Sustainable employment contracts: how might you make your contracts greener?

There’s increasingly a drive to embrace and champion ESG (the environmental, social and governance impacts of an organisation) in the workplace. For details of what ESG is and why it’s important in the workplace, please see my colleague Alice Parker’s blog here.  

We’ve previously written about steps employers can take to embed ESG into their workplace through the lens of the “S” and “G” in ESG – you can access that blog here. We thought it would also be helpful to consider the “E” in an employment context, given that environmental concerns are increasingly a priority for employees, and employers are under increasing pressure from regulators, the government, investors and stakeholders to reduce their environmental impact. So, in this blog I’m focusing on the “E”, by considering steps employers can take to make their employment contracts more environmentally friendly. I’ll also offer some thoughts on ways employers might champion their environmental impact in ways that go beyond the employment contract.

In implementing any changes, organisations mustn’t overstep the boundaries of what they can regulate. In other words, they should ensure that proposed changes don’t unreasonably interfere with employees’ private lives. Employment contracts shouldn’t be changed without the employee’s agreement, so these considerations would only apply to precedent or model contracts and advice should be taken if changes need to be made to the contracts of existing employees (for more on which see our blog here).

Don’t print if you don’t have to

A straightforward way to reduce your environmental impact is by avoiding printing hard copy contracts unless absolutely necessary. Many employers do this already, and there are a wide variety of methods to sign a contract electronically. The Law Commission confirmed back in 2019 that electronic signature for contracts is valid, including where a contract needs to be signed by deed. Sending employment contracts / variation letters electronically saves HR and employees time and hassle and is an easy way to reduce your carbon footprint.

Incorporate environmental obligations into the contract of employment

Consider whether environmental objectives can be incorporated into the contracts of senior leaders, directors and those responsible for procurement (in the latter case, to ensure that environmental considerations are taken into account when selecting new suppliers or partners).

If you’re reviewing your employment contracts, it’s worth ensuring relevant policies reflect your commitment to the environment and any changes made to contracts. My colleague Katie Fudakowski has explored here the importance of ensuring your whistleblowing policy includes environmental damage in the definition of wrongdoing, to make employees aware that UK whistleblowing law can protect disclosures regarding climate concerns.

Think about how your remuneration package could be more sustainable

Pension scheme

Research from Make My Money Matter in 2021 found that making an individual’s pension “green” is 21 times more effective at cutting carbon emissions than adopting a vegetarian diet, giving up flying or swapping energy provider. Employers may wish to explore whether their pension provider can diversify into more sustainable investments. Specialist advice should be taken to ensure pension decisions are appropriate for your organisation.

Benefits

Consider whether there are ways in which the benefits you offer employees could be made more sustainable and environmentally friendly, for example, by supporting employees to reduce their impact at home or when commuting and travelling. Some “green” benefits are already fairly well established, such as cycle to work or electric vehicle salary sacrifice schemes or the ability to give as you earn. However, newer, more sustainable initiatives are starting to emerge, for example, access to energy efficient schemes for the home or “journey days” for foreign holidays to reduce the impact of flights (as promoted by Climate Perks).

In addition, you may wish to consider giving employees paid time off to complete environmental work (perhaps as part of a more general volunteering initiative), potentially in partnership with local organisations.

By way of reminder, under section 1 Employment Rights Act 1996, employers are required to set out entitlement to benefits and paid leave in the employment contract.

Beyond the employment contract: could your workplace be more environmentally friendly?

There are many other ways employers might improve their environmental credentials. It’s not possible to cover them all in this article, but they range from improving energy efficiency to ensuring your workplace is conducive to sustainable commuting, from committing to reduce carbon emissions to auditing your catering arrangements to ensure food waste is minimised, and many more. With a 2021 report showing that two thirds of respondents felt it was important for their employer to be committed to acting sustainably, what is clear is that increasingly a company’s approach to environmental concerns is likely to have an impact on the recruitment and retention of staff. 

With special thanks to Alex Evans, a paralegal in the employment team, and Maya Bhat, a vacation scheme participant, for their contributions to this blog. 

If you require further information about anything covered in this blog, please contact Tabitha Juster or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, April 2023