Education’s Position at the Core of ESG
In this report, GBC-Education offers a new approach to corporate educational investment – focusing on the link between education and environmental, social, and governance frameworks . We propose the development of a new blueprint designed to yield benefits for companies and investors produced at the intersection of education and ESG.
“Simply put, you can’t drive performance in ESG if you don’t invest in education and skills.”
- Companies that traditionally committed to education as a social impact priority find it difficult to justify and integrate these efforts under new environmental, social, and governance (ESG) frameworks.
- Similarly, ESG professionals do not, at first glance, view education as a leverage point to advance their environmental or governance objectives.
- Yet, education has significant and measurable impacts across all ESG priorities. By recognizing and building upon education’s centrality to ESG, we can both help achieve critical ESG goals and improve corporate performance, enhance public perception, and mitigate risks.
ESG frameworks are under pressure — but they are here to stay
- ESG is facing a crisis centered around the question of whether it is a risk framework or a method for improving performance with positive environmental, social, and economic outcomes.
- Yet, ESG remains the most influential lens through which companies are measured for their impact on the environment and society.
- Over the past several years, regulators, investors, customers, employees, and communities have all increased pressure on companies to do better for all people and for the planet.
Education is key to unlock ESG goals
Investment in education drives measurable impact across numerous ESG areas, including:
- Education drives economic growth, with one additional year of schooling linked to an 18% increase in GDP per capita.
- Education curbs climate change. Closing the education financing gap in low- and lower-middle-income countries could reduce emissions by 51.48 gigatons by 2050.
- Education promotes life-saving health benefits for communities. A child whose mother can read is 50% more likely to live past the age of five, 50% more likely to be immunized, and twice as likely to attend school.
- Education leads to greater diversity, equity and inclusion in the workplace. Prioritizing education for the most marginalized and underserved communities provides the largest long-term economic returns and opens new doors for participation.
Education is central to improving companies’ performance
Education has been proven to address many of the most common material issues that companies face, including:
- Staff recruitment, morale, and retention — 3 of every 4 companies have reported talent shortages and difficulty hiring — a 16-year high. In one survey, nearly half of all workers would consider switching jobs for better learning opportunities.
- Child labor in the supply chain- 160 million children between the ages of 5 and 17 are in child labor globally, accounting for one in 10 of all children worldwide. One year of early childhood education dramatically increases the chance a child will transition into primary school and not child labor.
- Diversity, equity, and inclusion (DEI) — 76% of employees and job seekers said a diverse workforce was an important factor in their job application process. Supporting education opportunity means that more young people from traditionally marginalized communities are prepared to enter the workforce and the boardroom.
- Resilience to climate change — 16 million more workers will be required to meet the demand for efficient appliances, electric and fuel cell vehicles, and building retrofit industries, among others. This will require more investment in education today to meet the skills needed for the green workforce.
- Brand reputation — 76% of consumers say they will stop buying from companies that treat the environment, employees, or the community in which they operate poorly. One study showed that companies investing in community education programs increased business confidence and corporate reputation.
New standardized tools and metrics needed
Companies need clear and consistent metrics for education’s impact on their ESG priorities and core business objectives.
- This is especially true for the “S” area of ESG, which sometimes lacks the same level of rigor, resources, and standardization compared to the environment and governance aspects.
- As a result, many companies define, measure, and report social impact differently. Investors are thus given inconsistent data that cannot fully support financial risk analysis and can lead to incomplete assessments of corporate performance on social issue
- Yet investment in education, human development, and training — which encompass policies, programs, and activities ranging from early childhood development and literacy to formal education for marginalized groups and skills for the workforce — are proven, tangible corporate actions that present well-researched, quantifiable impact metrics for improving and evaluating performance.