Aligning employee benefits with your corporate ESG strategy

Businesses are repositioning themselves in the market by adjusting their operations and service offering to better reflect society’s rapidly evolving expectations regarding environmental, social and governance (ESG) standards. Employee benefits should not only reflect these values but also amplify them to improve the company’s image and reputation and attract and retain the right talent.

In today’s competitive labour market, the decision to join or stay with an employer is increasingly influenced by the organisation’s stance on ESG, making employee benefits a core area to explore.

Depending on the business’ ambitions, there is a wide range of options to select from to address all three ESG components.

The “E” in ESG

The increased concern about the consequences of climate change means that employees and applicants expect an employer to prioritise workforce sustainability. Millennials and ‘Gen Z’ generations are showing (opens a new window) to be more mindful of the world and their impact on it. Promoting benefits in this space can have a real impact on the image and reputation of a company.

  • Cycle to work

This is perhaps the most obvious tool in the environmental component. It can save an employee more than 25% on a bike and accessories. The employee doesn’t need to pay anything upfront, and the payments are taken tax efficiently from the salary by the employer. While the emphasis lies on the environmental aspect, employees taking advantage of this offering may also benefit from a health and wellbeing perspective.

  • Electric cars

Electric vehicles can be offered on a salary sacrifice basis, helping to reduce one’s carbon footprint, improve air quality and reduce noise pollution. The salary sacrifice scheme allows employees to pay for an electric car each month from their gross salary, creating a tax efficient way to fund greener vehicles.

  • Pensions

Many employers are looking to help their employees with their financial wellbeing, and education on their pension fund investments can be an opportunity to align both financial and environmental strategies. Offering a green or ESG focused investment option for the pensions scheme can be a great opportunity for businesses to show their commitment to these goals. Excluding investments in sectors and industries that harm the environment may also offer better returns in the future as economies worldwide shift towards sustainability.

Other options to explore the “E” in ESG may include travel loans, car-pooling, carbon offsetting and ‘source local’ suppliers.

The “S” in ESG

This is arguably the most innovative of area in employee benefits. A variety of new solutions are addressing rapidly changing needs and expectations in society.

  • Fertility

Couples have been postponing having children, in many cases to allow women to focus on their careers. In England and Wales, the average age (opens a new window) of women giving birth for the first time is now 29.1 years, up from 23.7 in the early 1970s. This has created a growing number of couples struggling to bear a child when they feel ready for it, creating significant stress not only in the couple’s relationship but also potentially affecting their wider social and professional relationships. Businesses are therefore increasingly exploring support opportunities to offer clinical advice, financing and benefits for fertility, family forming, sexual and hormonal health, menopause, and reproductive health. Insurers have responded by developing fertility-specific benefits and support for employees.

  • Gender reassignment

Issues around transgender rights and gender reassignment have risen on the corporate agenda. There were 262,000 people living in England and Wales in March 2021 who identified with a gender different from their sex registered at birth, according to the latest Census 2021 (opens a new window) figures. The number of gender identity clinics available on the UK’s National Health Service (NHS) is limited and there is currently a long waiting list for support. Furthermore, procedures such as facial surgery aren’t usually available through the NHS.

To address the needs of this group and show the company’s commitment to diversity, equity, and inclusion (DE&I) values, businesses can consider offering specialist mental health support and benefits which align with the support offered through NHS. Furthermore, there may be options to extend medical coverage to include surgical interventions and support not readily available from the NHS such as surgeries to masculinise or feminise the face and hair transplantation.

  • Neurodiversity

It’s now widely understood that people experience and interact with the world around them in many different ways; and that there is no one "right" way of thinking, learning, and behaving, and that differences are not viewed as deficits. The word neurodiversity refers to the diversity of thought of all people, but it is often used in the context of autism spectrum disorder (ASD) and attention-deficit/hyperactivity disorder (ADHD) or learning disabilities. Businesses can support these employees as part of their DE&I initiatives by adjusting their group income protection set-up, by promoting financial support and education around basic budgeting and savings or by extending workplace benefits to dependants, particularly as the neurodiverse diagnosis waiting lists on the NHS can be very long (opens a new window).

Other options to enhance support within the ‘social’ pillar may include considering gender specific healthcare, wellbeing initiatives, introducing both flexible and trading annual leave, initiatives around corporate social responsibility (CSR), activities with charitable associations and fund raising, and engaging with internal and external networks.

The “G” in ESG

A higher level of transparency required by regulators through corporate disclosures has increased public interest in governance issues particularly at medium and larger companies. This has driven companies to pay more attention to their diversity and inclusion policies and their ambitions in this area.

  • Gender pay gap

In the UK, any employer with 250 or more employees must report their gender pay gap data. A large or even increasing gender pay gap may cause unease among staff and potentially also trigger uncomfortable questions from applicants or investors. Specific goals and a robust strategy are necessary to address the issue and convince stakeholders that the business is heading in the right direction.

  • Board diversity

Some companies are having to comply with regulators’ minimum requirements for board diversity while others are designing and implementing such policies on a voluntary basis. The benefits of a diverse board include improved decision-making, access to a wider pool of talent, enhanced investor relations and stronger corporate reputation. A strategy to create a diverse board should consider factors like age, race, gender, educational background, and professional qualifications of the directors to make the board less homogenous.

  • DE&I initiatives

Employers use diversity, equity and inclusion (DE&I) initiatives for both compliance obligations and to make the company culture more attractive to a wider talent pool. Developing a DE&I initiative should include the following steps:

  1. Data collection and analysis to determine the need for change

  2. Strategy design to match business objectives

  3. Implementation of the initiative

  4. Evaluation and continuing audit of the plan

Other initiatives to strengthen the “G” in ESG may include considering your remuneration policy, identifying young or rising stars, and policy management.

Lockton People Solutions help businesses of all sizes define their benefits strategy and design their programmes to reflect their business needs. For more details on our products and services, please visit our Global People Solutions page (opens a new window). If you’d like to speak with us about your benefits and how to ensure they’re aligned to your corporate ESG agenda, please get in touch:

Andrew Simpson

Vice President Employee Benefits

T: +44 7584 261949 (opens a new window)

E: Andrew.Simpson@lockton.com (opens a new window)

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