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ESG stands for environmental, social and governance, which covers a range of factors against which an organisation’s sustainability credentials can be measured. This is very important for many businesses and organisations, particularly in terms of investment, meeting regulatory requirements and looking after their workforce (current and future).
The environmental aspect of ESG relates to an organisation’s impact on the natural environment, to include its carbon footprint and its impact on biodiversity. To address this element from an employment perspective, organisations could look at encouraging sustainable commuting, for example, by offering access to annual discounted railcards and cycle to work schemes, by offering electric vehicles to eligible employees, and by considering hybrid working, where appropriate. Employers can also take steps to encourage recycling and reduced use of plastic in the workplace.
The social aspect, from an employment perspective, is predominantly measured in relation to how employers treat their workforce, to include their approach to diversity and equality. By being proactive in this regard, it not only assists employers in complying with their statutory obligations under anti-discrimination law, it can also help in retaining employees and encouraging potential candidates. Measures which an organisation can take include promoting equality, facilitating flexible working practices, and encouraging a healthy workplace culture. In terms of social responsibility, organisations can also have a positive impact on the local community and wider society by offering employees the opportunity to volunteer for local charitable causes.
The governance aspect measures how an organisation operates in respect of leadership, reporting and transparency to include openness in relation to executive pay and from an HR perspective, ensuring diversity in leadership teams and boards, and having important governance procedures in place, such as health and safety and whistleblowing policies. It is important for organisations to set the example from the top to better ensure engagement and satisfaction throughout an organisation.
Research has shown that organisations which embrace ESG standards and consider them in the development, application and delivery of their policies and procedures are more attractive to potential candidates and will have higher levels of employee satisfaction, engagement, retention and productivity which leads to increased overall performance.
Should you require any information or advice in relation to the matters raised in this article, to include assistance in reviewing or drafting relevant HR or employment policies, please do not hesitate to contact our Employment team.
This article has been produced for general information purposes and further advice should be sought from a professional advisor.