“Smart” employers and SMEs are increasingly focusing on their ESG to market themselves as desirable employers, attractive to investors, and reliable to consumers. A company’s ESG is now used as a marker for determining whether the company has a competitive edge in today’s “digital” economy. What does ESG refer to, and is this something which employers should look to champion in the workplace?
We say, yes. ESG refers to a company’s Environmental, Social and Governance impact. So, how a company’s vision, policies, and strategy account for or reflect ethnical ideas and options (i.e. ways a company, through its work, is seen as meaningfully supporting environmental and social issues). ESG is often seen as an umbrella term and can also be looked at as a way in which companies evaluate their own performance to determine whether a decision or investment is a viable one (by paying mind to the environment and social impact of a decision).
Breaking this down even further, the “E” in ESG accounts for the way in which a company decision could impact the environment and/or the way in which a company manages environmental risks. The “S” assesses the strengths and weaknesses of any decision in respect of the company’s relationship with its customers, suppliers, employees, and the communities within which it operates; whilst the “G” deals with the company’s leadership and internal practices.
ESG is relevant to the management of various employment related issues, such as:
- Recruitment, retention, and training: what can employers do to attract and retain talent from a wide range of communities? How are employees rewarded/incentivised for any contributions?
- Working practices: is the organisation promoting an inclusive culture? Are negative working practices being addressed or dismantled? Are working practices conducive to employees’ mental/physical health and wellbeing? What support is on offer?
- Policies: what approach is taken to promote agile and inclusive working practices?
- Pay equality: how are gender/ethnicity pay gaps being approached?
- Diversity and inclusion: how can employers foster an inclusive and diverse working environment?
Employers, take heed. There are various ways in which you can put ESG into practice (or begin to consider ESG as part of working practices). Even being aware of what ESG is when making decisions, is a good starting point. There is no hard and fast rule on how best to approach ESG in the workplace, as there are countless ways of doing so and the best or most advantageous way will often depend on your specific circumstances, workplace size, and business model.
You could, however, follow our broad steps below to try to construct an ESG-based way of thinking:
- Take stock – where does the company sit currently in terms of its thinking on culture, social and diversity-based issues. Is the company’s culture conducive to diversity and equality? What are your employees’ thoughts on where the organisation sits on these issues (would you consider conducting a work-wide survey to understand employee views)? Is the company’s culture in line with ‘modern day’ working values (this may be particularly relevant depending on the type of work carried out by the company)? How is the company perceived by those outside of it?
- Does the company need to effect change – perhaps a solid equality, diversity and inclusion strategy is needed which entrenches the company’s approach to ESG? If so, this should be a meaningful strategy (rather than a strategy for the sake of there being one in place) and steps should be taken to show that such a policy covers all areas of the business, is based on research/data collection (again, employee surveys), and identifies any pre-existing gaps and issues in the business.
- Recruitment overhaul? Some of our other articles touch on how an unfair recruitment process can leave the floor open for discrimination claims, amongst other issues. Ensuring a fair recruitment process is in place is essential given the way a company recruits is often the first indication of a company’s approach towards diversity in respect of its workforce. Recruitment criteria should be as inclusive as possible – job criteria should not, indirectly, disadvantage prospective employees who have protected characteristics. What is a ‘fair’ recruitment process for you and your business ultimately depends on the size of the company and the type of business it is. This can be as simple as ensuring there are objective metrics in place for assessing candidates (i.e. avoid subjectivity and potentially hiring employees because you think they may be a “good fit” based on your perspective of the company’s culture or existing workforce), a full and proper system in place to record observations and decision making – with detailed feedback provided to applicants, and/or name blind processes – to avoid any unconscious bias.
- Training/policy overhaul? Staff could be trained in line with any shift in the company’s values to try to ensure that its working environment is reflective of its renewed approach. Training is a particularly useful tool when considering how best to tackle issues such as unconscious bias in the workplace. Policies should also be regularly reviewed – not only to account for any legal updates, but to also account for a company’s ESG and any employee related concerns. Meaningfully considering employee related concerns and using these to form part of a workplace policy can build employee confidence and morale, in that, employees feel understood and listened to.
There are several other ways employers can consider embedding ESG in its workplace practices; the above are just some broad steps to illustrate ways in which employers can begin to effect change at a time where, more than ever, employers are expected to reflect on their culture and impact. Having a clear ESG strategy in place or understanding its importance is a good start on this front – and clearly has commercial advantages.
For advice or assistance in how your organisation can improve/implement ESG in the workplace and the ways in which it approaches recruitment/employees, do not hesitate to contact our specialist employment team at firstname.lastname@example.org.
Please note, any references to law or the current position in this article are to that in force at the time of writing. It is strongly recommended that (and to the extent necessary), legal advice is obtained and/or the latest legislation/government guidance is consulted before any decisions are made.