In recent years, many companies hired chief sustainability officers and established a set of high-priority programs to reduce carbon emissions and the risk of global climate change. As the EU moves forward with a number of regulations designed to protect the workforce, it’s time to extend the concept of sustainability. People sustainability takes a holistic approach to corporate human capital practices, including diversity and inclusion, well-being, employee safety, and fair pay. It raises these human capital issues to the C-suite and obliges chief human resource officers to work with chief sustainability officers on these programs.
The EU has long been committed to improving worker well-being, claiming it wants to create more transparent and predictable working conditions for all its 182 million workers. Now, it’s moving ahead with this objective on a number of fronts:
- Its Transparent and Predictable Working Conditions Directive, which member states were required to enact by August 2022, is geared toward improving employee protections and increasing labor market transparency.
- Its Work-Life Balance Directive, which came into effect in 2019, aims to set minimum standards for paternity, parental, and career leave as well as flexible work arrangements.
- Its Corporate Sustainability Reporting Directive (CSRD) mandates that, starting in May 2024, any company with €40 million in net turnover, €20 million in assets, or 250 or more employees that trades in Europe publish detailed information about their efforts to address a range of sustainability challenges.
In recent years, many companies hired a chief sustainability officer and established a set of high-priority programs to reduce carbon emissions and the risk of global climate change. The enactment of these new regulations signals a new era in which it’s time to extend the concept of sustainability to include similarly critical issues with the workforce — an idea I call people sustainability.
People sustainability takes a holistic approach to corporate human capital practices, including diversity and inclusion, well-being, employee safety, and fair pay. It raises these human capital issues to the C-suite and obliges chief human resource officers to work with chief sustainability officers on these programs. It means that your employee well-being efforts are no longer delivered piecemeal, which was ineffective no matter how well-intentioned or resourced they might be.
The EU is essentially saying that all these “HR programs” are much bigger than HR: They now fall into the category of global citizenship mandates, and companies must treat and report them as such.
How to Integrate People Sustainability into Your Company
I’m talking to European and U.S. firms about how they are gearing up for the Corporate Sustainability Reporting Directive and developing people sustainability metrics. Here are examples of how a few companies are approaching this:
- Heineken has developed standard measurements of human rights, fair pay, and even living conditions for all its contract workers helping it deliver beverage sales around the world.
- Enterprise software leader SAP has coupled its industry-leading diversity program to new pay equity and sustainability initiatives. For example, the company now openly publishes all pay bands so employees can see where they are and the pay scales for all new jobs posted. In parallel, it provides hiring and workplace support for neurodivergent employees. After undertaking a progressive gender pay equity analysis, it inaugurated a very aggressive program of promotions of women into senior leadership — all long-term “people sustainability” strategies.
- Financial services firm Liberty Mutual sees people sustainability as a factor in limiting the global risks of its customers, partners, and employees in the face of accelerating climate change. Chief sustainability officer Francis Hyatt, who previously served as executive vice president of enterprise talent practices, oversees the integration of global climate issues in the firm’s risk management approach and promotes sustainability solutions for employees, resellers, and customers. The company promotes thought-through generational and gender equality programs, and Hyatt ensures that every employee understands how their long-term safety and success is part of the company’s overall sustainability strategy. In other words, this new job function unifies all the brand’s existing HR work into the context of sustainability and helping the planet.
What links all three of these major corporations is the way each separately discovered that when you frame human capital investment in the context of sustainability, it assumes even more importance than it did before.
If you see value in this approach, where should you start at your organization? Building on the European Union’s new detailed CSRD reporting requirements, leaders will need to address issues ranging from greenhouse gas emissions to gender pay across their own operations, as well as that of their suppliers and business partners. You should try to ensure sustainability becomes a pillar of operations as early as possible, as the compliance clock is ticking.
The real action is to get your HR team to start working as soon as possible with their ESG colleagues to get people sustainability metrics and strategies into your business goals. To drive this, bring together a team including your heads of HR, DEI, and ESG, as well as representatives from your corporate finance and legal teams, to design your people sustainability program. You’ll ultimately want to see these goals reflected in your annual report and other stakeholder communications, so that these programs are seen as a core part of company strategy.
A recent survey by PwC reveals that many CEOs anticipate climate risk will affect their cost profiles and supply chains in the next year. However, despite these challenges, 60% of the surveyed CEOs do not plan to reduce headcount, and 80% do not plan to decrease compensation, as they recognize the importance of retaining talented employees.
Data like this underlines how people sustainability has become an integral strategy for corporate growth. Investors will soon begin to measure the effectiveness of a company’s well-being initiatives as a key metric of overall performance as much as its P&L.
You don’t have to be directly affected by Europe’s new sustainability laws to see that bringing together previously disconnected efforts such as DEI, purpose, or L&D under the umbrella of “long-term organizational sustainability” makes a lot of sense. You might even see it as meeting the needs of the present without compromising your future: a measure of sustainability that certainly gets my support.