Good governance, Social impact
Last week, my colleague Alice gave us an insight into what ESG is and its advantages in an employment context. For those who missed it, you can read the article here. As Alice explained, in an employment context the “S” and “G” in ESG tend to be the most relevant, with (broadly speaking) social referring to how a business manages its relationship with its employees and workers, and governance referring to how it approaches its leadership, decision-making and internal practices.
This week, we consider practical tips for employers on how to put this into practice. There are a myriad of ways to do so and it’s not possible to cover everything, but the points below will assist employers to reflect on their identity and culture and identify steps they may wish to take for the future.
1. Conduct a culture review
Different employers will be at different stages in their thinking on culture and diversity issues. For those who find the prospect of ESG daunting, it can be helpful as a starting point to take stock of where your business is starting from.
What is your business’s culture? Are there any cultural issues that need investigating? Have you analysed diversity data across different aspects of your business (recruitment, disciplinary / grievances etc)? You might use surveys to assess how employees think the organisation is doing on diversity and cultural matters.
The organisation’s values will also be relevant to its culture. Values will be set from the top down and must be lived at all levels of the organisation. Are they clearly articulated and capable of being understood by employees? Are they relevant and in line with modern day values? Once you have identified your culture (or desired culture) any “cultural slippage” should be challenged and appropriate action taken where boundaries have been transgressed.
2. Consider an equality, diversity and inclusion strategy
Employers looking to embed ESG may wish to consider an equality, diversity and inclusion strategy. This goes further than policies and legal compliance, and can be developed to cover all areas of the business, set clear goals, collect and analyse data, identify gaps and areas of concerns, outline steps to address issues and monitor the progress being made. We discuss creating an effective EDI strategy in this article.
3. Review your recruitment practices
The recruitment process is the first opportunity for your business to send a clear message about who you are to applicants and the wider world. Employees are more alert to inequalities in the workforce than ever, and employers should frequently review their processes to check whether recruitment criteria could be directly or indirectly discriminatory or not as inclusive as they could be.
The recent case of Macken v BNP Paribas provides an example of recruitment practices gone wrong. Among other things, the Tribunal found it could draw negative inferences of discrimination from the lack of records and transparency in the recruitment process. Ms Macken was subsequently awarded over £2m for her claims of sex discrimination and equal pay. For more details on the case, see my colleague Caitlin’s blog.
Ensuring that recruitment practices are fair is key. Reviewing your practices might include:
- checking selection criteria / job descriptions for direct / indirect discrimination on the grounds of any of the nine protected characteristics under the Equality Act 2010 (age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation),
- ensuring any equal opportunities statement is put into practice,
- reflecting on how to eradicate bias at the recruitment stage, for example accepting “name blind” CVs (in which identifying features of candidates are removed) and having more than one person on an interview panel, and
- ensuring recruitment decisions are objective and recorded accurately and thoroughly. The case of Macken shows that the use of subjective language such as “pleasure to work with” and “good cultural fit” can in certain circumstances allow for an inference of discrimination to be drawn. These should be avoided and instead there should be a greater reliance on objective metrics.
4. Consider “positive action”
Positive action enables employers to take steps to improve equality for employees who share a protected characteristic, without opening themselves up to discrimination claims. Employers can take action to tackle a disadvantage, different need or disproportionately low participation experienced by people with a protected characteristic, provided it’s a proportionate means of achieving one of the aims in the legislation. Positive action is voluntary, and where an employer takes steps that satisfy the conditions, they may be able to rely on it to defend a claim of unlawful discrimination.
Positive action should not be confused with positive discrimination, ie preferential treatment of a person because of a protected characteristic, which is unlawful.
Examples of positive action include inviting applications from target groups, providing mentoring / work shadowing and creating work-based support groups. For further details on the types of action that can be taken under positive action, including the specific provisions that can be used in the context of recruitment and promotion, see my colleague Katie’s blog here.
5. Provide regular and targeted training
The education and training of all staff is an essential part of creating a safe work environment. Training is also an opportunity for employers to bring their values to life. EDI training, for example “unconscious bias” training, should be provided to staff on a regular basis (as explained in our blog Don’t let your equality and diversity training go “stale”).
6. Monitor policies on an ongoing basis
Policies should be regularly reviewed to ensure they remain coherent, relevant and legally compliant, and the impact of any ESG measures should be monitored over time. You may find it helpful to engage an external organisation to review ESG in your organisation, to act as a critical friend on the measures you’re considering or have already implemented and / or to provide more ideas about what more you might wish to do.
7. Deal with concerns – listen, observe, act
Grievance policies should provide employees with a clear channel for raising their concerns. Even if a complaint doesn’t describe itself as a grievance, it shouldn’t be ignored. It may be that the matter can be resolved on an informal basis such that a formal process is not needed, but disputes are likely to arise where managers fail to take allegations seriously or to follow the prescribed procedure. This can harm employee confidence that they will be listened to and act as a deterrent to reporting concerns. Where concerns are raised, take appropriate, proportionate steps to address them under the appropriate policy, including considering whether disciplinary action is appropriate and ensuring that employees who raise concerns are protected from detriment as a result.
Prioritising ESG has clear benefits from a cultural and commercial perspective. At a time when employers are increasingly expected to reflect on their culture and impact, embracing ESG is one important way of doing so.
With special thanks to Iman Kouchouk, a current trainee in our Employment team, for her help in preparing this blog.
If you require further information about anything covered in this blog, please contact Tabitha Juster or your usual contact at the firm on +44 (0)20 3375 7000.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, May 2022