ESG and the future of work

ESG has already had a deep impact on investment, on corporate governance, on reporting, with firms increasingly looking at ways to improve their levels of sustainability.

According to Katarzyna Dulewicz, CMS partner and head of the employment practice in CEE, changes are also now underway in the world of work. 

“Firstly, we can agree that hybrid working conditions which evolved during the Covid-19 pandemic are here to stay,” she says. “Employees working from home give us one obvious ESG advantage as it means a lower carbon footprint associated with less commuting.”

“Secondly, I think we will see all IT-sector jobs move one hundred per cent to home working, while most other white-collar jobs will remain hybrid, with employees expected to be in the office between one and three days a week,” she adds. 

“This means that a firm’s culture will carry less significance, which could have an impact on attracting new talent. Furthermore, the concept of the four-day week seems to be growing in popularity, with several EU countries running pilot schemes, although none in CEE. But I believe this will not necessarily take off because there is a significant all-or-nothing element here. If a company’s client has expectations for a Friday, they will have to be met—unless absolutely everyone in the global workforce moves to a four-day week.”

However, hybrid working creates its own complications. Nevena Radlova, a partner and employment expert based in CMS’s Sofia office, says: “On the surface, employers have health and safety responsibilities towards their workers, including when they’re working from home. But in practice, it is problematic for employers actually to ensure that office-based health and safety rules are being adhered to in their employees’ home environment.”

Radlova suggests that most employers do their best by diligently instructing their employees about health and safety workplace conditions they must abide by when working from home. 

“How these rules are put in practice, however, is another topic, as almost no employer nor employee would agree to a home inspection of the workplace, although by law employers do have that authority.

“Also, we are seeing the hybrid model lead to a lack of a sense of belonging for employees who are only in the office for a couple of days a week.”

But here, says Radlova, ESG can help. 

“Employers can invest in their local communities and encourage workers to take part in local green initiatives. However, any attempts to ‘green’ employment contracts, where a company might try to include clauses obliging workers to help meet the company’s ESG targets, would likely see a great deal of pushback from employees, and thus remain commercially unrealistic at this stage.”

Staying with the theme of hybrid working, Dulewicz notes other effects: “On the plus side, working from home aides the prevention of corruption and should lead to less white-collar crime. On the other hand, there are new issues surrounding business ethics and how to treat people who work remotely. This spills over into concerns regarding privacy and data protection. For example, if an employee is working from home, can the employer use location-tracking software in its IT hardware to confirm where the worker really is?”

Another important aspect is the equal treatment of female and male employees. Dulewicz is unequivocal in emphasising how important ESG can be here. “Pay disparity between the sexes still very much exists in the workplace across CEE jurisdictions, but ESG has the potential to resolve this, once and for all.” 

“Another related problem concerns artificial intelligence,” she says. “AI tends to be a male-dominated sector, and care needs to be taken to ensure that future AI avoids having a gender bias. Also, when the ability to measure an employee’s carbon footprint is developed, the door will open to incentivising workers by offering bigger pay rises or bonuses for the best ESG performers. In this and similar areas, ESG will become a powerful watchword. In doing so, it will therefore be able to promote equality, lessen discrimination, and ensure diversity and inclusion.”

Radlova also stresses the extent of ESG’s influence on the future of employment. 

“All businesses in CEE need to take account of the full range of key themes that ESG is obliging us to look at more closely. They need to plan. In addition to the issues we’ve already discussed, there are things like training and investment - both in people and skills - compliance, and waste management. It’s no longer enough that a company’s internal policies comply with EU and local legal regulations. Now, they need to constitute the basis for setting standards and goals, and where necessary helping to form part of a company’s global ESG strategy. In result, it is becoming crucial for companies, whatever their size, to be proactive, creative and to involve all of their stakeholders, including staff representatives.

“We expect that as companies continue setting and refining their own climate goals, they will increasingly look at how they can encourage their employees to align with those goals. Indeed, recent surveys have shown that both existing and potential employees would be receptive to this. However, as always, a balancing act is needed, because not all workers can be expected to welcome employer‑imposed climate goals if they impinge on employees’ day-to-day working lives.”

While some recent innovations around hybrid working seem to be here to stay, it is clear that ESG has only just begun its potentially far-reaching impact on the future of work in emerging Europe.