The Rise of ESG and What it Means for Your Leadership Approach

Your future workforce is more environmentally conscious and purpose-driven than ever before. Do you have what it takes to lead it? Here’s why the rise of ESG means it’s time for a new approach to leadership, writes contributor Brent Kedzierski.

Environmental, Social, and Governance (ESG) initiatives have emerged as a new lens through which investors, employees and other stakeholders view a business.

While ESG has arisen to deal with global and societal challenges, companies are finding that their ESG initiatives are about more than being a good corporate citizen – they’re also about being a good employer that people want to work for, especially younger generations.

The moral focus of ESG yields positive impacts on employee well-being as it creates a genuine sense of attachment to the individual’s role and the organization’s purpose and goals.

These programs pay off in terms of more satisfied employees that work harder to produce positive results for their organizations.

This is even more important as Millennials and Generation Z are a growing segment in today’s workforce; by 2029, they’re expected to represent over 70% of the world’s workers. These generations tend to have greater environmental and societal concerns than previous generations.

How can leaders more effectively attract, engage, and retain its Gen Z talent, while satisfying the rising demands of this demographic as consumers of products and services?

Enter the concept of Ethical Intelligence (eIQ).

Ethical Intelligence is the ability of humans to make ethical decisions through principled thinking, choosing, and behaving when faced with moral challenges.

The eIQ of an organization’s leaders and followers can literally be the difference between survival and failure of ESG programs. What we believe as an individual shapes how we behave, and how we behave is what we become, through our decisions and actions.

In this context, eIQ represents the leader’s awareness of the ethics they embrace in their private, public, and business lives. It represents their ethical functioning across areas such as ethical awareness, judgment, and action.

Ethically intelligent leaders continually grow their competence in questioning, processing, and responding to ethical issues. They practice ethical sensitivity, ethical reasoning, ethical decision making, ethical reflection and principle-based care.

Research shows that followers of ethically intelligent leaders feel like they have more control over their jobs, and their work is more meaningful. These employees tend to take more initiative, put in discretionary effort and are more willing to help others and avoid unproductive conflict.

The bottom line is that employees who feel they have a true North Star for ethical leadership are more satisfied with their leader, have a better attitude and are more dedicated and engaged in their work. Leaders with strong eIQ act as a role model in improving their own range of ethical competence, while developing the ethical strengths of others.

As ancient Chinese philosopher Lao Tzu said: “The best way to do is to be.”

Ethically Intelligent leadership supports ESG initiatives through the ideas of “being” and “doing.” It takes courageous leaders to model the ESG virtues that an organization embraces. Leaders are the ones who can inspire those around them to behave ethically against real world day to day constraints and operational challenges.

When organizations agree on what they aspire to “be,” their employees can’t let the urgency of a moment get them into implementing a “do” that conflicts with ESG values.

This is where the courage of a leader steps in to reinforce the power of ESG frameworks to guide ethically intelligent leadership. Ethically Intelligent leaders are those that can immerse themselves in “being” in line with ESG values even under the pressures and context of real world “doing.”

This often requires ethically intelligent leaders to show the moral courage to uphold their values and objectives to “do what is right” even in the face of significant pressures, adversity, or risks. They prevent or reduce ethical tensions and moral distress across the organization by respecting others’ individuality, acting confidentially, and having a sensitivity to competing values and principles.

In leading ethical resolutions, they ensure all selected decisions are courageously implemented with a willingness to identify the needs of ESG values and the human beings impacted.

Courageous leaders with high eIQ are willing to admit their mistakes, absorb criticism and create psychologically safe environments for making tough choices. They are highly sensitive to and adept at managing dilemmas where ethical standards do not prescribe a clear course of action. Moving an ESG program from compliance to courage requires ethically intelligent leaders.

Courageous and ethically intelligent leaders also know the dangers of blind obedience. When building an ethically intelligent culture, leaders must recognize that the environment that leaders create exerts an important influence over whether people make positive or negative ethical choices.

For instance, Stanley Milgram’s classic 1960s set of experiments revealed the power of obedience to authority. The classic study involved participants believing they were administering dangerous electric shocks, some of lethal strength, to another person.

The results revealed that 65% of the participants in the study delivered the maximum shocks. The study, while controversial in approach and findings, showed the willingness of people to obey authority.

Leaders must grasp the idea of how far some people will go to follow an order.

ESG and eIQ as a Workforce Strategy

ESG will come to be seen as a complement to workforce strategy as the relationship between ESG leadership, performance and workforce sentiment grows as a source of competitive advantage.

Leaders have a profound role to play in enabling an organization’s ESG program to serve as a force for good. Leaders are placed in a position of influence to leverage their ethical intelligence competence and to put the social or human factor at the heart of “being” and “doing.”

Moving ESG and eIQ Forward

The value of strong ESG programs will grow as they empower workers to better connect to their organizations and serve as an influential factor for improving overall employee satisfaction, well-being, and retention. These programs play a clear role in defining a company’s identity by creating a strong social and emotional signature.

The collective awakening and desire to make meaningful social and economic contributions will continue to mature ESG programs as the norm to doing business and grow the mindset of ethical intelligence in every corner of the organization.