As more companies take note of the ESG trend, I’ve been fielding client questions about how ESG is changing talent needs
In my view, ESG is having an impact in three key ways: It’s changing how we talk about the role of business in social and environmental issues, it’s catalyzing big new investments and it’s creating a demand for talent that the market is not yet ready to meet.
I’ve been working in this field for long enough to remember when we used the phrases “triple bottom line” and “3Ps” — terms popularized by consultant John Elkington — to describe how companies accounted for their impacts on people and the planet.
Over time, that terminology evolved. By the late 1990s, we started using “corporate social responsibility” or the even more ambiguous acronym CSR. It made sense at a time when companies wanted to reassure their stakeholders that they were doing the right thing: taking corporate citizenship seriously, earning their social license to operate, accounting for risks.
But by the early 2000s, CSR sounded quaint and too narrowly focused on social issues, so people started using the catch-all term “sustainability.” Sustainability was a much larger umbrella, with room for all kinds of social and environmental issues. Sustainability could mean environmental sustainability, social and environmental sustainability or even more broadly, futureproofing for tomorrow. Ten or so years later, Michael Porter and Mark Kramer coined the phrase “shared value,” which offered an even stronger, inclusive point of view: “We’re in this together, building a sustainable world.”
Over the past couple years, the term ESG has gained popularity, with more coverage in the mainstream press and more than a few companies hiring for roles with ESG in the title.
But is this just a rebrand or something more?
More money, more mainstream
It’s clear that ESG is more than just a new name. It’s a shift in investment — in dollars and attention. It’s telling that in June, the accounting firm PwC announced plans to invest $12 billion and create 100,000 new ESG jobs over the next five years. In an article about this decision, PwC Global Chairman Bob Moritz explained that, previously, PwC focused on the reporting aspects of ESG. “Now,” he was quoted as saying, “every employee has to be familiar with the issues.”
That one of the big four accounting firms plans to increase its workforce by 35 percent with new jobs dedicated to ESG shows the power of the investors behind this trend. But it’s not just about jobs; it’s also about new injections of capital.
According to a July report by Deloitte, global sustainable assets under management are likely to grow from $2.8 trillion in 2020 to $13 trillion by 2025. The report’s authors say asset managers are shifting from a focus on considering ESG factors to a focus on building portfolios that “actively promote” ESG as a primary objective.
Employers are looking for people who can lead on strategy and connect the dots between sustainability risks and opportunities, investor demands, government regulations, finance and business operations …
The driver behind this evolution? Global investors. “We’ve seen a massive shift in conversation even in the last three months,” Deloitte report co-author Alyssa Buttermark was quoted as saying. “A lot of gatekeepers and financial institutions are pushing for minimum standards for sustainability on products.”
Arguably, that investor demand started with BlackRock CEO Larry Fink, who, in his 2018 CEO letter, called on corporate executives to create “enduring, sustainable value.” New York Times columnist Andrew Sorkin called this letter a “watershed moment on Wall Street, one that raises all sorts of questions about the very nature of capitalism.”
It’s this kind of investor demand that’s driving ESG, injecting more money into the space and putting ESG squarely on the agenda of mainstream business.
Demand for talent outpacing supply
More recently, a spate of publications, including the Financial Times, has highlighted the ESG hiring frenzy. It’s something I’ve noticed in my own business as a recruiter. Companies across the board — from large brands to private equity houses and institutional investors — are looking for a range of experts, from analysts to investment leaders, reporting whizzes to heads of ESG.
In a July article in FundFire, Renee Neri, partner at the executive search firm Heidrick & Struggles, noted that “there have been more than 50 executive leadership transitions, hires or appointments to a ‘head of’ ESG post.’” As Joel Makower put it in a recent GreenBiz column, “It’s a good time to be an ESG professional. A very, very good time.”
Watching the demand for ESG talent, I have noticed a change: The current pool of qualified candidates is significantly smaller than the demand. Part of this is because companies are looking for specific credentials and more sophisticated skill sets. It’s not just a rush to hire data wonks who can collect, analyze and report the numbers. Employers are looking for people who can lead on strategy and connect the dots between sustainability risks and opportunities, investor demands, government regulations, finance and business operations to think holistically about integrating ESG into every company function — and get the CEO and board on board with new ways to invest and allocate capital.
Because this field is new, the pool of people with these skills and experience is small, so as the demand for talent grows, there will be a need to cultivate a robust talent pipeline with the right training and experience. And just as in the field of sustainability, the ESG field lacks diversity, so in addition to finding ways to expand education and training for future ESG professionals, we should make it a priority to cultivate diverse talent.
When I get calls about ESG today, I make clear that this is a game-changer. With investors driving the demand for sustainability, these are issues that are priorities for every company — and that’s a good thing. Ultimately, ESG is about directing the flow of the world’s capital in ways that enhance the 3Ps, the triple bottom line, CSR, sustainability and shared value. Regardless of what you call it, that’s exactly what we need to secure a better future for all.