Incentivising staff in a green economy: green benefits

Environmental, social and governance factors (ESG) alongside sustainability are hot topics in business right now. Employees are increasingly scrutinising what employers are doing to promote sustainability, not least in the benefits they offer.

ESG is a tool that can be used to measure sustainability within organisations and should not be an afterthought for businesses. It is increasingly becoming fundamental to financial performance, reputation and long-term success and businesses will find that investors, clients and customers are keen to know what is being done to drive sustainability before committing to working with an organisation. Alongside these groups, employees are also increasingly making career choices based on a company’s ESG credentials and businesses that want to remain competitive and attractive to talent should be mindful of how they promote a sustainable environment for their workforces.

Commentary suggests that to date, there has been very limited attention paid to how a business’ ESG performance affects its workforce – an interesting observation given the current relevance of ESG within organisations. Studies show that the ESG performance of a business can impact on employee attraction and retention and that the top employers in these areas have higher ESG scores than their competitors. So what can employers do to ensure they are retaining and attracting talent which values sustainability and ESG?
A good starting point is to look at existing employee terms and benefits and to what extent they currently promote sustainability within the business. 

Sustainable travel

Many employers will already have a cycle to work scheme in place and for those that don’t, it is an easy place to start. Most cycle to work schemes allow an employee to pay for a bicycle over a set period of time without having to pay any interest or tax on the bike. This encourages employees to cycle to work, resulting in decreased car emissions but also with the added benefit of increased employee health and wellbeing.

Employers may wish to consider introducing additional incentives to walk or cycle to work or where that isn’t possible, to take public transport rather than drive.  One idea is to provide employees, who walk or cycle to the office, with a green travel allowance. Employers could also look at deterring employees from driving to the office by subjecting them to a daily parking charge which is then donated to charity.

Another green incentive which is becoming increasingly popular is the offering of electric vehicles as company cars instead of petrol or diesel cars. Employers could look at offering a salary sacrifice scheme for employees to purchase electric vehicles, similar to the cycle to work scheme, to maximise the tax advantages of the benefit. Installing electric vehicle charging points in the workplace car park will also encourage employees to consider the use of electric vehicles for their commute to work.

Looking outside the workplace slightly, employers may wish to consider incentivising their employees to travel green when going on holiday. Offering additional leave if they choose to travel in a sustainable way or if they decide to remain within the UK for their holiday are two further ideas employers could consider.

Corporate responsibility

Corporate responsibility has always been on the agenda for most employers but now it is even more important to review current practices and volunteering opportunities for employees. As part of any plan to attract and retain talent, employers could allow their employees to take a paid day off work to volunteer for a charity as an additional benefit. Employers could also actively choose to support charities championing environmental or sustainable causes.

When employees are placed on garden leave, employers could ask employees to volunteer during this time to help charities and organisations who promote ESG and sustainability. Any request would need to be reasonable and employers should consider incorporating the possibility of such a request into the employment contracts of employees.

Bonuses and incentives

ESG is starting to play a part in setting senior management pay and bonus objectives within businesses. This started predominantly in the US but is now appearing within UK companies. Research shows that 45% of FTSE 100 companies have an ESG target included within their annual bonus scheme, long term incentive plan or both.

Organisations looking to implement ESG targets and objectives within bonus schemes should ensure that they are clearly linked to the organisation’s overall strategy.

Sustainability within businesses is developing every day and there are not many incentives that will provide a quick fix for employers. This should be taken into account when setting objectives and employers should consider how they will measure progress and achievement.

It doesn’t have to stop at senior management level either. Similar incentives can be applied to the wider workforce. Employers could consider introducing or changing an existing bonus scheme so that a percentage of bonus paid out to an employee is matched by the employer and paid to a charity or organisation promoting sustainability.

Pensions, a benefit most employees receive, is often overlooked when a business is reviewing how it can provide more sustainable or green benefits. Employers should consider what pension funds are being used and where money is being invested , for instance is it in sustainable companies championing ESG themselves?

With energy prices rising, an employee’s access to energy will be a key factor for many. Employers could support employees in this regard, not just by looking at pay increases but perhaps also by providing allowances for employees choosing energy providers that have a higher reliance on renewable energy sources or supporting employees in accessing greener energy more generally.

Diversity and inclusion

The ‘S’ in ESG refers to social factors. An element of this will be how well an employer manages its people and the communities within the workplace.

Employee networks are a useful tool for making employees feel included and to raise awareness of the diversity of the workplace. These can be employee-led but support from management will also go a long way to encourage such networks to begin and thrive. Culture within an organisation will also play a part how inclusive the workplace is – employees want to feel comfortable to be themselves and value their wellbeing as a top priority. Employees will look to organisations to reflect their culture and values from the top down, and this will be a key factor in retaining and attracting talent.

Employers should also look at inclusion and diversity aspects of their recruitment practices to ensure they recruit and retain diverse talent. In addition, employers should review their procurement processes more generally and consider how much emphasis is placed on employee welfare and diversity when making procurement choices.

A diversity and inclusion policy is also a good place to start for employers looking to increase their corporate governance. Ethical practice is key and employees will be looking at their employer to check that they are trading and working with suppliers who also commit to ethnical practices. Ethical practice will also extend to appropriate pay and working hours. Employees want a work life balance more than ever in this new hybrid working world and with the cost of living rising, businesses should consider how they can ensure their employees, especially those who fall into certain diverse groups, are not disadvantaged in the current financial climate.

Does incentivising employees with green benefits work?

SME’s and startups may struggle to provide a full suite of green benefits compared to large and medium corporates. However, these companies should remember that any actions they can take, even on a small scale, will contribute to their ESG goals.

Clearly, in the current climate with disrupted supply chains, rising prices and the energy crisis, there are many competing priorities for organisations and offering green benefits may be seen as a nice to have in the future rather than an immediate need. However, the statistics clearly show that sustainability and environmental impact are important to a large proportion of the workforce and it will be a brave employer that does not tap into the opportunity that providing green incentives offers in attracting and retaining talent.


This information is for general information purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. Please contact us for specific advice on your circumstances. © Shoosmiths LLP 2024.



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