How can leaders tackle the 'S' in ESG?

“If the past 18 months have taught us anything, it’s that employees crave investment in the human aspects of work. They want a renewed and revised sense of purpose in their work. They want social and interpersonal connections with their colleagues and managers. They want to feel a sense of shared identity. Yes, they want pay, benefits, and perks, but more than that they want to feel valued by their organizations and managers”. – McKinsey, 2021

The Covid-19 pandemic and associated shifts in working patterns have shone an unflattering light on a workforce under strain. As a result, organisations worldwide are under growing pressure to improve the experience for employees, where purpose and value now take a front-row seat. Research from CIPD (April 2022) has shown that a third of organisations have responded to this change by increasing their budget for wellbeing benefits.

Environmental, Social and Governance (ESG) criteria have been on our radars for a while, but the social element has only gained traction more recently. A focused definition of the 'S' is difficult to find, but at Positive we believe it to be grounded in prosocial behaviour: an organisation’s actions, policies, and investments that can – and should – positively impact its employees’ lives.

With purpose playing a huge role in psychological health and employee experience, the expectations of workers are shifting. A considered and clearly defined ESG agenda has become crucial for both recruitment and retention of talent.

Although we're seeing a growing catalogue of leadership training, there's more to the solution. Research indicates that organisational psychosocial conditions significantly contribute to employee health and wellbeing (Grossmeier et al., 2016; Sorensen et al., 2021; Schulte et al., 2019). They also influence business critical outcomes such as turnover, absenteeism, productivity and healthcare costs (Goh et al., 2016; Bloom et al., 2015; Williams et al., 2018).

To foster a durable psychosocial environment, the development of a core psychological skillset is vital. Data collected as part of our Positive Insights tool (Feb '21, n=180) illustrates how organisations with psychologically skilled leadership adapt and perform better amidst growing political and economic uncertainty:

Crucially though, psychologically skilled leaders also unlock potential across the rest of the workforce and improve their social environment, building those oh-so important organisational psychosocial conditions.

Our data (Feb '21, n=1183) illustrates significant positive shifts across the workforce when psychological skilled leaders are perceived as being good role models. The workforce reports fewer experiences of anxiety, low mood and stress; reduced difficulty focusing and minimising distractions; greater purpose and enjoyment in their role and also a greater sense of belonging:

In addition, we see greater team cohesion, better line-manager relationships, and most incredibly, shifts of almost 40% towards a psychologically safe culture:

The two graphs above show the impact when leaders are perceived to be good role models. However, it is also interesting to consider the data when leaders self-report on their own psychological skills.

The development of psychological skills is an active process – most leaders are continually learning and developing their psychological toolkit. Interestingly, we see that when departments have higher self-rated leaders, the workforce reports significant increases in their ability to focus (+7%), minimise distractions (+7%) and switch off from work (+13%). They also show a greater sense of belonging, and report that the psychological health is embedded more within the culture. However, we don't see the same impact across all areas. This highlights how the development of psychological skills is only one piece of the puzzle. In order to impact the entire workforce, effective role-modelling from leaders is also needed.

• Consider your own psychological contract. Think about what you expect from your organisation, as well as what you put back in. Remember, we all invest back into our organisations in some way or another. Something as simple as being sat at your desk feeds the psychosocial ecosystem – how you behave at your desk impacts others, and vice versa. If the environment (physically or virtually) is supportive, then we inadvertently look forward to work. We become an intrinsic part of our environment and can therefore play our role.
• Invest in leadership. Most organisations now acknowledge that the secret ingredient to success is understanding the human aspect of work. Invest in your leaders – build their psychological toolkit – and watch how their skills cascade across a people-focused culture. In this way, you can create a flexible workforce in an environment that anticipates and adapts to trends in the way work is structured, managed and experienced, effectively informing future policies and practices.