The E in ESG: making employment practices greener

July 16, 2024

The significance of Environmental, Social and Governance (ESG) principles has become increasingly pronounced and these principles are making their way into the employment landscape. Businesses worldwide are making commitments to become "greener" and to reduce their carbon footprint by promoting sustainability, and we expect to see this trend continue to gather pace. Employers are recognising that becoming green is not only a moral issue but also a strategic one, as it can enhance their brand reputation, attract and retain top talent who value sustainability, and potentially lead to operational cost savings.

But how can employers actually implement a more environmentally conscious approach within their organisations? Can we really align employment practices with environmental targets?

ESG audit

There are several ways in which HR can support businesses to focus on the E in ESG, en route to a more sustainable future. Before embarking on new initiatives, a good first step can be an ESG audit. An ESG audit is a thorough assessment that evaluates a company's adherence to environmental, social and governance standards. It brings together the internal and external stakeholders who will need to be part of taking steps towards a greener future - ranging from company leadership and employees to investors, customers and regulatory bodies. Internally, an ESG audit requires the collaboration of various departments such as HR, operations and finance to provide a full picture of existing practices. The goal is to identify areas where the company is performing well and to spotlight opportunities for improvement, creating a roadmap for integrating sustainable practices into the core business strategy. Some ideas that such an audit may support are set out below.

Commute to work

A popular initiative that presents an excellent opportunity for employers to take some initial steps into improving their ESG metrics is by introducing greener incentives, such as cycle-to-work programmes, the provision of electric vehicle charging stations and contributing to fuel expenses for employees who carpool, or covering a percentage of the train tickets for those that use public transport. These incentives could be offered on a discretionary, flexible basis, subject to eligibility, and can be a great way to encourage employees to think about greener commuting options on their way to the office. Offering a mix of such incentives can enhance employee satisfaction, especially in the context of the increasing return to office mandates and can play a key role in ensuring that more people are encouraged to use public transport or adopt sustainable practices.

Greener non-cash incentives

Non-monetary incentives have recently become a topic of interest within the context of employers enhancing their green credentials. For example, offering an extra day's holiday to those that take a staycation can help promote greener choices by reducing carbon emissions associated with travelling longer distances. However, while such incentives aim to promote sustainable practices, they should be implemented in a way that recognises the diverse needs and circumstances of all employees, including those that need to travel longer distances for family commitments. In such cases, alternative approaches could be taken, such as subsidising a carbon offset programme for long-haul flights, though many may feel that offering different benefits on the basis of the holidays employees choose to take is a step too far.

In addition to such benefits, other non-cash bonuses such as health and wellbeing incentives can play a role in becoming a greener employer. For example, offering free or discounted hike programmes, such as walking weekends, where the employer covers the cost of guided walks or the cost of public transport to the hiking site, can be beneficial for employees' mental health while raising environmental awareness. Employers might also consider partnering with local businesses to offer discounts on eco-friendly products. This not only supports the local economy but also furthers sustainable consumer habits. Such initiatives can enhance ESG metrics whilst improving overall employee engagement.

Pension schemes

A more across-the-board change could be looking into switching to pension scheme providers or default pension funds that have transparent ESG credentials and clear investment disclosures. Choosing a sustainable investment market can have a long-term impact on ESG metrics and encourage better governance. Opting for pension funds with more eco-friendly policies can empower employees to contribute to sustainable initiatives through their retirement savings. Such choices should be carefully considered to avoid scenarios of greenwashing and to minimise financial risks. Nevertheless, exploring those options can demonstrate that employers recognise the negative impact of harmful investments in high carbon emission sectors and prioritise the use of ESG-focused pension funds.

For further guidance on how pension schemes can be aligned with net zero targets, you can read Dentons' most recent article here.

Pro bono hours

Another way of enhancing ESG metrics and contributing more effectively to greener initiatives is to allocate a set number of working hours to pro bono hours for environmental causes. By channelling their professional expertise, employees can assist environmental charities that often lack the resources to obtain professional services. Further, fundraising for local green initiatives and even allocating time to sustainability projects during garden leave are also strategic choices that can be pursued to demonstrate an employer's commitment to environmental stewardship whilst simultaneously boosting employee morale. Dedicating time to green pro bono work can serve as a catalyst for innovation and learning, encouraging employees to come up with new ideas that can be integrated into the business's operations.

Going paper-free

Last but not least, going paper-free (for example, digitising expense management systems) can be a great way to provide a much-needed green intervention to the day-to-day workflow of the business. Any paper receipts, legacy expense reports and finance forms can be digitised to both streamline the work process and to eliminate the need to use paper and circulate copies, aligning daily operations with environmental sustainability. The move towards digital platforms minimises the carbon footprint related to paper production and waste, and can also enhance effective corporate governance. A paper-free expense management system may even help in identifying patterns of spending that could reveal further opportunities to implement sustainable changes to the business.

Conclusion

These are just a few ideas. There is a wealth of strategies that can be explored to advance the E in employers' ESG credentials that align with their corporate values and goals. As stakeholders increasingly scrutinise the environmental commitments of businesses, adopting green initiatives becomes an important part of corporate integrity and market competitiveness. By implementing some of the practices discussed here, employers can make a significant stride to a greener future by driving higher employee engagement and rethinking the way their business operates on a daily basis.