They say that pandemics press fast forward on change.
The level of activity among employers seeking to embrace fair and sustainable working practices is a prime example of this. While the changes were in the offing in both the private and public sector long before the pandemic, the mood music around why this matters has changed. What may have been seen as a fringe issue in the past is moving into the mainstream.
In the Scottish public sector, although the fair work agenda began life in 2015, April 2021 marked an important milestone with the Fair Work First criteria being applied in regulated procurement and grant funding processes. The idea is that those organisations that receive public funding have a role to play in providing fair working conditions and a decent standard of living for their employees.
Similarly, interest in the environmental social and governance agenda (ESG) within the private sector has grown in the last year. The drivers here come from corporate governance reform, growth in sustainable finance, and interest from investors and shareholders in sustainability. Companies are starting to be rated according to their ESG standards.
Both ESG and Fair Work ask employers to consider purpose, fairness and ethics in the way they behave towards their staff and wider stakeholders. In a year when it’s never been more important how employers treat staff, is it any surprise that these concepts are gaining traction?
The Fair Work First criteria are supported by Scottish Government guidance and are built on five key themes: ensuring that workers have an effective voice in decision making; investment in workforce development; no inappropriate use of zero-hours contracts; action being taken to tackle the gender pay gap alongside wider diversity and inclusion issues; and finally that employers pay the real Living Wage.
The same list is also used in the Scottish Business Pledge which targets the private sector, with measures in this list including community, the environment and innovation.
With the ESG agenda, we are starting to see a shift in focus from climate change and environmental factors to the social and governance pillars. The social aspect (at its most basic) is about how organisations treat their workforce, those engaged in their supply chain, and their local community. The expectation is that organisations need to exceed minimum legal compliance, by adopting ethical business standards.
Unlike the Fair Work First criteria and the Scottish Business Pledge which have specific issues for employers to focus on, one challenge for firms is identifying what areas to measure. If we were suggesting five areas to focus on, we would say diversity and inclusion, working conditions, modern slavery, executive remuneration, and community engagement. In extremely difficult conditions, is this just a pipe dream? Actually, no. Research has shown that companies that adopt ESG standards financially outperform their competitors in the long term.
Throughout the pandemic the media have been quick to highlight companies that have fallen short. In one case where it was reported that garment factory workers were allegedly paid less than the minimum wage and were not wearing masks, the media backlash subsequently wiped £1 billion off the company’s value. That level of risk is undoubtedly an extra level to drive organisations to review their working practices. Fair work and ESG are driving workplace change of a different kind. They show how public sector procurement and pressure from investors could drive change by encouraging employers who do the right thing.
Gillian MacLellan is a partner at international law firm CMS