The cost of living crisis is now an ESG issue
There’s no way to dress up the cost of living crisis that’s currently grasping the UK. Inflation is at its highest rate since the 1980s. Almost 1 million renters across the country are facing eviction. Rail, postal and nursing staff are (as we write this) taking historic industrial action.
For businesses, responding to the crisis isn’t just a financial matter now. Employees are feeling the impact on their mental wellbeing as well as their wallets. People from underprivileged backgrounds are being priced out of the job market, leading to less diverse teams. Environmental goals are falling to the wayside as paying the bills becomes the sole priority.
No doubt a number of businesses will just be trying to stay above water. But there’s a chance for companies to think beyond their own survival, helping their employees through the storm and finding creative ways to ensure we don’t accidentally knock the environment and our wider society overboard.
We’re all feeling the squeeze, but not in the same way
In something like a cost of living crisis, it’s easy to fall into the trap of thinking that everyone is facing exactly the same problem together. But the reality is far more nuanced than that.
Research by PwC found that 48% of 18-34 year olds said that a recession would have a high or very high impact on their daily life in 2023, compared to 36% of over 55s. That shouldn’t be too surprising. In general millennials and Gen Z tend to have less savings than older generations. They’re more likely to rent rather than own their home. And if they lost their job as a result of the crunch, they have fewer years of desirable service and experience to help them find another.
From an ESG perspective, the current cost of living crisis could also be a sledgehammer to efforts to build more diverse teams.
People from less affluent backgrounds already face significant financial barriers to higher education. But if their choice is between studying for a degree that might help them in the long term or taking a lower paid job that means they can feed their family now, it’s not hard to see which one looks more appealing.
Businesses need to be striving for better equality and representation anyway, but especially during a cost of living crisis. In 2023 we’re all going to have to look at where we find our talent and what we can do to better measure it. It doesn’t cost you anything to think twice about your recruiting strategy, and putting it off will only make the wealth gap problem worse.
The cost of living crisis will hit more than just wallets
As things get worse, it won’t just mean having to cut back on luxury spending. It’ll also mean people and businesses both seeing their environmental commitments as an option rather than a necessity.
For instance, how can we ask people to insulate their home if rising energy prices mean they’re not sure they can afford to heat it in the first place? And as a business, where does sustainability sit now that budgets are shrinking left, right and centre? If you’re not sure you’ll be able to keep the lights on this week, anything more existential than that falls way down the priority list.
There’s a real danger that those environmental targets will be seen more as peripheral items that can be put on the backburner until we’re out of the tunnel. But when businesses have so much more power than individuals to combat the climate crisis, those targets can’t end up as dead weight.
The more the current crisis bites, the more we could see all the collective environmental progress we’ve made over the last few years slow right back down. That kind of stagnation can take years to reverse again – years we don’t really have on the clock – and businesses have to do their fair share to stop that from happening.
We need to protect the lowest paid
In an ideal world, the solution to helping everyone navigate the cost of living crisis would be easy – boost their salaries. If your company can afford to do that, that’s great. But giving everyone the same raise might not be as impactful as if you think more strategically about it.
Imagine for a moment that your company includes Emily, who earns £20k a year, and Penelope, who earns £35k. They’re both feeling the squeeze right now, but Emily is considerably more worried about how far her salary will stretch than Penelope.
If they both got the same percentage pay rise, that might look equal on paper. But in practice Penelope gets a bigger increase than Emily, and the gap between their salaries gets even bigger.
Investors with ESG concerns are suggesting a proportionate approach to protect the lowest paid. For instance, you could tailor your pay rises so that Emily gets a higher increase that reflects her greater need. Or you could offer a one-off payment to your lowest-paid employees – HSBC, TSB and the Co-operative Bank have all recently done this for their employees in the lowest wage brackets.
When you start pricing up a pay rise, it’s easy to think you can’t afford to increase anyone’s salary because you can’t afford to increase everyone’s. Prioritising lower-paid employees over boosting higher earners opens up more room to manoeuvre, while giving more meaningful help to those who most need it.
When a pay rise just isn’t possible
If you’re a smaller business, you might not be able to increase anyone’s pay right now. But that doesn’t have to be the end of the question. If a pay rise isn’t possible, what else can you do to make things easier for your employees?
Speak to them and find out what they need. If fuel prices are their main concern, can you offer more reimbursements? If they’re worried about their energy bills, could you put laundry facilities in the office for everyone to use?
At the very least, look for financial wellbeing tools and advice you can either provide or signpost employees to. Those tools might not be directly relieving their money problems, but they can help people keep their heads above water until things level out.
The benefit of being a small business is that if you can afford to do something, you don’t have to navigate multiple levels of red tape and sign-off to implement it. You can be more nimble with the solutions you find, and pull together to help your people through the challenges ahead.
If you’re looking to do more to support your people through the crisis, read more about how tech can help HR be a force for good.
Ethical benefits that truly make a difference
Lumina Perks is a sustainable marketplace that offers your teams access to ethical perks, giving them opportunities to live more sustainably at work and outside of it. Lumina Perks gives climate-conscious employees a chance to do good, like upgrading to an electric vehicle or choosing ethical fashion brands.
It doesn’t have to be complicated. Getting Lumina Perks implemented within your business could be as easy as pressing ‘Go’, taking your benefits offering from nothing to something practically overnight.
Want to find out more about how Lumina Perks could work for you? Get in touch with a member of our team for a free 15 minute demo! Let us show you how with Lumina, everybody benefits.
