Skip Navigation

Speak to a consultant on +44 (0)20 3457 0894

The top three ESG factors influencing reward and benefits strategy





Posted by Justine Woolf on 13 January 2022

The top three ESG factors influencing reward and benefits strategy


Environmental, social and governance (ESG) as a concept has grown in prominence over the last few years, particularly as organisations look to demonstrate to internal and external stakeholders that they take responsible practices seriously. The correlation between ESG information, a company’s culture, values, and strategy, and its performance is increasingly clear: companies that commit to equitable, fair, and sustainable business models really do outperform those who merely meet their legal obligations.

The focus when it comes to Reward tends to be more social and governance than environmental, typically because environmental factors often relate to tangible environmental outputs like CO2 and plastic waste, and, let’s face it, we are all about the people. On the back of the pandemic, the desire to build back better, and global movements of #metoo and #blacklivesmatter, considerable focus has been made to reframe reward and benefit strategies and accelerate responsible reward.

One top area of focus we have seen influencing strategy is mental health and wellbeing. With a recent report from the HSE indicating stress, anxiety and depression were the cause of half of all work-related illness in the last year, and Glassdoor analysis highlighting that employee burnout has doubled since lockdown ended, the view of “it might be a nice-to-have” has changed to “it’s now non-negotiable”.

Before Covid, organisations were on different journeys with their wellbeing offers – some organisations had a set of random benefits disconnected from each other, while others had a clear proposition aligned to standard wellbeing pillars of mental, physical and financial wellbeing. Whilst initiatives are a start, the key is to create a defined wellbeing strategy - a long term plan of action that uses resources to achieve wellbeing goals or solutions. This enables you to be clear about what the end goals are, what are you trying to achieve through wellbeing for the longer term, and how this links to your people plan and business goals to your ESG ambitions.

Vitality’s Healthiest Workplace Survey illustrated that on average, small organisations offer 25 health interventions, and medium and large organisations offer 30 health interventions, but only around one-third of employees know about the support available. If your strategy is to improve mental health and wellbeing, adding the Headspace app or improving counselling on your EAP won’t do much. Think carefully about what change you really want to make, how you will deliver it and how your employees can access it.

Another key area of ESG focus currently is equality, diversity and inclusion (EDI). According to REBA’s wellbeing survey, there has been a big shift in the proportion of employers whose diversity, equality and inclusion teams tie into their wellbeing strategy, or indicate that this collaboration will happen in future. This reflects the growing awareness that standardised approaches to wellbeing aren’t as effective and that meeting a diverse set of needs is increasingly what employees, clients and customers demand to feel valued and stay loyal. The view of EDI isn’t consistent across wellbeing pillars, and REBA highlighted only 1 in 8 respondents consider diversity, equality and inclusion in their financial wellbeing strategies. However, this area may become more pronounced as those hit hardest by the pandemic include women and low-paid workers, widening the social divide that already exists.

We are also seeing more companies looking to go beyond the basic requirements on gender pay, with many digging deeper to understand what is driving inequity in pay. Likewise, more businesses are proactively conducting ethnicity and disability reporting as well as more detailed equal pay audits, although many are hindered by a lack of data. This must be a key focus going forward if we want to understand and measure success. Whilst many companies have strategies to increase gender or ethnicity diversity in their leadership teams, the McKenzie-Delis Packer Review found fewer than half had specified diversity in succession planning.

Finally, the third top area of focus from an ESG perspective we are seeing influencing reward & benefits strategy is community. While many organisations ‘leaned in’ to support their local communities in 2020, relationships with these communities seemed to be less strong this year. While some organisations are developing community strategies, many have understandably more focused inwards than outwards. As leaders struggle with mass resignations or fear of attrition, responsible business and purpose are a key part of the employee value proposition and evidence of making a positive societal impact is part of this. Also linked to this is employee connectivity, how aligned employees feel to your company purpose, and if they feel they have opportunities to make a difference. According to Mckinsey, not feeling a sense of belonging was one of the most frequently cited reasons why employees left a job in the past six months. Hybrid working and lockdowns have massively impacted a sense of community at work. In-person connectivity continues to have massive benefits for organisations, but it requires considerable management attention to get right. An effort needs to be directed to bring people together, even if still virtually, and our strategies to improve community need to ensure we include social recognition, celebrating success and giving back.

« Back to Insights