New Zealand Companies Should Increase ESG Focus To Attract and Retain the Best Talent

Environmental, Social, and Governance (ESG) issues are increasingly becoming a way for companies to differentiate themselves and gain competitive advantage. Although New Zealand generally ranks well on governance in the public and private spheres, New Zealanders are starting serious conversations about climate change efforts, and housing affordability continues to deteriorate with flow on effects on social inequality.

BCG recently surveyed around 1,000 New Zealand employees to understand how they think about ESG issues in the context of their employment decisions. With 60% of respondents saying they are open to a new role in the next 12 months, 36% actively looking for a new role, and 18% open to roles abroad—now is an important time for New Zealand employers to consider how to attract and retain top talent.

Employees care about ESG, but employers’ performance on ESG hasn’t yet caught up to employees’ expectations

Almost 70% of respondents say it is important or very important for organisations to focus on ESG activities. The primary reasons given are because it is the right thing to do (65%), to meet customer expectations (61%), and to meet legal or regulatory requirements (53%).

More than 60% of respondents say their organisation focuses “the right amount” on ESG, and a similar proportion (57%) say their organisation has the right amount of focus on communicating ESG performance internally and externally. However, only 23% of respondents believed that their organisation was doing better than others on ESG, and 52% said that their organisation was merely on par with others in New Zealand. Given the opportunities for differentiation through ESG, companies in New Zealand may be missing out on a source of competitive advantage.

Almost 30% of survey respondents say they have ESG-related performance indicators, targets, or metrics (KPIs) that are linked to delivering on the organisation’s ESG targets. For senior executives, the figure rises to 51%. ESG-related KPIs are more prevalent for employees in the public sector (34% of individuals, compared to 25% of individuals in the private sector). Perhaps unsurprisingly, employees with ESG-related KPIs are more likely to be aware of, and proud of, their organisation’s ESG performance.

From an industry perspective, respondents in agriculture (80%), financial services (77%), and public administration (76%) are the most likely to think their organisation has the right level of focus on ESG topics. Employees working in construction (50%) and utilities (energy, waste, water services) (40%) are the least likely.[SP1]

Despite these encouraging responses, employees weren’t entirely convinced by, or aware of, their organisation’s ESG performance:

• Just 35% of respondents think ESG is one of their CEO’s top 5 priorities
• 25% of respondents reported that their organisation has a net zero commitment, and 40% did not know whether their company had a net zero emissions target

ESG contributes to workplace pride and looks set to become increasingly important for employment decisions

13% of survey respondents listed “strong ESG commitments” as one of the top 5 reasons they joined their current organisation and why they would recommend their organisation as an employer—and 11% listed ESG as a top 5 reason to stay with their organisation. Traditional considerations like job description, location, salary, and work-life balance were the most important factors in choosing their current job.

Utilities and agriculture, forestry and fishing were the sectors with the highest proportion of employees citing ESG as a top 5 reason for joining their current organisation (23%). Employers in these sectors should have a particular focus on ESG to attract and retain the best talent. These employers are also central to tackling climate change, with roughly 60% of New Zealand’s greenhouse gas emissions coming from these sectors.

In addition, ESG issues are important drivers for those open to a new role. Of respondents who are open to a new role, 30% cited better company social performance as one of the top 5 reasons to stay with their current employer, 29% said better company governance, and 24% better environmental performance. Gen Z employees are more likely than other age groups to include social performance in their top 5 reasons to stay with an employer.

The ‘S’ in ESG is an important driver of employee pride. ‘Social’ factors such as employee welfare (69%), local community contribution (63%), and their company’s purpose (60%) were the most mentioned factors contributing to pride in the workplace. These findings align with BCG’s research into purpose in companies, which finds that companies with a strong sense of purpose outperform the market by +10% on average. Organisations enjoy better performance than competitors if their purpose is embedded in their culture, so employers should harness their employees’ pride in existing programs.

Gen Z employees are the most engaged, and most mobile

Of all age groups, Gen Z employees are the most engaged on ESG. They are more likely than other age groups to say that it is important or very important for organisations to focus on ESG (71% of Gen Z respondents vs. 68% average for all respondents). Gen Z were also more likely to list ESG in the top 5 reasons for joining their current organisation (19% of Gen Z respondents vs. 13% average for all respondents) and for staying in the organisation (19% of Gen Z respondents vs. 11% average for all respondents). ESG performance is a factor that employers need to perform well on if they want to attract and retain mobile young employees.

This is reinforced by the 31% of Gen Z employees open to job opportunities outside New Zealand or who are planning to relocate, compared to an average of 17% for all survey respondents.

Senior managers and people with advanced degrees are also more likely to be open to considering working outside of New Zealand (40% and 29% of survey respondents, respectively). Australia is particularly popular amongst those open to working outside of New Zealand, with 77% of senior managers and 65% of those with advanced degrees citing it as a possible relocation destination.

The ESG opportunities for New Zealand employers

New Zealanders care about ESG issues and expect their employers to take these issues seriously. Organisations in New Zealand have an exciting opportunity to leverage their employees’ enthusiasm to drive true competitive advantage through ESG while enhancing their employee value proposition.

Leaders can attract top talent, and especially younger talent, and gain a competitive advantage by implementing the following practices:

1. Lead from the front — make sure employees can see your commitment to ESG. Your executive team and board should show strong and visible leadership on ESG, including putting ESG front and centre in internal communications. Just 35% of respondents think ESG is one of their CEO’s top 5 priorities. Articulate what the company is doing in ESG through both data and stories, to tap into different audiences, for whom ESG will resonate in different ways.
2. Embed ESG at the heart of your organisation’s purpose. Purpose is an organisation’s North Star and reason for existing in society. More than 60% of employees surveyed were proud of their organisation’s purpose and contribution to the greater good. A strong ESG proposition can enhance an employee’s sense of pride and contribution.
3. Make ESG part of your core business strategy Put ESG at the centre of your business strategy rather than creating companion strategies specific to ESG topics. This will align your ESG goals and organisation’s objectives. It also helps employees see that the executive team and board are leading from the front and ESG is a core element of your organisation’s culture.    
4. Link employees’ performance metrics to the ESG priorities in your strategy. Our survey showed that employees who had performance metrics linked to ESG were more likely to be aware of, and proud of, their organisation’s ESG performance. Prioritise performance metrics in the areas in which your organisation is aiming to make the most impact.
5. Use ESG as a tool to maximise your organisation’s total societal impact. ESG is no longer a risk mitigation measure to defensively protect your organisation’s reputation. ESG is now vital in enhancing your reputation and creating long term value for shareholders.