Matt Sparkes, Sustainability Director at Linklaters and Chair of the Living Wage Foundation’s Advisory Council breaks down what ESG means and how the Living Wage can be a core part of meeting ESG targets.  

ESG: three letters that have grabbed business attention at a speed that has caught everyone by surprise. Originally tied to responsible investment, it is now an approach that tries to judge organisations on a host of topics related to doing the right thing. There’s no standard definition of ESG, so for the uninitiated, here’s my take:

  • E is for environmental, generally reporting numbers that indicate, ideally, bad stuff (carbon, waste, water) going down and good stuff (renewables) going up. As so much of these environmental factors are measurable, this is where you will find the bulk of the targets, the benchmarks and the assessment.
  • G is for governance, which is essentially how the business is run. There tends to be less data in this area, and rather more ‘yes/no’ or ‘tell us about’ – do you have a policy?, how are you structured?, how do you ensure xyz?
  • S is for social, which has traditionally been understood as both the internal(what are you doing for your own people?) and external (what are you doing for others?). There’s significant data on inputs for both but in terms of real, unequivocal impact, well what can you do?

The ‘S’ is where the real Living Wage comes in. You may talk about looking after your people, perhaps by being mindful of their health and wellbeing or by ensuring a comfortable working environment, but it is often hard to put a number to cultural factors,  and ESG rather relies upon numbers. Wouldn’t it be good to evidence how people are a priority in real money?

Any employer who pays a Living Wage can use that uplift in employee wages to demonstrate a real differential in what they choose to pay above what they legally must. That sum generates real social impact, latest Living Wage Foundation research demonstrates that if only 25% of jobs were lifted onto a real Living Wage, this would generate millions for UK local economies and £1.7bn for the national economy, with the majority of the increased spend proven to be going into local markets that leads to greater community prosperity. If minded, the people benefit can also be measured in multiple ways, whether that is enhanced employee retention, greater job satisfaction or improved performance (each of which can also be monetised if helpful.) Each of these numbers demonstrates a business that has made a good business decision based on hard money.

And, of course, paying a real Living Wage sends out a strong message about responsible business. It marks you out as an employer that understands its responsibilities to its people, that places real value on the work of employees and wants to show that success is not only shared at the top. This is all great context for a purposeful organisation and one that recognises the value of good corporate citizenship at the heart of the business. A strong narrative to back up the data.

Now, more than ever, we need to be valuing our people as the costs they face rise higher and faster than ever. For a host of reasons, whether benevolent or commercial, paying a real Living Wage is a credible, impressive and impactful way to make a difference. Your payback won’t just be in more motivated staff and much greater pride inside and out, now it will also allow you to walk the talk in the language of ESG. Mark me, that’s not always straightforward so please do take a second to look at something that really will pay dividends across your organisation – joining over 11,000 UK employers and getting Living Wage accredited.