Research has shown that better ESG scores translate to around a 10% lower cost of capital, according to McKinsey.
Around 70% of the more than 2,000 studies conducted on the topic show a positive relationship between ESG scores and financial returns.
So, what is ESG? Why is it so important? And what role does HR play when it comes to ESG?
What is ESG and why is it so important?
ESG stands for Environmental, Social and Governance.
“Environmental” refers to the impact of the business on things like climate change, carbon emissions and pollution levels. It considers how businesses are reducing their impact on the environment through focussing on areas such as the supply chain, waste and pollution and decarbonisation.
“Social” refers to the organisations impact on it’s staff, wider stakeholders and the wider community. This area considers factors such as gender and diversity inclusion, modern slavery, mental health and corporate social responsibility (CSR).
“Governance” considers how an organisation polices itself, considering areas like tax, fair remuneration, structures at board level and potential corruption.
Measuring each of these factors gives an overview of the sustainability and ethical impact of a business. It’s of particular interest to potential investors as it can often be tied back to financial success as mentioned.
However, it’s increasingly important for businesses to show their ESG credentials to wider stakeholders including existing employees and future candidates, for example.
What is HR’s role when it comes to ESG?
HR have a significant role in supporting the ESG priorities of the business.
Everything to do with pay and equality, corporate culture, diversity, equity and inclusion all impact the ESG credentials of the business.
Furthermore, HR play a vital role in linking the wants, needs and priorities of employees with the business, it’s policies and initiatives.
If employees feel their employer should do more to protect the environment, HR play a hugely important role in conveying that message to key decision makers and the C-suite to help employees have their voices heard and drive real change.
How employee benefits can help
So, where do employee benefits come in?
There’s a whole range of employee benefits out there that support employees in many different ways, many of them linking directly to the areas of environmental, social and governance.
There are green benefits including schemes like the Bike to Work scheme where employees can save up to 43.25% on the cost of a brand-new bike and accessories.
What’s more with this scheme is it’s as accessible as ever.
Employers can offer the scheme to employees with no limit allowing them to get higher-spec bikes and even e-bikes through the scheme to make the commute to work easier and more reliable and making it easier for employees to cut carbon emissions from their commute.
Schemes like Commuting Loans make commuting by public transport easier and cheaper too by allowing employees to spread the cost of an annual season ticket and pay monthly with no credit checks and no interest.
This helps make greener transport options more easily accessible for employees who want to reduce their environmental impact.
There’s also the Car Benefit Scheme, which helps make electric cars cheaper and more accessible for employees who want to make the switch and drive electric.
Other schemes like Liftshare and charitable giving which can be hosted through an employee benefits platform can help employees boost their green credentials too, in turn helping employers reduce their environmental impact.
Benefits like Holiday Trading and health and wellbeing benefits support the employer’s social efforts too by helping improve work-life balance, improve overall wellbeing, reduce absenteeism and create a happier, healthier workforce.
Holiday Trading is particularly effective in improving work-life balance by allowing employees to buy extra annual leave from their employer, giving them greater control over their work-life balance and also their overall wellbeing.
Health and wellbeing benefits including the EAP, health assessments and the health cash plan help employees improve both their physical and mental wellbeing which also go some way to helping employers support their social duties.
A good and fair pay and compensation package is a hugely important part of the governance side to ESG for any business.
Employee benefits can also go some way to supporting employees, making their pay cheque go further by helping them save on the everyday essentials and the overall cost of living.
Benefits like employee discounts can help employees save on their weekly or monthly shop, for example.
Schemes like MotorSave can help employees save and spread the cost of vehicle maintenance, giving them greater control over their finances.
Any employee benefit that can help an employee gain greater control over their finances can support an employer’s governance approach and improve their ESG metrics.
How can businesses put this into action?
An employee benefits provider can help lay out all the options your business has when it comes to improving ESG with employee benefits.
They’ll be able to show the full list of available options when it comes to employee benefits and help find a solution that works for your business and, most importantly, your employees.
At caboodle, we provide employee benefits for over 2,000 businesses globally and we’ve helped a ton of businesses improve their ESG credentials through their employee benefits.
For more information, take a look at our full range of employee benefits and get in touch.