Highlights
- As sustainability issues influence business decisions today, staffing and recruitment firms need to proactively consider and act on environmental, social, and governance (ESG) pillars, focusing on areas such as climate, ethical workplace, and diversity and inclusion.
- A materiality matrix will help staffing and recruitment firms identify and prioritize the industry's critical ESG issues.
- A comprehensive maturity framework can further support them in taking a structured and well-planned ESG approach.
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Going green
The staffing industry includes businesses that find and supply workers for other sectors.
Following five years of continuous growth, the global staffing industry generated $599 billion in revenue worldwide in 2021. The industry is projected to expand by 9% this year, following growth of 21% in 2021.
Sustainability has become a boardroom agenda with CXO-level sponsorship. Companies worldwide leverage digital technologies to sustainably source, create, and distribute products and services. While businesses invest heavily in ESG strategies and technologies, they also realize that sustainability can't be accomplished in isolation. An organization needs to look at its value chain, where every level of an upstream and downstream process helps uncover sustainability improvement potential.
Key ESG trends
ESG issues are influencing business decisions and are not just an afterthought.
Proactively considering and acting on ESG pillars have become increasingly critical for the staffing and recruitment industry, focusing on areas such as climate, diversity and Inclusion (D&I), and ethical workplace.
The following key staffing industry trends are categorized into ESG based on their impact on an organization.
1) Advancing diversity, equity, inclusion, and belonging (S and G pillars): Staffing firms are committed to building a workplace where everyone feels equally involved in and supported regardless of who they are. These firms employ tools and technologies such as AI-based resume parsing systems to prevent bias in resume selection and analytics dashboards to help leaders identify diversity trends and metrics.
2) Prioritizing employees’ health and well-being (S and E pillars): The staffing and recruitment industry has widely adopted the people-first strategy following the COVID-19 pandemic. Hence, touchless recruitment and virtual onboarding are taking center stage.
3) Skilling, upskilling, and reskilling employees (S pillar): Manpower Group invested $10 million to help employees keep up with the ever-changing industry requirements and regulations.
4) Reducing corporate carbon footprint periodically (E pillar): Staffing and recruitment firms strive to keep the ecological footprint to a minimum and promote environmental initiatives. Kelly Services lowered its corporate campus building’s carbon footprint by 26% over the last seven years.
5) Creation of virtual workplaces (E and G pillars): Virtual offices—an alternative to traditional office space—lower the carbon footprint in addition to reducing business cost. Aquent reduced 96% of its carbon emissions by simply letting go of its physical premises and becoming the world’s first virtual workplace.
Materiality matrix
A materiality evaluation identifies and prioritizes the industry's most important ESG issues.
The matrix illustrated here is based on the themes that are of importance to the staffing industry and in alignment with stakeholders’ expectations.
Figure 1: ESG themes for the recruitment and staffing industry
Firms should identify, prioritize, and validate their most important ESG concerns to maximize resource allocation. The matrix provides organizations with a guide to focus on and prioritize topics that need attention and may have been previously dismissed as lacking sufficient proof of results. During the matrix development, critical key performance indicators (KPIs) are assessed to evaluate numerous sustainability topics. Hence, identifying critical stakeholder criteria is important as it allows a company to be proactive with its ESG strategy rather than reactive.
Navigate challenges
ESG provides an opportunity for organizations to encourage growth sustainably and ethically.
Environmental challenges
The environment plays an essential role in the way people live and work. Extreme temperatures, poor air quality, water shortages, and natural disasters result from organizations’ long-term neglect and unwise decisions. Hence, it is now imperative to work towards a low-carbon economy.
Let’s investigate the various environmental initiatives and challenges:
- Access to the right data across suppliers and vendors, especially outside organizational boundaries, is a barrier to effective monitoring of scope 1,2,3 emissions.
- Using secondary data for emission factors increases obstacles like the authentication and validation of data collection, data quality, and standardization of metrics formulae.
- Switching to green recruitment is complex as it is challenging to define a methodology and identify the right ecosystem partners (renewable energy, clean tech, green finance, energy solutions) to support paperless recruitment.
- Converting traditional offices into green buildings requires significant efforts through the infusion of advanced technologies and analytics to reduce waste and optimize energy usage.
Social challenges
Human rights, diversity, inclusion, pay parity, labor standards, and gender equality are less quantifiable, making it difficult to analyze their impact on a company's performance. However, social considerations significantly impact companies' top and bottom lines.
- Staffing and recruitment firms have used new tools, technologies, and data and analytics, to serve clients and candidates better. This has increased the pressure on corporations to protect the data they have.
- Every firm wants a diverse and inclusive staff. Thus, staffing and recruitment firms must guarantee that the talent pipeline meets diversity and inclusion standards while ensuring that hiring technology is bias-free.
- Following the pandemic, employees’ health and well-being put pressure on staffing firms to offer the right perks and benefits.
- Although the Supplier Code of Conduct is a key part of ESG for staffing organizations, firms find it difficult to cooperate with suppliers from diverse geographies and legislations.
Governance challenges
Corporate governance oversees a company's interactions with its community. Inadequate governance structures and procedures can lead to lawsuits, penalties, and negative stakeholder interactions. Below are problems that staffing firms must address:
- Staffing firms in the US must adhere to NASDAQ's Board Independence Rule, which states that audit, compensation, and talent management committees must be fully separate
- Strict regulations, such as maintaining healthy diversity among board members and employees, must be followed by staffing firms
- Maintaining organizational codes of business conduct to prevent unethical business practices and corruption
- Firms must correctly disclose and file mandatory organizational reports like the annual statements and the ESG report, depending on the region. Most of the staffing firms are aligned to sustainability standards of the Global Reporting Initiative, Sustainability Accounting Standards Board, and United Nations Global Compact, among others
- Data collection and reporting according to the respective standards is challenging for staffing firms
- Data protection and data privacy are particularly important for staffing firms as they are entrusted with sensitive personal data of candidates, employees, customers, and suppliers.
Assess maturity
Without a proper and guided pathway, the journey toward sustainability might seem like a gargantuan challenge.
Hence, organizations must leverage maturity frameworks in order to take a structured and well-planned approach.
Considering all the parameters that have a bearing on an organization's ESG strategy, we have arrived at a comprehensive maturity framework for the staffing and recruitment industry.
Figure 2: An ESG maturity framework for the recruitment and staffing industry
The framework lays the basis for sustainable development. Firms must first establish internal sustainability and compliance with the help of a strong sustainability strategy. They should then strive for efficient and leaner procedures, less waste generation, energy efficiency, workforce diversity, equity and inclusion, and employee wellbeing.
The next level spans beyond enterprises' value chains and pivots on strategic alliances with multiple stakeholders to assist their sustainability initiatives.
Further up the maturity framework, the focus expands to include ecosystems across industries. Here, organizations need to take charge by leveraging innovations that can be universalized.
Ultimately, organizations must move from reducing adverse effects to maximizing positive outcomes to restore and protect the environment. This level encourages self-sustaining ecologies and communities.
Boost performance
The sustainability strategy must be backed by an up-to-date technology strategy, which has a significant role in the journey toward sustainability.
Staffing and recruiting organizations must leverage next-gen technologies in their existing as well as new solutions to increase productivity, efficiency, and cost-savings while simultaneously reducing wastage, environmental impact, and social-cum-economic disparity.
The maturity framework has been mapped to various ESG solutions and has been superimposed with relevant technologies. This can provide a clear direction to staffing and recruitment organizations in making their solutions more receptive, secure, connected, and intelligent.
Figure 3: ESG technology landscape
To understand the technology enablers, let’s consider the ‘workplace of the future’ solution under internal sustenance and compliance. A future workplace will indubitably be shaped by next-gen technologies where employees are empowered with intelligence, advanced analytics, collaboration tools, and much more. The workplace will be fortified with advanced security measures to ensure safety and compliance and integration with connected intelligence platforms (real-time big data analytics and artificial intelligence and machine learning models). Such a workplace will prioritize and ensure employee well-being while satisfactorily aligning with the social goals.
Conclusion
A decade ago, an organization with considerable corporate social responsibility (CSR) efforts was lauded and appreciated.
However, much has changed today, with ESG residing at the heart of business strategies and plans. And it’s not without reason. Many organizations today are struggling to recruit new employees and retain their existing ones. Some lose clients over compliance issues, while others lose investors’ trust. An organization's robust ESG strategy and action plan may fulfill employees, acquire consumers, and impress investors. Hence, staffing and recruitment firms must work toward generating ethical and compliant staffing solutions by embracing next-gen technologies and innovating continuously.
Staffing and recruitment firms must work toward generating ethical and compliant staffing solutions by embracing next-gen technologies and innovating continuously.
