News Analysis: Social and Human Capital Investing Will Drive More Focus on Enterprise Engagement
‘What gets measured, gets managed,’ says Jack Otter, Barron’s Associate Publisher, of the need to disclose investments in human capital. And we’re beginning to see the evidence at the front lines.
What makes Enterprise Engagement unique is its focus on engaging all stakeholders in a systematic, proactive way with clear return-on-investment measures. In the past month, the concept of Enterprise Engagement has received further support from multiple sources, putting more pressure on companies to identify and implement a more systematic and sustainable approach to the management of all their stakeholders, including customers, employees, distribution partners, vendors and communities. Consider these developments over just the past 30 days:
- Goldman Sachs launches a JUST Company ETF composed in part of organizations that value all their stakeholders and the environment that breaks records for a new ETF (see: “JUST ETF Launch Breaks ESG Fund Record.”).
- In June, Barron’s, the influential financial journal, featured a special section on ESG investing called The Value of Virtue. ESG stands for Environmental, Social and Governance, which according to Investopedia, means: “a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Environmental criteria look at how a company performs as a steward of the natural environment. Social criteria examine how a company manages relationships with its employees, suppliers, customers and the communities where it operates.” (otherwise known as Enterprise Engagement). “Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.” In the section, Jack Otter, Associate Publisher, writes: “I think [investors] may…be failing to recognize the full value of virtue. Is it possible that companies that treat their employees and customers well, take steps to avoid pollution, whose boards of directors follow best practices might outperform over time? While low employee turnover, loyal customers and a below average number of consent decrees won’t affect next quarter’s results, they might produce dramatic results over the next decade…We recommend that investors watch the ESG space carefully. As management guru Peter Drucker said in a different context, what gets measured, gets managed.”
- According to a survey last year by Morgan Stanley, 75% of general investors and 86% of Millennials are either somewhat or very interested in putting their money into sustainable companies. The survey found that the younger generation is two times more likely than their older peers to invest in socially- and/or environmentally-oriented companies. Almost all Millennials (84%) believe their investments can help lift people out of poverty, 59% believe there is a financial payoff and 61% had taken at least a “sustainability action” in the previous year. Just over half of all investors, however, believe there is a trade off to investing in sustainable companies. Apparently, values matter. The study also found that Millennials are almost twice as likely as older people to make a purchase from or to work for a company that is socially and environmentally conscious.
- The concept of connecting customers and employees begins to take hold at the front lines. ESM recently reported on how companies as diverse as technology leader Adobe and sports bra innovator Shefit have put teams in charge of customer and employee engagement (see: ESM: “Adobe Paves the Way for Leadership of HR in Enterprise Engagement Management” and ESM: “Shefit Exec Joins March to Merger of Employee and Customer Engagement.”).
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Enterprise Engagement Benchmark Tools: The Enterprise Engagement Alliance offers three tools to help organizations profit from Engagement. Click here to access the tools.
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For more information, contact Bruce Bolger at Bolger@TheEEA.org, 914-591-7600, ext. 230.