How green is your employee benefits strategy?

The benefit that could be doing the most damage to the planet might also be the one you thought was doing the best for employees: pensions

There are several benefits within the broader benefits mix that can either be doing good or bad for the planet. For example, a cycle-to-work scheme is good for employees’ health and wellbeing, but it’s also good for the environment.

The cycling campaign and promotions organisation Cycling UK says that employees who choose to cycle to work, rather than drive, could be saving half a tonne of CO₂ or 6% of their annual carbon footprint based on a daily four-mile commute.

With the end of the sale of new petrol and diesel cars by 2030 and hybrids from 2035, electric vehicle salary sacrifice schemes are a great way of encouraging sustainability while also helping employees step up to the goal of greener travel.

Remote working is another example of saving commuting related carbon emissions.

Burning up the planet

But in terms of impact, all these examples are small fry compared to the biggest potential game changer in the mix: pensions. Not many people realise that the average pension pot is helping to finance 23 tonnes of carbon emissions every year, the equivalent of burning over 1,000 coal fires a year or running nine family cars.

As a business, you may be making headway on the sustainability front – changing business processes and practices to really make a difference. But one of the biggest bills you’re paying every month could be creating more environmental damage than the business itself – effectively undoing all your good work.

Multiply the 23 tonnes figure by the number of employees you have and you’ve got a rough estimate of the impact your workplace pension scheme could be having on climate change.

It’s also about mixed messaging to stakeholders – especially employees.

Aligning to employee values

You might be publicly announcing how well your organisation is doing on the sustainability front and maybe you’ve gone as far as becoming a certified B Corporation. But despite all this great work, your workplace pension could be at odds with your public image.

Although climate change is the biggest challenge we’re currently facing, sustainability is a much wider issue. Employees, arguably the biggest stakeholder to consider, want their pension savings to be better aligned with their personal values. This could be in terms of improving animal welfare, dealing with poverty and homelessness, tackling biodiversity loss or stopping plastic pollution.

It’s basically about employees wanting their pension savings to be a force for good and change in the world. Everyone is waking up to the fact that investing responsibly doesn’t have to mean sacrificing returns.

It’s possible for pension investments to do good in the world and achieve good investment returns. It doesn’t have to be a trade-off. In actual fact, if you think about it logically, those businesses that are transitioning to a new, more sustainable world are the profit makers of the future. They are at the forefront of new technologies.

Sustainable investing

Pension investments are about investing in and for the future and the world is moving to a new, very different way of living. Sustainable investing is not only about aligning to organisational and individual employee values, it’s about looking after employees’ futures.

The good news is that the power of change ultimately lies in your hands and it’s simply about questioning and challenging the status quo. For example, what’s your pension provider’s Net Zero transition plan? Many providers have publicly announced targets, but is there a robust transition plan to substantiate these?

Cushon offers a Net Zero pension through a combination of reduced emissions and carbon offsets. We’ve already delivered a 60% reduction in financed emissions and have a Paris-aligned commitment to 7% ongoing annual reductions.

And if the answer from your provider is not good or detailed enough, then it’s time for a change of pension provider: 69% of employees are concerned that their pension is contributing to the climate crisis and 88% are looking to their employer to take action to address it.

Aligning all benefits to organisational values is important, but workplace pension schemes represent the biggest people cost to a business and, with their massive environmental impact, they have to be the main focus for change.