How to leverage benefit strategies to help meet ESG goals in 2025
Increasingly, employers are defining and acting on their environmental, social and governance (ESG) strategies.
The exact shape of these can depend on whether you are part of a large multinational corporation, a small business that serves the local community, or something in between.
Regardless of size, there are ways most employers can use their benefit strategies to reach their ESG goals.
Pension schemes
The clear place to start for most employers is with their pension schemes, which naturally covers the social element of ESG.
But with a little effort and employee education they can address the environmental part too.
The social aspect to ESG centres on a business’ stakeholders and making sure employers have a fair and equitable relationship with them.
For many employers, their most important stakeholders are their employees.
Having a pension scheme where the percentage of employee contribution matched by the employer is high helps to ensure the relationship between the two parties is equitable.
Understanding the membership of their pension scheme can help employers tailor benefits and make pension communications accessible, which both contribute towards social goals.
For example, it may not be worth offering a generous spouse pension if most of your scheme’s membership is unmarried.
Having an open forum where employees can feedback to employers on the types of benefits they need also helps them to feel listened to by management, which is part of the governance element of ESG.
Pension schemes can also support the environmental pillar of an employer’s ESG goals.
Employers and pension scheme trustees should be considering where their pension scheme assets are invested and asking their investment advisers about their ESG credentials.
Dedicated funds
For employers to better meet their ESG goals, there are now many options for dedicated ESG funds that pension schemes can invest in.
Placing part of a wider portfolio in an ESG fund not only ensures environmentally and socially responsible investing, but also covers the pension scheme’s fiduciary duty to members through diversification.
Even where investment advice does not indicate that dedicated ESG funds should be part of the strategy, it shouldn't stop trustees and employers of defined benefit and defined contribution schemes from making a difference.
Regular engagement with the investment managers on environmental points should over time improve all funds and ensure that environmental thinking becomes embedded in employer and trustee thoughts.
Small employers and their employees without their own pension scheme can also participate in ESG funds and invest their assets responsibly too, without the need for a tailored investment strategy.
Many popular master trusts like NEST which manage the pension schemes of many unrelated employers will default to investing employee’s money in a basic fund, but the option to invest in things like ESG and Sharia funds are available.
Ensuring that employees know about these options and how to access them form a key part in employer benefit strategies helping to meet their ESG goals.
Volunteer days
The social element of ESG goes beyond stakeholders too, considering a business’ impact on the community it’s part of.
As such, giving employees access to (or even organising) paid volunteer days for projects they feel passionate about can engage employees and help employers meet their ESG goals.
Some companies will choose a charity each year to donate too.
This can be an effective way for employers to meet their ESG goals, but volunteering days can go a step further.
Volunteer days can help employees bond not only with each other, but also feel a real ‘hands on’ sense of giving back to their community.
This effect is only amplified if, in a multi-regional or national business, employees are allowed to volunteer with projects local to them.
This allows employers and employees to have a direct impact on the communities they’re involved in, something which can be missed if just a single charity is chosen to donate to for the year.
Mentorship programmes
When it comes to employee benefits, the governance pillar of ESG can seem difficult to address.
Governance in ESG usually involves risk management, internal management practices, policies and controls, as well as regulatory compliance.
But it is also about fostering a culture of integrity, accountability and transparency.
This is where offering benefits like a mentoring programme between senior and junior employees can help companies reach their ESG goals.
A good mentor can embody an employer’s ESG values and pass them on to the mentee.
Meanwhile, the junior mentee can help keep the senior employee accountable and the decisions they make transparent.
In a successful mentorship programme, employees can work together to create a working environment that is more respectful, equitable and diverse.
What is clear is that when employers design their benefit strategies, they can create something that supports their wider ESG goals relatively easily.
However, it’s important to consider all three ESG pillars and listen to employee needs.
While the often offered cycle to work and electric car benefits are helpful for many, it’s important that benefit strategies don’t get stuck on the environmental.
In partnership with Vidett
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