Over the last few years, many employees left the traditional in-office work environment for remote workspaces in the comfort of their homes. The transition naturally blurred the lines between people’s work and their personal lives. Additionally, other effects of the coronavirus pandemic led to a heightened focus on workplace well-being. Many companies opt to demonstrate transparency in workplace well-being through their annual ESG Report.
What is Workplace Well-Being?
The umbrella of workplace well-being covers topics including physical and mental health, team building, work environment, and more. The benefits of workplace wellness include improved productivity, retention of employees, enhanced collaboration, increased levels of job satisfaction, improved mental health, and greater engagement of employees.
In an article released by Forbes, “The Future Workplace 2021 HR Sentiment survey found that 68% of senior HR leaders… rated employee well-being and mental health as a top priority.” According to Forbes, workplace well-being is at the forefront of executives’ minds as the workplace well-being market projects to grow to over $87 billion by 2026.
Business Impacts of Measuring and Reporting Workplace Well-Being
The impact of workplace well-being is recognized on the national front with the implementation of the 2020 SEC Human Capital Disclosure Requirement.
The 2020 SEC Human Capital Disclosure Requirement resulted in Regulation S-K Item 101(c) being revised to “include, as a disclosure topic, a description of the registrant’s human capital resources to the extent such disclosures would be material to an understanding of the registrant’s business.”
The mandatory disclosure topic exemplifies the SEC’s recognition of employees as a material resource and encourages companies to disclose how they manage such resources. The SEC also mentions that human capital is a management focus and an essential driver of performance. This information is necessary for investors to understand the scale of the business and other features. Although this disclosure is principles-based, PwC released a publication regarding the SEC requirement stating,
In certain SEC filings, a public company is now required to disclose:
- The number of employees and a description of its human capital resources, if material to the business as a whole; and if material to a particular segment, that segment should be identified.
- Any human capital measures or objectives, if material, that the registrant focuses on in managing its business, such as those related to the development, attraction, safety, engagement, and retention of employees.
Meanwhile, Congress introduced the Workforce Investment Disclosure Act of 2021 to require public companies to disclose information regarding workforce management policies, practices, and performance annually. The proposed disclosure includes:
- Demographic information
- Data on temporary and contract workers
- Employee turnover rate
- Employee skills and capabilities
- Workforce health, safety, and well-being
- Findings of harassment or discrimination
- Employee compensation and benefits
All in all, the importance of workplace well-being is recognized by the SEC, investors, Congress, and employees. Harvard Law School Forum released an article explaining that companies that practice and promote an environment that cultivates workplace well-being generates long-term sustainable value, employee retention, increased productivity, and more significant attraction by investors, customers, and employees.
ESG Standard Setters
While the mandatory disclosures prescribed by the SEC are principles based on perceived business needs, ESG standard setters present precise qualitative and quantitative ways of measuring and reporting.
The Global Reporting Initiative (GRI) Standards recognize workplace well-being in GRI: 403 Occupational Health and Safety 2018. According to the GRI, the terms ‘health promotion,’ ‘well-being,’ and ‘wellness’ are used interchangeably in their standards and refer to the “process of enabling people to increase control over and improve their health.” Disclosure 403-6 reports promotion of worker health. This disclosure requires the reporting organization to report the information below regarding employees and workers who are not employees but the reporting organization controls whose work or workplace.
- An explanation of how the organization facilitates workers’ access to non-occupational medical and healthcare services and the scope of access provided.
- A description of any voluntary health promotion services and programs offered to workers to address major non-work-related health risks, including the specific health risks addressed and how the organization facilitates workers’ access to these services and programs.
Disclosure 403-6-b covers voluntary services and programs of the reporting organization, which point towards combating non-work-related health risks among workers. Some examples of these voluntary services and programs are smoking cessation programs, dietary advice, healthy food, stress reduction programs, and gym/fitness programs. Further, when describing these voluntary services and programs, the GRI suggests explaining whether the services or programs allow workers to make use of these programs during paid working hours. Organizations can also report if services extend to family members of workers. In addition, the GRI states that organizations can also report:
- How the topics covered in these services and programs are selected, including how workers are engaged in the selection of topics.
- The extent to which these services and programs include proven effective interventions.
- The metrics used to evaluate the effectiveness of these services and programs.
- The approaches used to raise awareness about these services and programs and encourage participation.
The Sustainability Accounting Standards Board (SASB), which generally sets standards and metrics depending on the industry, includes Employee Health & Safety under the Human Capital dimension. In December 2020, the SASB released further information regarding said dimension in a Preliminary Framework Report. Conclusion #1 of the report emphasizes the trends surrounding the importance of employee well-being as it relates to mental and associated chronic health issues. The SASB mentions that there may be an opportunity for them to account for this issue more effectively. Meanwhile, the SASB states that comprehensive health benefits for workers (e.g., paid sick leave, medical leave, family leave, flexible working arrangements) enhance employee physical and mental well-being. The SASB concedes that the 77 industry standards may not adequately address the topic in practice. Financial well-being is also covered in Conclusion #3, which the SASB says is related to elements of the “Labor Relations” general issue category. The December 2020 statement also provides further insight into how workplace well-being affects businesses.
The World Economic Forum’s (WEF) International Business Council (IBC) places the topic ‘Health and Well-being' within the ‘People’ pillar. This pillar emphasizes a company’s responsibility to care for its employees by curating diverse, safe, and inclusive workplaces. Some metrics mentioned are diversity and inclusion, pay equality, safety, training, and human rights. The KPMG WEF IBC common metrics guide provides additional metrics specifically regarding Well-Being:
- The number and rate of fatalities as a result of work-related injury; high-consequence work-related injuries (excluding fatalities); recordable work-related injuries, main types of work-related injury; and the number of hours worked GRI:2018 403 – 6 (a).
- An explanation of how the organization facilitates workers’ access to non-occupational medical and healthcare services and the scope of access provided for employees and workers.
- The number and rate of fatalities as a result of work-related ill-health; recordable work-related ill-health injuries, main types of work-related injury; and the main types of work-related ill-health for all employees and workers.
- Percentage of employees participating in 'best practice' health and well-being programs that help to reduce absenteeism and improve productivity and employee absentee rate (AR) for all employees.
The WEF also mentions its rationale for including this metric, mentioning the implications employee well-being has on productivity and work relationships. Ultimately, prioritizing employee health and well-being, and reporting the actions being taken, are beneficial to reporting companies overall.
The examples below demonstrate how workplace well-being is currently displayed in ESG reports. Due to ESG reporting not being standardized, there is no ‘right’ way of reporting. For now, there are no mandatory metrics in ESG reporting.
In recent years, workplace well-being has come to the forefront of both SEC and ESG Reporting. Reporting workplace well-being informs investors, customers, and future employees of the measures that the reporting company is taking to further empower its employees. Aside from mandatory principle-based disclosures in SEC documents, the GRI and WEF Standards encourage companies to include detailed quantitative and qualitative disclosures in their ESG reporting. Although there is no subscribed unit of measure or mandatory approach, workplace well-being is centralized on reporting organizations' efforts to provide a conducive working environment and additional support given to workers to improve and sustain their well-being.
KPMG. “WEF IBC Common Metrics.” January 2022.
Meister, Jeanne. Forbes. “The Future of Work is Employee Well-Being.” 4 August 2021.
PWC Publication. “New human capital disclosure rules: Getting your company ready.” 8 October 2020.
SASB. Preliminary Framework on Human Capital and the SASB Standards. December 2020.
SEC Release. Modernization of Regulation S-K Items 101, 103, and 105. 26 August 2020.
U.S. Congress. Workforce Investment Disclosure Act of 2021. 25 May 2021.
Wahlquist, Andrea, et al. Harvard Law School Forum on Corporate Governance. “Workplace Wellness and Employee Mental Health—An Emerging Investor Priority.” 2 December 2020.