Sustainability as a Core HR Discipline
Haven’t hugged a tree lately, dear HR leader? Well, you’re not alone. According to the “State of Sustainable Business Survey 2013” by BSR, HR is among the least engaged corporate functions when it comes to sustainability. This is surprising because sustainable success has evolved from environmental concerns to a comprehensive strategic challenge.
Nowadays, sustainability is deeply related to business strategy and creating value, especially in the economic, social and environmental aspects that ensure mid- and long-term success. That’s quite a contrast to the much more short-term focus of corporate activities. Other than in discussions about the environmental impact of a company’s operations and supply chain (which differ vastly between industries), people play the vital role in a company’s mid- and long-term success — no matter the industry. And that is why HR can’t stand at the sidelines while the CEO, the management team, communications, legal and many other teams are more engaged.
Even more importantly, there are external factors that force HR organizations to ensure a company drives a sustainable strategy, specifically when it comes to employees:
- Young professionals are increasingly selecting their employers based on “sustainability criteria.” According to Price Waterhouse Coopers, 90 percent of U.S. graduates actively seek out employers whose corporate responsibility behavior reflects their own. In essence, they are looking for purpose, not just a paycheck. And purpose is a great way to retain both new hires and existing talents.
- Employee engagement is an essential tool to drive long-term success. Employers can foster employee engagement by enhancing people’s wellbeing, selecting the right (diverse) leaders and developing people’s strengths, according to Gallup Consulting’s “State of the Global Workforce.” All of those are both core HR and sustainability topics.
- Customers are paying increasing attention to how you treat your employees, both within your company and within your supply chain. For example, Walmart has developed 15 questions as part of its sustainability index, out of which one third deal with “people and community.” Many other companies have started similar activities to retrieve such information from their suppliers.
The big opportunity for HR in this context is to leverage its unique position in the organization to maximize the social value created with employees and local communities as part of a more comprehensive, sustainable corporate strategy. In other words, HR should strive to own the social side of the sustainability equation. Companies that are leading the sustainability transformation are leveraging their HR strategically and in line with the sustainable strategy. In turn, their HR organizations have adopted some of the following practices:
- HR co-defines a sustainable business strategy that’s driven by purpose. For example, SAP’s defined purpose is to “help the world run better and improve people’s lives.” This statement inspires SAP’s employees to embed economic, social and environmental sustainability into company operations and into the business software that is run by more than 240,000 companies around the world.
- HR owns the execution of the “human side” of the sustainable strategy. Most significantly, HR leaders start by identifying the biggest people-related risks and opportunities as part of the strategy. There are fundamental differences from industry to industry and even from company to company. They range from incidents in mining or utilities, to skills or talent in high tech, or to an ageing workforce in manufacturing or construction. The full arsenal of strategic HR tools is evaluated and aligned with the needs of the sustainable strategy. This includes all talent acquisition, onboarding, talent development, diversity, health, work-life balance, volunteering, organizational design and strategic workforce planning activities. As HR communicates with management and with existing and prospective employees, all activities are put in context with the strategy and its purpose.
- HR ramps up its change management abilities and engages employees in line with the sustainable strategy. The success of a sustainable strategy depends on how well employees unlearn unsustainable behavior and adopt new practices. Engaging employees in such change is the most difficult part of all “sustainability” efforts, a point shared by many sustainability thought leaders around the world. SAP has had most success with change campaigns that had a compelling “change story”, clear targets and metrics, easy to use tools and processes for employees to perform the change, strong role models in the leadership of the company and incentives that have an immediate positive impact on employees. For example, 15,000 employees of SAP participated in “health week 2013”, a series of world-wide activities where employees learned new ways to enhance their health and work/life balance.
- HR fosters new levels of transparency across the company and with external stakeholders. Sustainability leaders go beyond putting HR related data into their annual reports once a year. They communicate HR related sustainability data to all employees on a continuous basis. For example, SAP employees have the ability to see key HR sustainability KPIs for their organizations in an online dashboard. It includes information about early talent hiring and the ratio of women in leadership positions, for example. In addition, as part of a trend called “integrated reporting”, HR professionals should ensure that the company connects non-financial HR KPIs with financial KPIs to demonstrate its
contribution to sustainable success. For example, in its 2012 integrated report, SAP reported that an increase of employee retention by 1% leads to avoided cost of €62 million. Once such relationships are formulated, the understanding of the short and long term value of HR is enhanced and its ability to drive change grows.
In conclusion, HR is essential for the success of any sustainable strategy. As the pressure on companies increases to formulate and execute more sustainable practices, time is running out for HR to successfully engage, shape and execute a sustainable strategy. Embracing sustainability is an opportunity for HR to leverage its strategic position in the company to ensure the mid and long term success of the business.
By Anke Doerzapf, marketingmanager at SuccessFactors, an SAP company, and Peter Graf (@PeterGGraf), Chief Sustainability Officer of SAP