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Croatia: The S in ESG in Context of the Tech Talent War

Croatia: The S in ESG in Context of the Tech Talent War

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In the past decade, the tech industry in Croatia has been growing at four times the rate of the entire Croatian economy, according to research by the Croatian Chamber of Economy. Despite all the obvious positivity of its high growth, the Croatian tech scene has been facing a challenge of its own: talent gaps.

Due to rising demand for talent, individuals with specialized technology skillsets have become more selective when it comes to choosing employers. Given that employees can perform their jobs from anywhere in the world, Croatian tech employers face not only local but also global competition. Despite having a strong tech start-up scene and two unicorns, Croatia has not started producing enough highly educated tech experts, and retaining the existing ones is becoming ever more difficult. Croatia is one of the three EU member states that recently reported a decrease in the number of ICT experts. And this certainly enhances the risk of investments moving to other countries that do not have such a shortage. As even the most profitable Croatian tech employers often cannot compete with the financial benefits offered to employees in other jurisdictions, it might be time to focus on the non-material aspects.

To be clear, ping-pong tables and Mimosa Fridays are no longer enough to attract the best talent. A large part of the tech talent pool are Gen Z and care about nothing less than solving the world’s problems. A recent survey from Deloitte showed that this generation is extremely concerned about sustainability issues, with as many as 28% of respondents claiming that saving the environment is their top concern.

Besides the obvious goal to go green, companies should now also strive to achieve social sustainability.  The next generation of technology workers will consider an employer’s social impact before coming on board and are more likely to work for employers that align with their social values.

According to Croatian software company Leapbit’s recent report What do developers want, around 30% of software developers in Croatia have quit their jobs due to poor corporate culture and bad interpersonal relations. The same share of respondents found these factors to be among the top five reasons for choosing a new employer.

It should come as no surprise that positive social impact equates to higher job satisfaction, enhancing the chances of an employer attracting and retaining key talent. This requires strong and effective policies around work-life balance, as well as family-care policies, which is one of the most important job elements for over 20% of Croatian developers, according to above research.

Almost half of developers value health benefits and a flexible schedule as the most important job factors, as reported by Croatia-based online recruiting software company TalentLyft. This is a clear sign that Croatian tech companies aiming to develop knowledgeable and reliable teams should acknowledge these values and incorporate them in their business policies. Furthermore, recognizing the need for privacy can also enhance corporate reputation and boost the ESG rating. Corporations are socially and legally obligated to protect the personal information of their employees, whereas increasingly frequent data breaches have a substantial negative impact on a company’s reputation.

The costs of attracting talent are significantly lower for employers with a strong brand image, as they attract targeted candidates more easily and quickly. Companies with a poor brand image have been known to pay their employees up to 20-30% more than their competitors, as candidates don’t perceive them as desirable employers. This trend seems to be here to stay, as the post-pandemic priorities of employees are now set on social corporate responsibility and sustainable business, more than ever before.  

According to some estimates, the IT industry might soon account for a larger share of Croatia’s GDP than tourism. However, talent attraction and retention issues present a burden to this highly profitable sector of the Croatian economy. Considering the upcoming IPO of the first Croatian unicorn, Infobip, the rise of the first electric hypercar unicorn, Rimac, and the many rising start-ups in Croatia, the demand is likely to keep increasing. A sustainable approach and a healthy work environment can help employers stand out, create superior teams, and focus on their core business.

The next generation has already made it clear they want to work for organizations which contribute to the community. This is a chance for corporations to score some “S” points by showing they are going beyond the minimum legal requirements and creating a business that puts people first.

Mojmir Ostermann, Managing Partner, and Marta Jelakovic, Senior Associate, Ostermann

This Article was originally published in Issue 9.7 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.