ESG issues are rising up the boardroom agenda - Helen Cordon

Environmental, social and corporate governance (ESG) issues are rising up the boardroom agenda as climate change, high profile corporate scandals and issues of inequality continue to concern investors and the workforce.

Helen Cordon, Partner and employment law specialist at Pinsent Masons

International governments’ commitments to curb the rise in global temperatures is influencing the attitudes and actions of lenders and investors, giving cause to employers to consider environmental and sustainability issues afresh.

HR professionals can play a critical role in shaping and delivering ESG strategy, leading on developing practical environmental policies for employees to help cut a business’ carbon footprint, linking those policies to a business’ purpose and values, and helping companies address their skills gap in the process.

One example is the travel policy. Different individuals and departments are likely to have different needs and a one-size-fits-all approach to business travel may not be appropriate, but HR can disseminate the policies effectively so that employees understand them.

Focused young students interns workers making notes listening to old senior aged female manager coach mentor leader teacher talking at group office meeting instructing business work team with laptop

HR are also well-placed to identify and implement training on sustainability issues that complement the policies set, while environmental considerations can also be fed into appropriate reward, development and recruitment strategies. One emerging trend is the linking of pay incentives to the achievement of carbon reduction or other ‘green’ targets by employees.

With environmental issues becoming an increasingly emotive issue, HR professionals will need support from legal teams on managing issues such as employee activism and environmental whistleblowing.

How an organisation manages relationships with its customers, suppliers, employees and the communities in which it operates is important. Equality, diversity and inclusion are strong components, but modern slavery and health and safety management are also considerations.

HR teams can support D&I networks and employee resource groups, which with the right purpose and governance can drive real change in an organisation. Collecting and analysing diversity data can inform the setting of appropriate targets to increase gender and ethnic minority representation.

Legal teams can advise HR on managing data protection issues inherent in the collection of diversity data, ensuring the terminology used in onboarding documentation, contracts and HR policies is inclusive and meets legislative requirements, while also supporting pay equity and transparency initiatives, such as equal pay audits and pay gap reporting.

HR professionals can drive accountability and transparency by helping align the business with its purpose and values. Impactful organisational structure and leadership can lead to better investor and employee relations, reduce risks and regulatory pressure and increase government support.

Many businesses taking leading action in response to the ESG agenda have HR representation in the boardroom where the function is able to directly influence strategy and culture. Working with legal advisers, HR can support the board in pay reporting and audits, and with modelling to inform recruitment and succession planning around company, industry and regulatory targets.

In a competitive labour market it is important that businesses do all they can to attract and retain the best people and an organisation’s approach to the ESG agenda can be a differentiator in this regard. If employees have a choice over which organisation to join and the salary and benefits packages are comparable, then the deciding factor may be driven by the ESG agenda.

Helen Cordon, Partner and employment law specialist at Pinsent Masons