Why should corporates invest in ESG policies when walking hand-in-hand with Gen-Z employees

With Gen-Zs expected to make up just over a quarter of the global workforce by 2025, it’s vital for companies to attract and retain them. This means placing sustainability issues high on their corporate agendas.

More impacted by climate change than any previous generation, Gen-Zs care passionately about Environmental, Social and Governmental (ESG) issues.

Indeed, they are one of the most socially conscious generations – Greta Thunberg their most prominent face. In a 2019 Amnesty International survey of Gen-Zs across 22 countries, from Argentina to Canada, Australia, India, Kenya, USA, UK, Germany, Mexico and South Africa, climate change was their most commonly cited global concern.

The pandemic has had a profound impact on many Gen-Zs, with many graduating or starting work during the crisis, or even being made redundant early in their career. This will only have increased their worries about the state of the world. According to a study by Deloitte, at least 6 in 10 Gen-Zs and millennials say the COVID-19 crisis has made them more conscious of the impact of their actions on their communities. Such concerns influence the decisions they make in their lives – not least who to work for.

Their commitment to sustainability shapes the priorities Gen-Zs set when looking for a new job. This should have a strong bearing on companies’ recruitment, retention and engagement policies.

But businesses and their leaders, it seems, are not ready for this generation of activist employees. And they are misguided if they believe that they can ignore, or come up with quick fixes for, Gen-Zs’ ESG worries, aspirations and interests. Failure to give careful consideration to these views, or to reflect them in corporate policies and practices, is risky. A recent McKinsey study shows that COVID-19 has prompted employees across generations to consider leaving companies they feel are not purposeful.

It is clearly in businesses’ commercial interests to retain people with strong ESG convictions, as replacing a member of staff costs six to nine months of the departing employee’s salary. And companies that embrace sustainability are more likely to attract the most talented workers, even those that may, at first sight, appear to be too expensive. Gen-Zs are willing to work at lower rates for more sustainable firms.

So companies must keep up with the times and demonstrate that they recognise and identify with the issues Gen-Z employees care about. But they have to do so in an authentic way. If their marketing and communications teams put out ESG messaging that overstates or is disingenuous about actual commitments and policies, then they may face pressure-group charges of ‘greenwashing’. In this socially conscious era, that’s the last thing a company would want to be accused of.

Moreover, exaggerating your green credentials is not going to fool your Gen-Z employees. They will be taking a keen interest in their employers’ record, and will be quick to point out if there is a mismatch between sustainability policies and practices. Transparency and consultation are the best policies. A study on ESG by KPMG showed that communicating goals, KPIs and setting out the means by which those targets will be met are essential to engage purpose-driven employees and make them feel a part of the implementation process.

To ensure that ESG metrics are given equal importance to profit and revenue targets, McKinsey suggests linking them to compensation for the management team. It also recommends board members use purpose to pressure test trade-offs and decisions in company strategy. George Serafeim from Harvard Business School says that companies should decentralise ESG activities, ensuring all employees embrace the mission and have the means to deliver on it.

Business leaders can no longer be ambivalent about sustainability issues. They have to take them very seriously. If they don’t, Gen-Zs, also rightly called the green generation, will avoid their companies and they’ll no longer employ the brightest and best young talent.

Farzana Baduel is a crisis communication and PR expert. She is the CEO of Curzon PR, a London-based PR firm working with clients globally. She is a resident public relations expert at Oxford University’s entrepreneurship centre Oxford Foundry.