WHY ESG SHOULD NOW BE A PRIORITY FOR ALL EMPLOYERS?

Beyond a strict application of all existing legal provisions relating to environment, corporate governance and employment, ESG (Environmental, Social and Corporate governance) is becoming a major factor in demonstrating the commitment of employers for corporate sustainability efforts and positively differentiating vis-à-vis competitors, and also for raising funds through sustainability financing and generally demonstrating a sustainable strategy for growth. This trend has increased since the COVID-19 pandemic.

1° The challenges of having a genuine ESG policy

It is all the more important for Companies to pay attention to this issue as it can have major impacts in many areas, including:

• Brand image, reputation and value of the Company :

Being engaged in ESG initiatives improves the brand image of the Company and its reputation. Indeed, ESG now represents an effective communication tool that enables the Company to attract new customers by demonstrating a high level of values.

In addition to traditional rankings, Companies are indeed now ranked in consideration of ESG criteria. A new stock market index has even been created (CAC 40 ESG).

Therefore, Companies know that they must now build an environmentally responsible image, whether it be for politicians, investors, partners or the general public… and most of them take the lead through policies, codes of conducts, etc…

However, not all Companies show the same level of voluntarism. This can be detrimental since the breaches found can, in particular if social media gets hold of them, alter the Company's image, with the economic consequences that go with it.

Indeed, not going down this road means potentially losing market share (it is now impossible to participate in a call for tenders without highlighting the Company's ESG approach) and taking legal and image risks.

• Productivity / reduction of costs / financial profitability

By improving the Company's brand image and its reputation, ESG also allows to attract new skills, to increase commitment of the employees and, at the same time, to limit turnover and absences as it is now part of the employees' expectations to work in responsible companies with good ESG policies.

In this regard in a study published on February 7, 2022, ManpowerGroup detailed the new aspirations of workers in five countries (UK, USA, France, Australia and Italy) after two years of pandemic. As a result of this study, 49% of workers say they are ready to change company to improve their well-being, which confirms the importance of a good ESG company policy.

As a result, Companies with a strong ESG and labour relations proposition must benefit from better commitment and then from better productivity.

Indeed, employees who enjoy fair pay, favourable working conditions and who notice that their employer has diversity and inclusion policies, or a gender equality policy will be more likely to commit to their company.

This analysis is also confirmed by the ESG platform (the French national platform for global action on corporate social responsibility acting within France Stratégie) which recalls the importance of involving employees and their representatives as early as possible in the different stages of the ESG process but also more closely, in particular through individual or collective assessment criteria and profit-sharing agreements.

In addition, it recalls that governance bodies, through their composition (presence of employee directors), their function and the issues they address, have a special role to play in these approaches, so that ESG also becomes a component of a better social dialogue within the company, and a path for equitable sharing of added value.

Finally, ESG policies can also lead to costs reductions, for example in terms of electricity, water and paper consumption, but also reduce reputational, legal and financial risks.

• Legal compliance and international standards

The possibility of investigating ESG violations and fining Companies has increased considerably over the last few years. For example, in France, all Companies with at least 50 employees must calculate their gender equality index by 1st March each year.

Moreover, the impact on the Company's image is immediate, since the results obtained in the index must be published on the company’s website. It should be noted that, in addition, a collective agreement or an action plan relating to equal treatment between men and women is mandatory. Non-compliance is sanctioned by the payment of a penalty of up to 1% of the total wage bill corresponding to the period during which the company was not covered by such an agreement or action plan. 

Companies are required, under certain conditions, to put in place codes of conduct and whistleblowing procedures. Works Councils are also highly involved to monitor the actions of the Company on various subjects related to ESG, such as gender equality, professional training, working conditions and now the impact of the employer’s decisions on environment.

From an international point of view, new standards have also developed and are now guiding companies' ESG initiatives, among which the UN Global Compact (a sustainability initiative with around 12,000 corporate participants and stakeholders from nearly 160 countries); the International Labour Organisation Conventions and Declarations, the International bill of Human Rights and the OECD guidelines.

2° Concrete actions implemented by the companies

It is now important for Companies to be proactive and implement high-level ESG action plans in particular to improve transparency, equality, safety and protect environment.  

This may include a number of actions and questions that employers should address:

• What are our corporate values?
• Who is in charge of ESG? Does the company have appropriate ESG resources?
• Workforce: how diverse is the workforce? Which concrete actions are implemented to improve D&I? Are we compliant with all applicable provisions?
• Wages: how fair are the remuneration structures? Can variable compensation be linked to ESG criteria?
• Human rights / Discrimination / Harassment: does the Company have policies that go beyond dealing with safety and labour standards? What can be improved? Does the company control its suppliers?
• Health, security and well-being: does the Company look after the physical and mental health of its employees and more generally of people?
• Training: does the Company invest in people and in skills training?
• What is implemented to improve work life balance?
• How can the company contribute to decarbonation through HR policies ? What actions could be included in a waste management policy ?

It is clear that Companies that understand how ESG principles can have positive impacts on their image and reputation and are proactive on this subject will be able to transform what can be seen as a legal burden into a competitive advantage to get new opportunities and retain talents.