Article

Introducing the ESG Diagnostic: Navigating the path to resiliency and sustainability

What does ESG mean for the public sector?

Sept. 21, 2023 · Authored by Caitlin M. Humrickhouse

In the ever-evolving landscape of public sector priorities, where challenges such as affordable housing, infrastructure resiliency, social equity, and government transparency take center stage, the Environmental, Social, and Governance (ESG) movement has gained significant influence. Its influence is continuing to gain momentum in the United States, holding the potential to reshape how our cities and communities address critical issues. Furthermore, ESG principles are intertwined into almost every facet of government operations, as outlined in the graphic below.

ESG topics

The significance of embracing ESG principles becomes apparent when considering the following compelling factors:

Serving vulnerable populations: A 2021 study by Boston University underscored the challenge faced by mayors, with only 1 in 5 feeling they have “more than moderate” control over homelessness within their cities. And government leaders are further tasked with addressing the root causes of homelessness with both innovative and effective solutions.
Competition for talent: Recruitment and retention of a qualified workforce continues to plague public sector leaders with the largest numbers of vacancies in public health, public safety and engineering and skilled trades. Attracting the Gen Z workforce is paramount in filling those gaps. 90% of this generation believes companies should actively contribute to social and environmental causes. Moreover, 83% of Gen Z consider a company's purpose when making career decisions. *
Changes in population: Ongoing shifts in population patterns can disrupt regional fiscal and political dynamics. Strategic efforts to retain and attract citizens while planning for responsible growth are imperative for local governments and their private and non-profit partners.
Funding opportunities: Federal initiatives like Justice 40 and private sector regulation like the SEC-mandated climate disclosures are poised to channel federal grants and private investments toward public sector entities aligned with ESG principles. Organizations showcasing alignment with climate resilience, social equity and effective governance stand to attract the most substantial investments. Showing these alignments in conjunction with capital borrowings can occur through the use of designations, more risk and project disclosures, or an investor-focused resiliency and sustainability report.

Caitlin M. Humrickhouse

Principal

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ESG Diagnostic
Scoring criteria	Data and technology	Goal setting and accountability	Oversight, processes and policies	Reporting, communication and transparency	Sub category maturity	Rationale / Explanation
General organization
Business strategy alignment	Initial					Elements of ESG principles can be found throughout organizational planning and budgeting documents but there is no comprehensive ESG strategy or alignment of ESG programs with organizationwide strategic initiatives.
Environmental
Climate change vulnerability	Initial	Initial	Initial	Initial	Initial	Currently engaged with a consultant to begin work on a climate action plan.
Social
Employee engagement and development	Initial	Operational	Operational	Operational	Operational	The organization has a robust employee engagement program, defined career pathways and a mentoring and coaching program in place to develop employee soft skills and readiness for leadership. Tracking and management of programs is manual and not tied to other organizational technology.
Community relations and social impact on communities	Initial	Growth	Growth	Initial	Growth	Legacy community engagement activities are in place and managed within the community and economic development department. Reporting on feedback received and transparency on how it is incorporated into organizational budget and strategy is informally communicated to stakeholders. A strategic initiative of the department is to review current processes and find avenues for broader input and more transparent reporting.
Governance
Financial policy development and implementation (internal controls, etc.)	Operational	Operational	Operational	Operational	Operational	Financial oversight, controls and supporting technology are aligned with best practice and embedded in the standard workflows of the organization.