Peak during COVID-19 followed by intensified decline
Last year's net hires at 10% of 5-year average
Focus on profitability improvement amid high interest rates impact
It has been revealed that American companies, including big tech firms such as Meta, Amazon, and Google, are reducing hiring for ESG (Environmental, Social, and Governance) roles. This trend is attributed to a focus on improving profitability through cost-cutting amid the ongoing impact of high interest rates.
On the 13th (local time), the Wall Street Journal (WSJ), citing employment market research firm Live Data Technologies, reported that although the total number of hires in ESG roles at U.S. companies last year was 40,884?still exceeding the 39,452 departures?the growth had significantly slowed. This data was based on a survey of more than 360,000 current and former ESG professionals. Notably, the net hires, calculated by subtracting total departures from total hires, amounted to only 1,432, which is about 10% of the average net hires (around 15,000) over the previous five years.
The hiring freeze in ESG roles intensified in the second half of last year. As of December, the number of hires in ESG roles was 2,897, while departures reached 3,071, marking a reversal between hires and departures. This has led to expectations that total departures will exceed total hires in ESG roles this year.
The companies with the highest number of departures from ESG roles were big tech firms such as Meta, Amazon, and Google. This is seen as a continuation of efforts to reduce the workforce that was excessively hired during the COVID-19 pandemic.
ESG roles focus on non-financial corporate factors such as sustainability, environment, climate, and diversity. The ESG hiring boom began increasing in 2018 and peaked during the COVID-19 pandemic. However, as inflation triggered high interest rates and shook corporate fundamentals, the situation changed rapidly. Additionally, companies have faced political pressure to focus on profitability from shareholders dissatisfied with returns.
Recent corporate trends of allocating resources to issues like artificial intelligence (AI), cybersecurity, and supply chains have also influenced the reduction in ESG hiring. Chief Financial Officers (CFOs) are focusing on business areas that generate higher short-term profits. Alexander Bante, CFO research lead at consulting firm Gartner, said, "Corporate boards are placing less pressure on executives to focus on ESG risk management."
However, the reduction in new ESG hires does not necessarily mean that corporate investments in related areas have weakened. According to a survey conducted this month by management consulting firm Teneo, only 8% of U.S. CEOs reported scaling back ESG programs.
This is because many companies must continue to pay attention to ESG-related disclosure tasks due to regulations enacted in certain regions such as California and Europe. California passed the Voluntary Carbon Market Disclosure Act last October, which requires public and private companies with annual revenues exceeding $1 billion to disclose greenhouse gas emissions, and it has been in effect since this year. Additionally, companies with annual revenues over $500 million must report climate-related financial risks. The European Union (EU) adopted rules last year requiring sustainability disclosures from EU-listed companies and non-EU companies with substantial operations in Europe.
Some observers note that ESG work is shifting from marketing focused on ESG branding to disclosure-centered tasks aimed at regulatory compliance, such as carbon emissions reporting. Mike Wallis, Chief Decarbonization Officer at Persefoni, a provider of carbon accounting and management software, emphasized, "Businesses requesting sustainability, carbon data, or ESG data need to continue these efforts."
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