HR instead of PR – sustainability as a core task of human resources management

Germany

How can companies achieve professional sustainability and what role does HR play?

The topic of sustainability is becoming more important in all areas of life. It is impossible to imagine the working world without it. Sustainability has become a guiding principle and will continue growing in significance as companies are called upon to make their contribution to greater sustainability in society. They already face a severe consumer backlash, accompanied by significant losses in turnover and reputational damage, when sustainability standards are disregarded or greenwashing is exposed.

More and more investors and business partners want to see tangible evidence of a commitment to sustainability while legislators introduce legal requirements for sustainability and create new liability traps – reason enough to make the corporate culture and recruitment policy professionally sustainable.

Corporate social responsibility and sustainability

Everyone is talking about the trend to "go green", but what does "green" mean? Corporate sustainability basically means taking responsibility for the effects of a business's activities on society and its actions to this end. These activities and actions include social, ecological and economic aspects, as defined in internationally recognised reference documents on corporate responsibility.

There are various buzzwords floating around for this assumption of responsibility and each one has a specific focus. The term Corporate Social Responsibility (CSR), which comes up regularly, refers to a company's internal positioning in terms of sustainability. ESG (Environment, Social and Governance) is no less frequently mentioned, especially from a capital-market perspective and the guiding of investment flows into sustainable business. What all these buzzwords have in common is that they are linked to topics and subtopics elaborated in recognised reference documents such as the ISO 26000, the GRI or the SASB. Clearly, there is more to each buzzword and principle than environmental protection.

Professional sustainable management essentially covers four topics:

  • Industrial relations;

  • Business ethics;

  • Purchasing; and

  • Environment.

Dozens of sub-topics are linked to these topics, such as anti-corruption measures, fair business practices, diversity, equal pay, anti-discrimination, anti-competitive practices, supplier audits, emissions management and many more. Combined into a strategy, infused into corporate culture and implemented together, all of these topics can give rise to professional sustainable management. Green is a blend of different colours.

How green a company will be depending solely on its corporate strategy. However, is sustainability only implemented to comply with legal requirements or is it understood to be a guiding principle for corporate action that is approached professionally beyond greenwashing and bluewashing?

No legal obligation for companies to be sustainable

Meeting legal obligations is not enough for a company to call itself sustainable. So far, companies have only been legally required to be sustainable to a limited extent. Even the duty of management under section 76 (1) German Stock Corporation Act (AktG) does not specify any obligation to ensure sustainable corporate governance.

However, German and European legislators are increasingly focusing on this topic.

Currently, the implementation of the CSR Directive requires large companies to submit a sustainability report. The focus of this reporting obligation is on areas such as anti-corruption as well as compliance with human rights and employee matters. The reports are open to the public for viewing. Accountability (e.g. to customers and politicians) is intended to drive and promote sustainable development within a company. Small and medium-sized enterprises are not yet subjected to this obligation. Also, companies must only report on their actions and are not legally required to change their overall approach.

The German Supply Chain Act (Lieferkettengesetz) passed in June 2021 goes further. Its aim is to oblige companies to comply with certain labour and human rights standards along the entire supply chain. However, the actual impact of this new law remains uncertain.

Even within companies, however, there has been little legal pressure. Works councils in particular have limited influence on the sustainable development of companies. They have no rights of co-determination nor does the works council play a particularly proactive role in how the company implements its sustainability obligations, such as by preparing the CSR report. The only rights that can be considered here are information rights, as in the case of manpower planning under section 92 German Works Constitution Act (BetrVG), such as in relation to sustainable personnel development.

Voluntary corporate commitment

What does this mean for companies now? Those who simply wait for German or European legislators to impose legal obligations and then implement them will clearly lose out. For companies, a corporate commitment is crucial: taking control instead of being controlled.

There are already numerous legal mechanisms available to make sustainability tangible. Most companies have not exhausted these possibilities. Furthermore, all projects geared towards the sustainable transformation of a company must observe legal requirements that can make it difficult to implement sustainability goals. So if working from home proves to be an emissions management tool, would it be permissible to introduce a requirement to work from home? This question falls under the topic of the environment. However, other issues that concern industrial relations, such as data protection or the recording of working hours, are also linked to this. We will explore the answer to this question later.

HR as a driver

It cannot be left to the management alone to organise professional sustainability. It must be considered holistically within the company. It short, it must be both functional and strategic. Sustainability is an interdisciplinary topic. HR, which actively assists in creating the leaders of tomorrow and both adopts and builds sustainable structures, plays a key role in this. Different from most other departments in a company, HR has an overview of all employees. It acts as the company's architect and drives forward plans for the future.

A small focus on sustainable issues can directly influence the HR department's work. More and more employees are considering sustainability when choosing a future employer. This is clearly demonstrated in a recent survey conducted by the job board Stepstone in which 75% of respondents stated that sustainability should play a major role for the employer. A quick implementation can lead to an advantage over competition. In addition, applicants often rule out companies that do not meet their sustainability expectations. Sustainability must be considered in order to win over young talent.

But sustainability is also of central importance for those who are already employed. Employees who identify with company philosophy are less likely to leave. This reduces fluctuation in the company and promotes motivation. Also, offers such as company e-bikes, sustainable bonus programmes and a good work-life balance can lead to higher satisfaction among the workforce. HR is clearly responsible for this.

Anyone who doesn't find these factors convincing can also consider the economic benefits of sustainability. A study on the UN's 17 SDGs (sustainable development goals) reveals that achieving these goals can create new opportunities worth USD 12 trillion globally.

The sustainability agenda for HR

HR now needs to understand one thing: for successful and future-oriented HR management, the focus should already be on promoting a sustainable and responsible corporate culture now. Because sustainability is not achieved overnight, it should be considered a process of continuous improvement. But what does this mean exactly? The options include smaller decisions such as establishing a green office or implementing sustainable business travel, and large-scale issues such as interweaving target agreements and sustainability commitments as well as providing for relevant standards at the level of labour relations.

These options will be discussed in the next article of this series, which will focus on the possibilities for action under labour law.

For more information on achieving sustainability in your business, contact your CMS client partner or local CMS expert: