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The impact of "healthwashing" on employee well-being and how investors are taking a proactive approach to assessing the health of their portfolio companies.
It will discuss the impact of healthwashing on employee health and well-being, the upcoming ESG reporting requirements, and how investors are taking an active approach to assessing the health of their portfolio companies and potential investments.
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In recent years, companies have increasingly recognized the importance of creating healthy workplaces that support employee well-being. However, as with any trend, there are companies that engage in "healthwashing," the practice of using marketing to create the appearance of being employee-friendly and health-focused without actually taking meaningful steps to support employee health. This approach not only fails to provide real benefits to employees, but it can also have a negative impact on their health.
Furthermore, there is a growing demand from investors, customers, and other stakeholders for companies to be transparent about their environmental, social, and governance (ESG) practices, including their approach to employee health and well-being. In response, regulators and standard-setting bodies are developing new reporting requirements that will require companies to disclose both employee health data and the actions they are taking to support employee health.
For example, the European Union's Sustainable Finance Disclosure Regulation (SFDR) requires financial market participants to disclose how they integrate ESG factors into their investment decision-making processes. Similarly, the U.S. Securities and Exchange Commission (SEC) is considering new ESG disclosure requirements for public companies. These requirements could include disclosures related to employee health and well-being, such as the number of workplace injuries, employee mental health support programs, and the percentage of employees who receive health insurance.
While these upcoming ESG requirements are not yet finalized, they signal a growing focus on employee health and well-being as an important factor in sustainable business practices. By prioritizing employee health and well-being, companies can not only improve the lives of their employees, but also enhance their ESG performance, attract and retain top talent, and increase their long-term resilience and value.
However, it is important to note that simply disclosing data and actions related to employee health and well-being is not enough. Companies must take meaningful action to create sustainable workforces that support the health and well-being of their employees. By doing so, they can not only comply with upcoming ESG reporting requirements, but also contribute to a healthier, more productive, and more stable society.
When companies engage in healthwashing and fail to prioritize employee health, they not only harm their employees, but also society as a whole. The cost of not creating a sustainable workforce can be significant, both in terms of economic and social impacts.
Economically, unhealthy workers are less productive and have higher healthcare costs, leading to increased costs for employers and society as a whole. In fact, according to the Centers for Disease Control and Prevention (CDC), productivity losses due to employee absenteeism and presenteeism (employees being at work but not fully productive due to health issues) cost U.S. employers $225.8 billion each year.
Socially, the cost of not prioritizing employee health can manifest in a variety of ways. For example, unhealthy workers may be more likely to engage in risky behaviors such as smoking and drug use, leading to increased healthcare costs and negative social outcomes. Additionally, workers who are unhealthy may be more likely to experience job loss, leading to increased economic and social instability.
It's not just regulators and standard-setting bodies that are focusing on employee health and well-being. Public and private market investors, including venture capital and private equity firms, are also taking an active approach to assessing the health of both their portfolio companies and potential investments.
Investors are increasingly recognizing that a healthy workforce is critical to long-term business success. In fact, a recent study by Harvard Business Review found that companies with high employee well-being outperform their peers by up to three times in terms of long-term financial performance.
As a result, investors are looking beyond traditional financial metrics to assess the health and well-being of a company's workforce. For example, they may look at employee engagement and retention rates, workplace injury and illness data, mental health support programs, and access to healthcare and wellness benefits.
In addition, some investors are taking a proactive approach to improving the health and well-being of their portfolio companies. For example, they may provide resources and support for employee wellness initiatives or offer guidance on how to create a culture of health and well-being.
Overall, the growing focus on employee health and well-being from both regulators and investors signals a shift towards a more sustainable, long-term approach to business. By prioritizing the health and well-being of their employees, companies can create a more productive and engaged workforce, enhance their ESG performance, and increase their long-term value.
At LEON, we are working closely with investors to understand the impact of employee and organizational health on financial performance.
