By Robin Monical, Vice President Talent Acquisition, Ensono Generations raised on principles of environmental sustainability and ethical governance want employers who share their values—and are turning away from those who don’t.
Read about the future of the global workforce, and chances are you’ll encounter two themes: changing demographics and a looming skills gap.
First, this group’s age demographics are shifting rapidly. Millennials and Gen Z currently make up 38 percent of the global workforce, a figure that’s expected to rise to 58 percent by 2030.1 Second, studies predict that due to a combination of retiring Baby Boomers, aging populations and rapid technological advancements like AI, the world is looking at a talent shortage of roughly 85 million people by 2030.2 In this landscape, highly skilled Millennial and Gen Z employees become a valuable and sought after talent pool. Organizations must attract, engage, retain and upskill this cohort if they hope to future-proof themselves against the skills shortage and growing wave of retirements. To do that, they need to appeal to their values more so than with any other generation in the workforce.
Environmental, Social and Governance (ESG) is one such area where these generations place value. Millennials and Gen Z care deeply about their organization’s impact on the world around them. Because of that, companies need to find ways to truly meet their ESG obligations and ensure they are clearly communicating this commitment—and its impact—to existing and potential employees.
Let’s explore the symbiotic relationship between robust ESG initiatives and the recruitment and retention of Millennial and Gen Z employees. As you’ll discover, ESG is not just an exercise in altruism, but a strategic imperative for sustainable business success.
1“How prepared are employers for Generation Z?” PwC.com. 2Franzino, Michael and Alan Guarino, “The $8.5 Trillion Talent Shortage,” KornFerry.com. 32023 Gen Z and Millennial Survey, Deloitte.com.
ESG is more than mere corporate responsibility to appease investors or meet regulatory obligations. It has emerged as a pivotal factor in attracting and retaining the best Millennial and Gen Z talent. To understand why, you need to understand their values as a whole. Generally, they do not have an overly optimistic view of the future. According to a recent survey of Millennial and Gen Z workers from Deloitte:3
Most think the economy will get worse
Most are concerned about the high cost of living
Most are concerned about climate change
That list isn’t exhaustive, but it gives a snapshot into the mindset of this cohort. They’re extremely socially minded and feel an obligation to help improve a future they see as bleak. And, most importantly, they want to focus their time and energy on companies who share this commitment.
According to the Society of Human Resource Management (SHRM), ESG initiatives are considered important to 41 percent of all American workers. However, that number jumps to 55 percent for Millennials and 46 percent for Gen Z, highlighting the elevated level of importance for this younger age group.4 The environment, specifically, was overwhelmingly reported as the top ESG priority in SHRM’s survey. 54 percent of respondents said it was most important to them, followed by social issues at 24 percent. Deloitte’s research agrees, reporting that 60 percent of Millennials and Gen Z say they’re most anxious about the environment.
But this concern goes beyond anxiety— it directly impacts the jobs that this age group accepts and retains. According to Deloitte, 50 percent research an organization’s environmental impact and policies before accepting a job. Even more telling is that one in six say they’ve already changed jobs or sectors due to climate concerns, and one in four plan to do so in the future.
4Gurchiek, Kathy, “Survey: ESG Strategies Rank High with Gen Z, Millennials,” SHRM.org, March 2023. 5S&P 500 ESG Reporting and Assurance Analysis, TheCAQ.com, June 2023.
Clearly, ESG directly impacts Millennial and Gen Z recruitment and retention. So how are companies responding? According to SHRM, 51 percent of surveyed U.S.-based executives ranked ESG initiatives as being very important. 75 percent of those same respondents acknowledge that ESG initiatives have a positive and direct impact on employee engagement, which is directly tied to retention.
So, companies agree that ESG is important and is good business. That’s why 99 percent of the S&P 500 publicly report their ESG information.5 But, while having and reporting on ESG initiatives is important, that alone misses out on one key factor: Millennials and Gen Z want to have an active hand in advancing ESG goals. While companies have made progress on DEI and work/life balance programs since the COVID-19 pandemic, Deloitte’s survey reports that many fewer respondents feel they can influence their organization’s social impact and sustainability, relative to other areas of business such as products and services or personal development and training.
This means that, for many organizations, actively getting their younger employees involved with driving social impact and sustainability programs is a major area of potential growth. This is one secret behind successfully recruiting and retaining Millennial and Gen Z talent.
6Hastwell, Claire, “Workplace ESG: How Environmental, Social, and Governance Factors Impact Employee Experience,” GreatPlaceToWork.com, December 2023. 7“Balancing sustainability and profitability,” IBM Institute for Business Value, April 2022.
ESG’s role in talent attraction and retention
Giving Millennials and Gen Z the opportunity to drive change through ESG—particularly in relation to environmental and sustainability initiatives—has the potential to make or break recruitment and retention efforts. Consider these stats from Deloitte, and the importance of ESG to their loyalty and productivity:
37 percent of Millennials and 44 percent of Gen Z say they’ve rejected assignments due to ethical concerns.
34 percent of Millennials and 39 percent of Gen Z have turned down employers that did not align with their values.
Not having an ESG initiative, and employees lacking the ability to drive ESG, are both major risk factors for attracting and retaining young talent. Conversely, the SHRM survey found that 86 percent of workers at organizations with ESG-related goals are proud to work for their employers. They say their jobs are meaningful and they want to stay with their organization long-term. In other words, active and impactful ESG means stronger employee engagement and retention.
“Employees engaged in ESG initiatives feel a sense of purpose that transcends their day-to-day tasks,” explains Tony Bond, Chief Diversity and Innovation Officer at Great Place to Work. This sense of purpose contributes to an overall bump in employee experience and engagement—two factors that have a direct line to employee retention. His organization’s research found that employees who feel their employers make a positive impact in the world are 11 times more likely to stay with their organizations for the long haul, and 14 times more likely to say they enjoy coming to work.6
Employee experience, in turn, breeds a strong company culture that’s built on shared ESG goals and aspirations. That culture, when packaged and promoted through employer branding initiatives, becomes a compelling narrative that can be used to attract and hire top talent in the Millennial and Gen Z cohort.
The importance of an authentic narrative around ESG initiatives and culture cannot be overstated. IBM research found that 67 percent of survey respondents were more willing to apply to jobs with environmentally sustainable companies.7 Authenticity is the operative word here. Companies need to prove they’re environmentally sustainable via transparent ESG filings and other public-facing messaging.
According to Deloitte, Millennial and Gen Z workers say they actively consider a company’s sustainability claims and certifications to ensure that their marketing messaging matches their actions. A disconnect is seen as “greenwashing,” which is a major turnoff for these workers. But if companies are genuine in their ESG efforts and give Millennial and Gen Z workers space to make a direct impact, these job seekers are willing to put their money where their mouths are when applying for jobs. SHRM found that if companies meet the above threshold:
39 percent of Millennials and 34 percent of Gen Z would consider a pay cut
55 percent of Millennials and 53 percent of Gen Z would relocate
41 percent of Millennials and 40 percent of Gen Z would take a job with less benefits
43 percent of Millennials and 45 percent of Gen Z would accept a job with less work/life balance
These data points highlight the importance of these initiatives, relative to other variables that determine whether or not a candidate accepts a job offer.
Strategies for integrating ESG into corporate culture
Authenticity, transparency and empowerment are the three words that should be at the forefront of any ESG strategy. ESG needs to stem from a genuine desire to make a difference in the world. It needs to be transparent and honest through internal and external reports and communications. And it needs to include and empower participants from all levels of the organization.
True ESG—the kind that Millennials and Gen Z gravitate toward—goes beyond simple compliance and uses the organization’s collective resources to drive targeted and significant change, with goals like:
Reducing waste and pollution
Increasing energy efficiency
Reducing or combating climate change
Ensuring human rights throughout all company processes
Improving employee health and safety
Providing training and education programs
Ensuring board diversity
Following ethical protocols
Addressing executive compensation
Individually, each of the above goals relates to specific programs and initiatives that cumulatively make up the company’s ESG efforts. Companies don’t have to do it all, but they should be serious about driving meaningful impact from the initiatives that they do focus on. Ideally, these priority initiatives will stem from both leadership and grassroots proposals from employees throughout the organization. To foster this company-wide, grassroots effort, companies need to:
Set a clear vision – Be clear and specific about what the company is trying to achieve, by when, and what the desired impact is.
Get commitments – Secure buy-in and support from the board, senior leadership and key stakeholders who will drive the initiative.
Benchmark, measure and report – Establish a starting benchmark, specify success metrics and transparently report on progress and impact internally and externally.
Gather feedback – Create feedback channels to gather opinions and ideas from across the organization, both to improve existing ESG efforts and to identify new possibilities.
Communicate impact – Share success internally and externally, repackaging that narrative for prospects, investors and potential candidates.
Creating and promoting an authentic, transparent and empowered ESG program means an ongoing initiative to track, evaluate and actively improve key success metrics over time. Millennial and Gen Z employees don’t expect perfection, but they do expect effort. The steps outlined here are one way to show existing employees and candidates that your company takes ESG as seriously as they do.
To move forward, look inward
What are you doing right now to further ESG at your company? What channels are you leveraging to communicate these efforts to your employees and candidates? Use that assessment as your benchmark. Work with stakeholders across the company to identify your first areas of focus and improvement, and commit to a regular cadence of goal setting, execution, evaluation and refinement.
By committing to authentic ESG efforts, your organization will be set up for positive performance outcomes across all facets of measurement and proactively address the global workforce shortage, brought on by the retiring baby boomers, by attracting the next generations of talent.
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