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Why is mental health key to an ESG Strategy?

Why is mental health key to an ESG Strategy?


First of all, let’s start with what ESG actually means and why the focus is important:

Environmental, Social & Governance strategies define a company’s performance relating to these 3 areas which include:

  • (E) – Sustainability, environmental impact, risks & compliance related to these points
  • (S) – Social impacts via relationships internally & externally, community impact, internal culture & working conditions
  • (G) – Governance relating to accounting methods, compliance, processes and standards, diversity

ESG is generally key to increase value & performance of the company to attract investment or a sale.

The World Health Organisation defines health as a state of complete physical, mental & social wellbeing. Up until recently (particularly pre-pandemic), ESG metrics mostly related to injury, infirmity, or disease however there is growing evidence that this is not sufficient to capture the impact on wellbeing and that an organisation's environmental, social and governance pillars directly impact employee wellbeing, particularly in the wake of the Covid 19 pandemic.

So where does Mental Health fit in?

Mental Health, although not often front of mind, is absolutely key to:

  1. Define & evolve the company culture & what kind of place it is to work in – often defining if it’s an employer of choice in how it treats its staff, their conduct is actually a key part of the company’s environmental & social policies
  2. Offering ethical treatment of employees to ensure they cater for the sheer diversity of mental health spectrums, race, diversity, neurodiversity & disability as part of a comprehensive & Integrated ESG, Diversity & Inclusion & Wellbeing Strategy – all negative experiences & treatment can lead to negative mental health & wellbeing
  3. Drive productivity which translates into innovation, USP & market position & ultimately optimal business performance
  4. Proactively supports and drives employee performance, engagement, tenure & loyalty, reduced sickness & absence driving the sustainability of your workforce (ultimately reduced HR-related costs)
  5. Offer exceptional customer propositions & best in class customer service

Quite simply put, taking proactive care of your employee’s mental health & neurodivergent needs is simply the right thing to do!

What are the employer obligations?

  • Employers, no matter how big or small, have a legal duty & duty of care to identify risks and agree ways to prevent work-related stress and support good mental health
  • Under the Disability & Equality Act 2010, employees are protected from disability discrimination and are entitled from reasonable adjustments from their employer
  • Under the Law, a mental health issue can be considered a disability if the following apply
    • It has a substantial and adverse impact on the life of an employee (for example they cannot regularly focus on a task or it takes them longer to do)
    • It lasts at least 12 months or is expected to
    • It affects their ability to do normal day to day activities
    • The risks of not having a proactive & preventative approach to mental health can mean that mental health issues are not properly handled and therefore leaving the employer at risk of a rise in legal cases where the employee is rightfully protected by Law
  • The Health & Safety Executive states that work-related stress and poor mental health should be treated with the same significance as poor physical health & injury
  • Employers should be making provisions and carrying out regular risk assessments to prevent issues on:
  • Covid 19 Assessments (legally required)
  • Stress risk assessments (legally required

How can you influence it?

  • Leadership – exec sponsorship
  • Vision & Values shared via the Executive Sponsor as part of an Internal Communications Strategy
  • Culture – living and breathing values and being rewarded for this
  • Wellbeing Strategy – a clear and well-defined strategy with an Exec sponsor, communications plan, training and tools for employees & line managers, and a defined measurement framework in addition to risk assessments & defined policies
  • Alignment into ESG strategy – clarity of how the Wellbeing strategy & measurements fit here in influencing this
  • Defined KPIs which align with business performance (not just sickness)
  • Inclusion on the Risk Register with defined action plans to prevent & minimise risks to employees

What are the benefits?

Forbes published an article that ESG has proven both it's business and societal value. According to a McKinsey meta-analysis, nearly 70% of studies of ESG strategies find a positive business impact, and global sustainable investment has surpassed $30 trillion. A mental health lens is essential for organizations to truly understand their impact—both positive and negative—on employees, communities, and society overall, and ESG metrics provide a mechanism to track this impact over time.

Deloitte survey on mental well-being states that the business case for positive & proactive investment in mental health & wellbeing brings a return of £5 for every £1 spent. Conversely, those who have reactive strategies only get a £3 for return for every £1 spent.

Similarly, a Lancet study shows that for every $1 invested in mental health evidence-based programs, employers can save $2-4 on other expenses. These studies demonstrate that data on workplace mental health programs belong in ESG metrics

How many companies are embracing mental health as part of the ESG strategy?

It’s hard to say but we are seeing shifting attitudes and trends. The Health & Safety executive recently shared that Stress, anxiety & depression as the cause of all workplace-related illnesses in the past year. In addition to this Glassdoor has cited that burnout has more than doubled since the lockdowns ended, meaning that companies can no longer afford the focus on mental health & wellbeing as being a nice to have but now a hygiene factor within their business.

What are the risks of not tackling mental health?

We’ve talked about the benefits and the potential opportunity and the return on investment, however, companies should also assess the cost of not implementing a mental health and wellbeing strategy as part of their strategic goals, with the alignment with ESG, Diversity & Inclusion & general HR strategies.

The costs of not doing this offer a double negative impact to taking proactive action in the form of:

  • Increased sickness & absence
  • Reduced productivity & business performance
  • Poor culture & reputation (Both with Employees & Customers)
  • Reduced engagement, tenure & resignations
  • Increased recruitment costs
  • Potential legal costs from employee disputes & tribunals
  • Poor customer service & sales performance
  • Poor business results

Defined strategic priorities & clear measurement does make a difference. And we all know that what gets measured gets done!



Image from Devanath in Pixabay