The rising tide of ESG: Social compliance in focus

Keywords: ESG, social compliance, mental wellbeing, management, mental health

Author: Lisa Munro

Date: 10 April 2024, Worklife Digital

In the realm of corporate governance, the acronym "ESG" (Environmental, Social, and Governance) has become more than just a buzzword—it's a guiding principle shaping the future of businesses worldwide. While environmental concerns initially took centre stage, the spotlight is now also shifting to the "S" in ESG, reflecting a growing awareness of social responsibility. The Social dimension of ESG encompasses a broad spectrum of issues, including employee welfare, diversity and inclusion, human rights, and community engagement. It's not merely about philanthropy or token gestures—it's about fundamental changes in how businesses operate and interact with stakeholders.

One critical aspect of social compliance revolves around how organisations treat their employees. The well-being of staff members is not just a moral imperative but a business necessity. Research indicates that happy, healthy employees are more productive, innovative, and loyal. Yet, despite the growing emphasis on social responsibility, many executive teams remain disconnected from the reality of their workforce's well-being.

Executive Disconnect: Overestimating Employee Well-being

Deloitte's 2023 research shed light on this disparity, revealing that executive teams often overestimate the well-being of their employees. This misalignment can have profound implications, leading to a failure to address issues such as mental health, turnover rates, stress, and burnout effectively. Ignoring these concerns not only undermines employee morale but also exposes organisations to increased regulatory scrutiny and reputational damage. A case in point is the recent accusations against the British brewer BrewDog around fostering a toxic work environment, concerning workplace culture and poor treatment of employees. These repeated accusations included claims of overwork, poor safety, fear and mistreatment of staff. The backlash from customers on social media has been significant.

To navigate this evolving landscape successfully, businesses must prioritise the measurement of their social compliance efforts. This entails more than just ticking boxes or conducting superficial surveys—it requires a comprehensive approach that delves into the intricacies of employee well-being. Organisations need to continually assess factors such as mental health support, turnover rates, stress levels, and burnout indicators.

Driving Meaningful Improvements

Implementing a robust measurement initiative serves a dual purpose. Firstly, it facilitates accurate reporting on the social aspect of ESG, enabling organisations to demonstrate their commitment to employee welfare transparently. Secondly, it provides valuable insights that inform strategic decision-making and drive meaningful improvements in staff well-being, retention rates, and overall productivity.

For instance, monitoring metrics related to mental health can help identify trends and patterns within the workforce, enabling proactive interventions and support mechanisms. Similarly, tracking turnover rates and conducting exit interviews can uncover underlying issues within the organisation's culture or management practices, prompting corrective actions.

Moreover, addressing social compliance isn't just a matter of compliance—it's a strategic imperative for long-term success. Businesses that prioritise employee well-being and foster a positive work environment are more likely to attract top talent, retain key personnel, and cultivate a culture of innovation and resilience. In today's hyper-competitive marketplace, where talent shortages and skill gaps are prevalent, this can be a significant differentiator.

The Business Benefits of Social Responsibility

Organisations that embrace social responsibility also enhance their brand reputation and stakeholder trust. Consumers, investors, and regulatory bodies are increasingly scrutinising companies' ethical practices and social impact, demanding greater accountability and transparency. Prioritising the measurement of employee well-being and implementing effective strategies to improve it is no longer optional—it's imperative for sustainable growth and success.

WorkLife Digital is a global mental-wellbeing consultancy driven by the mission to improve the sustainability of businesses. Our psychological wellbeing tool, Worklife Quotient (WL-Q), is modelled on cutting-edge scientific research and provides organisation-wide measurement and intelligence on the mental wellbeing levels and psychological resilience of staff. WL-Q also assesses the impact of organisational practices (i.e. people and culture, leadership styles, organisational purpose and values, social impact) that have a direct influence on staff wellbeing and provides strategic recommendations on addressing risks and promoting strengths.

For more information, get in touch at lisa@worklife.digital