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Mental health and its impact on ESG reporting
A look at how employee mental health can and will affect ESG metrics and inform health management.
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 wellness is prioritized by a company, it can result in happier, healthier, and more productive 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.
The policies that companies have in place to support employees’ mental health can also impact their sustainability and ESG reporting, so employee wellbeing should be taken into consideration as part of a company’s sustainability and ESG 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 to boost their ESG score and enhance their reputation.
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 mental health is the mental state of workers, sometimes called mental wellbeing, which considers the physical and emotional health of employees as well. Mental health struggles can impact emotional and physical health, too, damaging work-life balance, finances, and relationships both in and out of the workplace.
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.
While COVID-19 may have hastened the link between the workplace and our mental health and wellbeing, it isn’t a new concept.
Workplace stress can arise from many different areas including:
- Heavy workloads
- Long commutes
- Unpredictable schedules
- Hostile working conditions, such as harassment, and discrimination
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.
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
The US Occupational Safety and Health Authority (OSHA)As discussed above, physical safety can be negatively impacted by a workplace that doesn’t support employee mental health. Increasingly, 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 don’t 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.
Further, 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, and 81% would actively seek workplaces that explicitly support mental health.
These growing statistics show that employers who fail to support employee mental health and provide a safe and sustainable workplace may have trouble attracting and retaining talented employees, hindering their business growth and damaging their reputation in the long run.
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, companies are subject to sustainability reporting, more detailed and transparent sustainable reporting requirements, and mandatory sustainability reporting standards. For example, the CSRD’s reporting standards highlight that the mental health of workers is coming into focus in ESG and sustainability conversations.
European Sustainability Reporting Standards
On 31 July 2023, the Commission adopted the European Sustainability Reporting Standards (ESRS) for use by companies that are subject to the CSRD, enhancing disclosure rules relating to environmental, social, and governance (ESG) data. Companies which fall within the scope of the CSRD must report ESG information, covering risks and opportunities, metrics, strategies, and impacts of their operations.
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, worker mental health is 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. This means companies will have to consider these types of illnesses and injuries in their ESG reports.
Tip: Consider variations in stress to inform employee wellbeing strategies
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
- 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.
ESG mental health
So, even if your company isn’t yet subject to regulations related to mental health in the workplace, more are likely to come.
From guidance to compliance, 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.
Interested in learning more about ESG reporting?
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