As employees become more concerned about the climate emergency, employers must ensure their ESG strategies stand up to scrutiny. If they face allegations of ‘greenwashing’ via their whistleblowing processes, there are several things that HR must do, write Michelle Chance and Lydia Cammiade.
Environmental, Social and Governance issues have rarely been off boardroom agendas in the last decade, and as the UK transitions to net zero by 2050, the regulatory and reporting burden on companies concerning their ESG credentials will only increase further.
In tandem, employees’ awareness of the climate emergency is rising, particularly in the wake of COP28. Scrutiny of an employer’s ESG strategies will therefore not only come from investors and regulators but also from staff and potential recruits. This means that ESG performance is not just critical in the war for talent, but also for retention.
Against this backdrop, ESG-related whistleblowing complaints will increase, and it is crucial that HR is equipped to respond to them.
Regulatory and disclosure requirements on companies are increasing rapidly. The EU leads the charge in this area with the Corporate Sustainability Due Diligence Directive, which will require businesses above a certain size to audit their value chain with respect to human rights and the environment. Meanwhile, in the UK, the government plans to introduce mandatory requirements for financial institutions and listed companies to publish net zero transition plans, setting out how they will decarbonise in the period to 2050.
Financial Conduct Authority-regulated firms will also need to contend with the recently published Sustainability Disclosure Requirements, hailed as “anti-greenwashing” rules to help consumers identify sustainable investment products.
Additionally, both the FCA and Prudential Regulation Authority are consulting on the introduction of measures to boost diversity and inclusion in the financial sector, including extensive reporting requirements on diversity and an emphasis on non-financial misconduct, including bullying, discrimination and harassment – which will become an even more integral part of assessing an employee’s fitness and propriety under the Senior Managers and Certification Regime.
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Understandably, organisations are fearful that key ESG regulations will be missed, or that the company will unintentionally misreport when seeking to comply with the full spectrum of requirements across all the locations in which a global business may operate – which could bring reputational consequences.
Intersection between HR and ESG
HR professionals are not new to the ESG space, as the importance of employee wellbeing, diversity and inclusion, and ESG-friendly benefits have long been a way for employers to demonstrate their commitment to the “S” pillar of ESG.
However, HR may be less familiar with the Environmental and Governance pillars of ESG, on which the spotlight is now shining more brightly. An emerging intersection between HR and ESG is the increasing trend for ESG-related issues to be the focus of employee complaints and whistleblowing. An employee could make a complaint in the form of a grievance or under the employer’s whistleblowing policy which should ring alarm bells from an ESG perspective if it concerns the company’s environmental impact or allegations that it is greenwashing.
Allegations of human rights abuses in the company’s supply chain or relating to bribery and corruption would also fall under the category of an ESG-related complaint or disclosure.
Complaints relating to bullying, discrimination and harassment should also be considered an ESG issue because company culture is an integral part of the “S”. Further, such issues are increasingly becoming the subject of regulatory scrutiny.
Responding to an ESG complaint
How HR should respond to an ESG-related complaint or disclosure will depend on the allegations made. If the allegations relate to employee misconduct, then HR will already be well-versed in managing a thorough and fair investigation and taking appropriate action under a disciplinary policy, should the allegations be well-founded.
However, in the wake of #MeToo and #TimesUp, HR professionals are increasingly having to run investigations dealing with complex historic sexual abuse allegations, which may involve multiple incidents and complainants, or where criminal allegations necessitate police involvement. In these cases, assembling a team including HR, senior management, external counsel and PR, to manage reputational risks, is advisable.
Where specific allegations are made about environmental concerns or greenwashing, then an employer should consider involving their compliance team or any in-house sustainability experts, or appointing external subject experts and/or a law firm to investigate, to ensure the necessary expertise is involved and to remove the risk of actual or perceived bias.
HR will be key in triaging the complaint to establish whether it should be dealt with under the company’s grievance or whistleblowing procedures, as employees often don’t know the correct procedure under which to raise their concerns. HR will also liaise between the employee and management and deal with procedural queries from both the complainant and those investigating the complaint.
HR will be key in triaging the complaint to establish whether it should be dealt with under the company’s grievance or whistleblowing procedures, as employees often don’t know the correct procedure under which to raise their concerns.”
Depending on the nature of the complaint and whether the investigation is handled by an external law firm or other external experts, or the company’s internal compliance and/or legal department, HR’s role may also involve obtaining further details of the complaint or disclosure of relevant documentation from the employee, keeping them updated on the investigation, and offering wellbeing support (such as under an employee assistance programme).
Protecting whistleblowers
HR should also ensure that the company provides thorough training for managers about the protections afforded to an employee who reports a reasonable belief of wrongdoing which meets the legal definition of a “protected disclosure” under whistleblowing legislation. A whistleblower who has made a protected disclosure should not be subjected to detrimental treatment, for example being passed over for promotion or “frozen out” from the team and should not be dismissed for making a whistleblowing complaint.
The government is due to publish a consultation on the legal framework for whistleblowing and any changes will likely further strengthen whistleblower protections. HR should follow up with whistleblowers and all those who give evidence in an ESG investigation for several years following the complaint, to track their progress and ensure that they are not inadvertently or purposely subjected to detrimental treatment in respect of salary, bonus or progression prospects.
HR should lead the way in embedding a culture where employees feel able to speak up in the belief that their concerns will be taken seriously, and they will not suffer any retaliation for doing so. Having a clear whistleblowing policy which is known and understood throughout the organisation – and which supports effective internal scrutiny by setting out what type of issues can be reported, who they should be raised with, how they will be investigated, and how the employee would be supported through the process – will ensure employees can form an integral part of ensuring the success of an employer’s ESG strategy.
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