REBA Inside Track: To align benefits and reward with ESG HR teams need to work differently

After talking to a myriad of employers and reward experts about climate change and a future cleaner, greener sustainable environment, I can see the dots starting to join up between employer, investor and employee actions.

First, organisations are going to struggle (and possibly fail) to meet targets linked to environmental, social and governance (ESG) without having new skills in the business. Trying to go green by changing how a pension fund is invested or switching the fleet to electric cars is largely tinkering around the edges. Important tinkering, to be fair, but a long way from sustainable change.

Instead the focus needs to be on the people within the organisation; their creativity, adaptability and willingness to learn new skills. Mapping the skills a company has today against the skills it needs in five or ten years’ time is an area very few employers appear to have achieved. Not only because it is so hard to do, but also the half-life of a skill has shrunk dramatically. A skill you could once learn and keep using for 10 to 15 years is now fairly rare; we’re having to learn new skills more frequently, and expect them to have become less relevant within a few years.

Building an ESG-focussed reward and benefits package, therefore, means also working out what needs to be in it that will encourage employees to learn, develop and evolve their skills, while at the same time support employees to adapt to change and not feel overwhelmed by it.

But what if your leadership team do not even understand what is coming down the line? Many Boards are expected to be slow to adapt because they lack ESG experience. Unless they have the skills to understand the science behind climate change, they will not spot the risks of not adapting nor the opportunities of taking environmental shifts into account for future corporate strategy.

How executive incentives are structured will play a major part in how minds get focussed when to comes to ESG. Increasingly investors are pushing CEOs away from short-term targets to long term sustainability and purpose. Performance incentives will shift to align to these new demands, so behaviours and timescales should change over time.

Employees themselves are increasingly cited as a major pressure group to get their employer to change the way it does business, how work is done and the environmental impact of current products and services. These employees are a rich source of advice for employers researching which benefits and reward incentives to offer that will closely align to the life needs and aspirations of those wanting to work for a cleaner, greener employer.

For the foreseeable future, reward and benefits teams will need to keep talking to all stakeholders in order to adapt offerings and support the business transformation towards a cleaner, greener sustainable environment.

The author is Debi O’Donovan, director at REBA.