` The top three ESG factors influencing reward and benefits strategy - and how to improve them | Reward and Employee Benefits Association (REBA)
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11 Jan 2022
by Justine Woolf

The top three ESG factors influencing reward and benefits strategy - and how to improve them

The concept of environmental, social and governance (ESG) has grown in prominence in recent years, particularly as organisations look to demonstrate to internal and external stakeholders that they take responsible practices seriously.




The correlation between ESG information, a company’s culture, values and strategy, and its performance is increasingly clear: companies that commit to equitable, fair and sustainable business models really do outperform those who merely meet their legal obligations.

The focus when it comes to reward tends to be more social and governance than environmental, typically because environmental factors often relate to tangible environmental outputs like CO2 and plastic waste. And, let’s face it, we are all about the people. On the back of the pandemic, the desire to build back better, and global movements of #metoo and #blacklivesmatter, considerable focus has been made to reframe reward and benefit strategies and accelerate responsible reward.

One top area of focus influencing strategy is mental health and wellbeing. With a recent report from the Health & Safety Executive indicating stress, anxiety and depression as the cause of half of all work-related illness in the last year, and Glassdoor analysis highlighting that employee burnout has doubled since lockdown ended, the “it might be nice to have” attitude has changed to “it’s non-negotiable”.

Different paths to wellbeing

Before Covid-19, organisations were on different paths with wellbeing offers – some had a set of random, disconnected benefits, while others had a clear proposition aligned to standard pillars of mental, physical and financial wellbeing. The key is to create a defined wellbeing strategy - a long term plan of action that uses resources to achieve wellbeing goals or solutions. This enables an organisation to be clear about the goals, what they are trying to achieve through long term, and how this links a people plan and business goals to ESG ambitions.

Vitality’s Healthiest Workplace Survey illustrates that, on average, small organisations offer 25 health interventions and medium and large organisations offer 30 health interventions, but only around one-third of employees know about the support available. If your strategy is to improve mental health and wellbeing, adding the Headspace app or improving counselling on your EAP won’t do much. Think carefully about what change you really want to make, how you will deliver it and how employees can access it.

Big shift towards EDI

Another key area of ESG focus currently is equality, diversity and inclusion (EDI). According to the REBA/AXA Health Employee Wellbeing Research 2021, there has been a big shift in the proportion of employers whose diversity, equality and inclusion teams tie into their wellbeing strategy, or indicate it will happen in future.

This reflects the growing awareness that standardised approaches to wellbeing aren’t as effective and that meeting a diverse set of needs is increasingly what employees, clients and customers demand to feel valued and stay loyal.

The view of EDI isn’t consistent across wellbeing pillars, and REBA highlighted only 1 in 8 respondents consider diversity, equality and inclusion in their financial wellbeing strategies. However, this area may become more pronounced as those hit hardest by the pandemic include women and low-paid workers, widening the social divide.

We are also seeing more companies looking to go beyond the basic requirements on gender pay, with many digging deeper to understand what is driving pay inequity. Likewise, more businesses are proactively conducting ethnicity and disability reporting as well as more detailed equal pay audits. This must be a key focus if we want to understand and measure success. While many companies have strategies to increase gender or ethnicity diversity in leadership teams, the McKenzie-Delis Packer Review found fewer than half had specified diversity in succession planning.

Building a community at work

Finally, the third top area of focus from an ESG perspective influencing reward and benefits strategy is community. While many organisations ‘leaned in’ to support their local communities in 2020, relationships with these communities seemed to be less strong this year. While some organisations are developing community strategies, many have understandably focused more inwards than outwards.

As business leaders struggle with mass resignations or fear of attrition, responsible business and purpose are a key part of the employee value proposition and evidence of making a positive societal impact is part of this. Linked to this is employee connectivity, how aligned employees feel to a company purpose and if they see opportunities to make a difference.

According to Mckinsey, the lack of a sense of belonging was one of the most frequently cited reasons why employees left a job in the past six months. Hybrid working and lockdowns have massively impacted a sense of community at work. In-person connectivity continues to have massive benefits for organisations, but it requires considerable management attention to get right. An effort needs to be directed to bring people together, even if still virtually, and strategies to improve community need to ensure we include social recognition, celebrating success and giving back.

The author is Justine Woolf, director of consulting at Innecto Reward Consulting.

This article is provided by Innecto Reward Consulting.

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