As simple as E.S.G.? – pre-empt the challenges of implementing an Environmental, Social and Governance (“ESG”) agenda
Having in place a genuine ESG agenda counts for a lot in today’s employment market. As well as appealing to prospective employees, it also attracts attention from peers who can view open reports.
As such there is growing support (and increased pressure) for employers to consider how they can operate their business in a manner which is as sympathetic as possible to ESG considerations. For example, businesses are responding to the challenge of climate change through finding innovative ways to reduce carbon emissions and increase sustainable practices, such as rethinking their use of disposable materials or increasing their use of green or public transport options. Doing so can however, create challenges from an employment law perspective.
So, to what extent can an employer require their workforce to comply with any ESG initiatives? A simple way to formalise a change to internal working practices is to introduce a new policy or to amend an existing one. This doesn’t require any explicit consent from your employees so is arguably the most straightforward way to set out your plans. The downside is that enforcing a policy can be difficult, so it might be preferable to instigate an update to contractual terms (this will be required in any event if the relevant policy is contractual in nature).
Updating contractual terms lawfully will involve a little more legwork than the policy option, including communicating the changes to your employees and getting their explicit consent. If they do not consent to the change, then their contractual terms will not technically have been updated because an employer cannot unilaterally enforce a change to contractual terms. Carrying out a short consultation process to engage employees with the proposed changes may increase the likelihood that you will get a high level of agreement to the updated terms.
More broadly, the increased focus on ESG agendas fuels the debate surrounding what is and is not a protected philosophical belief for the purposes of the Equality Act 2010 (the “Equality Act”). Where a belief is deemed protected under the Equality Act, individuals holding such a belief will be protected against discriminatory practices. For example, if an employee reasonably chooses not to comply with a policy because it would contravene their protected belief, an employer cannot compel that employee to comply without exposing themselves to the risk of a claim under the Equality Act being brought against them by the employee.
Where there could be some resistance to the implementation of policies, for example, if they arguably support some political agenda, the extent to which these policies risk straying into discrimination territory must be taken seriously. The Employment Tribunal has already considered the extent to which ethical veganism can be protected from discrimination in the case of Mr J Casamitjana Costa v The League Against Cruel Sports. In this case, ethical veganism was found, in a non-binding judgment, to be a protected philosophical belief. So, in a rather speculative way, it is possible that this shift in commercial focus could result in an increase in employment law developments.
An additional prediction, also related to ESG agendas, is the scope for protected disclosures (whistleblowing) to be made which expose employers’ “greenwashing”, i.e. insincere efforts to appear to be supporting a green agenda, or similar. It is clear that only realistic and genuine efforts, policies and contractual terms should be promoted, and equally, employers should be alive to the protections afforded to potential whistleblowers and to the correct way to respond when an employee comes to them with a potentially protected disclosure. Demonstrating ESG credibility through setting ambitious goals and having strong data-based credentials can help avoid charges like greenwashing – for example aligning your sustainability work with science-based targets, or another framework.
The current focus on ESG is leading many businesses into new territory in what is an exciting, yet challenging, time for employers. Developing ways in which your business and employees can do their bit to support sustainability and other ESG initiatives is an important role and one not to be shied away from. But, implementing these practices needs consideration and careful planning to reduce the potential risks.
If you wish to discuss the above in any more detail or have any other employment or HR law related issues, please contact Joe Beeston, Counsel, or Nina Gilroy, Legal Executive, in our Corporate group.
Disclaimer
This note reflects our opinion and views as of 9 February 2022 and is a general summary of the legal position in England and Wales. It does not constitute legal advice.