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Sustainable HR: a ‘green’ fad, or a realistic model for change?

Source | | Ed Houghton, Head of Research and Thought Leadership

Thinking beyond the performance imperative of strategic HRM and instead considering a more holistic, multi-stakeholder model is gaining traction in academic circles, but is the profession ready?

‘Companies must ask themselves: What role do we play in the community? How are we managing our impact on the environment? Are we working to create a diverse workforce? Are we adapting to technological change? Are we providing the retraining and opportunities that our employees and our business will need to adjust to an increasingly automated world? Are we using behavioural finance and other tools to prepare workers for retirement, so that they invest in a way that will help them achieve their goals?’

Larry Fink, Chairman and CEO BlackRock, in his 2018 letter to CEOs.

When investors ask questions, CEOs tend to sit up and listen. And earlier this year when Larry Fink, the Chair of BlackRock wrote to CEOs calling for them to take sustainability risks seriously, many recognised a marked difference in tone. His letter wasn’t a saccharine or glossy PR statement. Instead, it appears to be a firm call to action to CEOs, arguing for leadership and a renewed focus on the ‘right’ kind of value creation. And this wasn’t coming from just anybody, this was from the Chairman and CEO of one of the largest investment houses in the world, a firm that manages over $6 trillion of assets globally.

Many sustainability commentators welcomed his letter, recognising that for too long businesses have worked mainly for one type of stakeholder: owners/shareholders, often for short-term gain. Responsible investors (or ‘impact investors’) have for many years argued that this strategy is deeply damaging, not only to the environment but for many other types of outcomes, notably for workers in the supply chain and those on low wages. In 2019, after many years on the periphery, the most mainstream of investment firms appears to have taken a considerable step. Work and job-quality related issues are no longer the preserve of technocratic econometricians and policy makers; now those with real power and ability to make change are taking notice.

That many of the issues Larry Fink highlights are within the expertise of the people profession is clearly a good thing. CEOs may come under increasing pressure to quantify important qualities related to work and their workforce, meaning they are likely to come knocking on HR’s door. The question is, is the profession ready?

A story of conflicting priorities and shifting power

One of the most powerful academic papers I’ve read recently is the work of Tony Dundon and Anthony Rafferty at Manchester Business School, provocatively titled ‘The (potential) demise of HRM?‘. It’s powerful not just because it lays out the complex systems in which the profession currently operates, but also because it highlights the exciting opportunities facing leaders of the profession who, whether they know it or not, are actively designing its future. After recently re-visiting the paper, I’ve had the chance to reflect on where the major opportunities and risks lay for the future. It’s clear that we need new models and ideas about how HR creates value, and who benefits.

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