DGFP // Wissenswert

ESG and Human Resources Management

The term ESG (Environment Social Governance) has gained a great deal of popularity. In the business sections of the daily press, one reads almost daily that ESG is increasingly a key subject for companies, both in the financial sector and in the real economy. In terms of regulations, the EU precedes the rest of the world. This is due to the comprehensive political sustainability agenda of the EU, which ultimately focuses on aligning the private sector with environmental and social sustainability goals. So far, the main focus of these regulatory initiatives has been on the concept of sustainable finance, which is based on the fundamental assumption that the appropriate alignment of private financial flows is the most efficient way to achieve politically set environmental and social goals. Correspondingly, the EU strategy for corporate social responsibility has already been promoted for years through regulatory requirements on non-financial information in corporate reporting. Increasingly, objectives other than ecological ones have come to the fore in this context. In other words: Increasingly, the discussion also centers on the “S” and the “G” in ESG.

Consequently, alongside other social aspects, employee matters are becoming an increasingly important basis not only for investors when making investment decisions or voting at annual general and shareholders’ meetings. A convincing performance with regard to ESG- relevant social and governance aspects as well as meaningful reporting on these aspects play an increasingly important role for the external image of the company and its attractiveness for customers and employees. In view of the regulatory dynamic, especially in the EU, companies - in all sectors and regardless of their capital market orientation - can no longer avoid the social and governance criteria of ESG in the short-to medium-term.

For human resources management (HR Management), the question arises in theory as to what role human resources can or must play in this context and what contribution that practical human resources work, and the managers responsible for it, can make to achieve the strategic ESG goals within the corporate organization. This is precisely the subject of this issue of the DGFP // Worth Knowing series. With regard to selected non-financial corporate reports, the working hypothesis seems to suggest that the alignment of practical HR work with ESG-relevant criteria can generally be described as heterogeneous at best. The same finding applies to the sustainability reporting system per se. With respect to the increasing importance of the topic of ESG, however, there are opportunities in HR management which, at least up to now, appear to have been insufficiently exploited.