BDO Legal Guide to The S in ESG Green clauses in employment contracts

This BDO Legal guide is designed to give you an overview of these considertaions in some of those countries.

Sustainability or ESG (Environment, Social & Governance) is increasingly on the agenda of organisations. This can be due to intrinsic motivation or the increase in laws and regulations, such as the Corporate Sustainability Reporting Directive “CSRD”. Questions from clients, suppliers and employees about an organisations’ sustainability goals can also play a role in this. Sustainable or “green” employment conditions can be a way to give substance to the “S”(social) in ESG.

CSRD: Reason to make changes in personnel policy

Under the CSRD certain companies are required to report on ESG, including – among other things – their personnel policy. Examples include work-life balance, equal pay and the involvement of the works council. This reporting is based on so-called data points. The outcome of an analysis of the data points regarding the S (social) may give reason to make changes to personnel policy.
On the one hand, these changes can be made from a compliance perspective. On the other hand, updating the personnel policy can also be an opportunity from the perspective of being a good employer and support the retention strategy. For instance, integrating green elements into the employment conditions can be a way to attract and retain employees.

Benefits for employers

For organisations, there are several advantages for updating the personnel policy and introducing
sustainable employment conditions. These include, among others:

Complying with (new) laws and regulations in the field of ESG. The CSRD is a good example of this. But in addition, other European legislation that specifically focuses on the S in ESG, such as the Directive to strengthen the Application of the Principle of Equal Pay for Equal Work or Work of Equal Value Between Men and Women Through Pay Transparency and Enforcement Mechanisms (EU Directive 2023/970).
Employees find sustainability increasingly important and also set requirements for this when they start working for a new employer. In addition, it can contribute to employee retention.
Meeting the requirements of clients and suppliers who are increasingly asking what the company is doing in the field of ESG.