Skip to main content

Insight article

February 8, 2024

What is ESG, and what does it mean for employers?

ESG is now a commonly used term growing in relevance for businesses.

ESG Vector of windmills and an electricity cable going into the letters ESG

ESG refers to a range of environmental, social, and governance factors that were once traditionally used by investors to assess the sustainability credentials of companies they were considering for investment.

It is now typical for a company’s customers, workforce and regulators to scrutinise its ESG profile closely. Indeed, an ESG profile communicates the company’s principles, culture and commitment to integrating ethical and sustainable values across its business.

How does ESG impact employers?

Demonstrating a solid commitment to ESG can help employers recruit and retain top talent. It can also positively affect its productivity, reputation, and standing against competitors.

Environmental

The environmental factor measures a company’s environmental impact. It takes account of the company’s carbon footprint. Insofar as it is relevant to employment, this factor might look at incentives for employees to travel greener, encouraging recycling or volunteering days for climate change charities or organisations. 

Social

The social element has gained much more prominence since the COVID-19 pandemic and the # MeToo and Black Lives Matter movements; it is at the forefront of public scrutiny.

There is, rightfully, a demand for employers to do more than point to a dusty workplace policy. An employer’s approach to equality and human rights and how it engages with its workforce are crucial.

Key areas for focus are Diversity, Equity and Inclusion, employee mental and physical well-being, flexible working practices, pay and pay gaps, and employee engagement.

What is Diversity, Equity and Inclusion?

DEI are often terms used independently but interchangeably. Each term, though, has a different meaning, as follows:

  • Diversity: the characteristics that differentiate people. It goes further than the protected characteristics identified in the Equality Act 2010. It includes social, demographic and cultural background and cognitive and personal strengths, such as neurodiversity.
  • Equity: whether people are treated fairly based on their individual needs. It identifies that people may need different resources and opportunities to excel. Equality, often confused with equity, is the same treatment to all, regardless of individual needs.
  • Inclusion: the actions taken to ensure people feel a sense of belonging and value in the workplace.

Governance

Governance measures how a company operates its leadership, executive pay, audits, internal controls and shareholder rights. It covers risk, compliance and regulation, such as anti-bribery, corruption and tax evasion matters, and overlaps and incorporates some of the social elements of ESG, such as pay and pay gap reporting.

Conclusion

The principles of ESG continue to gather momentum, forcing businesses to look beyond their profit line and address their impact on society and the world at large, which can only be good. Putting in place an ESG policy that documents the business’ approach to ESG concepts will only stand an organisation in good stead. It will help to protect a business’ reputation and give transparency to its commitment to its ethical conduct.

An ESG policy should be high on any employer’s agenda.

Contact Karen Cole for assistance with your ESG strategy and policies or for advice on supporting your employees.

Note: This article is not legal advice; it provides information of general interest about current legal issues.

Stay in touch

Subscribe to our newsletter

Stay in touch

By completing your details and submitting this form you confirm you are happy for us to send you marketing communications and that you agree to our Website Privacy Policy and Legal Notice and to us using Mailchimp to process your data.


Sending

News/Insight

  • Why is clear contract drafting important?
    How simple contract clauses can protect your business.


    Read more
  • Ensuring equality: A legal guide to responsibilities and compliance
    Understanding equal opportunities in the workplace


    Read more
  • Navigating the Economic Crime and Corporate Transparency Act 2023: What it means for your business
    The Economic Crime and Corporate Transparency Act 2023 (the Act) represents a significant shift in the UK's approach to combating economic crime, improving corporate transparency, and anti-mo


    Read more
  • Blowing kisses, not boundaries
    Tribunal clears air on workplace etiquette.


    Read more
  • Estate planning: How not to make mincemeat of it!
    The High Court has confirmed that a will handwritten on the back of two cardboard food packages is legally binding.


    Read more

What they say...

  • C Smith, March 2025
    “As executor of a will it was a relief for a solicitor to act on my behalf as though no disputes it was still a lengthy and complex process. It was dealt with mostly by Charlotte B. who kept me informed at all times. She explained the process c

  • Marc, March 2025
    “RIAA Barker Gillette were engaged to handle a real estate transaction with unusual circumstances. As a non-UK resident unfamiliar with English conveyancing procedures, I felt completely satisfied with the depth of the information and explanati

  • Leigh, March 2025
    “Instructed Martin on my first property purchase. He was a delight to work with, kept me informed and updated regularly. It was an incredibly smooth and quick process. Couldn’t be happier.”

  • Ms Brownell, March 2025
    “Patrick was amazing from start to finish. He made the process so easy, and explained each step in detail ahead of time so I’d understand what would happen and when. He was incredibly organized and noted every detail, calling out things t

  • Roman Cassini, February 2025
    “Peter Wright – highly recommended solicitor, helped us though a complicated flat sale with consummate professionalism.”

Read more
Send this to a friend