A new focus on employee and stakeholder engagement – why businesses should prioritise social, environmental and ethical considerations

2nd July 2020

Businesses are revolutionising the way they think about and do their business.  Many employers recognise that companies have a crucial part to play in environmental, ethical and social challenges.  The idea is that engaging with stakeholders in a meaningful way on such matters will create shared and sustained values – and will ultimately lead to greater success (and therefore profits) for the company.  This concept is known as “stakeholder capitalism”.

Businesses will have already implemented a significant amount of change due to the coronavirus pandemic and the associated economic consequences – but many have recognised that now is the time to embrace further challenges and continue the conversation with employees, customers and suppliers.  We’ve identified three themes which have a key role to play in the overarching concept: employee engagement; equality and diversity; and environmental and ethical commitments.

Employee engagement

There’s been an increased focus on meaningful consultation with staff at every level in seeking to save jobs and make workplaces “Covid-secure”.  How can this be developed further?

• Recognition and retention – What does fair remuneration and reward look like for those who have been key in keeping the business running during the pandemic? There have been calls for a culture shift in the way we think about the use of the National Minimum Wage and the value of certain roles, which will likely form part of the wider discussion about the future world of work.  But it is also the softer-side of employee engagement that is key, particularly in difficult economic times.  An increased focus on employee recognition, mental health and wellbeing, and embracing the ideas of staff members, can lead to greater job satisfaction.  Many businesses, such Company Shop Group, are using LinkedIn and social media channels to regularly share positive stories about staff members’ contributions and thank their #hiddenheroes – which can go a long way to making employees feel valued.
• Employee shareholdings – To date, employee share ownership and share incentives have typically been reserved for senior management. As we move forward, more companies may choose to extend employee ownership to the wider workforce.  Offering share incentives as an alternative to cash incentives can offer significant cash flow advantages to companies whose finances may have been significantly impacted by lockdown.  John Lewis and, more recently, Richer Sounds, are leading examples of the total employee ownership model.  With proper thought, a share incentive proposal can be designed to meet the needs of most employers – while also demonstrating commitment to long-term investment in employees.
• Board representation – Despite a pledge in 2016 to make it mandatory for companies to include worker representation on boards of directors, the government backtracked and announced that it would not be compulsory. The UK Corporate Governance Code, which came into effect for financial years from 1 January 2019, instead gave companies three options: invite an employee to sit on the board; designate a non-executive director as the workers’ champion; and/or create an employee panel – however, compliance is not mandatory.  While there are some exceptions such as FirstGroup, UK companies have generally been reluctant to embrace worker representation – in direct contrast to most other European countries, where employee representation on boards is commonplace.  The pandemic and resultant changes may well encourage directors to re-evaluate the structure of their companies, to find innovative ways of including employees in strategic decision-making.

Equality, diversity and inclusion

Part of the conversation is being driven by a commitment to equality in the workplace.  In the wake of recent events in America and resulting protests and campaigns for equal rights across the world, many brands and companies globally have expressed their commitment to equality and diversity, including, for example, Kraft Heinz’s CEO Miguel Patricio, who has implemented a new value: “We demand diversity“.  Businesses will now be working on putting those commitments into action.  How can that be done?

• Structured approach – Much in the same way that employee representation should feed in at board level, creating a working group to champion equality and diversity will likely be the first step in implementing a Diversity Action Plan. Employees can then share ideas and concerns with that working group and encourage a review of company practices such as recruitment processes, availability of apprenticeships and accessible advertising campaigns.  While a zero tolerance approach to discrimination, bullying and harassment in the workplace must of course continue, it is clear that this alone is no longer enough.
• Mentoring, training and grass-roots initiatives – There is an acknowledgement that change is not instant but will require energy and time. A lack of representation of BAME individuals at board level cannot be addressed without encouraging school-age children to develop career aspirations.  Companies should consider grass-roots initiatives such as mentoring programmes and careers talks at schools across a range of communities, with a focus on disadvantaged backgrounds.  Similarly, equality and diversity training, which should educate staff about the full range of protected characteristics, should no longer be a once-a-year, tick-box exercise. This can be bolstered with meaningful sessions to promote understanding and inclusion of those from ethnic minorities, the LGBQT+ community, and individuals with disabilities – perhaps by hosting a series of events with speakers from diverse backgrounds, to share experiences and ideas.
• Data and transparency – We have already seen a focus on the Gender Pay Gap, which UK companies have been required to report on since April 2018 (albeit there has been a temporary pause on this requirement in light of the pandemic). The government has undertaken a consultation in respect of Ethnicity Pay Gap reporting, which closed in January 2019, but this has yet to be actioned into policy.  However, some companies such as PwC already voluntarily report on their Ethnicity Pay Gap; with the importance of transparency on such issues growing, others may follow suit.  In addition, while a number of employers such as Lloyds Bank have already signed up to The Race at Work Charter, it should now be widely recognised by businesses that racial and ethnic diversity in the workplace is advantageous and should be actively supported.

Environmental and ethical commitments

Increasingly, consumers want to buy from and employees want to work for companies which are environmentally conscious and committed to sustainability and ethical programmes.  Many are calling this the “Greta Thunberg” effect.  How can this benefit businesses?

• Reducing the carbon footprint – The home-working experiment resulting from the pandemic has already shown huge benefits in terms of the reducing carbon emissions. As a result, many companies have revised their policies to promote agile working in the long-run, with Twitter announcing it would be allowing staff to work from home forever.  Businesses have also proved that there isn’t necessarily a need for significant work-related travel in the future to see clients and customers, with the use of technology to conduct meetings and social events being more successful than expected.
• Sustainability – There are already many examples of companies investing in environmentally friendly programmes and low carbon commitments. Lucozade Ribena Suntory’s “Growing for Good” initiative is one such example – and they have recently invested to extend a partnership with researchers to develop new varieties of climate-resilient blackcurrants.  Such initiatives are only set to increase, particularly given the UK’s commitment to implement the single use plastics directive and its planned tax on plastic packaging that does not contain at least 30% recycled plastic: as a result, sustainability programmes are likely to be high up on the agenda.
• Ethical considerations – Many consumers (and employees) have a growing concern regarding matters such as meat and dairy farming – and we have seen this play out in the increased trend towards plant-based diets and veganism. This movement is only set to grow in the food and drink industry, with an increasing number of challenger brands producing plant-based choices, including The Meatless Farm, which is the UK’s fastest growing meat alternative brand.  Companies will also want to ensure that ethical considerations are feeding through their supply chains, which will require a review of existing relationships and the implementation of due diligence exercises when considering future partnerships.

While change can be difficult to implement, it is evident there are only positives to be gained from businesses making environmental, ethical and social challenges a priority – with the ultimate goal of long-term and sustainable success.

Watch our recent webinar on the topic of employee engagement and future HR trends.