Representation in the workplace: ESG

Social considerations cover a broad range of areas, including human rights, data privacy and information, diversity and inclusion, remuneration and pay equality, health and safety, and worker protection, to name just a few. From a workforce perspective, a key element of such social considerations relates to a company’s relationship with its workforce. But one area often overlooked as businesses continue to embed environmental, social and governance matters in their business strategies is the possible legal requirement to involve worker representatives in plans.

Obligations towards employee representative bodies can differ significantly by jurisdiction and the nature of the ESG-related measure. Globally, there are already a vast number of areas in which representative bodies must be involved. As the legal and regulatory obligations around sustainability grow, so too will the duties towards such representatives. Failing to recognize and action such obligations have the potential to create unexpected and often significant negative impacts.

Following on from our Representation in the workplace: Essential guide for global businesses, in this briefing we explore some of the employee representative body considerations in relation to ESG-driven workplace projects.

Focus on: ESG-related employee representative body considerations in France

In France, a number of new and amended laws aimed at encouraging companies to take steps to build positive environmental, social and/or governance considerations into their business practices have been seen in recent years. With a view to driving progress from wider avenues, such reforms often include new rights and obligations for the company’s Social and Economic Committee (CSE), (i.e. the employee representative body/Works Council). This expanded involvement of the CSE in driving forward workplace ESG-related change further builds upon the significant role the CSE has historically played in companies’ plans.

Alongside from the wide remit of the CSE, the CSE’s impact derives from its wide range of rights and powers. Often going beyond the typical information and consultation rights seen in other countries, those rights include the right to bring individual or collective claims on the employees’ behalf, the right to conduct investigations within the company, the “right of alert” on certain topics, as well as the right to participate in the management of board meetings. In addition (in companies employing at least 50 employees), the CSE is annually informed and consulted on the strategic orientations and the economic and financial situation of the company, its social policy, and the working conditions and professional training of the workforce. In this way, it has direct regular insight and involvement in the company’s direction and its future plans.

ESG-related circumstances where the CSE should be informed and consulted

The determining factors for the CSE’s involvement are the nature and impact of the contemplated measure and how many employees would be affected. Therefore, although the general rule is that the CSE should be informed and consulted on matters relating to the organisation, management and general running of the company, whether the obligation is triggered is assessed on a case-by-case basis. However, in light of the significance of ESG-related matters in the workplace, the fact that such matters can often influence working conditions, and the impact across entire workforces, it will regularly be the case that CSE involvement will be required on ESG-related projects in France.

The protection of worker health and safety, diversity, inclusion and professional equality, as well as, the environmental consequences of a company’s actions, are just some of the areas where recent laws in France have sought to strengthen the social responsibility of companies in looking after their people and others who could be affected by the organisation, supported by robust rights of the CSE.

For example, a Vigilance Law aims to protect against human rights and environmental abuses, including by requiring the preparation and implementation of a “vigilance plan” to identify and prevent any risk of serious damage to human rights and fundamental freedoms, health and security, and the environment. The CSE has a significant part to play in this area, including through the right to be informed and consulted on key decisions regarding the health and safety of the workforce. Moreover, it has a right of alert and investigation in the event of harm to the physical or mental health of employees.

On the area of diversity, inclusion and professional equality, in addition to its wider rights to information and consultation, the CSE receives regular information (via the economic, social and environmental database (BDESE)) on workforce diversity, giving it regular insight to enable it to maximise its input and effect in this area. The CSE also has a right of alert in the event of allegations of harassment or discriminatory measures, with a designated CSE member usually being part of any investigation led by the employer in harassment cases. The CSE’s influence is further expanded with the right to propose actions to prevent sexual harassment and other sexually discriminatory behaviour.

The CSE is also increasingly an influential stakeholder in environmental matters in France. A recent change in the law has introduced a requirement for larger companies in France to inform and consult the CSE on the potential environmental consequences of certain company actions and proposals, prior to their implementation, thereby ensuring that the CSE act as a company’s environmental ambassador. It will mean, for example, employers with at least 50 employees wishing to make certain changes will have to provide the CSE with an assessment of the environmental consequences of the proposal and consult on both the environmental and employee impact. The expansion of the CSE’s remit in this way represents a considerable shift in the CSE’s role and is an important step in encouraging businesses in France to embed “greening” in their practices.

ESG-related employee representative body considerations in other countries

As well as a myriad of novel approaches being seen at company level to seek to propel ESG-related change, a number of new and proposed government and regulatory approaches are being seen globally focused on social and governance matters. Most recently in the EU, this has included enhanced whistleblower protections, a new Directive aimed at ensuring pay transparency in employment, a proposed new Directive requiring companies to conduct human rights and environmental due diligence, and a corporate sustainability reporting Directive to make EU companies more accountable by requiring greater disclosure of information.

Some of the new and proposed laws to drive ESG-related change expressly give additional rights to employee representative bodies to help drive that change, denoting a change in approach in many jurisdictions. For example the EU Pay Transparency Directive, where new minimum requirements will not only include a legal requirement for certain employers to prepare and publish gender pay gap reports, but will also require those employers to work with worker representatives to prepare a joint pay assessment and develop an action plan in circumstances where the pay gap exceeds a set metric.

New corporate sustainability due diligence and reporting Directives also demand a significant uptick in the involvement of employee representative bodies, as well as workers directly, in matters beyond those such bodies have traditionally been involved in to date. According to the Directive, engagement with affected stakeholders, which include workers, is central to managing sustainability risks and reporting.  For example, under the  corporate sustainability reporting Directive, certain companies will be required to publish detailed information on the existence and scope of, and the process for engaging with, workers and workers’ representatives on environmental, social affairs and governance matters (or report that no such process has been adopted). Similar to the existing requirement in France to consult with the CSE on the potential environmental consequences of certain company actions and proposals, the Directive includes the introduction of an expectation that companies will engage with workers and workers’ representatives on any workforce impacts that may arise from reducing carbon emissions and transitioning to greener and climate-neutral operations, and report on such engagement. In addition, the draft corporate sustainability due diligence Directive proposes engagement with trade unions and workers’ representatives, as part of a company’s due diligence approach.

The expanding range of express rights for the involvement of workers’ representatives to drive ESG-related change represents a significant shift, but it should be remembered that even where worker representatives are not expressly given additional powers or duties, ESG-related measures may nonetheless trigger such requirements. Measures that result in changes to working conditions, terms of employment, employment practices, or workforce structures, can often trigger obligations to provide information to, consult with or even obtain the agreement of worker representative bodies. This may also include obligations towards a European Works Council.

For example, in the Netherlands, where the consent of any Works Council is required before any measures are taken to introduce, amend or withdraw certain benefits schemes, including any remuneration or job assessment system. To the extent that companies propose to link performance on environmental, social or governance targets to variable compensation (such as environmental or workforce diversity and inclusion targets), the buy-in of the Works Council will therefore most likely be required. Overlooking the right of the Works Council to give its consent can have significant implications, as failing to obtain such consent can render any decision null and void.Works Councils in Germany also have extensive information rights in all matters affecting employees, and must be consulted and their consent obtained before a measure is carried out. This could include, for example, environmental, social or governance matters impacting the workforce, such as remuneration matters, occupational health and safety (where there is also a mandatory right of co-determination in respect of the introduction and application of regulations in certain matters) and measures to promote diversity and inclusion. Works Councils in Germany also have far-reaching information, monitoring and participation rights in connection with whistleblowing and other reporting/monitoring systems.

Planning ahead

Workplace social considerations cover a vast range of areas, many of which already include related obligations towards employee representative bodies. Pay transparency requirements, obligations when setting remuneration, and changes to ways of working are just a few examples. With the legal and regulatory obligations around sustainability continuing to grow exponentially around the world, employers can expect to see a corresponding growth in the requirements around the involvement of employee representatives.

Careful planning and involving, at an early stage, any employee representative bodies in proposed measures where required will help ensure that ESG-related plans can be smoothly implemented. Some of the key actions and considerations include:

• Recognizing the possibility of employee representative body involvement in such plans.
• Establishing what employee representative bodies exist and their powers, composition and functioning in any particular country with reference to the proposed ESG-related project.
• Understanding any required timescale for information and consultation with employee representative bodies and building that into the timeline for the project.
• Determining any particular formalities for exercising any information and consultation obligations.
• Looking ahead and planning for additional requirements that are on the horizon.

How we can help

Our extensive global footprint means that we are well placed to support global employers with their workforce plans, wherever they have a presence. Our lawyers are not only experts in the complexities of different laws, but also in the management of projects spanning jurisdictions and driving those projects to maximize the strategic aims and benefits. 

Our teams can help with advice on ESG-driven workplace projects across all jurisdictions, as well as comprehensive risk assessments and practical action plans. Advice and assistance on works councils issues, pay transparency requirements, reporting obligations and human rights are just some of the areas our teams regularly cover.

See also the ESG webpages on our global website and our other materials in this series: Representation in the workplace: Essential guide for global businesses; Employee representation considerations when introducing or making changes to pensions and benefits; Representation in the workplace: Technology.