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The First Word: HR leaders have a crucial role to play in corporate sustainability agenda. Here’s why.

People can make or break corporate transformation toward a sustainable future.

 

The pursuit of corporate sustainability has evolved from a buzzword to a strategic imperative in recent years. As organizations grapple with the multifaceted challenges posed by climate change, social inequality and governance issues, we are, more than ever, at a critical juncture where we should expect to see acceleration of corporate sustainability efforts. However, the opposite is happening. 

According to the EY organization’s Sustainable Value Study 2023, business progress on sustainability is slowing. While Chief Sustainability Officers (CSOs) are critical to organizations making progress on sustainability, the success of any of such efforts will depend on whether sustainability is collectively seen within an organization as a strategic business objective. CSOs should collaborate with Chief Human Resources Officers (CHROs) to lead the strategic approach and integration of corporate sustainability efforts, as HR leaders lead the workforce transformation through talent development and reskilling. The CSO-CHRO collaboration will be a game changer in the pursuit of corporate sustainability. 

 

Human-centered transformation has a higher chance to succeed

Sustainability transformations can be a daunting task that is complex and far-reaching. The International Panel for Climate Change (IPCC) predicts that sustainability transformation will need to focus on behaviors. Beyond environmental factors, companies need to consider social issues, such as health and wellbeing, diversity, equity and inclusion (DE&I), training and development and supply chain transparency.

It will require an organization-wide mindset shift and behavioral changes to achieve any workplace transformation. So how can organizations engage their employees in the sustainability transformation journey? The simple answer to that is: Put people at the center of the transformation. 

According to the EY Humans@Center research, conducted in collaboration with Oxford University’s Saïd Business School, there are six key drivers that will determine the success of workplace transformations, with a focus on the emotional journeys and motivations of the workforce, namely purposeful vision, practical technology, adaptability, psychological safety, disciplined freedom, and radical interdependence. When combined, these are the formula for increased success rates for transformations.

The adoption of the formula — a human-centric approach — works best by putting HR leaders in the driver’s seat since CHROs are experts in inspiring and facilitating a mindset shift and behavioral changes in organizations. To optimize the key driver “purposeful vision,” CHROs can create a corporate vision that embeds sustainability into both the inorganic and organic growth strategies and position it to drive both innovation and opportunities within an organization. The creation of values is only the start of the transformation — values must be realized and put into execution. HR leaders will be able to support execution and accountability by linking sustainability strategy to executive reward and metrics, as well as incorporating sustainability into remuneration frameworks.

The expanded role of CHROs supercharges sustainability agenda

Historically, the core function of HR had an administrative and operational focus, such as recruitment, payroll management, and talent development. But at the helm of this transformative journey, HR leaders find themselves increasingly at the intersection of transformation and corporate strategy. 

The new remit of CHROs will require HR leaders to work even more closely with CEOs and other business leaders to co-develop long-term strategy as a business. It also means the prominence of business-driven HR is increasingly undeniable, with emerging trends such as HR leaders possessing CFO or business backgrounds assuming the role of CHRO. This shift underscores the critical importance of strong business acumen and data literacy in HR leadership as they are expected to contribute as a strategic partner to the business and demonstrate understanding of the intricacies of financial metrics, market dynamics and operational strategies. A CHRO with robust business acumen will be able to seamlessly connect with key stakeholders such as supply chain leaders, sales executives and CSOs, facilitating direct engagement to address practical challenges and resolve business-related issues efficiently by aligning HR initiatives with broader organizational goals, driving value creation and fostering a culture of innovation and agility.  

In the context of sustainability increasingly becoming a crucial element for corporate strategy, organizations will need CHROs’ skill sets to assess the sustainability skills gaps within the workforce and define talent development pathways and upskilling or reskilling strategies that will improve employees’ ability to adapt to market forces, such as the green economy or workforce digitalization.

 

CHROs and CSOs work to change the game for ESG reporting 

In Asia-Pacific, we are beginning to see CHROs and CSOs of global corporations headquartered in the region share the responsibilities of facilitating corporate DE&I initiatives, as well as handling investor relations and media engagement — especially in industries such as health care and life sciences. There is even a stronger business case for such collaborations in industries with extensive global operations such as technology and electronics as they need to align with global standards, especially regarding sustainability and human resources practices.

As corporations face increasing scrutiny from investors, regulators and consumers, transparent reporting on ESG metrics has become non-negotiable. In this context, HR leaders are uniquely positioned to spearhead the reporting process, particularly in the “S” (Social) and “G” (Governance) aspects as the HR function becomes even more data driven.

Social responsibility encompasses issues including labor practices, employee relations, and community engagement. HR leaders, with their expertise in managing human capital, can provide accurate and comprehensive data that reflects the company’s commitment to social sustainability. Moreover, their role in governance ensures ethical business practices and transparency, addressing the “G” in ESG. The input from CHROs does not only lessen the workload of CSO, but also broadens the discussion in ESG reporting.

 

CHROs: change agents for a sustainable future

The synergy between CHROs and CSOs is not just about aligning values but creating a seamless integration of sustainability goals into the core fabric of the organization. Now, more than ever, HR leaders play a pivotal role in weaving sustainability into the organizational culture.

In the tapestry of corporate sustainability, HR leaders emerge as indispensable architects of positive change because people are the core of any transformation. It often takes years of planning, reskilling the workforce and hiring for a successful organization-wide transformation to happen. 

Going forward, the imperative for HR leaders to actively contribute to the corporate sustainability agenda cannot be overstated as they hold the power of reshaping the workforce to facilitate transformation of business models and portfolios by positioning sustainability as a key lever of innovation growth. The remit of CHROs is changing rapidly as we speak. By recognizing the interconnectedness of human resources and corporate sustainability, organizations can harness the transformative power of HR leadership to not only meet ethical and regulatory standards but also to drive innovation, enhance brand reputation and secure long-term success.

 

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.


 

About the authorey_shinichiro-uzawa

Shinichiro Uzawa is the leader of People Consulting (PC) services in EY Japan and EY Asia-Pacific.

He has over 25years of experience in HR transformation in business and consulting companies, specializing in HR strategy development, transformation, change management, and digital HR. Prior to assuming his current position, he served as the HR Transformation Practice Leader at a top global consulting firm and as an HR Consulting Leader overseeing seven countries in the Asia-Pacific.

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