07/11/2023
Beyond D&I: when your ESG priorities collide with an HR crisis
Environmental, social and governance (ESG) considerations are fast becoming embedded in strategy and decision making processes at board level, and are particularly relevant to life sciences and healthcare (LSHC) businesses, where such considerations align with the sector’s commitment to ethical, sustainable and responsible business practices. As part of this, the “Social” pillar of ESG, which reflects an organisation’s commitment to its communities, including its workforce, is growing in importance. Traditionally, the focus here has been on an organisation’s approach to diversity and inclusion (D&I), but increasingly companies, and their stakeholders, are looking more broadly at how organisations treat their people and whether they are fostering a positive workplace culture, encouraging employee engagement and openness. Investors and regulators see this as a key focus area, which directly impacts the underlying safety and sustainability of a business, both in terms of core strategy, but also in light of the ever-increasing risk of poor workplace culture resulting in scandals which are played out in the public eye and can have significant repercussions for organisations and their wider industries. These “HR crises” may arise out of a range of situations, including high profile one-off allegations of inappropriate behaviour by senior staff, but also from allegations of wider organisational failings fostering cultures of, for example, bullying and harassment or mistreatment of whistleblowers. The role of a strong and purposeful culture and appropriate governance is obviously key in seeking to avoid such issues arising in the first place. However, how organisations deal with these situations when they do arise also brings their commitment to their ESG values into sharp focus. In this article, we look at some key considerations for employers operating in the LSHC sector to help manage risk and maintain ESG credibility and integrity when handling HR crises. Foster a “speak up, listen up” culture Fostering a healthy “speak up, listen up” culture is essential. Employees must feel able to raise concerns (regardless of the seniority of those “accused”) without fear of reprisal. Putting in place whistleblowing frameworks, including policies, escalation procedures and reporting channels, are key to developing and maintaining a healthy speak up culture. But underlying these processes must be a culture of trust that reassures employees that their concerns will be taken seriously and acted upon. Building this trust requires a clear and committed buy-in from senior management, fostering a sense of common organisational purpose; it is everyone’s job to report suspected wrongdoing and you will be listened to. Without this, policies and procedures alone will have limited impact.A successful speak up culture will itself contribute to a healthy workplace culture and may prevent issues arising in the first place, but it will also reassure stakeholders, including investors, regulators and customers, that when issues do arise, these will be identified and addressed quickly. Swift detection of an issue that could undermine ESG commitments will help an employer get ahead of a situation, deal with it appropriately and manage related risks. Consider your response – is it in keeping with your organisational values? When HR crises arise, organisations will inevitably consider the immediate risks (legal, regulatory and reputational). The “traditional” corporate response is understandably almost entirely driven by closing down that risk as quickly as possible. However, it is important to consider how an organisation’s actions in addressing these situations may impact on its wider ESG commitments and culture and on longer term risks. Negotiated settlements with individuals at fault and the use of NDAs have for a long time been seen as a key part of a quick and efficient response to HR crises, but where these result in a failure to deal with the root cause of the issue, they may be hugely counter-productive. Culpable decision makers become seen as “untouchable”, or worse rewarded for their wrongdoing through lucrative exit packages. In the blink of an eye, this can undo a lot of good work undertaken to build a healthy culture of trust, respect & authenticity and can undermine confidence with key external stakeholders such as customers, investors and regulators. Even where the situation playing out in the public eye is avoided, there will almost always be a degree of internal visibility and the impact on organisational culture of perceived “cover ups” or “whitewashing” is likely to be extremely negative. Consider failings holistically and honestly Alongside the risks to an organisation’s “authenticity of purpose” that arise from how HR crises are handled, the “quick fix” approach may in fact exacerbate or simply delay the risks arising from the underlying HR issues. Failing to consider and address the underlying concerns of course increases the risk of similar issues arising in future. A failure to address any of those concerns may also restrict the legal defence that an employer has against future claims, being unable to show that it took “all reasonable steps” to prevent employees discriminating against other employees. Where an employer is aware of cultural issues and does not address these, such a defence is unlikely to be available. It is often better to acknowledge that mistakes have been made and lessons learned, as opposed to denying there was a problem in the first place. It is important to consider any failings holistically and honestly - aside from any immediate shortfalls; are there wider governance or supervisory issues to manage or do the findings indicate more deep rooted cultural failings that need to be addressed? Is what you are investigating the tip of the iceberg? Applying that lens can lead to uncomfortable but necessary conversations, in some cases with senior stakeholders. The organisational culture, set at senior management level, will be key to enabling this. Importantly, those people tasked with investigating and addressing such concerns, including HR, will need a genuine mandate to uphold that culture and to act accordingly both during and following these HR crisis situations. Summary In today’s social, industrial and regulatory environments, it is not enough simply to pay lip service to ESG in the good times and ignore it when things get tough. Business will be judged by whether they adhere to their ESG commitments during and in the wake of an HR crisis, and those that do not risk falling behind their peers and be less likely to weather the storm longer term.
Social Media cookies collect information about you sharing information from our website via social media tools, or analytics to understand your browsing between social media tools or our Social Media campaigns and our own websites. We do this to optimise the mix of channels to provide you with our content. Details concerning the tools in use are in our privacy policy.