From Carbon Footprints to Workplace Morale: Seven Ways ESG Matters to Employees

Analyst Insight: With workforce engagement falling and turnover rates rising, employers must prioritize employee relationships. Establishing and sustaining a company culture is only the start of improving a work environment. 

Workforce engagement fell for the first time in a decade in 2021 — and it’s continued a downward spiral. Just 21% of employees feel engaged at work, according to Gallup’s State of the Global Workforce Report, and 45% said now was a good time to find a new job.  

That spells trouble for employers, who have dealt with rising turnover rates (up 9% since 2019), labor shortages, and soaring salary offers — meaning they have to offer more to attract new talent.  

It all comes as environmental, social, and governance (ESG) reports are quickly evolving from a differentiator to a business requirement. According to McKinsey, more than 90% of S&P 500 companies now publish ESG reports in some form, as do approximately 70% of Russell 1000 companies. 

Organizations must provide a good working environment for their employees — going beyond ESG benchmarks like carbon footprints. Employees should enjoy coming to the office every day. Their performance is higher when morale is high, and those who feel valued and supported will stay in their job. Here are seven ways employers can improve employee relationships.  

1. Reinforce company culture. Establishing company culture is simple during a company’s early years. Sustaining that culture as the company grows, especially when offices open up around the world, becomes a critical challenge. Quantum Workplace found that employees who say their company culture is positive are 3.8 times more likely to be engaged during the workday. To effectively reinforce that culture to everyone, the message must start from the top and work its way down. Scheduling annual, in-person meetings with managers in all offices is a way to connect with all corners of the company and inspire them to buy into the culture. That intentional interaction will leave managers motivated to bring in and reinforce the company’s culture every day, even when no one is watching. 
2. Foster a “we, not me” mentality. A critical aspect of managing employee relationships is fostering a team mentality, because great ideas stem from other people’s good ideas. Team collaboration brings minds together, allows all voices to be heard, and gives everyone an opportunity to make an impact on a project. According to Queens University of Charlotte, 75% of employees think collaboration and teamwork are essential, but 39% say their employers don't collaborate enough. With a “we, not me” mindset, employers can drive forth new, forward-thinking ideas and raise productivity companywide.
3. Encourage decision making and learn from mistakes. Currently, 30 million Americans say that their workplace is toxic due to bad leadership and unhealthy social norms. Good leaders must establish a mentality that encourages all employees to share their ideas, even if a mistake is made, because being afraid of making mistakes stunts professional growth. Instead, employees should be learning from their errors. Employers can use negative experiences, as well as positive ones, as learning tools to spur that growth. 
4. Be intentional about recognition. Feeling valued in the workplace can leave a lasting impression on an employee. However, 41% don’t feel any sense that the work they do matters, and 46% left a job because they felt unappreciated. But Deloitte found the companies that prioritize recognition see employee engagement, productivity, and performance numbers 14% higher than those that do not. Employees thrive from knowing the hard work they put in is recognized by supervisors and upper management. Email shoutouts, company-wide video calls praising specific teams, or simply an in-person pat on the back keeps employees assured that their work is critical to company success. 
5. Offer the little things. Another way for employees to feel valued is by offering small, but meaningful things in the office that make their day just a little bit better. That might be raffles, pizza parties, free coffee, a snack bin, or fruit bowl for them to enjoy throughout the day. Ping pong tables, TVs, and comfortable seating can also make workspaces more fun and fluid in terms of meeting varying employee’s needs. It also brings people from different parts of the company together into those shared spaces, who might not communicate regularly otherwise.
6. Schedule out-of-office events. Company functions outside of the daily grind have been welcomed back post-pandemic with open arms: 88% of companies planned in-person, team gatherings for 2022, and about half scheduled team bonding events. Employee relationships grow away from desks and meeting rooms, because it gives them the chance to be friends — not just co-workers. Whether it’s a team dinner, or an office-wide bowling night, colleague bonding is enhanced when there’s an opportunity to spend time together outside of the corporate setting. When employees are back in the office, they’ll then have each other’s backs, and go above and beyond for one another because they have fostered a deeper friendship. 
7. Promote social responsibility. Deloitte found that today’s Gen Z and millennial employees want to balance their work lives with a drive for societal change. Hosting fundraisers, donation drives, or participating in community volunteering events can give employees an opportunity to feel like they are making a greater impact on the world around them. Implementing sustainable practices in the office is another way for employees to feel part of something larger than themselves.  

Managing employee relationships has never been more important: Gallup found that unengaged and disengaged employees cost the world $7.8 trillion in lost productivity. So how do we fix that?  

About 42% of Gen Z and Millennials would rather be at a company with a sense of purpose than one that pays more. Employers need to figure out their sense of purpose, and then spread that message and culture company wide. Giving everyone the opportunity to buy into that purpose and an environment to share their own ideas will not only boost employee relationships, but also their engagement, morale, and productivity.