THIS ARTICLE IS WRITTEN BY SUZANNE DE BOER AND RUBEN HARDING. SUZANNE ([email protected]) AND RUBEN ([email protected]) ARE CONSULTANTS WITHIN RSM BUSINESS CONSULTING SERVICES OF RSM NETHERLANDS FOCUSSING ON ESG AND BEHAVIOUR
Over the last few years there has been a substantial increase in awareness about the need to combat the negative effects of climate change and deal with resource scarcity. You can’t seem to escape the mentioning of ESG. Especially with the current COP27 and the publishing of the Emissions Gap report by the United Nations Environment Programme (UNEP), it seems more pressing than ever to cut global emissions. The UNEP report concludes that the 1.5C threshold is now in serious peril and that the new efforts to cut carbon would see global emissions fall by less than 1% by 2030, when according to scientists, reductions of 45% are needed to keep 1.5C in play. Looking at the impact on temperatures, the study finds that with the current policies in place, the world will warm by around 2.8C this century.
Governments are setting ambitious climate goals and businesses are integrating ESG within their strategies to make the transition towards a new, more sustainable, economy. Yet, these goals and strategies rarely get implemented the way they were intended because the operational reality is always more unruly than expected.
It might be ‘easy’ to come up with a strategic plan, to set targets and implement hard controls, but the success of an actual implementation depends highly on the support from employees within the organization. They are the key to success, as they are the ones who must change their behavior to implement the new strategy and the policies that come along with the change.
So why is it so hard to change behavior?
The biggest issue is that goals and interests are not always aligned with exhibited behavior. For example, people want to save money for retirement, but they don’t because they prefer to enjoy it now and find it difficult to see how it will help them in the future. We want to live long, but we don't always exercise or eat healthily. A lot of times, people find it hard to change their behavior in the short term to achieve what they desire in the long term. And this is about individual choices to make an individual’s own life better. Now imagine having to change your behavior for something that is as abstract as ‘fighting climate change’. Our brains have their own way of dealing with such a major and intangible concept; it starts applying biases as to be able to handle this abstract idea and its potential consequences.
Biases of the human brain
Biases are ways of thinking that help to deal with acute situations but aren’t always beneficial in the long run. From an ESG perspective three biases that are very relevant:
- Hyperbolic discounting: the perception that the present is more important than the future will hamper the feeling of coming into action. This is a way of thinking that comes from our evolution but does not help us in dealing with current challenges. Abstract and seemingly far off threats aren’t terrifying to brains that evolved to solve local, experiential and imminent problems. It is very hard to realize that the way we behave at work can influence the flooding of an island in the Pacific Ocean, to feel responsible for this and to adapt your behavior accordingly.
- The Calimero-effect: the underestimation of the impact of your behavior. By stating that others (be it colleagues, companies or countries) are bigger and might therefore have more impact on climate change, the urgency to act is taken away from the employee. For example, six out of ten Dutch people agree with the statement 'As long as large companies do not reduce their CO2 emissions, my actions do not matter' (I&O Research). In the larger scheme of things this is not that surprising when you consider that worldwide only a hundred companies are responsible for 71% of all CO2 emissions since 1988. When seeing industrial areas blasting out smoke when driving by, it is hard to imagine how using a reusable coffee cup would make a difference.
- Bystander effect – The phenomenon that in times of crisis nobody acts because they all think that someone else is already dealing with it. The bigger the group of people who can ‘do something’, the smaller the tendency is to step up and act yourself. Seeing that the climate crisis will affect us all, there is a bigger group than ever who can do something about it, which might lead to apathy for many.
It is important to be aware of these potential biases as this may slow down the behavioral change that is necessary to implement your ESG strategy.
Resistance to change
Whether employees will change their behavior depends on various factors, amidst the degree of resistance that is present. Resistance is a negative behavioral intention about the introduction of change in structure, culture or working method of an organization. This often results in an effort to slow down the process of change. The intention of a person in combination with the observed behavior around him/her will determine whether she or he will exhibit behavior that contributes to the ESG goals or not.
This intention is determined by the factors of ‘willingness’ and ‘being able to’. ‘Willingness’ is determined by six components. The personality and the importance a person attaches to preventing climate change, the grandeur of change, the emotions that the change evokes, the perception of the added value of the change, and (also very important) the perceived external need to change. ‘Being able to’ is determined by knowledge, experience, the available options, available time and resources and the timing of the change.
Possible steps you can take
If an organization wants to take steps to deal with relevant ESG requirements it is necessary to confront existing biases and resistance. For this, there are several success conditions:
- Invest time in explaining the need for the change, getting as close as possible to making employees feel the necessity. This ‘need’ could be explained by demonstrating the impact climate change has on the organization’s performance, the potential impact it will have on their individual jobs and the difference a change in behavior could lead to. When this is clear and relatable employees can envision a change in their behavior.
- Involve employees from the start. When a strategy is developed and then ‘presented’ to all staff, it might come as a surprise, or it might not fit the actual daily practice of employees. When an array of employees is involved in drafting the strategy and implementation plan, the chance of success is much higher.
- Assess if those involved have the right knowledge and experience to further the change or to deal with the new situation.
- In addition, pay attention to the timing of the change and the ability of the employee: is he/she able to start changing their behavior? Are priorities clear? Aren’t there too many processes that make people ‘change tired’?
Besides the above-listed success conditions, we would recommend to take into account the potential existence of resistance from staff, to analyze where and by whom it might be experienced and analyze any resistance at an early stage. This makes sure that the willingness and the ability to change behavior can be addressed before resources are spent on a costly sustainable strategy that will potentially fail due to not considering behavioral factors.