Talent Threat: Great Resignation or ESG?

This article appears in our Q2 2022 issue of Finance Transformation Magazine. To download the issue, click here

Elias van Herwaarden, Head of Location Strategy at Colliers, explains why he thinks the ‘Great Resignation’ is not going to be that ‘Great’ after all and why he thinks Finance Leaders should think ESG when addressing Talent Acquisition and Retention challenges!

For Finance teams across the Globe the pandemic-triggered remote working either from home or indeed anywhere that suited the employee. It has shaken the too-dated concept that most work must be done from corporate premises. Finance teams are responding to this as many now reposition their floorplates as collaboration spaces, as venues to foster team culture, as platforms to promulgate corporate values.

Admittedly, not having all resources at arms-length on a daily basis does require Finance Leaders to develop new management styles and this is a challenge the majority seems to struggle with. In the US for example Finance staff are resigning in droves as they are drawn to opportunities for gig-work and freelancing, They seek more recognition for their work and crave for more independence in deciding how and from where it should be conducted.

Yet, while conducting client research across Europe and Asia recently, I found little evidence that the Great Resignation is as truly Global storm as some would have it. Though in some Central European countries it clearly rages.

Maybe the world still needs to catch up with the United States and the freelancing Tsunami could still hit European shores. However, let me put it to you that the United States has a culture that strongly promotes individualism and entrepreneurialism, which not all countries can or will follow. Nor will Finance Departments, certainly not overnight nor across all operations.

Just ask yourself the question, ‘how would you conduct business critical processes based on resources that phase-in and out in a somewhat unpredictable manner?’

Therefore, the amount of work available to the today’s “Great Resigners” will be limited for the time being. Meanwhile, both in the United States and abroad, mortgages still need to be paid.

Given a 90% failure rate of start-ups, the Great Resignation is likely to be great just for a lucky few. The others will have little choice but to trade their temporarily gained independence for the steady income stream associated with more traditional employment contracts. And this is not just me pondering a hypothesis. In April 2022 the Times of India reported on so-called “boomerang employees” returning to the companies they had quit during the pandemic.

My take on it: In Europe and Asia Finance Leaders should not have their heads spinning because of the Great Resignation. It is bound to blow over and there is a far more fundamental and overriding topic when it comes to Talent Acquisition and Management – ESG!

Environmental, Social and Governance

In essence, ESG is all about doing the right thing. Preserving the Environment through climate policies, natural resource conservation and treatment of animals. For the Social acting in high regard for stakeholder relationships including employees, customers and (local) communities. For Governance ensuring accurate and transparent accounting methods, pursuing integrity and diversity leadership, and accountability to shareholders.

Equity investors have been applying ESG criteria to rate countries and companies alike, with solid reason. Financial Times Adviser research showed that high-rated European ESG corporate stock outperforms the market by 12 per cent annually.

But ESG is about more than analysts’ ratings. Just consider that as of 2019, both the US Security and Exchange Commission and EU authorities have issued non-financial, ESG-related reporting directives for publicly traded companies. So ESG has become a regulative matter. It will not blow over!

The cost of ESG Failure: On May 23rd the SEC fined BNY Mellon $1.5 million. The US financial regulator had found that the bank did not go through a quality review of environmental, social or governance factors on some mutial funds it managed from July 2018 to September 2021.

With ESG regulations gradually becoming more stringent the data set that companies need to report on for their ESG performance rapidly expands. As corporate “data-master” Finance already sits on a stack of data that could be used for ESG reporting purposes. Just think of the need for corporations to report on the ESG performance of their suppliers.

Yet as ESG regulations are rapidly evolving, there is no fixed template that corporations can draw on. Unsurprisingly, most companies struggle with what to report, and on how to do so. Through the last 4 years an increasing number of Finance Leaders have been tasked with managing Business Intelligence processes. Would it not take a small step to extend such capabilities to the field of ESG intelligence and reporting?

But there is an additional reason why Finance leaders should make ESG their business and it is all about Employer Value Proposition. Even before the Covid-pandemic, Finance employees started becoming more aware, and vocal, about Corporate Social Responsibility (the S in ESG).

HR specialists and real estate experts agree that employees favor working for favor Businesses that opt for carbon-neutral buildings. To illustrate this, Skanska Central Europe a leading office developer in the region, achieved 90% of its buildings as environmentally friendly and applies rigid criteria to tenant and supplier selection (the E in ESG).

With a war for talent raging, certainly in Europe, Finance Leaders have little choice but to heed the ESG call as it will impact all. From supervision practices, talent management, life/work wellbeing, fostering of gender neutrality and managerial styles to choosing the correct suppliers for such mundane items as coffee beans. Then, by administering ESG compliance for their own and corporate front line operations Finance will help not just themselves to attract talent but also investors’ confidence.

Beyond the Box

To be clear, I understand perfectly that the Great Resignation worries many Finance leaders have. For too long they have had to deal with managing business continuity through at times ruthless attrition. But as outlined above, there is a more important play surfacing. The ESG play, which if handled right, may even help to address current worries.

It is just my view but considering that Google results for “ESG” outnumber those for the “Great Resignation” by a factor of 4, I may not necessarily be wrong…

About the author: Elias van Herwaarden

Working across industries and around the world, Elias conducted over 150 location strategy and sourcing projects for SSCs and GBS. His experience includes new location searches, portfolio optimisation, process allocation and talent pool analysis. He leads the Location Strategy service of Colliers.