Employee well-being as an ESG strategy

Employee well-being as an ESG strategy: a guide to planning for better employee welfare and why it matters.

ESG criteria have become critical to shaping a sustainable direction for organisations today. However, while environmental and corporate governance concerns have received much attention within this area, the S, which stands for social factors, is also gaining increasing focus. A crucial part of this dimension is employee wellbeing, which may currently lack the attention it deserves as an ESG factor within your organisation. 

If so, you’re not alone. It’s an area that many businesses could use more attention. 

The guide will explore how prioritising the well-being of employees as a strategic ESG pillar can help to boost corporate success.

• Planning for employee well-being can result in gains in productivity and innovation
• Your organisation is likely to attract better talent and retain them as a result
• Ideas such as flexible work arrangements and fostering a more inclusive culture can help
• Getting employee well-being right can help engage employees in broader ESG strategies

ESG covers a set of criteria which investors and other stakeholders can use to assess a company’s impact. The factors covered include carbon emissions, ethical practices, board diversity and social responsibility. When it comes to social responsibility, we often consider how the organisation cares for its external environment, customers and community, and rightly so. However, we can also consider how the organisation cares for its internal stakeholders, ensuring their health, happiness, and job satisfaction. 

There is an intrinsic link between the well-being of employees, growing a sustainable business, and fostering a culture that enables this. 

Getting this right will significantly help with aligning your organisation’s ESG principles. This involves prioritising the welfare of employees, and since the employees are part of the wider community, taking care of them can create a ripple effect that extends into the community and contributes to the organisation’s broader ESG goals.

When there is a positive environment for employees at work, there is also more likely to be greater creativity and problem-solving, which can help with growth. 

In addition to these benefits, focusing on social factors can help organisations attract top talent. This is particularly important in a competitive job market as employees are attracted to companies where their well-being is valued. If your organisation wishes to attract top talent, considering employee welfare as an essential factor within your ESG strategy can be an excellent way to prioritise this.

While these factors can be improved in several ways, one way is to examine whether wellness programs promoting physical and mental health can be implemented. Things like offering gym membership and access to employee assistance programs can be considered.

Allowing employees to engage in remote or hybrid working or to have more flexibility around their work hours can attract them. This recognises the needs of a diverse workforce.

Organisations today aim to be more inclusive. These are places where equality is valued so companies can prioritise diversity and inclusion training, ensure equal opportunities, and set up support networks to move forward in this area.

Of course, all of this must be measurable, so metrics must be decided. Regular reporting on key indicators such as diversity and inclusion benchmarks and employee satisfaction should occur to provide accountability. 

Useful KPI’s to track might be:

• Employee satisfaction
• Retention
• Utilisation of well-being programs
• Changes in absenteeism

Recognising the importance of employee well-being within the ESG framework is ethically sound and an excellent business advantage. Not only does it help the individual organisations concerned, but also the wider community since the employees are also stakeholders in that broader community. Embracing employee well-being will be crucial to thrive in the long term, where increasing scrutiny is placed on these issues. 

Transparency around employee well-being has become a must-have, but this also creates a need to collect relevant data to demonstrate the effectiveness of such initiatives. It is challenging to report on well-being due to its broad scope, and managing this area typically falls under the remit of HR. 

This transformation has been further affected by Covid-19 and new working methods. ESG metrics for well-being tend to focus on disease, infirmity, or injury, but these alone are insufficient. Mental health and access to health care are increasingly crucial, as are issues related to diversity and inclusion.

Other factors such as working hours, rest breaks, and workplace hazards could also be considered if your organisation is trying to improve its policies. 

Employers can look at the physical workplace and how it affects employee well-being. The provision of catering and access to good air and water quality are important, too. Hybrid working allows leaders to use office days to increase employee well-being and encourage collaboration. 

So, organisations can consider planning for well-being across three dimensions – the workforce, the workplace, and work design. This could include incorporating flexible scheduling and feedback systems, ensuring adequate staffing, and providing employee assistance programs. Health insurance, skills training, and designing physical spaces with well-being in mind are all areas to think about.

This is why leaders interested in moving their organisation forward in this area should try to understand better employee perspectives on what causes stress and what drives purpose and meaning. 

Since the office door has now become our own front door, there is not the same distinction between where the employee’s responsibility for health and well-being ends and the employer’s responsibility begins. 

There is an increasing need to balance making the world a better place with making the world of work a better place. Considering this as a part of the S in ESG strategy would be helpful. Employee interests are not always reflected in corporate ESG strategies, and yet getting the employee experience right as a part of the S in ESG can be a perfect foundation for building other social improvements since happy employees will create more satisfied customers who will be part of a more comfortable community.