The Evolving Relationship Between ESG and the Employee and Customer Experience

by Charles Araujo | June 29, 2022

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Welcome to The Digital Experience Report, your source for news, analysis, and insights on the ExTech (Experience Technologies) market and all things related to the Digital Experience.

In this report, a comment at my recent Digital Experience Salon caused me to examine the evolving relationship between ESG, the employee, and the customer experience with Rita Soni of Everest Group — and why its probably a much bigger deal than you think. Also new studies from Twilio (on personalization), Accenture (on healthcare in the metaverse), and Ivanti (on the impact of employee tech). Plus news from Qualtrics, the Metaverse Standards Forum, LogRocket, Cogito, Sprinklr, Appian, Mendix, Appsmith, ServiceNow, Zendesk, UiPath, Iqor, AskNicely, HubEngage, Front and InMoment.

The Evolving Relationship Between ESG and the Employee and Customer Experience

“I try not to buy from them because I don’t like the way they treat their employees and some of their other practices.”

I don’t have too many epiphany moments these days, but this comment caused me to pause and rethink some things. I was holding my first Digital Experience Salon — basically, a group of really smart people who gathered to have an intellectual conversation about things that matter — and we were discussing the true impact of the experience on purchase and employment decisions.

And despite my focus on both the customer and employee experience, and my advocacy for their tight coupling, I was a bit taken aback by this connection between them — that someone’s customer experience could be influenced by someone else’s employee experience, or other indirect factors.

On the one hand, I guess I shouldn’t have been surprised. The idea of ESG (environment, social, and governance) issues as an area of corporate attention has been bandied about for some time. And, of course, I’ve been touting the tight interconnectedness between the customer and employee experience (CX and EX, respectively) for years.

So, I guess I should have anticipated that these two trends would intersect. But I didn’t. (Bad futurist!)

In my own defense, I believe this is a relatively new evolution in the relationship between CX and EX. And it will get more competitively significant — and stickier — for enterprise leaders everywhere. And if you don’t believe me, you need only look as far as last week’s Supreme Court ruling overturning Roe vs. Wade for proof.

It, and other similar “non-business” issues, will continue to impact CX and EX, and possibly rewrite their relationship. It’s time to pay attention.

ESG’s Put Up or Shut Up Moment

I think part of why I was caught a bit off-guard is that while ESG has gotten lots of press over the last several years, many of us (myself included) have felt it was mostly just talk. It was the stuff that CEOs and other enterprise executives rattled off to connect with customers who shared these beliefs, but which had limited real impact.

And in some cases, it came off as outright disingenuous, with words and actions being not only out-of-sync, but even duplicitous and detrimental to the customer or employee experience. “Many companies are manipulating ESG requirements to justify aggressive cost cutting policies that negatively impact customers and employees,” said Rashida Salahuddin, President & CEO of The Corporate Citizenship Project. “For example, airlines have packed more people into smaller spaces and decreased seat padding in many cases using the pretense that these initiatives help ‘reduce carbon footprint’ when instead the goal is to cut costs.”

But that comment at my Salon (and the broad agreement it engendered from the rest of the group) seems to indicate that a shift may be underway. And this shift may be part of a more prominent, potentially generationally driven realignment in how people respond with their wallets and the jobs they take.

“If we think about the employee experience, and what’s happening with the great resignation, you see that people of all ages — but maybe more with millennials, Gen Z and Gen Alpha — are making these very conscious decisions about what they’re doing and what kind of work environment they want to put themselves into,” said Rita Soni, Principal Analyst, Impact Sourcing and Sustainability Research with Everest Group.

Whether it’s the maturing of the ESG movement or just people responding to ever worse behavior by some companies, it would seem that the moment in which ESG is becoming a significant component of the customer and employee experience is fast approaching.

And that’s going to put CEOs and all other enterprise leaders in the hot seat.

Consumers are Demanding the Companies and CEOs Take a Stand

This fast-approaching tipping point can be seen in the recent shift in consumer expectations. It wasn’t too long ago that companies would get into trouble for taking a stand on a social or other non-business issue.

Today, it’s the opposite.

“Today’s challenges, from the pandemic to ESG to ongoing efforts to address racial inequity, have only woven business and society more tightly together,” write Sarah Jensen Clayton, Tierney Remick, and Evelyn Orr in the Harvard Business Review. “Indeed, 86% of CEOs and board members see business and society becoming more interconnected, and two thirds of the American public want CEOs to take a stand on social issues.” (Emphasis added.)

My jaw dropped a little when I read that stat — two-thirds of people expect organizations to put some skin in the game. Presumably, that means that these would-be buyers are now making decisions based on the degree to which organizations represent their values — and whether they speak out and act in support of them.

I have to admit, it was a little dizzying to watch the Disney vs. Florida fight unfold over the so-called Don’t Say Gay bill. But it makes sense when you see it in the context of these numbers. Customers and employees are changing the rules — they want to invest their money and energy with organizations representing their values.

And it’s going to get even harder to stay out of it.

The Supreme Court’s overturning of Roe vs. Wade is already creating a ripple effect in the battle amongst states for major companies and the jobs they bring to a region. While the location of plants, distribution centers, and offices used to be solely about logistics, taxes, and other business considerations, ESG issues are now becoming a significant factor.

Combined with the so-called great resignation and the general fight for top-shelf talent in many of the most critical sectors of the economy, this is shaping up to be a significant flank in the effort to woo companies. “The overturning of a woman’s right to bodily autonomy — and the chilling effect this decision will have on your ability to attract and retain top female talent by being located in a state which has refused to recognize women’s reproductive freedom — cannot be ignored,” New Jersey Gov. Phil Murphy wrote to companies, according to MarketWatch, in an effort to entice them to move to his state.

All of these indicators point to the fact that the relationship between the customer and employee experience (and beyond) is evolving, becoming more complex, and putting even more pressure on enterprise leaders to change how they build and manage the new ecosystems of constituencies they must serve.

The Enterprise’s New Ecosystem Mandate

I have spent a lot of my recent career talking about digital ecosystems. I even wrote a short book about them!

But my perspective was that organizations needed to build and sustain ecosystems that would enable them to serve their customers.

However, today’s enterprise leader needs to think about a new, broader ecosystem of constituencies that all have a stake in how they function and their impact on the wider business and social community. And importantly, consumers and employees now judge them based on how they build and manage these ecosystems.

The ecosystem is now about serving society.

In their Harvard Business Review article entitled Today’s CEOs Don’t Just Lead Companies. They Lead Ecosystems, Clayton, Remick, and Orr, explain, “If CEOs are to deliver against their new job description, they must become a different type of CEO: an enterprise leader who also stewards the ecosystem in which their business operates, including customers, suppliers, partners, competitors, governments, and their local community.”

Seen through this lens, it’s not surprising that many organizations and their leadership are struggling. This remit is more extensive than it was just a few short years ago — let alone when most of them began their careers.

We are literally watching a massive, lightspeed transformation in how consumers, business customers, and employees perceive the nature of value delivery.

Shifting How You Look at the EX-CX Relationship

I expect that this evolution of what impacts the perceived customer and employee experience will be rough for many organizations.

Most have only just begun to take these two disciplines seriously — and now the ground is shifting beneath their feet right as they were getting started with investments in technologies that enable them to monitor the transactional experiences they’re delivering.

They now need to add a cultural and social dimension to it and change how they view it.

Most enterprise leaders still think about the customer and employee experience as things they deliver. But this movement represents a shift to a much bigger, more complex, and more nuanced view of these experiences. “You often hear the phrase, ‘happy employee makes a happy customer,’ and I think that is absolutely true,” said Soni. “But how does that affect the way that you are looking at the employee experience? And not just the digital employee experience, but are your employees getting a living wage? Are you meeting these other sort of global standards and criteria?”

As Soni sees it, it will represent a massive change in how organizations look at everything, and it will demand that they see it holistically. “Basically, everything is up for grabs when we think about a more inclusive, holistic society. And that, to me is what’s exciting,” she says.

I think the last sentiment — that this should be an exciting period — is the most important. These are challenging times in which the rules are changing. But it’s also a fantastic opportunity for organizations to play a role more significant than just delivering products or services.

Soni sees these opportunities even amid the disruption to the impactful sourcing jobs for the marginalized communities for which she advocates. “What I’ve seen is that the impact sourcing jobs have also transformed as those jobs got automated, they also went up the value chain, and [organizations] started figuring out how to do the training so that we could have them doing computer programming, so they could do anything, really, in the end.”

So whether it’s taking a stand on Roe vs. Wade, serving marginalized communities, or engaging on any other issues, the big message is that you have choices in how you respond to them. Your employees and customers are evaluating those choices, and what you do impacts their perceived experience.

And in the end, that may be the only thing that matters.

Are You a DXO?

If you’re an enterprise executive that understands the critical role that the digital experience plays in creating value in the modern enterprise, then you’re a Digital Experience Officer — or DXO — and you should be a part of our DXO Council. 

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Image credits: Tim Marshall and Sarah Penney.

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About the author 

Charles Araujo

Charles Araujo is a technology analyst and internationally recognized authority on the Digital Enterprise, the Digital Experience and the Future of Work. Researching Digital Transformation for over 10 years, he is now focused on helping leaders transform their organizations around the digital experience and to reimagine the future of work. Publisher and principal analyst of The Digital Experience Report, founder of The Institute for Digital Transformation, co-founder of The MAPS Institute, and author of three books, he is a sought-after keynote speaker and advisor to technology companies and enterprise leaders.

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