Mental health and its impact on ESG reporting
A look at how employee mental health can and will affect your sustainability and ESG metrics.
Employee mental health and wellness have become hot topics and trends within environmental health and safety (EHS) and sustainability conversations. We’ve seen studies that show when employees’ mental health and wellbeing are supported by their company, it can result in happier, healthier, better employees.
Some countries have started proposing and adopting regulations around employee mental health, wellness, and workplace stress — meaning mental health is beginning to make the transition from a nice-to-have to a must-have for organizations to maintain compliance. On top of that, the policies that companies have in place to support employees’ mental health can also impact a company’s sustainability and ESG reporting. Therefore, the issue of employee mental health is often taken into consideration as part of a company’s sustainability strategy. Accordingly, companies that implement policies to protect employee mental health and promote employee wellness can see improvements not only in the safety of their workplace, but they can also use that data in their sustainability and ESG reporting.
So, what’s covered by mental health in the workplace? And how can you make the most of your mental health policy to not only help your staff, but support your EHS, ESG, and sustainability reporting metrics too?
What is employee mental health and why does it matter?
Employee safety is a core part of sustainability. We typically think of physical health when thinking of workplace safety, but mental health can impact the safety of employees as well. Supporting employees’ mental health and mitigating workplace stress is just as important to workplace safety as properly guarding your machines and using the appropriate personal protective equipment.
During the COVID-19 pandemic, the relationship between workplace stress and employee wellbeing was highlighted even more clearly. While COVID-19 may have hastened the link between the workplace and our mental health and wellbeing, it isn’t a necessarily new concept. Workplace stress can arise from many different areas including heavy workloads, long commutes, and unpredictable schedules. Employees can also experience hostile or dangerous working conditions, harassment, and discrimination in the workplace. All these factors and more have an impact on employee mental health and wellbeing. When employees are being negatively impacted by these types of stressors, workplace safety and productivity can be negatively impacted as well. For example, when employees are anxious or depressed, the quality, pace, or performance of their work can decline leading to injuries, missed days at work, or other issues.
How can employee mental health be part of your ESG strategy?
In ESG conversations, employee safety is captured under the “social” pillar. Social metrics are sometimes overshadowed by environmental issues like climate change, but a safe workplace is a sustainable workplace. Social topics are of course just as important to ensure your workplace is safe and your business is productive and efficient. The US Occupational Safety and Health Authority (OSHA) has said that “organizations cannot be sustainable without protecting the safety, health, and welfare of their most vital resource: workers. Sustainability is not just about what is done, but how it gets done. It is a mindset that requires leadership; not settling for second best in any aspect of operations; setting and achieving goals beyond regulatory compliance.”
As discussed above, employee physical safety can be negatively impacted by a workplace that doesn’t support employee mental health. More and more, companies have been dealing with issues like burnout, high turnover, and difficulty retaining or attracting talent. These issues can all be linked, at least in part, to workplace stress and company cultures that do not support employee mental health and wellbeing.
According to a report published by the US Surgeon General, 84% of respondents reported that their workplace conditions contributed to at least one mental health challenge. The American Psychological Association also found that 57% of employees experienced negative effects due to workplace stress that are often associated with burnout such as emotional exhaustion, a desire to quit, and lower productivity.
The Surgeon General’s report also found that 81% of employees reported that a company’s support for mental health will be an important consideration in future job searches. These days employees can easily use services like GlassDoor to check out whether a potential employer is good to their staff before they even apply for a role. This means that employers who fail to support employee mental health can have trouble attracting and retaining talented employees and maintaining a safe and sustainable workplace.
How does the CSRD address mental health?
Something that may help incentivize more companies, other than those that are already subject to regulations, to include mental health in their sustainability strategy and safety programs is the European Commission’s Corporate Sustainability Reporting Directive (CSRD).
Under the CSRD, more companies are subject to sustainability reporting, there are more detailed sustainable reporting requirements, and there are new mandatory sustainability reporting standards. For example, the CSRD introduced for the first time a set of reporting standards, the As a result, we can expect to see the mental health of workers coming into focus in ESG and sustainability conversations.
On 31 July 2023, the Commission adopted the ESRS for use by companies that are subject to the CSRD. The delegated act is still under scrutiny by the European Parliament and the Council of the European Union, which can still raise objections to it. If it’s adopted, companies that are subject to the CSRD will have to align their sustainability and ESG reporting with the ESRS. The ESRS covers environmental, social, and governance issues, including climate change, biodiversity, and human rights. For employee wellbeing, companies would focus on social issues. The social pillar of the ESRS specifies disclosure requirements that will enable users of the sustainability statements to understand the undertaking’s material impacts on its workforce, as well as related material risks and opportunities.
Specifically, we see worker mental health covered under ESRS S1 — Own Workforce. For example, Disclosure Requirement S1-14 — Health and Safety metrics requires companies to disclose information on the extent to which their own workforce is covered by its health and safety management system and the number of incidents associated with work-related injuries, ill health, and fatalities of its workers. Ill health here includes mental health, for example, anxiety and post-traumatic stress disorder, according to AR. 92.
When we look closer at what “work-related” means, we see it includes mental illness. According to AR. 86, mental illness is considered work-related if it’s voluntarily notified by the employee, supported by an opinion from a licensed healthcare professional with appropriate training and experience, and the opinion states that the illness is work-related. In the case of remote workers, AR. 85 recognizes work-related injuries or ill health “if the injury or ill health occurs while the worker is performing work from home; and the injury or ill health is directly related to the performance of work rather than the general home environment or setting.” So, if mental health issues are work-related, they would be included under these disclosure requirements. In sum, worker safety includes mental health and thus could become part of some companies’ ESG reporting metrics. This means companies will have to consider these types of illnesses and injuries in their ESG reports.
Of course, there can be differences in what stressors affect an employee’s wellbeing and mental health — and how they can impact employees. Companies will have to consider and reflect that in their programs and policies. For example, companies will have to acknowledge that employees face different challenges based on many factors, such as their specific occupation, whether they work remotely or onsite, the organizational structure, and personal characteristics such as race, sex, age, or disability. Tracking wellbeing and implementing policies around this topic can be complicated, but it can also dramatically improve a company’s culture, workplace safety, and ESG metrics.
So, even if your company isn’t yet subject to regulations related to worker mental health, more are likely to come. Beyond that, sustainability and ESG reporting has put a spotlight on employee health, including mental health, meaning companies that are required to submit ESG reports would be well advised to start considering workers’ mental health in their health and safety programs and ESG strategy.
Beyond improving workplace safety and employees’ overall happiness, it’s evident that protecting and supporting employees’ mental health in the workplace could have a positive impact on your ESG reporting in the future. Therefore, a company that develops and implements policies related to protecting and supporting employees’ mental health can see improvements in workplace safety and culture and in their sustainability and ESG metrics.
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