Many employers are familiar with the idea of tying employee remuneration to commercial performance, with profit-sharing structures commonly used to motivate and reward.

An example of a company that employs this model is Lego, but the toymaker recently announced it would be updating its approach with an important twist. From this year (2024), Lego announced it will link a portion of bonus payments for salaried employees not just to its annual financial results but to another metric: its carbon emissions.

While undoubtedly an eyebrow-raising move, it is one that sits in the context of a wider sustainability strategy being implemented by the Danish firm. At a deeper level, it also reflects the continuing shift in attitudes regarding environmental issues among both employers and their employees.

Embedded principles

Besides the obvious benefits that a more environmentally aware stance delivers to the planet, companies are increasingly cognizant of the fact that employees today expect employers to embed sustainability principles within their business practices. Any perceived shortcomings in this area can negatively impact a company’s appeal, compromising the potential to attract talented new recruits. It can also be damaging in terms of talent retention, with some ethically minded workers taking decisive action where they see a failure to prioritise sustainability in a trend labelled ‘climate quitting’.

The importance of implementing a robust environmental, social and governance (ESG) strategy is spelled out in a survey commissioned by KPMG UK. It asked 6,000 office workers, students, apprentices and individuals who left higher education in the past six months about their attitudes to work, and just under half (46%) said they want their employer to demonstrate a commitment to ESG. One in five (20%), meanwhile, said they have turned down a job offer when the company’s ESG commitments were not in line with their own values.

Findings such as this are often segmented by age to reinforce the idea of a generational divide on the importance of safeguarding the environment. This narrative typically pitches Gen Z and Millennial cohorts as being more in touch with the issue compared with their Generation X and Baby Boomer counterparts.

And while respondents to the KPMG survey aged 25-34 were indeed most likely to value ESG commitments from their employer, separate research points to the fact that there is more generational consensus on this issue than many headlines would have you believe. The study found that as many as 39% of over 55s would turn down a pay rise based on their disapproval of an employer’s stance on matters of ethics or sustainability. In addition, more than a quarter (27%) would ‘climate quit’ if they felt their employer was guilty of ‘greenwashing’.

Delivering on ambitions

Indeed, greenwashing – where companies are perceived to push a pro-environment image that is at odds with the reality of their surface-deep efforts – can be a sensitive area on both sides of the employment coin. On the one hand, workers are keen to ensure their employer’s environmental ambitions are honest; on the other, employers are fearful of being met with harmful accusations that their ESG activities lack integrity.

This point is highlighted by research into sustainability jobs by online recruitment portal Indeed. It found that a fifth of jobseekers in this sector are put off applying for jobs with a prospective employer on the basis of suspected greenwashing. However, an equal proportion of employers also feared that greenwashing judgements were a barrier to recruitment.

More generally, the importance given to an issue such as greenwashing only serves to underline the continued prioritisation of sustainability. However, a global workforce study by PwC provides useful context for this shift. It highlighted that environmental factors and ESG strategy are valued in general, but workers’ most important concerns relate to fair and equitable salary increases and total reward. Less than a fifth (19%) of participants said they value ESG policy at the same level as, or above, their salary.

When it comes to ESG and environmental matters, therefore, companies face the challenge of striking a delicate balance: they must not only do the right thing, but do it a way that is recognised and valued by employees.

For some, that will mean ensuring policies are aligned with the ambitions of their current and prospective workforce. For others, such as Lego, it will mean introducing policies that directly reward staff for helping build a lower-carbon future.

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