Member Article

The pandemic alongside a renewed focus on climate change following COP26 and the growing interest in ESG credentials are all contributing to a changing world of work. But what does this mean for employers and what can be done to future-proof businesses?

ESG and CSR in the world of work

ESG (Environmental, Social and Governance) issues and CSR (Corporate Social Responsibility) both relate to the decisions and behaviour of a business, from how their staff are treated to the suppliers they engage and their role within the wider community. Such behaviours are becoming increasingly important, not just because they are the right thing to do, but also in terms of improving financial performance, attracting and retaining talent, enhancing brand reputation, securing contracts and ensuring a sustainable business model.

Inevitably, the impact of such behaviours will be seen in the workplace. We focus on five areas where the changes are being felt the most.

1. Working practices and green jobs

The way organisations work and operate has a huge impact on their ESG footprint and there is much talk about creating green jobs for the future. Employees may increasingly ask employers about their own and their suppliers’ green credentials when deciding whether to accept a job offer or stay with the employer. What is also clear is that the government’s aim of achieving net zero emissions by 2050 is only achievable if employers and employees alike make significant changes to the ways in which they currently work and adopt a more sustainable approach to business.

Some changes have already been taken towards this in response to the pandemic, with the rise in home-working and flexible / hybrid working models helping to reduce the need for the daily commute by car, train or bus and providing greater opportunity for employees to achieve a work / life balance.

Such ways of working are still in their infancy and there are many issues to be resolved from how to effectively manage remote workers to sustaining team dynamics and encouraging the effective exchange of ideas across the airwaves.

In addition, an employee’s home working arrangements need to be considered, both from a health and safety / wellbeing perspective as well as an environmental one. The pandemic has highlighted the importance of employers caring for their employees, from supporting their physical and mental health to providing a safe environment for them to work in. The ability to work in a flexible way is seen as part of the response but what about the environmental impact as individuals’ heating and electricity consumption at home increases? How far could employers be expected to go to reduce their employees’ environmental impact as part of the organisation’s wider ESG strategy? Will we see a day when employers contribute to the cost of solar panels on an employee’s home to support their electricity requirements for example?

Notwithstanding home-working arrangements, most employers will still have office or other premises from which some or all their staff will need to operate, and such environments and the working practices within them will also need to be assessed and future-proofed. Employers should consider requirements for work travel, whether domestic or international, as well as how they source tools and equipment for employees. Uniforms, for example and where they are made and with what materials will be an important consideration for any business strategy.

2. Green incentives

Part of the creation of green jobs for the future will include a review of the benefit packages offered to employees and whether they meet green credentials. Cycle to work scheme, e-vehicle schemes and workplace charging points are likely to see an increase in popularity. Organisations may also find employment rights for workers enhanced to support a greener approach such as enhancements to family-friendly policies, minimum wage and protections for whistle-blowers. ESG metrics are also starting to be seen in executive incentive plans and remuneration awards to increase engagement and progress an organisation’s longer-term strategy.

Employees increasingly want to work in an organisation that is socially responsible and has a broader outreach. The approach of a business to CSR will therefore also increase in importance. Opportunities to volunteer in the local community, support charitable organisations through fundraising or support young people to develop skills in the world of work are likely to be important in attracting and retaining talent in the future and organisations should consider their approach to CSR with this in mind.

3. Reskill / upskill

Another implication of the drive to net zero emissions will be the loss of jobs within carbon-intensive industries and an increase in demand for certain skills in other areas such as technology. With recruitment issues already hitting the headlines, particularly in growth areas like technology logistics, science and healthcare, it is clear there is an urgent need to reskill and/or upskill individuals to suit the future workplace and any organisation seeking to future-proof its business should be alive to this.

Skills development will also involve training employees not just in technical skills but also skills to help them perform at work and in the world generally. Many employers are already providing support in the form of mental health training and resilience workshops and this is likely to continue to develop in the future.

4. Diversity and inclusion

This is not just about having the right policies in place, although that is important. The need for new and diverse skill sets will in turn drive the need for a more diverse workforce. What will be key for businesses is establishing a culture in which staff feel included and valued. This is critical for attracting and retaining talent, generating ideas and is increasingly becoming a metric against which organisations are judged in terms of investment opportunities and contract tenders, making it essential for a sustainable business model.

Employers are likely to need to demonstrate their credentials in this regard. There is already pressure on the government to introduce mandatory ethnicity pay gap reporting to sit alongside the current gender pay gap reporting regime. Although the government is yet to publish its response to the 2018 consultation on mandatory ethnicity pay gap reporting, it has confirmed that it intends to do so. It would not take a great leap for other forms of data collection to be brought in, be that disability pay gap reporting or social mobility reporting.

There is already increasing scrutiny of the make up of company boards. The Department for Business, Energy & Industrial Strategy recently announced that the government will back a new five-year review to monitor women's representation in the upper rungs of FTSE companies with the aim of increasing women's representation at board and senior leadership level. In addition, the FCA has consulted into diversity and inclusion on boards and executive committees. The FCA is proposing to change its Listing Rules to require companies to disclose annually on a comply or explain basis whether they meet specific board diversity targets. Listed companies will also be required to publish diversity data on their boards and executive management. According to its website, the FCA will seek to make relevant rules by late 2021. Such reporting will bring with it greater scrutiny of recruitment practices, promotion opportunities and pay as well as how businesses engage with the local community in furthering social mobility.

5. Contingency measures

Not only will businesses have to consider their working practices, they will also have to prepare for and respond to the consequences of climate change such as shock weather events and flooding, not to mention the potential for another global pandemic to hit.

Such events may make workplaces difficult, uncomfortable or even dangerous to attend and employers will need to have contingencies in place for when this happens, ensuring their employees know what is expected of them and keeping in mind that it is a criminal offence for employers not to protect workers from risks to their health and safety.

Conclusion

Given the impact which these issues have on the future of work, we will be launching our Future of Work campaign in January 2022. Alongside our article series, there will be a new programme of events including webinars, networking discussions and useful resources on the future of flexible working, fostering diversity and inclusion and the green economy.

Sign up here to find out more.