What is ESG and How Does it Affect Employee Engagement?

Corporate jargon has its fair share of acronyms — ROI, YOY, B2C. But there’s a new term companies should add to their vocabulary: ESG, or “environment, social, and governance.”

When thinking about ESG, companies establish strategies to reach measurable goals that answer three core questions:

• Environment: how is the company working to minimize its environmental impact?
• Social: how does the company advocate for social good?
• Governance: how does the company’s leadership drive positive change?

These intertwined elements provide metrics that help companies show the progress they are making toward their corporate social responsibility (CSR) goals and identify potential risks related to ESG factors, like impacts due to climate change or human rights concerns. Those numbers can give their investors confidence and ensure their customers feel good about supporting them.

As of 2020, 88% of publicly-traded companies had ESG policies in place. Leidos, a Fortune 500® information technology, engineering, and science solutions and services firm, and NEEF partner, is one of those companies. Leidos’ ESG goals are closely linked to its mission to make the world safer, healthier, and more efficient.

“We continue to connect our corporate responsibility and sustainability efforts under the ESG umbrella as part of our efforts to seek continuous improvement,” said Daniel Pellegrom, Leidos Director of ESG & Corporate Responsibility. “The term ESG represents a more specific and measured approach and a focus on risk.”

Daniel Pellegrom, Leidos Director of ESG & Corporate Responsibility

What Are the Benefits of ESG?

Companies like Leidos understand that a thoughtful ESG strategy goes deeper than simple public relations.

“The success of our ESG goals will increase our business resilience, employee engagement, and impact in our communities — all key to our business success,” said Pellegrom.

There is data to back up these claims. A 2020 study found that employers with the highest rates of employee satisfaction had significantly higher ESG scores than their peers. The socially-conscious consumers of the future are seeking out products and investments that are aligned with their values. A 2022 Gallup poll found that 48% of investors are interested in sustainable investment funds.

Integrating ESG issues into a company’s overall business strategy helps build consistency and a sharp focus on long-term impact.

“Leidos still works to achieve this balance, but we recognize the relationship between good ESG practices, corporate resiliency, and sustainable value. These are not just ‘extra’ or ‘feel good’ issues, they are value drivers,” Pellegrom said.

Connecting Employees with ESG

Part of Leidos’ corporate vision is to strengthen the communities where its employees live through volunteerism, sustainable operations, and the advancement of equality. To accomplish this, the company partnered with NEEF to host “Day of Service” events to engage employees at three of its nationwide locations — Washington, DC, northern Alabama, and southern California.

From left: NEEF President Sara Espinoza, Leidos Director of ESG & Corporate Responsibility Daniel Pellegrom, and Leidos Senior Manager of Sustainability and ESG Reporting Carla Post join the Day of Service.

First, employees met up at Rock Creek Park in DC on a beautiful Earth Day morning to clear invasive plant species and pick up trash. Then, employees in Huntsville, Alabama, helped build accessible trail infrastructure at Harvest Square Nature Preserve with the Land Trust of North Alabama. A week later, NEEF coordinated a beach cleanup with the Surfrider Foundation and Leidos employees in San Diego.

“One of our ESG beacons is to promote healthier lives,” said Pellegrom. “Coupling volunteerism with spending time outdoors can reduce stress, increase mental engagement, and instill a sense of purpose. Activities like the Day of Service events definitely help strengthen our employees’ connection to, and understanding of, our sustainability goals.”

Leidos Director of Supply Chain Risk and Resiliency Brian Johnson has fun while removing invasive species in Rock Creek Park.

Leidos plans to use photos and videos from both events to share its sustainability mission with more people within the company. They also kicked off “Corporate Green Teams” in April 2023 to harness the passion for sustainability and the environment that so many Leidos employees share.

One of Leidos’ most impactful social efforts is focused on mental health at work and in their communities. Looking ahead, the company is partnering with NEEF on a pilot project to support programming for school-aged children whose mental health may be negatively impacted by climate change.

Leidos employees learn about the importance of their service work in helping the environment of Rock Creek Park.

“Success is transparency, progress, and holding ourselves accountable,” said Pellegrom. “Success is also helping all of our employees understand why these goals are critical to the enterprise and how they can individually contribute.”