Important Data Trends Require Action

The election to Exxon’s board of three activist directors who are focused on environmental sustainability was an eye-opener for many corporate C-suite executives. This may not seem immediately relevant for credit unions, which are owned by members who elect their organizations’ volunteer boards. Yet, the same dynamic that is playing out on the corporate landscape applies to credit unions as well. There is a heightened level of awareness of ESG (environmental, social and governance) issues among customers, employees and investors. Members increasingly want attention drawn to these factors in the organizations they associate with. And it’s important to note that people are willing to change their financial relationships based on these factors.

A credit union’s structure, in which the members are both the customers and the owners, makes paying attention to ESG even more relevant. And the COVID-19 pandemic has accelerated the pace and focus of ESG – a recent report from the IBM Institute for Business Value found that 93% of respondents said the pandemic affected their views on the need for environmental sustainability. In addition, this global survey of 14,000 adults in the U.S. and other countries with some of the largest economies also found that people are willing to pay to preserve the planet for future generations. Also, a Pew Research study found environmental concerns are at a new high in America, with it almost matching the economy as a top priority. These data trends reflect new ways of thinking among consumers concerning how they define the relationships they want to have with the people they do business with.

People want organizations to pay attention to other areas in addition to environmental stewardship. On the radar are items of social responsibility, including business ethics; waste reduction; employee and community health and safety; human capital development and fair employment practices; diversity, equity and inclusion; executive pay and organizational transparency; volunteerism and philanthropy. These issues are adding increased complexity for leaders as they seek to understand them and take action.

Strategies and planning around ESG are fundamental to a brand and member perceptions.  People want their personal values to align with those of the organizations they do business with. IBM’s survey data show that 54% of consumers would pay a premium for brands that are environmentally responsible, and that customers want to do business with brands they know are ethical and socially aware. In fact, IBM found issues of social responsibility like education, gender equality, ending racism and promoting opportunity were very or extremely important to about 75% of respondents.

Sustainability and social responsibility give organizations a leg up in an extremely tight market for employees, where people seek values alignment in their workplace. Two-thirds were more likely to apply to companies seen as socially responsible and almost half (48%) would accept a lower salary to do so. Values are important for employee retention as well. More than two-thirds (70%) of the IBM survey respondents would stay with an organization with a good reputation when it comes to environmental sustainability. Three-quarters expect their employers to act on social responsibility issues.

ESG-oriented business strategies are proving to be important for members, employees and communities; therefore, people are more likely to want to know what credit unions are doing about them. Internal and external ESG-related strategic communications providing such information are important to attracting business, and recruiting and retaining talent. ESG reporting is not currently required for most credit unions, although there may be a regulatory push to increase ESG-related disclosures. Indeed, California and New York request that credit unions provide certain ESG information, especially on environmental sustainability.

Still, this is an area where business rationale should take the lead. Remember, the personal nature of a member entrusting your institution with their business and family financial well-being requires the creation of trust and respect in the relationship. Credit unions have a good story to tell and are well-positioned to take advantage of a population that is value oriented. For example, many credit unions have integrated ESG strategies into the way they operate, working to reduce their own carbon footprint, promoting “cleantech” lending and investment policies, and striving to assure equity in their communities. In another example, several credit unions have joined the Global Alliance for Banking on Values.

Sustainability and social responsibility policies will have a positive impact on members’ lives as well as on employees’ lives, which can lead to stronger performance. At a high strategic level, boards should collaborate with their CEO to craft a CEO dashboard that tracks data on these important issues. Clarity from the top will ensure appropriate actions and progress on these critical member concerns.

Stuart R. Levine is Chairman and CEO for Stuart Levine & Associates LLC in Miami Beach, Fla.