Increasing Focus On Employee Governance To Boost Spending In Engagement Solutions
The governance aspect of ESG has been closely scrutinised since the ’08 crash. Investors have acknowledged that issues such as board structure, diversity, and degree of risk appetite have a material effect on financial performance. Recent events have shone a spotlight on one intersection between ‘social’ and ‘governance’ issues – how firms treat employees. A group of disgruntled junior bankers from Goldman Sachs recently issued a report noting frequent 100-hour work weeks, and the resulting dismal mental health consequences. Similarly, Amazon has recently come under fire for opposing unionising at plants across the US, reportedly denying even basic hygiene facilities for employees. Deliveroo’s disastrous IPO – partially the result of investor scepticism after recent Uber setbacks - suggests investors are carefully weighing risk stemming from employment issues.
The consequences of poor employee governance go beyond negative PR, and represent a real financial risk due to staff turnover and decreased performance. Poorly treated employees are more likely to experience workplace stress, decreased productivity, and firms with a negative reputation are unlikely to attract the best Gen X talent. To counter this, the appetite for employee engagement solutions is increasing. Recent Verdantix research (see ‘ ’) shows that 51% of firms plan to increase spend on employee wellbeing. Growing investment in firms such as Headspace, Calm, and Happify – which recently raised $73m – reflect this market growth. Traditional EHS vendors, including Cority and ProcessMAP have additionally launched health tracking and support modules into their offerings.
Demand is clearly growing for improved employee engagement tools, reflecting an awareness that issues including absenteeism have clear effects on financial performance. Yet passive approaches to employee engagement are still common, creating dire health & safety issues. Firms would do well to invest in employee management tools, and implement holistic strategies to improve social governance. For further insights on the state of Mental Health software market, see Verdantix: ‘Growing Mental Health App Market Presents Opportunities for EHS Software Providers’. In the short term, resistant businesses face reputational consequences, and risk shunning cautious investors. Social metrics are set to become more and more critical to a firm’s ESG performance, and poorly performing companies risk exclusion from both active and passive investment vehicles.