The number of investors & buyers of business services using risk reduction in their investment & buying decisions is continuously increasing. All of these play a vital role in Environmental, Social, Governance (ESG) initiatives. According to an Everest Group survey, 77% of investors gave more importance to ESG in 2020 because of the COVID pandemic.
In the initial weeks of December 2021, the Everest Group's stellar panel of experts gave a brief overview of the impacts of ESG on the business services sector. The introduction provided by Rita N. Soni (Principal Analyst, Impact Sourcing & Sustainability Research) concluded that more & more numbers of service providers are stepping up to move towards ESG to help create sustainability. With minimal & generation Z workforces wanting to change the world.
Thus, for the RPO (Recruitment Process Outsourcing) space, attracting & keeping this talent is essential. Also, various factors are driving these providers to shift to ESG, including it being a tool to attract & retain talent, the factor on which this post concentrates.
With the purpose to help source teams for the RPO buyers & RPO providers, this post ensures that they get their ESG objectives met.
ESG (Environmental, Social, & Governance) includes the objectives investors & buyers consider before investing in or working with a firm. Further, before buying or investing from a company, the impact is considered that the decision will have on the above three categories.
For example, under the environmental category, the buyer or investor will consider the carbon footprint of the selling company. Under the governance category, the investor/buyer can take into account the company's labor practices & check if they are ethical or not. And for the Social category, investors/buyers can check the company's Diversity, Equity, & Inclusion initiatives.
During the panel discussion, Bhanushree Malhotra (Practice Director, Business Process Services) pointed out the important objectives sourcing teams should consider while making buying decisions. Also, whether you are a buyer of RPO services or an RPO searching for a service partner, you should weigh the three ESG objectives while making buying decisions. These objectives include:
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Environment |
Social |
Governance |
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Suppliers’ carbon footprint |
Impact sourcing |
Supplier governance |
|
Waste management |
Social/digital upskilling |
Risk management |
|
Water conservation |
CSR, Consumer rights |
Supplier certification |
|
Energy efficiency |
Community impact |
Ethical labor practices |
|
Energy profile |
Diversity, Equity & Inclusion |
Audit/compliance, Data privacy |
Malhotra further stated that these objectives are fluid throughout the lifecycle of the relationship between firms & their service partners. This lifestyle consists of the following 3 phases:
And each of these steps has a criterion the buying firm needs to consider.
Teams need to consider their ESG objectives for working with the existing & new suppliers. Further, Malhotra suggests that sourcing teams think differently while considering ESG objectives during supplier selection. For example, sourcing teams can consider a provider with an effective DEI strategy while choosing an RPO provider.
Initially, the relationship needs to be nurtured when an organization works with its strategic supply partner. Malhotra also points out that sourcing teams need to focus on consistent tracking of the ESG metrics, including energy efficiency. Moreover, should the RPO provider meet its declared non-zero targets? Or to meet the supplier's ESG commitments, the buyer becomes an accountability partner.
The sourcing team and their RPO partner can establish the metrics they should measure. These metrics follow the ESG criteria upon which both the supplier and the purchasing firm have agreed.
Digital & data management plays a crucial role in continuously tracking the ESG metrics. Malhotra stated, "For the suppliers, you can check the quality of tracking your service providers are using to keep track of their own ESG metrics. "She further pointed out how some service providers use MLA (Machine Learning Algorithms) and AI (Artificial Intelligence) for tracking their energy efficiencies. This technology enables RPOs to provide the correct ESG metrics to their working partners.
Meeting the ESG objectives is a process in which the following 3 things can help you a lot:
According to Amy Fong (Vice President, Strategic Outsourcing and Vendor Management), the more technologically advanced an organization is, the more successful it will meet its ESG objectives along with strategic service providers. While talking about the RPO sector, having a wholly enabled digital approach enables sourcing firms to:
Fong stated sourcing teams do not need to stop working with the suppliers who don't meet their firm's ESG objectives. However, the sourcing team can use the firm's ESG objectives to partner with their current supplier to integrate some of its desired ESG objectives.
Partnering with suppliers to integrate your firm's desired ESG objectives could help establish a solid long-term relationship with those suppliers. And to get the suppliers on board with you, Fong recommended teams infuse ESG sustainability with their SLAs. Again, this approach includes you asking your supplier to be its accounting partner for specific ESG criteria.
The RPO provider and a service partner could agree in a contract that it will hold you accountable for maintaining an ethical workplace environment. This type of accountability could be focused on DEI or impact sourcing initiatives. For example, an RPO provider can include ethical workplace practices in its SLA benchmarks.
If your organization considers reducing talent attrition, you should partner with an RPO provider holding a solid record in impact sourcing. Impact sourcing is a term that includes international sourcing for talent under marginalized communities. Further, these marginalized communities can include women in the rural areas of your geographical location, incarcerated women, or spouses of veterans. Being open to sourcing talent at unlikely places is a great way to expand your talent pool.
Various companies are using DEI strategies to enhance their culture & talent pool. RPOs enable you to design a work culture that fulfills this ESG objective with the technology for fostering accountability of your DEI initiatives.
If you are a sourcing team required to make your buying or investing decisions based on your firm's ESG objectives, you need to be international with your approach. Researching RPOs & RPO service providers is the initial step to make a conscious effort to meet these objectives. Here, we are inviting you to start your search with E-Global Soft Services.
