ON May 1, people around the world observed Labour Day, defined as a day when workers are celebrated and recognised for their contributions.
It was also a much-welcomed respite that most workers, if not all, had the chance of having.
Nonetheless, Labour Day should act as a reminder to business owners that employee well-being comes first because ultimately, they are the heart of the company and their productivity affects overall performance and bottom line.
The International Labour Organisation (ILO) defines workplace well-being as relating “to all aspects of working life – from the quality and safety of the physical environment, to how workers feel about their work, their working environment, the climate at work and work organisation.”
The S in ESG
So how a company treats its employees, not just its stakeholders and the community they operate in, is crucial and part of the social pillar in the environmental, social and governance (ESG) framework.
While each pillar has its own set of criteria for companies to achieve in the long run, we need to be reminded that the ESG components are intertwined and cannot do without the other.
To put it simply, a business cannot achieve its goal in protecting the environment (E) without qualified human capital and happy stakeholders (S), and good governance (G) to provide the right direction.
The pandemic has made ESG issues even more prominent and thus, accelerated the urgency for ESG-related strategies, including the social component.
Our working conditions have taken a 180-degree flip, while the Covid-19 situation has exacerbated workplace well-being and mental health issues as a result of several factors such as financial stress, work fulfilment and uncertainties about the future.
Prior to the pandemic
As it is, the workforce’s state of health such as sleep insufficiency, depression and anxiety – all of which contributes to low levels of productivity in organisations – has been a prevailing issue even before the pandemic.
This was highlighted by the Malaysia’s Healthiest Workplace by AIA Vitality 2019 survey to understand how a workplace can affect employee health.
Of the total respondents, 51% of employees suffered from at least one dimension of work-related stress whereas 53% received less than seven hours of sleep every day.
On top of that, most of the respondents experienced shoulder and neck pain with 84% reporting one or more musculoskeletal conditions.
In the 2022 wellness report by Employment Hero, 58% of Malaysian workers who responded were feeling burnout from work while 32% who positively rated their employers’ commitment to wellness were most likely to be loyal to them.
These days, it is so easy for an unhappy, disgruntled employee to comment about their company on social media, and with a click of the “share” button, news of the company will spread and spark a slew of backlash and protests, and such dirty linen would be visible to current or potential investors.
Time for a shake up
Suffice to say, human capital is a company’s greatest asset.
“It is evident that a healthy, engaged workforce can positively impact a company’s bottom line,” reported an article by Deloitte titled Well-being: A New Cornerstone for ESG Strategy and Reporting – Part 1.
Several studies have shown that organisations experience lower turnover and burnout but greater productivity and engagement when they support the well-being of their people.
Forward-looking companies are already looking deeper into these matters, redesigning the domains of their work culture by expanding the traditional metrics of what constitutes human capital management (HCM) to more than just recruitment, engagement, empowerment and retention.
Human capital metrics include, but are not limited to, talent development and management, diversity, equity and inclusion (DEI), culture, employee experience, employee productivity and pay gaps.
Strategies and interventions pertaining to the human capital agenda have expanded beyond the purview of human resources (HR) to the boardroom with leaders now integrating human capital metrics with financial and operational measurements.
Efforts to introduce meaningful measures of human capital into financial reporting have accelerated in recent years, as shared by the World Economic Forum white paper, in collaboration with Willis Towers Watson titled Human Capital as an Asset: An Accounting Framework to Reset the Value of Talent in the New World of Work.
This is a result of a growing market interest to understand how companies manage and measure human capital in upholding the principles of stakeholder capitalism.
Closer to home, the level of focus and weight given by investors to ESG issues, as well as ESG considerations now having become a top priority in investment decision-making, are in line with global trends, highlighted by PwC Malaysia's 2022 survey in collaboration with The Malaysian Institute of Certified Public Accountants (MICPA).
Of the total respondents who participated in the survey, 91% agreed that how a company manages ESG risks and opportunities is an important factor when making an investment decision.
Case in point: To help and support companies in their sustainability journey, the Employees Provident Fund (EPF) has established its Workers’ Well-being Issue policy, built upon its 2020 Sustainable Investment (SI) policy.
The policy outlines the expectations set by EPF – as a global financial investor – on companies to manage various workers’ well-being through a number of phases as it recognises the importance of incorporating and addressing sustainability matters in its investments.
EPF believes that workers’ well-being has the potential to significantly impact business reputation, performance and ultimately overall portfolio returns. To this end, EPF has set a 2028 deadline for companies to meet all expectations listed in its policy.