Organizations often take a closer look at policies and procedures at the start of the new year, seeking ways to bolster talent engagement and attraction as well as improve their bottom lines while also adhering to new rules and regulations. As previously reported in CWS 3.0, having environmental, social and governance programs in place helps demonstrate that a company cares for its people, the environment and social good — and can be a key differentiator for in-demand talent comparing their options for contingent work.  

“The goal of ESG is to capture all the non-financial risks and opportunities inherent to a company’s day-to-day activities,” noted Matt Norton, SIA’s workforce solutions research director, at a panel at this year’s CWS Summit Europe.  

And it is being driven by new regulations. 

Regulations 

The EU set a precedent in January 2023 when it passed the Corporate Sustainability Reporting Directive, or CSRD, a directive that applies varied timelines and criteria to organizations based on their size. 

“This really marks a significant step, a change in reporting, with more companies impacted,” Norton said. “Roughly about 50,000 companies are going to be impacted by this, with more data required and more stakeholder scrutiny than ever before.” 

Starting in January 2024, companies with more than 500 employees with a $50 million net turnover in the EU, or 25 million euros in total assets, needed to start reporting in order to disclose that information in 2025. Smaller companies will be impacted as the timeline progresses. 

The CW manager’s role. Because required reporting criteria includes an organization’s permanent workforce, agency workforce and any independent contractors that work in the business, contingent workforce managers play an important role. Reporting requirements also include workers in the “value chain” — defined as accompanying the activities, resources and relationships the undertaking uses and relies on to create its products or services from conception to delivery, consumption and end of life.  

“Showing that you’ve got a robust ESG purpose is now essential when it comes to talent attraction for both the permanent and contingent workforce,” Norton says. “And it means that you, as a contingent program manager, are responsible for highlighting not only your role in terms of ESG but also how your program and supply chain partners support ESG.” 

In addition to the CSRD, about 2,000 ESG regulations worldwide now specifically impact publicly listed companies, including the EU’s taxonomy regulation, non-financial reporting directive, the sustainable finance disclosure regulation and the Corporate Sustainability Due Diligence Directive 2024.  

US pushback. The situation may be a bit different in the US, however. Although many measures supporting ESG have been proposed, they are having difficulty gaining approval; meanwhile, legislation prohibiting such policies is on the rise. For example, Florida’s House Bill 3 prohibits financial institutions and banks from considering non-financial factors in making investing choices and from enacting “social credit scores.” Gov. Ron DeSantis asserts that banks are violating those laws and implies that more legislation may be coming to strengthen enforcement, wrote Fiona Coombe, SIA’s director of legal and regulatory research, in SIA’s ESG Reporting and Due Diligence in Contingent Workforce Management report. 

Another point to consider is that large publicly traded companies seeking investment from funds with a focus on ESG need to demonstrate they have good policies. In addition, private firms that provide services to publicly listed companies also need to have good ESG standards, as they are part of their larger client’s supply chain. 

Getting Started 

According to a panel discussion at SIA’s recently held Executive Forum Europe, the first step to develop an ESG strategy is to conduct a materiality assessment. This process provides a path to follow in order to clarify the issues that matter to your business. 

“The purpose of an ESG strategy, like any business strategy, is to focus your attention on the things that matter,” explained Madeleine Karn, global sustainability director at PageGroup, during the discussion. “So that’s what you need to be thinking about when developing that strategy. I’d say the starting point is really taking that step back and thinking about who your stakeholders are and what they expect of you.” 

Challenges 

Launching an ESG program, however, is not always an easy task.  

“I think one of the things is that when markets are tough, anything that is noncore, nonessential — or perceived as that — it’s difficult to prioritize,” Tom Lakin, global practice director – future of work at Robert Walters, said at the Executive Forum Europe panel. “So, it’s about building that business case.”  

The globalization piece of the puzzle is also challenging. 

“If you’ve ever tried to do a DE&I program and expand it into different geographies, you will know that it’s incredibly difficult and totally inappropriate to just lift and drop,” Lakin explained. “You have to localize it. It’s the same thing with ESG – it does mean different things in different cultures and sometimes it’s a case of having localization tweaks, which is easier said than done.” 

David Campbell, head of category management at Siemens, noted it is “all about collaboration” and focusing on the areas you can impact. 

Working with its providers, Siemens now has more than 40 workers impacted from the war in Ukraine as well as individuals with disabilities or from underprivileged backgrounds. And the program is now working on attracting candidates that are survivors of modern slavery. 

All these initiatives are having real value, Lakin explained. “And just to show the impact of that, if I go to our CEO and say, ‘We’ve saved $10 million last year, and we’ve done a great job of putting bums on seats in terms of recruitment and filled every vacancy,’ he’s going to say, ‘Well, so what?’ But when we took 40 workers from the Ukraine and really helped them, that message went up right to our global CEO.” 

In the US, in particular, corporate ESG programs are under increased scrutiny, facing more shareholder proposals from anti-ESG groups, state-level anti-ESG legislation and rising pressure from stakeholders concerned about corporate environmental impact, according to research released this month from The Conference Board. And the pressure shows no signs of abating going into 2025. 

This landscape reinforces the importance of companies being able to prove the financial value of their sustainability initiatives, according to The Conference Board. Yet many executives have doubts about their firm’s ability to do so: Its new survey of roundtable participants found that about 40% of executives say their company’s assessment of sustainability investments is either underperforming or uncertain. 

The study, produced with Weil, Gotshal & Manges, also queried executives regarding why they want to measure and communicate their company’s sustainability ROI. A top reason cited was the ability to address ESG backlash. 

“Companies that communicate effectively will unlock financial value and gain stronger internal support,” Rebecca Grapsas, partner and co-leader of the ESG & Sustainability practice at Weil, Gotshal & Manges, said in a press release. “To make progress, they should consider tailoring sustainability communications to their different audiences, ensuring accurate reporting, and aligning messaging with evolving business goals, stakeholder priorities and regulations.”