What the growing focus on ESG issues means for CHROS

CHROs are being called on to play a greater role than ever in addressing ESG issues, including the risks and opportunities for employers.
By: | May 27, 2022

Events of the past two years—including the COVID-19 pandemic, social strife, and the Great Resignation—have had a serious impact on the role of the CHRO. And now, a new challenge: According to a survey of more than 100 HR leaders across the U.S., Asia, and Europe, CHROs are being called on to play a greater role than ever in addressing environmental, social and governance (ESG) issues. – both the risks and opportunities for employers.

The recent report, The CHRO’s Role in Navigating the Future of Work from The Conference Board, focuses on the increased pressure on companies to act on ESG issues and the expanded role of human capital leaders in doing so.

“Human capital management has never been more important, especially after the black swan events of the last few years,” says Rebecca Ray, executive vice president of human capital at The Conference Board. As a result of those events and their business impact, investors, employees, and customers now expect transparency from businesses about their human capital management strategy.

“Going forward, CHROs are going to play a crucial role in helping to shape and share this narrative with all relevant stakeholders,” she says.

For example, Ray says, CHROs will need to help shape the corporate voice on social issues, articulate the mission and purpose of their companies, and communicate the company’s people strategy to an increasingly broad set of stakeholders. This has become all the more urgent as companies prepare for newly imposed SEC requirements to disclose a company’s human capital data, including its resources and progress against objectives.

“The crises of the past few years have underscored why human capital management matters are an essential part of the overall business strategy, including achieving a company’s ESG goals,” Ray says. “Board oversight of human capital management will continue to grow in importance. CHROs will need to ensure that directors understand the organisation’s capability to execute the business strategy.”

Additionally, the report explores the challenges that CHROs must navigate to successfully lead remote and hybrid teams and shape an organisational culture that both attracts and retains workers.

The complexities of societal change and the demands for transparency will require CHROs to boost the ways they partner with C-suite colleagues and the board, Ray says. Disclosing human capital metrics and shaping the corporate narrative around people issues for a variety of stakeholders—both internally and externally—also will become more critical. Finally, the ability to work closely with, and benefit from, board directors in their human capital management oversight role will be increasingly important.

Technology and analytics also will be critical in guiding CHROs as they work toward business goals, the report says. For example, the HR function will have a broader impact on people across the organisation (for example, workforce diversity and predictive analytics) and a sharper focus on business outcomes.

“CHROs will leverage technology to track and measure progress on metrics related to human capital,” says Ray, adding that roles within the HR function, such as HR generalists and others, will become more sophisticated as technology reduces administrative burdens.

READ: Malaysia pushes for companies to adopt ESG standards

“The pandemic rapidly accelerated the digital transformation of businesses,” Ray says “Now, the use of digital platforms and data are at the core of the workplace.”

She explains that those digital tools help HR not only collaborate in remote and hybrid work environments but also to improve efficiency, guide decision-making and enhance the employee experience.

“Effectively using analytics and technology are going to be essential for the future of the HR function,” she says.

By Tom Starner, a freelance writer based in Philadelphia who has been covering the HR space and all of its component processes for over two decades. This article was first published on Human Resources Executive.