The hidden benefits of ESG: Are sustainable practices the key to retaining top talent?

Workforce Management
Anna Frazzetto

By Anna Frazzetto
March 5, 2024

June 3, 2024

0 min read

As the way we search for top talent continues to evolve, environmental, social and governance (ESG) practices have moved steadily towards the heart of strategic business planning. Beyond the obvious benefits in promoting sustainability and ethics, ESG initiatives are increasingly recognised for their role in attracting and retaining talent. This blog delves into unseen advantages of ESG commitments, as supported by recent research, and explores whether sustainable practices could be the secret to maintaining a competitive edge in the recruitment industry.

The growing appeal of ESG

Recent studies have illuminated a shift in workforce values, particularly among millennials and Gen Z professionals, who are now a significant portion of the labour market. These groups are not just looking for a pay check but for purpose and direction in their work. According to Deloitte Insights in their 2023 Global Millennial and Gen Z Survey, 40% of millennials and Gen Z workers prefer to work for companies that have strong sustainability credentials.

This demographic shift highlights the importance of ESG in talent attraction and retention, and this correlation is supported by an increasing body of research. For instance, a study by Harvard Business Review notes that companies with strong sustainability programs have a 25% higher likelihood of attracting top talent. Findings like these suggest that sustainability is not just a moral imperative but a strategic advantage in the war for talent.

Young female businesswoman in the office

Enhancing employee engagement and loyalty

Beyond attracting new talent, ESG initiatives play a crucial role in enhancing employee engagement and loyalty for those already settled in their roles. A report by McKinsey & Company revealed that robust ESG commitments are directly linked to higher job satisfaction among employees. Employees at companies with robust ESG commitments feel more connected to the company’s mission and are more likely to stay long term. This sense of belonging and purpose is a critical factor in reducing turnover rates and fostering a culture of loyalty and productivity.

Image of human hands holding plant shaped like arrow

The role of social responsibility in talent retention

The social component of ESG, which focuses on company culture, community engagement, and diversity and inclusion, is particularly influential in retaining talent. A 2022 Forbes study indicated that organisations with diverse and inclusive cultures are 35% more likely to outperform their competitors. To take advantage of this boon, companies must ensure their policies and practices are inclusive. This includes setting diversity goals, hiring diverse talent and conducting training on cultural sensitivity. Companies that embrace such practices are proven to be more productive and profitable.

Unposed group of creative business people in an open concept office brainstorming their next project.

ESG’s impact on employer branding and reputation

The impact of ESG does not stop at employees: Social responsibility initiatives can enhance a company’s reputation, making it more attractive to customers and investors. A positive corporate reputation, bolstered by transparent ESG commitments, can significantly enhance business branding. In today’s digital age, where company reviews and ratings are readily accessible, a strong brand is vital for both internal and external relationships. Companies that are perceived as sustainable and ethical employers enjoy a competitive advantage in the job market, attracting individuals who share these values while also positioning themselves ahead of the competition.

businessman hand working with new modern computer and business strategy as concept

Considerations for a sustainable future

While the benefits of ESG practices on talent retention are clear, companies face challenges in implementing these initiatives. It requires a genuine commitment beyond surface-level discussion. Effective ESG strategies should be integrated into core business operations and reflected in the company’s culture and values. Communicating these efforts authentically is likely to building trust with both current and potential employees as well as customers and clients.

As the business landscape continues to evolve, the importance of ESG practices in retaining top talent becomes increasingly apparent. Sustainable practices offer a pathway not only to become an ethical and environmental leader but also to gain a competitive advantage in the talent market. By fostering a culture that values sustainability, social responsibility and ethical governance, companies can unlock the hidden benefits of ESG, making them more attractive to a workforce seeking purpose in their professional lives.

Share the knowledge

Latest Jobs

S&F Airswift newsletter form graphic

Fast-track your STEM career