Corbin Advisors is proud to partner with IR Magazine and Corporate Secretary for the ESG Integration Forum. Our Head of ESG Advisory Leahruth Jemilo joined a dynamic panel discussion on getting the right metrics for social, human capital and diversity factors with Jana Croom, CFO of Kimball Electronics and Laurie Havelock, Editor-at-Large of IR Magazine.
“We are moving away from a check-the-box approach to integration with the overall business strategy,” Jemilo said.
The COVID-19 pandemic and civil unrest of 2020 highlighted the importance of the social factors of ESG, Jemilo said, adding “The pandemic and certain racial and social issues did not create these inequalities – they were just brought to the surface for all to see.”
As a result, there’s been an increase in the importance of non-financial factors that affect business outcomes, including disaster preparedness, risk mitigation, and employee benefits, such as paid sick leave, paid care leave and flexible working arrangements.
Jemilo outlined three focus areas for companies:
- Integrate “S” into overall business strategy – Companies should consider conducting a communications analysis to see how they are communicating about ESG across all channels. Give ESG, especially social factors, a starring role in investor presentations
- Increase accountability of measurable results – Commit to hiring a head of ESG and/or DEI and give them agency and ownership over the role. Creating real feedback loops – with reporting to the board and CEO – will help drive impact and change.
- Innovate on hiring practices – Seek to attract, recruit and retain the best and brightest talent. A commitment to ESG, to hiring talent from outside the traditional talent pools, can lead to a more diversified team, which can be a competitive advantage, as well as a way to attract, recruit and retain more diverse talent.
Adding that companies that don’t address issues from increased diversity to more flexible working arrangements risk losing top talent to other organizations, Jemilo emphasized the importance of accountability and oversight for ESG goals; integrating diversity, equity and inclusion into the talent strategy; and tying philanthropic and social efforts to business goals.
Bringing increased accountability to ESG strategy
To further drive accountability, fellow panelist Jana Croom said that ESG should be tied to the compensation of senior leadership. “You move what you measure, and what you’re accountable for, you will do,” said Croom. She added that authenticity matters, and it’s better for companies to admit that they have room for improvement if they are committed to making progress.
“Take a “go slow to go fast philosophy,” Croom said. “What is well intended but poorly executed doesn’t benefit anyone.”
Jemilo agreed. “In your conversation with investors, be honest about where you’re at. It’s so much better to be authentic. It can harm the reputation of company if it’s not genuine. Show where you want to be in next one, five, and 10 years.
Is ESG just IR 2.0?
An audience member asked the panelists, “Is ESG just IR 2.0 or are we actually trying to accomplish a positive societal impact?” Jemilo and Croom agreed that it was both. “You have to have the impact to go along with it. As a CFO, I’m going to expect to see a return on investment,” Croom said. “Our CEO says, ‘ESG is operational excellence on steroids’ and she’s right,” Jemilo said. “This is not a fad. This is not going away. It’s only going to increase in importance and companies that do it right and take it seriously will have a competitive advantage in the future.”
Jemilo added, “You will hurt yourself financially if you don’t take the S component seriously.”
What ESG factors and metrics will investors focus on in 2022
As with anything, there will be new focal points – many of which we probably don’t even know what they are today – this is a rapidly changing environment. However, we do know that climate change and HCM disclosure is going to continue to be top of mind for investors and something that is absolutely going to take center stage is interim targets.
“It’s great to have long-term goals,” Jemilo said. “We see a lot of companies promising net zero and they’re looking out at 2040/2050 – but investors want to see what you’re doing in the meantime – what are your goals for 2023, 2025 – what are you doing to move the needle forward. The big grand gestures – such as net zero – are absolutely important – we are in the midst of an environmental and biodiversity crisis – but it’s the things that you’re doing today that will allow for the long-term goals to ultimately be successful.
How can you tie social efforts to business goals?
“If you’re a company that has a lot of engineers, we know that there’s opportunity to increase the number of women who are in those roles, so connect with a women in STEM program or Black Girls Code and build relationships with those organizations to both support those efforts and also use it as a pipeline for future talent,” Jemilo said.
For example, a client in the transportation space wants to hire more women, so they have a huge present at the Women in Transportation (WIT) conference each year. “They spend a significant amount to send close to 100 women to that conference every year so that they show that they are really ‘walking the walk’ about wanting to make their org an attractive place for women to come work.”
To validate around social issues, Jemilo suggested companies look at what is material to their organizations, determine where they can get real feedback and consider hiring a third-party to assess culture.
Learn more about ESG and working with Corbin Advisors on ESG communications gap analysis, market research into ESG ecosystems and trends, and ESG-dedicated investor presentations.
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