A growing awareness of environmental issues is prompting employers to re-examine their eco stance with perks playing a key role, says Debbie Lovewell
Millions of people around the world are due to come together later this year to watch a series of concerts featuring acts such as Bon Jovi, the Red Hot Chilli Peppers, and Sheryl Crow. Rather than simply being a music lover’s dream, the Live Earth event, backed by former US president turned eco-warrior, Al Gore, is intended to encourage individuals, businesses and governments to take positive steps to combat climate change.
The state of the environment is considered by many to be one of the biggest issues facing the world today.
Already public interest in this subject is such that some individuals are exercising their power as consumers to select products and services from organisations able to demonstrate their green credentials, while others are choosing to only work for employers that are environmentally aware. Organisations are also starting to sit up and take notice of the issue of climate change, partly in response to this increasing public awareness and also because they are facing up to the possibility of government legislation to reduce carbon emissions. Some are already taking steps to reduce their carbon footprint and are reviewing their policies on anything from product sourcing to their employer brand, including the benefits on offer, so that they reflect public and employee concerns.
Annika Haslett, head of flexible benefits and total reward at Gissings Advisory Services, says: “Corporate social responsibility has been kicking around for quite some time. The environmental awareness in the UK and the world as a whole has pushed this right up everyone’s agenda.”
Political momentum in support of cutting carbon emissions is already gathering pace. It is not unfeasible that, in the future, legislation and government-backed initiatives will force industry to curb its carbon output. Following the publication last year of the government-commissioned Stern Review: The economics of climate change, the Climate Change Bill was unveiled in March 2007. The draft bill, currently subject to a consultation exercise scheduled to end next month, sets out targets for cuts in carbon emissions of 60% on 1990 levels by 2050, with an interim target of 26%-32% by 2020. Although the bill does not stipulate how this will be achieved, it makes provision for the government to implement policies in order to meet those targets such as new trading schemes for businesses not included in the existing EU carbon emissions trading scheme. The EU scheme currently covers sectors such as power generation, steel, glass, paper and cement.
There are also strong economic reasons behind the need to combat climate change. Stern’s report estimates that, unless action is taken to reduce carbon emissions, the overall cost of climate change will be equivalent to 5% of global GDP each year. And if wider factors and risks are taken into account, it estimates this could rise to 20% of global GDP.
With the government beginning to take action, it may not be long before employers are legally required to review their business practices. While many organisations may already have some green initiatives in place such as recycling or energy efficiency schemes, several have also begun to review other policies including employee benefits. In some areas such as fleet management, positive steps can be taken to reduce carbon emissions, however, elsewhere, employers may wish to take on board employee concerns about the environment by reviewing other perks on offer.
Growing staff awarness
The power of employees to influence organisational change should not be underestimated. Hugh Jones, senior account manager at the Carbon Trust, says: “One of the key factors that is changing the mix now is growing employee awareness.”
According to a survey of 1,018 employees carried out by the Carbon Trust in April 2006, more than three-quarters now consider it important to work for an employer that has an active policy to reduce its carbon emissions. Less than a fifth, however, said their company runs programmes to help employees become more energy efficient.
So taking an environmental stance could help to recruit key talent, particularly among certain demographics. “Graduates seem to be increasingly interested in the ethical ethos of the organisations they are going to work for so that can be a clincher in recruiting key staff,” explains Haslett.
Including benefits in an organisation’s environmental strategy, however, is still a relatively new concept. “It has captured the imagination of a lot of employees, but employers have a lot of other issues so it isn’t a [top] concern for HR. Over the rest of the year, we think we [will] start to see more evidence of [it in] employee benefits and employee schemes on offer,” says Jones.
There are, however, a number of green benefits options that are available. “It’s all very developmental at the moment, but there’s no end to the things you can do if employers have an appetite for it,” explains Haslett.
One option open to employers is to include a carbon offsetting or carbon trading scheme in a flexible benefits plan or salary sacrifice arrangement. This enables employees to fund carbon-offsetting initiatives such as paying for trees to be planted or purchasing carbon credits in order to counter the effects of their personal carbon emissions.
Incentivising staff to reduce their own carbon footprint can also be a valued perk. BSkyB, for example, (see box) has issued employees with a carbon credit card. If staff do something that is considered to be environmentally friendly, such as walking or cycling to work, they receive points on their card earning them entry into a prize draw.
Dev Raval, group head of reward, explains such initiatives are intended to raise employees’ awareness of the company’s environmental ethos. “Minimising our environmental impact is very important to us. I think it’s something that a lot of organisations talk about, but our customers and employees can see we’re doing something.”
An area where organisations can make a real inroad on carbon emissions is around company car and transport policies. So far just under a quarter (22%) of organisations have introduced an environmentally-focused transport policy, according to Company car UK published by PricewaterhouseCoopers’ reward survey arm Monks in March.
Last month, the government added an extra incentive to encourage the purchase of environmentally-friendly cars in this year’s Budget by raising vehicle excise duty rates on the most-polluting cars (band G) to £300 in 2007-2008, and to £400 in 2008-2009. The rate for low-carbon cars in band B, meanwhile, was reduced to £35 in 2007-2008 and subsequently frozen for two years. A similar fiscal policy has been applied by the Treasury to company car tax, with lower rates levied on drivers of cars with low carbon emissions.
But Stewart Whyte, director and membership secretary of the association for fleet operators, Afco, doesn’t think this goes far enough. “That is a strong message and signal, but you have to look at the context of vehicles that fall into the [higher] category. It’s not great encouragement to say to someone ‘downsize or pay the penalty’ because when you’re at that level, £100 a year isn’t very much.”
Other possible options include restricting the vehicle models offered to employees to greener cars, and encouraging staff to make fewer business journeys or adopt car sharing for essential trips. Gerwyn Davies, public affairs manager at the Chartered Institute of Personnel and Development, adds: “We think organisations should be doing more to promote subsidised car parking to employees who car share.”
However, Whyte believes such measures must be in keeping with the nature of the organisation and its drivers. Businesses with a large number of high-earning perk drivers, for example, may find that these staff do not appreciate being asked to switch to a lower-status vehicle in order to reduce fleet emissions.
But greener cars, such as liquefied petroleum gas (LPG) or hybrid vehicles, have the added advantage of incurring tax savings on fuel costs. This year’s Budget also decreased the duty on LPG by 1p per litre, while the duty on bio-gas will remain at its current level until at least 2011-12. These cars are also exempt from the London congestion charge, a tax which is likely to be extended to other cities in the UK.
However, despite the introduction of these tax breaks several years ago, the popularity of greener cars among employers has failed to increase significantly. This is partly due to the lack of LPG refuelling facilities, while hybrid cars have yet to be built for the mass fleet market.
But cars are not the only green transport options that can be offered to staff. There are a number of other alternatives, including bikes-for-work that are supported by the government’s green transport initiative. The aforementioned Monks survey also found that nearly half (48%) of employers now encourage staff to cycle to work. Providing a bikes-for-work scheme, which gives staff the opportunity to loan a bicycle from their employer through a salary sacrifice arrangement, may help to boost the number of staff choosing this method of transport. Jon Bryant, head of flexible benefits at Jardine Lloyd Thompson (JLT), says: “We’ve seen a huge increase in take-up rates this year.”
To cut the number of staff travelling to work by car, employers can also provide a free or subsidised works bus. These are free from national insurance contributions for employers and staff, and income tax for employees as long as they are used mainly for journeys to and from the workplace, and seat nine passengers or more if a minibus is used, or a minimum of 12 if a bus is provided.
Allowing staff to work flexibly, or from home, can also help to reduce travel-related carbon emissions.
Employers may find such measures have the added advantage of boosting employees’ physical and mental wellbeing. If staff understand their employer has had a hand in making them feel better about themselves, this will help to increase engagement and loyalty to their organisation and, in turn, productivity.
To further capitalise on this feel-good factor, employers could provide a payroll-giving scheme and include environmental investment funds in their company pension plan.
David Ferris, senior consultant at Punter Southall Financial Management, explains: “[Socially-responsible investment] is becoming more important and we are talking to employers about it when reviewing schemes. What you need to do in these circumstances is provide real information for people.”
Employers can also use criteria based around social responsibility to select benefits providers, for example, by setting standards for how a supplier should deal with its waste. If competition among providers is close this could help seal the contract, says Haslett. “We don’t think that’s the be all and end all, but if you get to a tie-break situation, it could be the deciding factor.”
The manner in which environmental initiatives are communicated to staff should also be taken into consideration. Using reams of paper to get the message across, for example, may well undermine the scheme’s objectives. “These schemes tend to work well when employees have internet access,” says Bryant.
He adds that it will be at least three-to-five years before most employers adopt an environmental approach to business and, with that, a greener reward package.
As the CIPD’s Davies concludes: “I think it will take some time. There are some people that are yet to be convinced. It will be one of the key issues political parties are fighting over in the run up to the next election. It’s set to become more mainstream, which is when people will sit up and take notice.”
CASE STUDY: BSkyB
BSkyB bosses on cloud nine about eco-perks
BSkyB offers a host of green benefits for staff as part of the organisation’s environmental strategy, the Bigger Picture.
Under one initiative, it issues carbon credit cards to employees onto which it loads points for environmentally-friendly acts of behaviour, such as walking or cycling to work. This can then earn them entry to a prize draw to win items such as a holiday.
The company has also negotiated a series of discounts on green products for employees. These include items such as environmentally-friendly nappies and green holidays.
Dev Raval, group head of reward, explains: “What we’re trying to do is give [staff] some education around what they can do. Everyone appreciates the issue. What we’re trying to do for our people is empower them to do something themselves. We give them a way to join in.” It has also negotiated discounts for all employees on hybrid cars, and offers a £1,300 one-off payment to staff who choose to purchase one.
Last month, it added carbon offsetting to its salary sacrifice scheme. Raval explains this is linked to the company’s Bigger Picture website, which contains a carbon calculator.
- More than half (57%) of employees wish their employer would do more to be environmentally responsible.
- Over a third (35%) say that receiving greener benefits would make them more loyal to their employer n Just 14% would change employers to receive a greener benefits package, but more than a third (35%) of those aged between 16 to 24 years said this would motivate them to do so.
- The three most popular green benefits among employees are incentives to move to sustainable energy/electricity, discounts on green products, and discounted public travel.