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Employee Engagement Is Key to Sustainable Success
July 5th, 2012
More and more businesses are beginning to see the correlation between happy, inspired employees and increased profitability. Rather than focus on external factors such as retaining market share, companies can better drive productivity and returns by focusing internally on effective employee engagement and retention; companies that understand and utilize the power of their workforce to further their initiatives will ensure market leadership in the years to come.
“In a prosperous society, you really have only two assets: people—their creativity and skills—and the ecosystem around them. Both need to be carefully tended.” –Mats Lederhausen, former senior executive of McDonald’s Corporation[i]
Employee engagement and the bottom line
Few businesses recognize the truth of Mats’ quote. Fewer recognize that tending to both people and the ecosystem is the route to profitability.
Let’s track the logic: Taking care of your workforce, particularly by engaging them in implementing a corporate commitment to sustainability, will drive greater productivity and thus greater profitability.
Gallop-Healthways Wellbeing Index, which each year surveys employees about their level of job satisfaction, reports that the single most important way to engage workers is to enable them to make progress in meaningful work. They found that organizations that do this successfully have 3.9 times the earning per share growth compared to organizations with lesser engagement in the same industry.[ii]
American workers, Gallop warns, are more unsatisfied with their jobs than at any time since their surveys have been conducted.[iii] Beyond the obvious impact on the unhappy people, the lost productivity costs the economy $300 billion each year.
Where does sustainability come in? The antidote to unhappy workers is to engage them. And it turns out that one of the best ways to do that is to enable them to be part of implementing a company’s commitment to sustainability.
The American workforce no longer views work solely as a means to a paycheck. To many people, especially the younger generation, their job is an integral part of their lifestyle. A 2010 study by Johnson Controls found that 96% of Generation Y respondents are highly concerned about the environment and expect that employers will take steps towards becoming more sustainable. Almost three quarters want businesses to make a real commitment to sustainability.[iv]
To attract and retain the best talent, an employer must engage employees in ways that motivate and empower them. If this sounds like a lot of work just for the privilege of giving someone a salary, remember that an inspired workforce is your best sales tool. Employees with positive feelings towards their jobs work harder, are more innovative, are healthier and are a lower risk to your business.
Employee engagement—the practice of creating supportive, stimulating, collaborative, and rewarding work environments—is nothing new. Good workplaces have always motivated their workers to gain operational efficiency, better relations, and strengthen community ties. Employees at such companies have long enjoyed higher job satisfaction, training, empowerment, and in some cases, financial bonuses or incentives.
Two things are different now: What motivates today’s workers is changing, and there is a very strong business case for doing what it will take to engage the modern workforce.
In comparison to peers who do not actively engage employees, companies who do can measure their competitive edge in the form of increased profitability (16%), productivity (18%), and customer loyalty (12%), as well as decreased employee turnover (25%), safety incidents (49%), and absenteeism (37%).[v]
This article profiles companies seeking to secure their status in the marketplace and are setting their priorities accordingly.
The link between employee engagement and sustainability
Tim Mohin, Director of Corporate Responsibility at AMD Corporation, and an expert in employee sustainability integration states, “If employee engagement is a top business priority and sustainability programs are a way to drive better engagement, there is a clear imperative to make sustainability a part of the work experience. The question is: How?”[vi] Companies often implement sustainability projects without a strategy. One-off efforts to recycle or plant trees are fine, but they have fleeting impacts either on employee satisfaction or on company profits. Worst case, these dis-integrated efforts add costs.
The new US workforce is increasingly comprised of individuals who seek the opportunity to make a contribution to society, and who are choosing jobs that enable them to make this a part of their lives. Case in point: 92% of Millennials say they want to work for environmentally conscious firms.[vii]
It is now clear that the companies who are the sustainability leaders are outperforming their less sustainable peers in the same industry. Now over 40 studies[viii] from all the big management consulting houses, in academic journals such as Harvard Business Review and MIT Sloan Review, and dozens of other researchers show that these sustainability leaders have higher, faster growing stock value, better financial results, lower risks, and more engaged workforces.
Putting sustainability into practice requires people doing the work. Synchronizing employee engagement with sustainability strategy is key to building an innovative, environmentally responsible, and socially conscious business. Workers on the front line are often in the best position to identify inefficiencies and propose solutions. In contrast to ghettoized corporate sustainability departments conducting costly life-cycle assessment analyses and putting out lonely CSR reports as a marketing exercise, the best companies are integrating their sustainability strategies into their employees' day jobs.
Empowerment and Incentives
An example of harnessing human capital to achieve company goals is the Kimberly-Clark Corporation, which recently committed to cutting its use of natural forest fiber in half by 2025.[ix] To achieve this and other sustainability aspirations, Kimberly-Clark started awarding employees for out-of-the-box sustainability ideas. Winning employees have the opportunity to travel and collaborate with one of Kimberly-Clark’s partner NGOs on an international project enhancing or restoring natural and/or human capital.[x] This type of program combines employee satisfaction, sustainability strategy, and positive public relations.
Not surprisingly, the secret is out. In 2011 88% of senior sustainability executives say they plan to invest in increased employee engagement.[xi] Many firms have established Green Teams to help drive internal sustainability efforts via programs focused on such initiatives as waste diversion and building efficiency. The leading companies tie achievement of their sustainability goals to employee bonuses. Interface founder Ray Anderson, still the corporate sustainability movement’s revered icon, tried an array of employee training efforts and motivational techniques. The year he tied waste reduction to employee bonuses, savings from efficiency measures became one-third of Interface’s operating profits.[xii] Organic yogurt producer Stonyfield Farm employed a similar strategy to cut energy use by over 22% per ton of product. They challenged employees to save energy at company facilities, and connected energy savings directly to employee bonuses.[xiii]
Since 2008, Intel has calculated every single employee’s annual bonus based on the firm’s performance in measures such as product energy efficiency, completion of renewable energy projects, and company reputation for environmental leadership.[xiv] Interestingly, Intel’s market share, now top among 25 semiconductor manufacturers, recently hit a ten-year high.[xv] Carrie Freeman at Intel reported, “When it comes to looking at ways to reduce our footprint, we very much see a direct correlation between reducing our costs and engaging our employees.”[xvi]
Employee recognition and incentive programs such as those at Interface, Stonyfield and Kimberly-Clark advance company initiatives because they align company values with employees’ personal interests. We all love rewards for our good behavior.
Empowerment and financial gain are big motivators in times of relative economic instability. Some of the most forward-thinking companies in sustainability and beyond—Seventh Generation, Google, Burt’s Bees, Aveda, Intel, and New Belgium—ensure a competitive advantage by weaving employee engagement into the fabric of their business. The Greater Good initiative at Burt’s Bees empowers workers through a 30-hour-per-year educational program that trains employees in actionable environmental stewardship, social outreach, natural wellness, and leadership. The initiative, which has generated positive PR since its inauguration in 2007, also supports a company goal to achieve 100% employee engagement in sustainability by 2020.[xvii]
Engaged employees inspire engaged customers
In a market of increasingly critical consumers, effective communication of a company’s sustainability story can optimize revenue opportunities. Conversely, ambiguous messages translate to lost profits. As the best of all possible sales representatives, employees, whether in frontline jobs or not, play a major role in enhancing brand value by linking a company’s sustainability platform to its consumer base.[xviii]
Engaged employees who have a positive perception of their employer explicitly or inadvertently “sell” the company for which they work, the products it produces, and its sustainability platform. Sure, customers listen to what businesses say they are doing in terms of environmental and social responsibility. More so, customers trust those companies they know are putting theory into practice. There’s no one more likely to inspire customer trust—and loyalty—than engaged and knowledgeable employees. Kenexa Research Institute (KRI) found that employees working at companies with clear environmental and social programs are more satisfied, stay at their jobs longer and are happier with senior management than peers at companies lacking CSR programs. Jack Wiley, executive director at KRI, lists benefits of CSR activities as competitive advantage when recruiting; creating a distinctive employment brand; elevated teamwork among employees; and establishing good emotional ties between the employees and the company.[xix]
Tools such as the Rapid eLearning Tools used by Eco-Products and Aveda, described in subsequent posts on this site, empower employees and franchisees to spread a company’s message.
Enhancing the wealth of human capital
Replacing a good employee can be done, but it commands a hefty price—between 70% and 200% of an employee’s annual salary, according to the National Environmental Education Foundation.[xx] But there’s no need to replace when you can retain and increase productivity. Human capital underpins financial gain, market competitiveness, and socially and environmentally sound practices, as well as customer service and satisfaction. Rather than focus on external factors such as how not to lose customers or how not to lose market share, companies can maximize their investments by focusing internally on effective employee engagement programs. Companies who treat their employees as valuable and unique collaborators rather than as replaceable laborers secure their positions as dynamic innovators and market leaders in the years to come. Furthermore, they will realize that it doesn’t have to be so lonely at the top.
At Sustainable Brands 2012, Natural Capitalism partnered with Jeff Mendelsohn, founder of New Leaf Paper, to introduce the A Team. Hosting a pre-conference workshop, the A Team introduced the concept that today’s best employee engagement is sustainability integration—making the implementation of a company’s commitment to sustainability a part of employees’ day jobs. A subsequent post by Jeff will describe this work.
[i] Esty, Daniel C. and Andrew S. Winston. Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage. New Haven: Yale University Press. 2006. P. 32.
[iv] Stika, Nicole, “Sustainability Drives Recruitment and Retention,” Mindspring.Com, 9 June 2010, http://www.cosemindspring.com/Topics/Sustainability/Greening%20Your%20Business/Sustainability%20Drives%20Recruitment%20and%20Retention.aspx
[v] “The Relationship Between Engagement at Work and Organizational Outcomes,” Gallop, 2009, http://www.gallup.com/consulting/126806/Q12-Meta-Analysis.aspx[TH1]
[vi] Mohin, Tim, “How Sustainability is Driving Employee Engagement and the Bottom Line,” GreenBiz.com, 29 September 2011
[vii] Dunn, Collin “Get a Green Job: GreenCareers by MonsterTRAK” Treehugger, 5 October 2007, http://www.treehugger.com/culture/get-a-green-job-greencareers-by-monste...
[ix] Personal communication: Margaret Ward (Kimberly-Clark) to Lily Thaisz (Natural Capitalism Solutions), Neenah Wisconsin, 24 June 2012
[x] Kimberly-Clark Corporation, “The Crystal Tree: Leadership in Sustainability Award.” http://www.sustainabilityreport2011.kimberly-clark.com/people/employees/...
[xi] The Annual Sustainability Executive Survey, Green Research, http://shop.greenresearch.com/products/annual-sustainability-executive-s...
[xii] Personal communication Ray Anderson to Hunter Lovins, Catauba Georgia, 1999
[xiii] Madren, Carrie, “Green Strategy Can Save Business Big Bucks” The Fiscal Times, 29 May 2011, http://www.thefiscaltimes.com/Articles/2011/05/29/Green-Strategy-Can-Sav...
[xiv] Lubber, Mindy, “Compensation and Sustainability,” Harvard Business Review, 21 April 2010, http://blogs.hbr.org/cs/2010/04/compensation_and_sustainabilit.html
[xv] Graziano,Dan, “Intel’s market share surges to 10-year high” BGR, 26 Mar 2012, http://www.bgr.com/2012/03/26/intel%E2%80%99s-market-share-surges-to-10-...
[xvi] Deborah Fleischer, Green Teams: Engaging Employees in Sustainability,” GreenBiz.com Report, Nov. 2009, http://www.neefusa.org/pdf/greenbiz-reports-GreenTeams.pdf
[xvii] “Burts Bees, Marks and Spencer Share Staff Engagement Tactics,” Environmental Leader, 31 May 2011, http://www.environmentalleader.com/2011/05/31/burts-bees-marks-spencer-s...
[xviii] Lovins, Hunter. “Empowering the Frontline.” Sustainable Industries. February 14, 2012. http://www.blog.sustainableindustries.com/articles/2012/02/empowering-fr... (Accessed June 19, 2012).
[xix] Anne Moore Odell, “Working for the Earth: Green Companies and Green Jobs Attract Employees,” 16 Oct. 2007,http://www.greenbiz.com/news/2007/10/16/working-earth-green-companies-and-green-jobs-attract-employees
[xx] National Environmental Education Fund (2010)“The Business Case for Environmental and Sustainability Employee Education,” P. 9, Feb. 2010, http://www.neefusa.org/BusinessEnv/white_paper_feb2010.pdf