The meteoric rise of ESG caught many companies by surprise and shorthanded. Among the questions raised by companies at the moment is whether they need to increase staffing to manage their ESG programs/initiatives. Certainly each company faces different pressures and will have a different answer to the question.
Here are a few considerations in evaluating whether adding staff may be appropriate:
- As a starting point, management should have a candid conversation about the importance of ESG in the company. To be blunt, ESG does not have the same level of criticality to all companies. If it poses a meaningful risk to – or new business opportunities for – the company, then it likely warrants having specific dedicated in-house leadership, management and/or staff. Does the CEO have compensation tied to ESG? That potentially influences the situation.
- Who is pushing for ESG program development or improvement? Investors have been extremely active and aggressive in pushing their holdings to make ESG improvements. Corporations tend to be generally responsive to investor concerns and actions, but there are contextual matters that are important to consider. Companies are typically more deferential to large shareholders than to smaller ones, although Engine No. 1’s success against ExxonMobil brings a new dimension to the historical dynamics. Is the Board of Directors mandating changes? If so, the Board may hand down specific internal roles and responsibilities for management, including new staff positions.
- Does a comprehensive program need to be developed from scratch? It would be unusual if a company doesn’t have at least some building blocks of formal corporate governance, environmental management and human resource programs in place. Yet if robust systems, processes and procedures need to be developed across company operations, adding staff could be the right way to go especially for large multinationals. Small companies with few operations might be served well by hiring a consultant rather than increasing permanent headcount.
- Are reasonably qualified resources in the company already? You may find junior staff in operational positions with significant experience in managing discrete ESG elements or collecting data who can fill broader ESG reporting or data management needs. Installing a senior level leader may not be necessary if the short term need is more technical or data-oriented.
- Should you engage a consultant instead? Paying consultants is not usually near the top of most corporate Bucket Lists, but it can be a sensible approach. External experts function on an as-needed basis and don’t have overhead burden. On an annualized basis, they can be more cost effective than hiring similarly-qualified in-house staff. Consultants frequently need minimal learning curves so they can hit the ground running. Conversely, in the short term they can be more expensive, plus they might not be given the same courtesy or credibility as employees and unable to achieve results as expected.