Letting ESG fade into the background would be dangerous

Why the ‘S’ in ESG is finally in focus

“Our commitment to net-zero”… “We are committed to employee welfare and diversity”… “Sustainability is at the heart of what we do”…these are just some of the phrases that you will have come across from companies communicating their ESG (Environmental, Social, Governance) strategies. ESG gained popularity in the last few years as investors started to realise that it was no longer just an outlying trend, but rather a mainstream hallmark of investing. Add to this a heady cocktail of millennials’ focus on purpose, David Attenborough’s Blue Planet documentary and Greta Thunberg; all fundamentally impacting companies’ social licence to operate.

Against the backdrop of a global pandemic and in some cases arguably ineffective leadership by governments, the need for companies to act according to their ESG strategies – the values and purpose that they stand for – has never been greater. But in this difficult operating environment, are companies pressing pause or is the show still going on? Will they be in a position to follow through on their commitments as they are impacted financially?

Letting ESG fade into the background would be dangerous, as it is likely that companies which have truly adhered to their ESG strategy, embedding it across their business, would be more resilient and rebound faster and emerge less affected, helped by their strong governance, effective leadership and focus on all stakeholder relations. Not only this, but the latest MSCI data shows that corporate equities and bonds with high ESG ratings have outperformed the index too (source: Financial Times, 8 May 2020).

A considerable amount of intangible reputational goodwill has been generated for some companies who have demonstrated they  are “doing good” during the pandemic, for example those who cut executive pay, extended payment terms to their suppliers or repurposed manufacturing plants to produce PPE equipment, ventilators and hand sanitisers.  But many others who haven’t are facing criticism from employees, media and investors in particular for not having adequate health and safety measures in place, for buying back shares, or for using COVID-19 as an alleged excuse to lay off their staff.

While progress is being made on the ‘E’, the spotlight now is shifting more towards the ‘S’ in ESG – social – how companies manage their relationships with their employees, as well as their customers, suppliers and the communities in which they operate. It is very clear that at this time, companies are being judged especially on how they treat their employees.

One key aspect of the impact of COVID-19 is employees’ mental health, which may be impacted as they are potentially furloughed, working longer hours to compensate for lost productivity, dealing with the anxiety of the impermanence of their job, homeschooling their children and a host of other factors. And how are companies going to make their workplaces safe and create an engaged workplace culture with all the restrictions in place – as they start to think of exiting lockdown?

We spoke to some of our clients and have gathered below their thoughts on how they are helping their employees’ mental health and the trends that they have seen.

Letting ESG fade into the background would be dangerous

Lizzie Darbourne, Marketing Director at Gresham House commented “In our industry, and at Gresham House, employees are a business’s most important asset. Gresham House’s culture has always prioritised the wellbeing of its people, and this is a direct result of the strong emphasis placed on this by the senior management team.

Our internal communications have been central to keeping this culture alive during these unprecedented times, and steps have been taken to increase communication to ensure that everyone feels well looked after and has access to the right resources to enable them to work from home efficiently. It’s often the small things which matter – such as everyone receiving a personal thank you note (and biscuits!) –  and these small gestures continue to make you feel valued and your hard work recognised.

Our support of the Trussell Trust and NHS Charities Together as well as our support of charities on an individual employee level have helped everyone at Gresham House contribute and offer direct support to specific and much needed resources to counter the impact of COVID-19.

We are fortunate that day-to-day Gresham House has been able to operate as it would under normal circumstances, but we are aware that there are long-term changes that we can make, as a business, to give the team more flexibility and maintain productivity. How we leverage the positive aspects of the difficult time that we are currently operating in, for the community and for the business, will underpin our way forward.”

Helen Kemp, Head of Communications at Biffa said “ We have 8,000 key workers working hard to keep the nation’s bins emptied and our streets cleaned. We’ve focused on three key priorities throughout the crisis – protecting the health, safety and wellbeing of our people and the communities we serve, maintaining service to customers and protecting our financial strength. It’s been a challenging balancing act but I’m so proud of how we’ve come together to do this.

As well as keeping our people physically safe, it’s been equally as important for us to keep them mentally well – from those out on our frontline collecting bins and working in our facilities to those at home adjusting to new ways of working to those on furlough. Regular, clear communication has been central to how we’ve been able to enable this. We’re providing wellbeing support including podcasts, virtual classes and toolbox talks – remaining well connected with those on furlough too – on areas such as sleep, relaxation, hydration and spotting the signs of mental health issues. These have been in such high demand that we’re creating additional sessions.

Although the crisis has created so much uncertainty, we’re very keen to learn from the changes we have had to make and collaboratively develop new ways of working which will reduce our environmental impact and genuinely improve our work/life balance. And it’s also given us the time to really reflect and embed our vision, purpose and values – what it means to be Biffa, the role we play and where we’re going. There is an opportunity to create something sustainable, positive and new together, which I think is incredibly exciting.”

COVID-19 is proving to be the ultimate test of our times for companies -not only of their financial health but also of their ESG commitments. Companies should use this challenging time to accelerate their ESG strategies.  And before we know it, companies are likely to face scrutiny – as well as lauded – for what is seen as the right action.

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