How can employers link carbon-neutral goals with their reward strategy?

Need to know:

  • Organisations are under pressure to reduce their carbon footprints and employee benefits can help with this.
  • Ensuring pension funds are invested in environmentally-friendly businesses is a good place to start, while executives can be rewarded on similar metrics.
  • The use of green reward schemes and encouraging greener forms of travel can also have an impact.

While the fight against Covid-19 has dominated the business agenda for the past year, it is the wider battle against carbon emissions that is set to be the defining feature of the coming decades. With the UK committed to net-zero carbon emissions by 2050, organisations are realising this is a topic they must confront, particularly if they are to continue to attract and retain staff.

Craig Williams, director of employee benefits at Broadstone, says: “The specific drivers for the increased focus on sustainability vary from business to business, although typically they are being considerably influenced by the business’s clients, the communities that they work with and, of course, employee input.

“Irrespective of size, we are increasingly seeing businesses acknowledge that striving to become carbon-neutral not only provides some very obvious environmental benefits but can save money, help attract and retain staff and attract new customers.”

While much of the heavy labour will be done by corporate social responsibility (CSR) or operational teams, those working in employee benefits also have their part to play, in ensuring the benefits they offer fit in with environmental goals and in encouraging staff behaviour that does the same.

Net-zero pensions

Perhaps the most obvious area in which employee benefits and reward teams can have an impact is through pensions. According to fintech workplace savings firm Cushon’s Climate change pensions research, published in February 2021, the average UK pension pot finances 23 tonnes of carbon dioxide (CO2) emissions each year, around four times an individual’s carbon footprint and the equivalent to nine times the emissions of the average family car.

But while 69% of employees say they are worried that their workplace pension could be investing in businesses that are contributing to climate change, 99.5% admit they have no idea about the amount of carbon that is emitted through their pensions. “The UK has a pension crisis and the world has a climate crisis, and at the moment the two are inextricably linked but in the wrong way,” says Ben Pollard, CEO and founder of Cushon. “The more we address the pensions crisis by getting employees to save more, the more damage we are doing to the planet. It’s a crazy situation that needs to be urgently addressed.”

Under pressure from employees and investors, employers will need to adopt more stringent criteria for the selection of benefit providers to support sustainability, says Richard Morgan, principal at Aon. “Pension schemes are already required to report on sustainability and more ‘ethical’ funds are being made available to members,” he says. “Interestingly, there is plenty of evidence that ethical investments have actually out-performed more traditional investments in recent years.”

Incentives and sustainability

It’s also likely executive reward will be determined in part by metrics around sustainability, believes Alex Beidas, partner in Linklaters’ employment and incentives practice; with asset management firm Amundi announcing in February that it would vote against pay packages that do not contain certain environmental, social and governance (ESG) objectives.

“Financial metrics are still an important part of pay awards, but as [employers’] strategies are incorporating climate change, corporate culture and diversity objectives, these need to be reflected in variable pay metrics,” says Beidas. “The logic is that [organisations] focusing on ESG will perform better in the long term, so those exposed to environmental, social or reputational risks should include relevant targets that focus management in mitigating these risks.”

Encouraging staff to do their bit is also important in helping to reduce carbon emissions, and can be incentivised through reward programmes. Jump, for instance, rewards employees, or teams of employees, for activities that tie in directly with their organisation’s objectives and targets. “There is a range of green and ethical behaviours that employers can reward,” says Graham Simmonds, CEO at Jump. “Employers can reward employees for switching to renewable energy or ethical banks with vouchers and charity donations. Additionally, this reward strategy enables employees to collaborate to achieve these sustainability targets, as they compete as part of a team to earn the most green points.” Staff can see the impact they are having in a dashboard, he adds.

Organisations can also use green reward sites as the basis for their own incentive schemes. Treepoints allows firms to subscribe to offset their carbon footprint, with money going towards environmentally-friendly projects. Businesses earn points for every donation they make, which can be allocated to employees and spent on a range of ethical products from brands such as Patagonia and Toms. “If young people are prioritising a sustainable agenda in the [businesses] they choose to work for, then providing for this with employee benefits is only going to get more important,” says Jacob Wedderburn Day, Treepoints co-founder.

Green voluntary benefits

Employers can also make a difference through the type of benefits they offer, particularly through voluntary benefit schemes. “This includes benefits such as ‘green’ car schemes, [bikes-for-work] schemes, season ticket loans when we can start commuting again, and time off for volunteering,” says Morgan. “With the impact of the pandemic meaning that working from home may remain much more common, we expect to see employers looking at how they can help employees to make their homes more efficient, such as providing support and guidance with home insulation, more efficient heating and using low-carbon energy providers.”

In more ‘normal’ conditions, encouraging staff to change how they travel is likely to be a particular area of focus. “This can be easily implemented, at relatively low cost, by offering small incentives to employees who choose public transport, carpooling, biking or walking as the way they commute to work,” suggests Williams. “It may be that the commuting reward includes the provision of gift vouchers for cycle stores or for sporting goods stores.”

Reducing carbon emissions and improving sustainability is a core focus for contract catering business Elior UK. It has recently committed to ensuring that by 2025 all its vehicles, whether delivery vans or company cars, will be either electric or hybrid; something that will impact over half of its 10,000-strong workforce. Manufacturers not offering electric vehicles will be removed from the company car scheme, says Charlotte Wright, head of corporate responsibility and sustainability at Elior UK, and electric charging points will be installed at its own offices.

The business also offers staff two paid days off a year to volunteer for charities; an initiative that has seen staff take part in annual beach cleans in North Wales and Weston-super-Mare, organised by the Marine Conservation Society. “It’s about collecting waste but also surveying that waste to help inform where it is coming from,” says Wright.

Other initiatives include implementing a ‘cup for life’ scheme at its own head office, which included charging staff who wanted to use disposables, after surveying employees to get their thoughts. “The engagement was brilliant, and before Covid-19 (Coronavirus) hit we had seen an 80% reduction in the number of disposable cups,” she says.

Staff canteens are another area where employers can help employees make a difference. Catering firm Eurest recently introduced a new plant-based menu using pulled oats, soy and wholefood proteins such as nuts, seeds, beans and pulses, giving employees an easy way to move away from more carbon-intensive meat-based items. “Being able to choose a plant-based dish at work is a positive and easy change people can make,” says Liz Forte, health and wellness director at Eurest. “It is affordable and meaningful for businesses and individuals alike, and allows the employee to feel like their personal choice has benefited the environment.”

Elior UK has also engaged its own employees in helping to make the services it offers clients more sustainable. It’s recently introduced an app-based loyalty scheme to reward customers who make more environmentally-friendly food choices across 60 client sites. “Each time they choose one of our hot offers that is vegetarian or vegan they receive a loyalty point, and once they get 10 we plant a tree on their behalf,” says Wright. Surplus food is donated to local communities through the food-sharing app Olio, with more than 10 tonnes, or 50,000 portions, having been donated to date. Being able to demonstrate its environmental efforts has helped the business recruit staff, says Wright. “They want to know that we care about the environment, and that it’s not just green-wash,” she says. “We’ve definitely seen a shift in that over the last few years.”

Benefits partners

Organisations can also make a difference in their selection of partners, including employee benefits providers, believes Wendy O’Callaghan, employee benefits director at Gallagher. “The performance of benefit suppliers in their own ESG approach and facilitation of carbon exchange programmes will become of greater relevance and instrumental in informing provider selections in the future years,” she says, giving the example of Zurich’s partnership with Tree-nation, where every policy leads to a tree being planted, as a good example.

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The pressure on organisations to address their own carbon footprint is only going to increase over the next few years, so employee benefits and reward teams need to take action now, believes Morgan. “Aon’s 2021 UK Benefits and Trends Survey, [published in January 2021] has shown that employers are reporting significant shifts in what their employees expect from their employers,” he says.

“Sustainability, flexibility, home working and diversity have quickly risen up the ranks. Other research shows that the younger generations feel even more strongly about sustainability and more generally about businesses being ‘good corporate citizens’. Since these people will soon be the majority in the workplace, employers will need to ensure that they can meet those expectations.”