ESG reporting mandates have grown by a whopping 74% in the past four years.

As companies face mounting pressure to prioritize environmental, social, and governance factors, a hyper-focused ESG workforce planning strategy can be the key to success. A strong ESG workforce planning strategy will boost the company’s ESG ratings, drive innovation, reduce regulatory risks, and increase enterprise profitability.

By fostering a culture that values sustainability and ESG, companies can differentiate themselves from competitors, attract socially responsible investors, and access new markets.

Understanding the Role of ESG in Shaping Workforce Planning Strategy

Environmental, Social, and Governance (ESG) is a set of criteria investors use to assess a company’s sustainability, ethical practices, and long-term viability. Integrating ESG into your workforce planning strategy ensures alignment with environmental impact, social responsibility, and governance standards.

Environmental criteria in ESG refer to how a company performs as a steward of nature. It may include a company’s energy use, waste, pollution, and natural resource conservation. Social criteria assess how it manages relationships with employees, customers, suppliers, and the community where it operates. And Governance criteria address executive pay, leadership, audits, internal controls, shareholder rights, and how these factors align with the company’s broader workforce planning strategy.

According to research, high ESG scores positively impact the financial returns of large firms worldwide.

Companies that prioritize ESG and align it with their workforce planning strategy are often seen as more responsible and better long-term investments.

Key Factors Driving ESG Momentum in 2023

80% of investors worldwide believe ESG ratings are important when choosing investments, making them a crucial parameter for long-term business, workforce planning, and ESG strategy.

Here are three key factors driving this trend in 2023:

1. Customers prefer businesses with high ESG ratings.  
2. Companies with higher ESG ratings have long-term potential toward net-zero strategies.
3. Government and PE firms are also increasingly interested in businesses with high ESG ratings.

Increased Demand for ESG Talent Across Industry

Demand for ESG talent with specialized skillsets is growing rapidly. A forward-looking workforce planning strategy is essential to identify and develop critical skills such as sustainability reporting, ESG communications, ESG data analysis, and financial modeling for ESG.

The demand for ESG talent is projected to grow significantly higher. However, the talent pool for ESG roles is limited, making talent acquisition challenging.

According to Draup’s analysis, more than 72% of ~2,800 companies plan to increase their investment in ESG, of which 50% are having difficulty finding ESG talent.

To overcome this challenge, companies need to assess the organization’s specific needs and develop an effective ESG team structure aligned with its goals and workforce planning strategy.

Challenges Faced by Companies in Understanding, Structuring, and Building ESG Team

76% of corporate directors are integrating ESG ratings into their business goals and ESG strategy. But only 10% of companies in the MSCI ACWI Index have an “AAA” ESG rating.

This suggests that a significant percentage of industry leaders are unable to effectively align their ESG strategy, workforce planning strategy, and broader business goals.

Companies like Swiss Re AG, Intel, Honda Motor, and Credit Suisse Group are leading the way in ESG ratings. However, even leading enterprises with high market capitalization—such as JP Morgan, Apple Inc., and Alphabet have lower ESG ratings than their peers, highlighting the need to align ESG goals with a forward-looking workforce planning strategy. 

Some companies have even faced substantial fines for failing to comply with ESG regulations imposed by the US government highlighting the need to align compliance efforts with a proactive workforce planning strategy.

Workforce planning leaders are facing numerous bottlenecks in developing an effective ESG talent and workforce planning strategy, including:

• Identification of ESG team structure in line with the organization’s goal
• Geographical constraints on ESG roles subject to specific regulations of the region
• Limited inter-industry and inter-geography talent movement of ESG roles
• High demand & fierce competition from peers acquiring & retaining ESG talent
• Hyperinflated hiring cost of ESG-specific talent
• Limited pool of ESG talent & lack of proper Learning and Development Module

ESG Workforce Planning Strategies to Consider in 2023

Developing a successful ESG talent strategy, supported by a robust workforce planning strategy, will help companies improve ESG performance. An ESG-focused workforce strategy can also give companies a competitive edge in addressing emerging issues like climate change, diversity and inclusion, and human rights.

Here are six workforce planning strategies to help firms build efficient ESG teams:

1. Identify and understand the critical job roles required based on specific ESG focus areas to help build efficient teams with defined workloads.
2. Globalize ESG teams at different experience levels and functions to leverage specific talent from mature and niche ESG locations. Globalizing the ESG teams can be 2X cost-effective.  
3. Use external consultants and Gig workers to further save costs.
4. Identify the feeder talent pool with a high overlap of required ESG skillsets. These talents can fill critical positions and is cost-effective too.
5. Upskilling or reskilling feeder talent can result in cost savings of up to 50% compared to acquiring new talent. Cost efficiency and the ongoing talent crunch make ‘training feeder talent’ a crucial part of the ESG team’s workforce planning strategy.
6. Build an ESG team with Peer Intelligence to understand the standard team structure prevalent in the industry.

Draup’s Talent Intelligence platform uses machine learning models to provide global HR leaders with actionable insights for ESG workforce planning. With data for 4,500+ job roles and any business function, HR leaders can analyze critical ESG talent hotspots and identify untapped feeder talent pools.

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