Environmental, Social, and Governance (ESG) criteria are shaping business strategies. Integrating employee wellbeing into the ESG framework is not just innovative; it’s imperative. This integration is an opportunity for organisations to enhance their employee wellbeing offerings, yielding significant benefits in employee engagement, productivity, and overall organisational health. 

What is ESG? 

ESG stands for Environmental, Social, and Governance. It’s a set of criteria used to evaluate a company’s impact and sustainability practices. The Environmental aspect considers how a company performs as a steward of nature. The Social criteria examine how it manages relationships with employees, suppliers, customers, and communities. Lastly, Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. In essence, ESG is a holistic approach to assessing a company’s ethical impact and sustainable practices.

The ESG Framework: A New Paradigm for Employee Wellbeing 

ESG has traditionally focused on environmental impact, social responsibility, and governance issues. However, the ‘Social’ component of ESG is increasingly being recognised as a crucial element, encompassing employee wellbeing. This shift reflects a growing understanding that the health and happiness of employees are vital to the long-term success of any organisation.  

A report by Mind Forward Alliance and City Mental Health Alliance highlights this new shift in ESG framework, outlining how employee wellbeing fits into the ‘Social’ component of the ESG framework. They propose that wellbeing and building wellbeing capital should sit as an overarching output or result, from a range of important inputs, not as a subset of health and safety inputs, where many businesses currently place it. Without it, social capital does not accumulate and therefore businesses cannot thrive.  

The Ripple Effect of Wellbeing on Organisational Health 

When employees thrive, so does the organisation. A report by McKinsey states that a strong ESG proposition can help companies attract and retain quality employees, enhance employee motivation by instilling a sense of purpose, and increase overall productivity. This is likely because healthy, satisfied employees tend to be more engaged and productive. 

A diagram from the Oxford University Wellbeing Research Centre and Indeed: key indicators for happiness at work.

Strategic Integration: Employee Wellbeing within the ESG Framework 

To effectively integrate employee wellbeing into the ESG framework, organisations must take a strategic approach. This involves setting clear goals, measuring outcomes, and continuously improving wellbeing outcomes. It also means going beyond traditional wellbeing initiatives to address factors like work-life balance, mental health support, and inclusive work environments.  

The report by Mind Forward Alliance and City Mental Health Alliance defines certain levers of wellbeing that can be incorporated into an organisations ESG framework. For example, focusing of sleep programs and physical health and safety influences quality of sleep and exercise which is correlated with energy. We know that when employees have greater energy, they experience increased motivation and productivity, supporting business output. 

It’s important to recognise that the integration of employee wellbeing into the ESG framework is not a one-size-fits-all approach. Each organisation must tailor its strategy to fit its unique culture and workforce needs. This customisation might involve developing targeted programs that address specific challenges faced by employees, such as stress management. Additionally, effective communication is key to ensuring that these initiatives resonate with employees and are utilised effectively.