Two Birds with One Stone

Most UK employers are trying to grapple with the twin impacts of the Great Resignation and subsequent labour shortages and the growing importance of ESG transparency, both for business investors and the wider public, and all this against the backdrop of a faltering economy when management time needs to be focused on business needs.

These may seem to be different, if equally pressing, concerns.  But there is way businesses can think about addressing both issues pragmatically.  It’s even more essential these days to focus on retaining staff, as well as recruiting.  On Recruitment and Retention a growing body of surveys and other work is showing that one of the key aspects of a business that employees and prospective employees view as being very important is its position on Environmental, Social and Governance issues.  Socially responsible and sustainable businesses are viewed far more favourably by employees, but this has to be more than mere words and needs to cover all aspects of the business.  It’s been widely reported that by 2025  three quarters of the global work force will be millennials whose sense of social justice is more attuned than previous generations and who prioritise job offers based on ESG values (even to the detriment of salary).  So not addressing ESG or only doing so in a tick box way will mean your business alienates a lot of potential recruits.  Conversely there is lots of evidence now to show a clear link between ESG performance, successful recruitment and retention and driving a business’s value and performance.

The work done in ensuring a business is aligned to these goals will pay a double dividend, as it will also form part of the information investors (whether banks or private equity) will want to know (it’s estimated around one third of all managed assets are subject to ESG criteria).  If you regularly tender for work, ESG issues, and demonstrating a real commitment to them, is an increasingly important part of successful pitches.  You will also need to understand how other businesses in your supply chain complying with their ESG duties and your customers and Regulators will require your business to disclose.

So what type of things align prospective recruits with prospective investors?  Some obvious key areas include diversity and Inclusion, reward and benefits, work/life balance and wellbeing, but all feed into the firms overall culture and values.  This can also include approaches to waste management, transport and environmental issues as well as clarity around supply chains.  The breath of ESG factors to be considered can be off putting but having a multi facet approach can tie many areas together quite quickly.

Some examples of proactive steps organisations have taken include:

• Diversity and Inclusion – have you got developed polices based on an audit of your business, including recruitment processes to address issues around gender pay, race, age, disability, sexual orientation and transitioning and social mobility? These policies can also include issues around anti-harassment and bullying.  If not can you use surveys to start building a picture of what needs doing in these areas in your organisation?
• Reward – paying national minimum wage/living wage (or above it where there is a clearly developed sector or similar position that suggests pay should be higher), having modern slavery commitments (including in your supply chain and for your contractors), reviews of inequalities in gender pay and fair incentive structures and executive remuneration as a multiple of worker pay.
• Benefits – multi generational, family friendly policies (including parental leave and care leave options for the sandwich generation), flexible working policies, health benefits such as gym memberships, dietary education and insurance products (seen as much more important to address health inequalities post covid), menopause policies, carbon calculator apps, fleet electric vehicles (or offering access to your own scheme to make employees’ own lease or purchase of electric vehicles more affordable) and cycle to work schemes. The use of salary sacrifice to save NI costs for you and your employees can help with many of these.  You can also work to provide locally sourced food discounts, sustainability education, assisting employees with the use of local public transport via annual ticket loans etc, pensions with ESG default funds and investment options, along with technology to deliver ESG information on funds and providers voting records on key issues.
• Work/life Balance and wellbeing – mental health well as physical health support, access to free or subsidised financial advice available to all employees.
• Employment structures – the extent to which gig workers, freelancers, or IR35 workers make up a workforce and how they are treated; the use of net zero clauses in employment contracts, use of terms and conditions to reduce carbon emissions and incentivise sustainability and how redundancies are handled (trying to avoid the PR disaster of P&O ferries as well as acting fairly at all times), use of NDAs which may stifle improvement, use of transport and travel policies to support ESG goals and embedding ESG targets as part of appraisal processes, UN Global Compact adherence, advice on whether climate change is a protected philosophical belief under the Equality Act 2010, help using immigration to address key skills gaps
• Workplace safeguards – anti corruption, bribery, whistleblowing, modern slavery and child workforce issues both for the business and in relation to its supply chains, health and safety in the workplace (including Bangladesh Accord 2013 and supply chain manufacturing), embedding ESG into the fabric of your business decision making and procurement decisions

It’s a large and disparate number of areas to cover requiring many of your business managers from HR and CSR and compliance and risk, procurement to legal and finance, to align their specific specialisms to develop an integrated multi-dimensional approach. 

This can seem daunting.  It’s made even more difficult by the myriad of charters / principles and schemes to sign up to and the fact there is as yet no recognised universal data standards for measuring ESG compliance.  

This means the risk of ‘greenwashing’ can be present unless you undertake thorough due diligence and ongoing assessment.  Reputational risk isn’t confined to greenwashing though.  It can arise via sexual harassment, race discrimination, supply chain or health and safety cases brought by employees or organisations.  All can be damaging to company value and shareholder / investor goodwill and usually arise from risks which were foreseeable in advance.

We work across all kinds of legal disciplines from corporate and finance to Pensions and HR and with employers in many different types of sectors.  As a firm we can distil the best practice we are seeing across all of those areas to help you formulate an ESG risk governance structure that works for you, your employees and your wider contacts.  We can help with an audit of current practices to see where strengths and weaknesses lie.

From working with you to develop employment policies to corporate governance reporting, and preparing employee documents and communications, to delivering training on diversity issues and from advice on benefit structures and changes to your pension scheme and health and safety to investigations and workplace grievance support, we can help you with the practical things that will differentiate you in a tight labour market and allow those two thirds of candidates who look at corporate values  before making a decision to see you as a more attractive choice.