ESG has dominated the minds of HR leaders and the wider corporate world for over a decade, with many recognising the business case for integrating environmental, social, and corporate governance (ESG) objectives into their strategies. A recent McKinsey study showed that companies who integrate ESG into their growth strategies tend to outperform their peers. The allure of becoming a “triple bottom line” business — one that balances the needs of the people, the planet and profit — has never been more important than it is now. As talks of ESG legislation in the EU and UK becomes more concrete and shareholder activism is on the rise, corporations face higher scrutiny for greenwashing.
As HR leaders look to address these concerns, many businesses have begun to look to HR technology as the first step in creating a responsible and sustainable business. The “S” or the “social” aspect of ESG is most typically seen as the area where HR tech can bring the most value. However, businesses want to ensure that the technology they invest in can help them incorporate the other significant pillars, i.e. environmental and governance. Recently,
Atlas, a HR tech firm, recently published its 2023 Global HR Study revealing insights from over 500 HR leaders across five markets: the US, UK, Australia, Singapore and UAE. The study showed that over half of the leaders (58%) saw finding the right technology as the main barrier to adoption. Despite this, the appetite for HR tech is at an all-time high as the study found that 9 in 10 companies, with a value of $189 billion in global turnover, are looking to increase their investment in HR tech over the next 12 months.
A possible solution for businesses looking to HR tech to help them incorporate ESG principles is an Employer of Record (EOR). An EOR is a third-party organisation that enables companies to legally engage with workers internationally without needing to set up legal entities or risk violating local laws. Additionally, an EOR will undertake the responsibility to pay and manage permanent or temporary employees on behalf of another company.
An EOR is uniquely suited to helping enterprises implement ESG principles and can help businesses grow sustainable global employment strategies.
Environmental – contributing to the ‘green office’
EORs enable businesses to hire the most qualified employees across the globe, meaning employees can work and reside in a completely different region than where the company is based. As such, the primary way EORs address this pillar is by reducing enterprises’ environmental impact and implementing sustainable practices. By endorsing remote work and virtual gatherings, EORs contribute to lowering office energy consumption and the need for office space. There are no carbon emissions from work commutes, and office waste is minimised as EORs promote the use of digital documentation and other communication methods which curbs the use of traditional materials such as paper.
Social – fostering inclusive and diverse work environments
Using an EOR provides various benefits in supporting the social pillar, particularly by promoting fair labour practices, fostering diversity, equity and inclusion practices (DEI), aiding in social mobility, supporting well-being and more. Most notably, EORs help level the playing field for both employees and employers by enabling companies to access a global workforce with specific skills and ensuring a consistent supply of talent and a diverse workforce. Furthermore, EORs help to establish a standardised compensation structure based on skills and responsibilities rather than demographics. This structure assists in eliminating wage gaps and ensures fair remuneration where all employees are valued equally.
Governance – keeping compliant in every jurisdiction
EORs can also help companies adhere to the governance pillar, as it is the EOR’s responsibility to remain abreast of local laws, regulations and compliance rules imposed on a company in a new jurisdiction. By its nature, EOR firms help organisations manage risks associated with workforce management and safeguard them from legal and reputational challenges. According to the same Atlas survey, over three in five (63%) HR decision-makers find that keeping track of changing regulations across multiple jurisdictions to be particularly challenging. EORs can help address this issue as it can provide customers with detailed reports and insights into the varying legislation to help the company tailor bespoke strategies.
Overall, with an increasing number of companies looking to make greater investment in HR tech coupled with the need of businesses to build more sustainable workforce, an EOR can play a significant role. By using an EOR partner, organisations can reduce their ecological footprint, build diverse and fair workplaces and seamlessly navigate governance and compliance hurdles.