ESG & Human Capital

Employers that have a clear ESG policy create their own advantage

10-11-2022
How an employer decides to implement ESG says a great deal about the organisation and perhaps even more about the progress that that organisation has made in the way it thinks about ESG. Employers that have a clear ESG policy create their own advantage. An ESG policy that is recognisable, both for employees and for the public and that contributes to the development of the company and its people helps not only to find talents, human capital, but also to retain them. A healthy and safe working environment reduces absenteeism and conflict and may also prevent other (financial and adverse) impact, such as reputational damage. Finally, a balanced ESG policy also pays off economically.

Some employees have implemented their ESG policy across the company. Others are still searching or implement elements of ESG themes without treating the individual elements as one whole.

The company lawyer, who often oversees the overall operations within the company, can make an important contribution to giving effect to ESG policy and can ensure that overlapping subjects and themes are viewed and implemented in their mutual coherence.

ESG and employers

The relationship between the employer and the employee encompasses numerous themes and subjects that come under the S in ESG. This is an opportunity, but at the same time could be a pitfall for companies, particularly when a company is still working out how to implement ESG. The risk of labelling too many subjects as ESG at the same time is that there will not be enough focus and no real impact will be achieved. Developing an ESG policy, one step at a time, based on the company's DNA, supported by the organisation and recognisable for the public will lead to more sustainable results than, for example, making one individual within the organisation responsible for developing an ESG policy.

An ESG policy is not just intended for large companies that can release resources and make investments for this purpose. Smaller companies that may, in principle, not have a budget for certain investments can still take an important step towards implementing ESG policy by designating certain subjects as falling under ESG. The first step is awareness, gaining knowledge about possible subjects, learning from other companies, either within or outside the company's own sector, and translating this to its own organisation. The time invested by a company in this first step will always pay off.

In this chapter, we have outlined the subjects that, in a broad sense, should not be forgotten in ESG policy. The list of subjects is not exhaustive. Attention will also be paid to a number of subjects in existing ESG-relevant bills. What is striking is that there are a relatively large number of bills without a concrete implementation date that may be relevant to the frameworks for ESG policy.

ESG policy always needs the input, involvement and commitment of employees.

Whatever the effect given to ESG policy, it always needs the input, involvement and commitment of employees. In some cases, the works council may have a right of consent before a policy can be implemented or the involvement of an employee representative body or trade organisations may be required.

Recruitment and retention of talent

With more vacancies than jobseekers, the tension in the Dutch labour market is historic . This tension has multiple causes, which makes it difficult to solve. The impact of COVID-19, disappointing turnovers and increasing costs, so that talent cannot be retained, are factors in addition to the trend that employees nowadays are less likely to stay in one job for their entire career. To create as large a pond to fish in as possible, it is important to look at the recruitment and personnel policy with a broad view. A recognisable and visible policy, which a wide group can relate to, makes an employer more attractive and better able to recruit more talent. Such a policy also contributes to retention of talent. When it comes to recruitment and retention of talent, a number of subjects jump to the foreground, where employers make the difference.

Training

Since 1 August 2022, in some situations, employees have been entitled to free training during working hours. Training contributes to employability and improves the quality of the company. Employees who continue to develop their skills can continue to generate income and are less insecure about losing their jobs. A focus on training and translating development into new skills will help prevent the organisation from having to make employees redundant at some point, while at the same time having to look for new employees with a different set of skills. With a focused training policy, employers can stand out and lay the foundation for sustainable employability of employees and use of knowledge. We see that some employers do not make a distinction when offering training opportunities, but offer all training free of charge and as part of the working hours.

Terms of employment

To retain talent within the organisation, training is important, but so are good terms of employment. Terms of employment not only relate to the amount of the salary, but particularly how the salary is calculated, whether that calculation is sufficiently transparent, and how the company defines a fair salary. Equal work should earn equal pay - a subject that has been on the national and international agendas for years. In the Netherlands, a private member's bill was presented in 2019 advocating equal pay between men and women. A similar proposal for a directive is also being discussed at European level. The directive intends to increase transparency and offers opportunities to enforce equal pay. Additional obligations, including reporting and explanatory duties, have also been proposed for organisations with more than 250 employees. An increasing number of companies report not only internally, but also externally, on the relationship between the highest and lowest wages and are setting targets for the maximum bandwidth.

Standards and values

In addition to training and fair terms of employment, an open and transparent culture within an organisation is essential. This may include facilitating processes such as surveys to encourage employees to speak up, for example, about what they want for their own careers, but also about the organisation. Employees should be given the opportunity to speak up about incidents that they do not feel comfortable with. A policy describing the framework of standards and expectations within the company is helpful in this respect. It is essential to take an active attitude towards a dialogue with employees about the policy and to bring it to the attention on a regular basis. Check if employees understand the policy, or better yet incorporate their input, and place discussions on this point on the agenda. Evaluate the policy and share the outcome within the company. Although a confidential counsellor is not mandatory, in actual practice, we see that appointing a confidential counsellor often makes it easier for employees to speak up, without having to take a more formal route. Since October 2020, there has been a legislative proposal to make the appointment of a confidential counsellor mandatory by way of an expansion of the working conditions legislation. An implementation date is not yet in sight. 

A company with more than 50 employees must have an internal procedure for handling reports of abuse or suspected abuse under the Whistleblowers Authority Act. The bill for the Whistleblowers Protection Act differs from the existing legislation on a number of important points, but unfortunately it does not yet have an implementation date. Under the bill, great importance is attached to a company being actively able to demonstrate, both internally and externally, that abuse can be brought to attention. Encouraging people to speak up without having to fear any consequences for their positions may seem simple, but it is not sufficiently safeguarded in every company.

Employers are responsible for providing a safe working environment. Stop to think about the standards and values of the organisation and actively propagate them to those working for the company. Organise sessions within the company to hear employees' thoughts on these subjects and to check whether they know who they can turn to for questions or concerns. Make sure that reports are handled in line with the underlying rules within the company.

Healthy and safe working

Every company is a group of people working on common goals. How a company treats its employees and whether it meets the standards set for health and safety play a crucial role within the ESG policy. This social side of an ESG policy should focus on providing employees with a healthy and safe working environment. For purposes of the ESG policy, an employer should consider the following factors in particular: mental health, working from home and equality.

In the context of the overall working conditions policy, an employer is required to limit the psychosocial workload of employees. Psychological problems increase the risk of sickness absence and may lead to reduced productivity. In 2020, 42% of disability benefits were provided on account of psychological symptoms. Pursuing an actual prevention policy and properly caring for the employees, means that an employer must give psychosocial workload a permanent place on the agenda.

Three types of psychosocial workload can be distinguished: (1) work pressure, (2) undesired behaviour and sexual or other harassment; and (3) aggression and violence, including bullying.

To prevent psychosocial workload as a result of work pressure, employers should ask their employees, including those structurally working from home, on a regular basis how they are handling the work pressure. The psychosocial workload should not just be monitored in team meetings, but especially on a one-on-one basis, so that the employee can speak freely. This could also be part of the regular evaluation process. An advantage of this approach is that the employer will be able to demonstrate in writing that the work pressure is being monitored.

It is still essential to have a clear set of rules.

COVID-19 has proved to be a game changer for the way we feel about working from home. Many companies still struggle to find the perfect balance. Employees increasingly indicate that they would like to work from home part of the time on a permanent basis. All this means that employers are looking for new ways to safeguard the contact with their employees. This new reality requires different ways of giving direction, consultation, support and communication. Although the upcoming legal framework seems to be outdated at this point, in practice, we see that employers are using their implementation of working from home as a selling point to attract new employees and retain them. It is still essential to have a clear set of rules, particularly for situations where an employee has to re-integrate after sickness or due to performance issues. In those situations, an employer that looks beyond the law and asks its employees about their needs will stand out. This goes beyond supporting an ergonomic home office. 

An internal company policy aimed at equality will realise an important social goal and, thus, contribute to long-term value creation for a company. It will increase the commitment of stakeholders and the effectiveness of the operations of an organisation. Netflix is an example of a company that prioritises equality, inclusion and diversity, as is shown, inter alia, by its annual publication on progress and inclusion updates. Netflix considers inclusion and diversity within the organisation to be not only right or desired, but also the driving force behind the company's innovative power. With the help of a specialised team, Netflix teaches its employees to work with a 'diversity lens': during the work, they should constantly be aware of what groups' voices are missing. Netflix is aware that internal inclusion and diversity are essential to realise inclusion and diversity in the output.

Diversity and inclusion

Equality, diversity and inclusion are three terms that are often mentioned in the same breath. Diversity and inclusion are an essential part of an ESG policy. Several studies show that companies with an active diversity and inclusion policy generate a better profit. It also leads to more innovative and creative teamwork, less shortage of staff, recruitment and retention of talent, better anticipation of expectations and needs from a diverse customer base, and a more positive image.

Diversity and inclusion refer to a policy and strategy adopted by a company to create an inclusive workplace and to recruit a diverse workforce. Diversity not only relates to a migration background, but also to gender differences, people with disabilities, and the LGBTQ+ community. Inclusion relates to the way that these differences are handled and who can, and who cannot, fully participate in the decision-making process.

Employers can increase diversity and inclusion in the workplace by recording the strategies and efforts and by raising awareness within the company. There are five action areas where companies can take steps to increase diversity and inclusion:

1. representation of diverse talent;
2. reinforcement of leadership responsibility and capacities for diversity and inclusion;
3. offering equal opportunities through fairness and transparency;
4. promoting openness and addressing microaggression;
5. promoting togetherness by giving unequivocal support to diversity.

An ESG-aware employer will encourage the organisation of diversity and inclusion training to increase awareness, for example by following the Netflix example. Finally, it is important to monitor the diversity and inclusion initiatives on a regular basis, in order to measure whether the strategies are effective.

Disabled or chronically sick employees

Equal treatment also means that a company considers relevant differences. Unequal cases should be treated unequally taking into account the degree of inequality. In that respect, effective adjustments tailored to the needs of disabled or chronically sick employees are important, unless this would impose a disproportional burden on the employer. To assess whether such adjustments are proportionate, certain elements must be considered, such as the size of the organisation, its financial capacity and the costs of the adjustment. 

The adjustments in this context must be suitable and necessary to enable the disabled or chronically sick person to participate in social life and in the work process just like any other. The effective measures to be taken will depend on the specific circumstances of the case.

People at a distance from the labour market

In the context of equality in the workplace, an employer must also consider a group of potential employees who may need some additional assistance to work within a company, such as people at a distance from the labour market. There are all kinds of resources to help employers in this regard.

• A wage cost subsidy for employees are not able to earn the minimum (hourly) wage. Regional work placement branches and employer service points can offer support when determining the wage value of such an employee.
• Subsidies for any necessary adjustments to the workplace.
• Wage compensation in the event of sickness (no-risk insurance policy).
• Support by a job coach or other forms of coaching. A job coach assists in the personal coaching of disabled employees.
• Use of, and support from, regional work placement branches and employer service points.

Work-life balance

Work-life balance has been high on the professional agenda for years. An increasing number of employees are suffering stress-related symptoms or from burnout. More and more employers are actively steering in the direction of a policy to prevent employees from continuing to work nights or weekends, for example, by blocking the receipt of emails after 06:00 p.m., shutting down systems after a certain time, and providing training programmes to raise awareness among managers as to how they can set an example for their employees.

Right to disconnect

In order to perform well, it is important to be able to enjoy leisure time. In today's society, this is becoming increasingly difficult. The days where a computer was shut down and left behind at the office are over. With the development of technology and the advent of the information society, employees can experience a sense of constantly having to be available and to be alert. After all, laptops and mobile phones are always within reach, which has blurred the line between work and private life. Increased working from home also contributes to that blurring of the line between work and private life. And although working from home has many advantages, employees do run the risk of working more overtime and continuing to work longer. It goes without saying that employees need leisure time. Undisturbed leisure time. Since July 2020, there has been a bill on the availability of employees outside working hours. This bill intends to limit the risks of psychosocial workload by encouraging employers and employees to make mutual arrangements about their availability outside working hours. Or rather: about their unavailability. The 'right to disconnect' has since been included in several collective bargaining agreements. The bill introduces the obligation for employers to have discussions with their employees about availability outside working hours. An employer must be able to demonstrate that this discussion has taken place based on a written report. The discussion may be conducted with individual employees, but also with the works council or trade unions. If there is a large difference within the organisation between jobs and the related working hours or work pressure, an employer would do wisely to discuss this with the various groups in order to obtain an accurate picture. No two organisations are the same, so there is no one solution that fits all. Even if this bill is enacted, there will still be a large degree of self-regulation.

Green employment agreement

In addition to offering undisturbed leisure time and more flexibility in terms of duties and the workplace, an employer can also encourage employees to make healthy and sustainable choices as part of the ESG policy. Employers can draw up sustainable ambitions and deploy their employees to realise those ambitions. But still: you can’t get something for nothing. Employees who make deliberate healthy and sustainable choices may be rewarded in their terms of employment. With this idea in mind, initiators drew up the green employment agreement. This may include planting a tree in the name of an employee, offering a day off to do volunteer work, participation in the company, supporting environmental standards, etc.

Tips & Tricks

• Invest in gaining knowledge about ESG and the subjects that play a role in that respect for the employer. Assuming that ESG is a shared responsibility of the entire organisation, coordinate to see whether or not the various ESG goals reinforce each other.
• Bring focus to ESG goals and policies and involve employees, the works council and trade unions in the further shaping and implementing those goals and policies.
• Draw up a multi-year plan for step-by-step implementation of the ESG policy. Incorporate any investments in the plan. Evaluate the policy at regular times and measure its impact.
• Communicate both internally and externally about the ESG goals. In doing so, be consistent, invest in training for employees, and make sure that all communications are in line with this.
• Be up to date on the financial schemes provided by the government and involve collective bargaining parties, including R&D funds.