27 October 2023

Environmental, social and governance (ESG) goals have arguably never been more important than they are right now.

The social aspect of ESG is one that businesses need to pay particular attention to, according to the Chartered Institute of Personnel and Development (CIPD). The CIPD emphasises that most firms have well-developed environmental and governance strategies, but they need to invest just as much in their social strategies.

HR teams will be well-placed to bring the social aspect of ESG alive, not just by shaping the people agenda but also by making sure companies are playing their part in creating thriving and sustainable communities. Gender Pay gap reporting is now commonplace. Most organisations also have policies for combatting modern slavery and improving rates of diversity and inclusion as part of their people strategies.

Many employees now prefer some form of hybrid working and they expect employers to be more accommodating. The balance of power in some areas of the workforce shifted during the pandemic, and organisations that don’t offer a form of hybrid working may need to review their employee propositions to attract and retain the best people.

This kind of review should encompass an organisation’s ESG aims, which can be met by a combination of the HR, reward, global mobility and tax teams. Organisations may be creating and implementing new policies to address the changing work environment, but it’s also a great opportunity to reassess and incorporate their ESG aims into their people policies.

The new ways of working and ESG

Hybrid working is now the ‘new normal’ in many sectors, and the ESG implications are vast. In environmental terms, employees may no longer be doing as much commuting or business travel so in that way their carbon footprint is reduced. But instead, they are working from home and drawing on more power (heating, laptops etc), even though their office location is still fully functional.

From a social perspective, virtual collaboration worked during the pandemic but are we missing the social benefits of meeting in person? Will someone who chooses to continue with a hybrid work arrangement see their career progression suffer from a lack of real world interaction? The social considerations encompass not only the impact of hybrid working on doing business, but important fundamental considerations regarding employee welfare such as mental health and wellbeing.

Global mobility

Throughout the pandemic, global mobility and HR teams faced a fast moving and multi-faceted change environment that brought to the fore many aspects of ESG. The initial phases of the pandemic, when employees were stuck in various locations, reinforced the governance aspects of ESG. It became clear that an effective process for tracking where employees are in the world at any given moment is essential for managing security and health and safety, and being able to act as needed.

As global travel recommenced, and organisations looked to restart business trips and allow global remote working arrangements, organisations have taken the opportunity to review their ESG commitments and embed them into enhanced or new policies.

Global business visitor polices can support net zero commitments. Global travel creates carbon emissions, so a policy underpinned by a robust process can ensure that business trips are limited to those that are strictly necessary. That said, the policy should address the social value of in-person meetings.

Bear in mind, also, that the carbon footprint for business class travel can be up to four times as large as standard class travel. Building in a process by which an executive can manage their carbon footprint as part of a travel policy can therefore support ESG aims and show that the leadership is fully invested in achieving them.

As we see the return of more traditional expat arrangements, re-assessing the associated policies and packages can also support ESG (eg organising eco-friendly accommodation in the host country and supporting eco-friendly travel options).

Tax and reward

Employers will gain from seeking their employees’ views as to the sort of benefits they would value, and reviewing their employee benefits to ensure their offering is market-competitive. For example, a more attractively structured and well-communicated benefit package could be motivating to many employees.

Flexible benefits allow people more choice as to how their benefit package is put together, which could be a good option for organisations with a wide range of age groups represented among their employees.

Employees at different stages of their lives will have different priorities, so it pays to take that into account when structuring benefits packages. One size will not fit all.

Benefits that address the social aspects of ESG can also meet the environmental aspects, for example implementing an electric vehicle car scheme or cycle to work arrangements.

Share schemes and incentives

Long-term incentive and share schemes also continue to appeal to all types of workers. Reminding employees of what these schemes provide them by way of a total-reward approach has never been more important as the struggle to recruit and retain continues. Turnover and availability of staff have not been this much of a challenge for businesses for some time.

For senior executives, the environmental aspects of ESG may be factored into the share scheme structure, so that the net zero commitments of the organisation are part of the performance measurements of the share scheme plan. This might be linked to the class of travel for business trips, whereby an individual can manage their own carbon footprint by considering different classes of travel and the associated emissions.

Non-monetary offerings, such as allowing employees to buy extra holiday or take volunteering days, may help to attract and retain people who have come to value their free time more highly over the last few years.

A growing number of workers appreciate an employer that invests in both their wellbeing and in its own corporate responsibility.

Improving and revising your HR, global mobility and total benefits offering can go some way to addressing your organisation’s desire to shape its people agenda and support your ESG strategy and commitments.

If you would like to discuss any of the points covered or have any queries, please contact Joanne Webber or Rich Hall.