While environmental factors often get the most attention, ESG is also about concern for people and communities. Diversity, equity, and inclusion (DEI) is a fundamental ESG consideration and part of the metrics used to measure an organization’s social score.
DEI considerations include workforce diversity; fair and equitable treatment of all employees in terms of pay, professional development, and career advancement; and an inclusive workplace culture that seeks diverse perspectives so employees feel they belong and can fully contribute to the organization’s mission.
Also vital are connections to the community through partnerships and support for diverse suppliers.
Research points to significant benefits of a diverse, equitable, and inclusive workplace boosting its competitive advantage. These include attracting and retaining top talent, improved financial performance, better customer orientation, increased employee engagement, fewer sick days, and more innovative and collaborative teams.
Sound governance is fundamental to a credit union’s ability to fulfill its mission of serving its member-owners. Sound governance is also vital to our growth and continued relevance in the marketplace.
Governance is embedded in our cooperative principle No. 2, member democratic control.
This includes meeting relevant standards of transparency, compliance, and accountability, and considering the broad set of stakeholders’ interests.
This may mean considering the composition of the board and executives: Are they a diverse and inclusive group that reflects the credit union’s membership?
If not, the credit union risks not having the needed perspectives and insights to operate in a way that ensures long-term relevance and sustainability.
A competitive differentiator
Since their inception, cooperatives have represented an alternative to the traditional corporate approach that focuses exclusively on serving shareholder interests. As cooperatives, credit unions are guided by eight cooperative principles which codify our sense of accountability and responsibility to a broad set of stakeholders—members, community, society, underserved and historically marginalized groups—and prioritizing people over profit and communities’ sustainable development.
There is a clear opportunity for individual credit unions to use ESG as a competitive differentiator and a means to advance financial well-being for all.
At the same time, there is a window of opportunity to get in front of policymakers and regulators to avoid regulations that limit credit union self-determination and to respond to growing consumer and employee demand.
If we seize on this moment, it will yield positive impacts on credit unions’ bottom line, as well as for members, employees, and communities.
Some credit unions are already prioritizing ESG. Last summer, the Pacific Northwest experienced an unusually hot summer where temperatures hit dangerous levels. The heatwave killed 200 people in Oregon and Washington.
Access to quick and affordable credit took on a life-and-death urgency for these areas. Low-income and historically marginalized groups were among the most vulnerable, unable to afford air conditioning or heat relief of any kind.
Verity Credit Union in Seattle, which has a robust DEI and green-lending program, recognized this gap. The $733 million asset credit union responded by working with partners to ensure it offered products that served the most vulnerable consumers, not just high-net-worth individuals.
Verity’s experience bears out what an abundance of research shows: namely that women, Black, Indigenous, Latino, low-income, and other vulnerable groups disproportionately suffer the consequences of environmental hazards and climate change.
This demonstrates the power of ESG, which calls on institutions to use a holistic lens that considers environmental, social, and governance considerations.
The good news is that credit unions don’t have to pivot to integrate ESG into their approach. It is baked into our cooperative principles and is a natural fit.
Increasingly, we see credit unions explicitly committed to environmental sustainability, and connecting the dots between E, S, and G. We can no longer afford to see financial services as disconnected from the health and well-being of our members and communities.
Continuing to be our members’ best financial partner means making those connections and serving the needs of everyone in our communities.
Traditionally, corporations have focused solely on serving their shareholders.
The Business Roundtable, a group of nearly 200 CEOs from America’s largest companies, defined a new statement on the purpose of a corporation, which calls for a radical rethinking of this narrow focus. It challenged companies to “deliver long-term value to all of their stakeholders—customers, employees, partners, communities, the planet, and society”—not simply shareholders.
Credit Union Magazine’s Summer 2023 issue highlights the lending outlook for the rest of the year, how credit unions leverage fintech companies to boost digital lending, the power of lending partnerships, common Bank Secrecy Act violations, and the shift board members must make when becoming chair.
