Employment Law
Sustainability is a topic that is increasingly characterising the actions of companies and is becoming a decision criterion not only for stakeholders, but also for applicants in the recruitment process. A company’s sustainability will therefore determine its long-term competitiveness in the future.
ESG-orientated corporate governance includes the obligation to take into appropriate account the social aspects (S) as well as environmental (E) and governance (G) aspects. In terms of employment law, companies have therefore been addressing issues such as diversity and inclusion, human rights, occupational health and safety and gender equality for some time now. Topics such as work-life balance, e.g. through the introduction of flexible working time models and home office or in-house childcare, also play a major role in ESG corporate practice. Some companies go even further and are introducing employee benefit programmes, e.g. in the area of sustainable mobility, such as by offering a job bike. Companies are also ensuring that their management is committed to social projects in the long term.
The promotion of gender equality in particular has become a key component of the "social" dimension of ESG. The discussion about pay differentials was reignited by the EU Pay Transparency Directive, which came into force in 2023. Accordingly, employers will be obliged in future to set up special remuneration systems that guarantee equal pay for equal work.
Firstly, it is therefore important that companies are structured in such a way that ESG standards relating to the "social" aspect have a direct impact on the company’s own workforce. The workforce needs to be motivated to act in a more environmentally conscious and sustainable manner. This applies not only to internal company behaviour, but also to external relationships (e.g. with suppliers or business partners). Companies should develop mechanisms and processes that incentivise employees to support the - defined - ESG goals in the best possible way.
In this context, HR managers face a variety of issues:
- How can the bonus system be changed to incentivise all employees to influence ESG goals?
- How can the ESG objectives be reflected in the remuneration of the management board, managing directors or management?
- To what extent do travel guidelines and remuneration structures need to be adapted (public transport and job bike instead of company car)?
- How can the further diversification of the workforce structure be achieved?
- How can employees be involved in the sustainability process?
- How can occupational health and safety be optimised?
- How can employee retention be improved in times of a shortage of skilled labour?
- What reporting obligations exist in relation to the "S"?
- Should a code of conduct be amended or introduced?
The implementation of ESG measures in the area of a company’s HR requires sound preparation, which essentially takes place in three steps:
- The first step is to determine and prioritise the company's ESG objectives.
- The existing situation should then be assessed to determine the regulations and structures already in place to promote these objectives.
- Finally, suitable measures need to be implemented in the company in order to achieve the previously defined and prioritised goals.
It should be noted in particular that a multitude of the regulations (e.g. concerning the changing of remuneration systems, introduction of a whistleblowing system or issues relating to health protection) involve not only individual contractual issues, but also issues relating to co-determination law in the event that the company has a works council.
We would be happy to advise you in the strategic development process, assessment of the existing situation and subsequent implementation of ESG measures in the area of HR.
