovative approaches of several leading firms across various industries. Here are just some of companies exemplifying sustainable HR in practice:

●       BASF, a European multinational chemical company, has used tools like smartPlan to simulate realistic diversity scenarios, helping to increase the diversity share within the company and providing global sociocultural benchmarks for diversity. This approach integrates sustainability with diversity and inclusion initiatives.

●       Novo Nordisk, a European Pharmaceutical company have recognized the prevalence of mental health issues post-pandemic place a strong emphasis on sustainability and employee well-being. The company has developed a strong emphasis on initiatives to support employee health, for example physical fitness, mental health, and work-life balance. This has led to improved employee satisfaction, increased productivity, and reduced healthcare costs for the company.

●       Patagonia, a purpose-driven apparel company is renowned for its ethical treatment of workers and sustainable HR practices. Patagonia's commitment to employee well-being and sustainability has resulted in high employee retention rates and a positive brand reputation. The company has a very low staff turnover rate of only 4%.

●       Interface, a modular flooring company is known for its commitment to environmentally sustainable practices. It implements sustainable HR in the form of increased employee education among other practices. This has led to improved job satisfaction and retention and a corporate culture of innovation and continuous improvement.

Tools and Resources

Using the right tools and resources can help transition the move towards more sustainable HR. There are many tools and models available.

●       The Kubler-Ross Change Curve provides a guide for understanding and managing the emotional aspects of organizational change.

●       EcoVadis provides comprehensive, actionable steps that translate into impactful organizational change. It can also be useful for assessing and improving sustainability performance, for example in areas such as supply chain management. Equipped with the right tools for their needs, organizations can be more prepared to approach sustainable human resource management.

●       Gathering internal HR data: This approach will help understand the narrative of change within the business and during the execution of employee communication strategies. Key HR metrics serve as important examples. Attrition and sickness rates, reasons for job offer rejections or acceptances, and insights from employee surveys and feedback all contribute to a more detailed understanding of the organization. Such data will offer a more defined understanding of the areas in sustainable HR that necessitate concentrated attention and prioritization. This also aids the alignment and approach of HR strategies.

●       Communicate: Start small and share quick wins. Ongoing communication with employees and the business is a major key to success.

●       Sustainability reporting understanding: Tools like the GRI (Global Reporting Initiative) framework help develop companies' comprehensive sustainability reports and create a deeper understanding of sustainability and its impact on business. These reports are also key to transparently communicating your organization's sustainability performance to stakeholders.

●       Learning and development: Incorporate e-learning platforms such as LinkedIn Learning or Coursera, offering courses on sustainability and ethical business practices. This helps in upskilling teams to be more aligned with sustainable practices.

Conclusion

HR can potentially lead the way for change in companies and society by incorporating green practices into areas such as hiring, employee involvement, operations, and the employee lifecycle. Sustainable HR improves morale, health, accountability, and retention. It meets the needs of new talent seeking balance and a sense of purpose. Moving to sustainable HR needs support from multiple stakeholders, resources, and overall buy-in. Although there may be some challenges along the way, sustainable HR creates value for all employees. Companies can potentially enhance their effectiveness by integrating HR and sustainability at their core, focusing on continuous improvement through small, measurable steps. Ultimately, sustainable HR practices nurture any company's true assets: its people.

Further Reading and References

Asia Pacific Journal of Human Resources. (2022). Sustainable Human Resources Management: 6 Defining Characteristics. Asia Pacific Journal of Human Resources. https://doi.org/10.1111/1744-7941.12321

CIPD - The Professional Body for HR and People Development (n.d.). "Environmental sustainability - Dassault Systèmes." Available at: https://www.cipd.org/en/knowledge/case-studies/environmental-sustainability-dassault-systemes/

McKinsey & Company (2021). "The New Possible: How HR Can Help Build the Organization of the Future." Available at: https://www.mckinsey.com/capabilities/people-and-organizational-performance/our-insights/the-new-possible-how-hr-can-help-build-the-organization-of-the-future

McKinsey & Company (2023). "The State of Organizations 2023." Available at: https://www.mckinsey.com/~/media/mckinsey/business%20functions/people%20and%20organizational%20performance/our%20insights/the%20state%20of%20organizations%202023/the-state-of-organizations-2023.pdf

PubMed Central (2020). "The impact of COVID-19 on the mental health of healthcare professionals." Available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7470767/

ScienceDirect (2018). "Risk management for electric power systems: A focus on power transmission and distribution." Available at: https://www.sciencedirect.com/science/article/abs/pii/S0921344918303719