PwC and TrueChoice Investigate the Role of ESG in Employee Engagement and Organizational Success

According to PwC’s 27th Annual CEO Survey, Environmental, Social, and Governance (ESG) issues remain a top priority for organizations, driven by increased regulations and pressures from consumers and reputations. Companies are investing in ESG strategies and policies to encourage desired behaviors, boost engagement, and attract and retain talent.

However, despite these leadership efforts, employees may not always perceive the tangible value of these investments. To investigate this, PwC conducted global research in collaboration with TrueChoice, collecting insights from over 5,000 respondents across 95 countries. This research aimed to understand how employees value their employer’s ESG strategies and policies, helping companies identify which aspects are most important to their workforce.

Findings reveal that employees are not sufficiently engaged with sustainability and ESG initiatives to drive significant organizational change. Nonetheless, there is potential for companies to make ESG more central to the employee experience, making it more personal and impactful.

Key insights include:

• • Salary and Total Reward Motivation: 43% of participants are highly motivated by salary and overall compensation. Nearly half of the respondents consider their company’s ESG policies only after their financial and well-being needs are met. This group prefers ESG engagement through job benefits that directly impact them, such as health and well-being, upskilling and development, addressing the gender pay gap, and managing reputation.
  • ESG and Salary Balance: 38% of respondents prioritize salary but also weigh ESG policies significantly. Environmental factors, particularly company responses to climate change, are important to this group. A subset focuses intensely on carbon emissions policies and recycling and reuse practices.
  • High ESG Value: 19% of participants value ESG policies as much as or more than salary. This group is particularly concerned with environmental practices, governance, and accountability, although specific ESG factors vary greatly within this cohort.

The study suggests that integrating ESG into the core Total Reward offering can enhance its perceived value. Fair and equitable salary increases and Total Reward packages are ranked as the most important by participants, with fair and equitable pay, a 10% salary increase, and fair benefits being top priorities. Additionally:

• • Societal Practices: These are the most valued ESG categories, with attributes like health and well-being and career development being crucial to employees.
  • Environmental and Governance Practices: Ranked fourth and fifth in importance, with key attributes including recycling practices, reputation management, waste management, and privacy policies.
  • ESG Communication and Accountability: Ranked lowest, with trust in the employer, accountability, and appropriate ESG performance objectives being the most valued attributes.

By adopting a ‘strategy for a sustainable age’ that integrates ESG into the fundamentals of Total Reward, companies can create a more holistic and tailored view for employees. This approach would elevate the importance of ESG while ensuring that employees feel fairly compensated, cared for, and developed.

Top 5 Employee Preferences:

1. 1. Fair and equitable pay (fixed and variable)
   2. 10% salary increase
   3. Fair and equitable benefits
   4. Career opportunities (upskilling and development)
   5. Well-being leave and allowances

Bottom 5 Employee Preferences:

1. 1. Company charitable support
   2. ESG targets in incentive plans
   3. Third-party ESG checks (e.g., certification)
   4. 2% salary increase
   5. No increase

When Total Reward factors are met, societal factors become the most favored ESG attributes. Well-being leaves, allowances, and societal health and well-being are considered almost as important as 8% and 6% salary increases. Societal health and well-being, as well as approaches to employee engagement and satisfaction, are the only ESG attributes ranked in the top ten.

Conversely, salary and Total Reward have five attributes within the bottom ten preferences, including 0-2% salary increase, company charitable support, ESG targets in incentive plans, and leave for volunteering. The least valued ESG preferences include third-party checks, transparency of company ESG performance, and broader societal attributes that don’t directly impact the individual.

While governance overall is generally less important, an employer’s reputation is ranked highest among governance-related attributes and is perceived as nearly 15% more valuable than the next most important area of governance (privacy policies).

Societal attributes, including societal health and well-being, employee engagement and satisfaction, and upskilling and development, are significant motivators for attracting and retaining talent. Organizations should broaden their employee value proposition to incorporate societal factors impacting both the individual and broader society to enhance impact and value.

Focusing on strong risk management, governance, and an organization’s reputation as an employer will encourage employees to listen and act, supporting the need to work for a reputable employer that they can trust and be proud to work for.

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