With environmental sustainability a fixture of the global zeitgeist and a cornerstone of social movements, as seen with the extensive coverage of last week’s COP 26 summit, a growing number of employers are considering how they can align the values of their businesses with environmental and sustainability commitments.
There has been a growing interest in Green Human Resource Management (Green HRM), which refers to a set of wide-ranging yet specific practices, policies, systems and/or objectives that focus on environmental sustainability and management. While the purpose of this will be partly to ensure compliance with ever-changing regulations, many larger employers are taking steps beyond the minimum. Some are developing their own initiatives and integrating environmental sustainability into policies, contracts, strategies and even articles of association.
The Business Case for Green HRM
While many businesses will be keen to make altruistic commitments to the environment, they are understandably concerned about possible adverse effects on business performance. However, strong business performance and environmentally-friendly practice are far from mutually exclusive.
Recent data suggests that environmental values and commitments are not luxuries or peripheral elements; they may soon become a necessity and employers may benefit from acting promptly.
Whilst pay, benefits and career prospects are clearly important to job applicants, an increasing number (51%) will only apply to work for businesses that have environmental and sustainability values that align with their own.
A report from Robert Walters found that 34% of white-collar job applicants would turn down an offer if the employer’s values on the environment, sustainability or climate control did not align with their own. Considering the well-publicised worker and skill shortage, employers will have to assess whether they can afford to ignore this growing interest in environmental credentials from applicants.
Half of 18-24 year olds and 55-73 year olds cited environmental strategy as a primary factor when considering potential employers. Recent reports show a growing number of older people re-entering the job market following COVID-19 and, more obviously, the number of ‘Gen-Z’ applicants is ever-increasing. Therefore, employers may fail to attract both younger and older recruits if they fail to demonstrate a commitment to environmental sustainability.
As with recruitment, employee retention is no longer simply the domain of increased perks and benefits. Environment-focused policy and strategy is an increasingly strong pull-factor, and its strength is expected to grow further as more of Gen-Z enter the job-market.
When employees feel their environmental (and in many cases social) values are reflected by their employer, they feel a greater sense of association and loyalty towards the business. Data from Anthesis shows that organisations with an environmental focus retain more talent than those which do not.
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Employee Wellbeing and Workplace Culture
Where environmentally-conscious practices are integrated into a business, the wellbeing of the employee can benefit massively. Many employers introduce cycle to work schemes or volunteering days to directly improve wellbeing. However, wider strategies or policies can also have a positive impact by promoting collective values and team spirit. As the number of mental health complaints has increased among workers, especially since the lockdown-induced shift to remote working, these collective values can prove critical to employee wellbeing. Any improvement in wellbeing is also an improvement to productivity and a reduced risk of liability or claims.
Many businesses are looking beyond their own impact and have started to look at their supply chains; it is becoming rare for tender processes to not include at least some questions about the sustainability initiatives of suppliers. Customers of all sizes are increasingly likely to look favourably on suppliers who can demonstrate sustainability credentials.
Options Available to Employers and Businesses
Many employers have fallen into the trap of proposing change in name only, however there is a growing awareness of such ‘greenwashing’.
To make commitments they can actually commit to, employers should balance their business needs, substantive change to the environment, and employee recruitment, retention and wellbeing. Therefore, employers should identify their goals and values and set out how environmentally-focused practices can be properly implemented or integrated. Here are some examples of the steps that some employers/businesses are taking:
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Reducing Carbon Footprint
Perhaps an obvious step many businesses take is to reduce their carbon footprint. This can be by changing to renewable energy suppliers, reduce waste by encouraging recycling or providing reusable bags/bottles, changing to more sustainable suppliers, using green appliances etc. Many businesses are using tips they’ve learned through lockdown to further environmental goals, for example using video conferencing instead of meeting clients in person or allowing flexible working to reduce travel and fuel emissions. The purchase of carbon offsets (funding projects that aim to reduce greenhouse gas emissions) can be a good way of reducing a businesses carbon footprint, but to avoid accusations of greenwashing it should be done as part of a carbon reduction strategy rather than instead of. These changes may not require constitutional or systemic change but can make an impact.
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Achieving Sustainability Accreditation
Businesses are seeking sustainability accreditation from accreditors like Green Mark, iiE, or B Corp, in order to prove to prospective recruits and investors that they have committed to sustainability. Achieving such accreditation is not a simple process, but it can demonstrate a real commitment to sustainability that is easy for employees and customers to understand. For example, in addition to proving a commitment to sustainability, B Corp requires companies to amend their articles of association to adopt a ‘triple bottom line’ of people, planet and profit and pay annual certification fees. Feedback from businesses achieving such an accreditation is overwhelmingly positive, not least because it can help open doors to ‘green finance’ (as below) and ‘green recruiting’ (attracting environmentally-conscious applicants).
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Amending and Creating Policies
Although an entirely new ESG or environmental policy may seem an easy fix, employers should consider whether there is risk of overcommitment or that it may not correspond with wider business goals – it may become a commitment in name only. Some employers are creating ‘green targets’ for employees with incentives, providing volunteering days or opportunities with an environmental focus, amending flexible-working policies to reduce travel into the workplace etc. Ultimately, amendments to policies and new initiatives should be considered holistically and should be compatible with business needs and values.
Many investors and funds are environmentally-focused and will only invest in companies that have environmental accreditation or have demonstrated a commitment to sustainability. The government announced earlier this year that it was creating a Green Financing Framework to provide Green Bonds and other instruments to finance ‘green expenditures’. A growing number of investment platforms, including pension providers, are offering ‘ethical’ and environmental funds. The Investment Association reports that on average around £1bn a month is invested into responsible investment funds. Companies can make use of this green-finance to grow and develop their business.
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Expanding Directors’ Duties
With growing expectations among shareholders and investors for businesses to be environmentally-friendly, the ‘best interests’ of the company arguably include more than profit and growth. The Better Business Act is a campaign aiming to amend section 172 of the Companies Act 2006 (which outlines directors’ duties to promote the success of the company) to include a legal obligation to consider environmental impact. Placing the interests of shareholders and environmental protection on an equal footing is a serious commitment and one that may be difficult to make, however it would be a significant step towards achieving a green accreditation (and is mandatory for B Corps) and would open the door to green finance. If change is coming, it is often beneficial to be ahead of the curve.
Given the speed with which social commentary, public attitude, market and investor interest, and government policy is shifting in relation to environmental sustainability, employers may not be able to afford to sit still for much longer.
To discuss how your business can align its values to accommodate environmental sustainability or implement practices and policies, or anything else discussed in this article, please contact Lydia Edgar, Simon Lewis or Huzaifa Moosa, or your usual contact within our Employment or Corporate team.
