Sustainability and Social Responsibility Increase in Importance

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 environmental, social and governance (ESG) issues among customers, employees and investors. People want attention drawn to these factors in the companies that they buy from, work for and invest in. They are willing to put their money where their mouths are when it comes to these critical factors.

A credit union’s structure, whereby the members are both the customers and the owners, makes paying attention to ESG even more important. Likewise, employees, who are more value-driven than ever, are also taking notice, and the COVID-19 pandemic has accelerated the pace of this. 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. Importantly, this global survey of 14,000 adults in the U.S. and countries having 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 a new high in America for environmental concerns, which almost match the economy as a top priority. The increasing frequency of destructive environmental events is making people prioritize the need to protect the environment over near-term expediencies like lower cost and convenience.

Moreover, people want organizations to pay attention to other areas beyond environmental stewardship. On the radar are items of social responsibility, including business ethics, waste reduction, employee and community health and safety, human capital development, fair employment practices, diversity, equity, employee inclusion, executive pay, organizational transparency, volunteerism and philanthropy. That is a handful of new issues that need prioritization and attention rather than lip service.

Strategies around ESG are integral to a brand. People want their personal values to align with those of the organizations they do business with. IBM’s survey data showed that 54% of consumers would pay a premium for brands that are environmentally responsible, and that customers want to do business with brands that 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 companies a leg up in an extremely tight market for employees. 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 IBM respondents said they would stay with an organization with a good reputation on 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 it. 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. Credit unions have a good story to tell and are well-positioned to take advantage of a population that is values-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 make a positive impact on members and employees that directly drives financial returns. Global investment firm BlackRock was instrumental in electing sustainability-oriented directors to Exxon’s board. Regarding the importance of ESG, Larry Fink, BlackRock chairman in his 2021 letter to CEOs stated: “Over the course of 2020, we have seen how purposeful companies, with better environmental, social and governance profiles, have outperformed their peers.” Moreover, as President Joe Biden aptly advised: “Today, sustainability is a competitive advantage. But tomorrow it will be business as usual. Don’t get left behind.”

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