ESG and employee benefits: why ESG only matters if employees can feel it

World Environment Day on 5 June is often a prompt for employers to review their Environmental, Social and Governance (ESG) strategy…

…from net-zero targets and carbon reduction plans to wider sustainability commitments.

For employees, however, ESG is rarely felt through a report or policy alone. It is experienced in day-to-day working life through wellbeing support, financial resilience, and the way an employer invests in their people.

In this article, we’ve explored the growing disconnect between ESG strategies and employee experience, why employers should shift their focus to ESG employee benefits and workplace pensions, and how these inclusive benefits can support a diverse workforce.

There is a growing disconnect between ESG commitments on paper and the employee experience in practice. 

Today’s workforce increasingly views ESG through a personal lens. For some, that means purpose and environmental impact. For others, it means financial wellbeing, inclusive benefits, and confidence that their employer is genuinely invested in their long-term future.

If ESG only exists in a report, it risks becoming a statement rather than a strategy. Across the UK and internationally, ESG expectations have shifted.

Employees now judge an organisation’s ESG credentials not only by its environmental pledges, but by what they can actually see, feel and use.

In many workplaces, that comes down to the social side of ESG, including employee benefits, workplace pensions, financial wellbeing support and a clear commitment to inclusion.

This is where the expectation gap is emerging. Employers may be investing heavily in ESG frameworks, but employees often assess those efforts based on the support they experience directly. Often, that means the “S” in ESG (Social), and how effectively employers support their people in a meaningful, consistent and visible way.

In short, this is no longer a nice-to-have, but is becoming a defining factor in employee attraction and retention. Employers are seeing a shift in what potential talent values in a prospective employer.

Questions are no longer limited to pay; people also want to understand what a business stands for, how it supports employees, and whether its employee benefits and workplace pensions genuinely contribute to their long-term wellbeing.

Why employee benefits and workplace pensions should sit at the heart of ESG 

They make ESG visible in the employee experience 

Too often, employee benefits are reviewed once a year and measured mainly on cost. That approach is becoming outdated. If the “S” in ESG is about wellbeing, inclusion and financial security, then benefits and pensions are not separate from ESG. They are some of the most visible and consistent ways an employer delivers it. In many organisations, they represent the largest direct investment made into employees.

They strengthen business performance as well as employee wellbeing

There is also a clear business case. Research from the Chartered Institute of Personnel and Development (CIPD) continues to show a strong link between employee wellbeing, performance, engagement and retention. At the same time, absence levels in the UK have risen to some of the highest levels seen in more than a decade.

They turn workplace pensions into a strategic asset

Workplace pensions are one of the biggest financial touchpoints employees have with their employer, yet they are still often treated as a compliance exercise rather than a strategic part of the overall employee offering. That creates a missed opportunity for employers looking to strengthen both their ESG strategy and their employee value proposition.

Moving beyond minimum pension requirements

Automatic Enrolment has been a success in many respects, helping millions more people save for retirement after the UK Government’s reforms. However, many employees are still not saving enough. The Pensions and Lifetime Savings Association (PLSA) has highlighted a widening retirement living standards gap, with minimum contribution levels unlikely to deliver the outcomes many employees expect.

This is where ESG and workplace pensions align more meaningfully. If employers are serious about social responsibility, supporting better long-term financial outcomes should be part of that conversation.

This goes beyond meeting statutory obligations. It can include encouraging higher contribution rates where appropriate, providing access to financial education and guidance, and reviewing default fund strategies for alignment, transparency and employee understanding.

How inclusive employee benefits support a diverse workforce 

A one-size-fits-all benefits package is becoming less effective for today’s workforce. Employees have different priorities depending on life stage, income, health needs, family circumstances and retirement readiness. As a result, broad and undifferentiated benefits strategies often fail to resonate with the people they are designed to support.

This is often where the ESG expectation gap becomes most visible. Data from organisations such as Gallup consistently shows that employee engagement remains low, and a lack of perceived support, particularly around wellbeing and financial security, is a contributing factor. Employers that want ESG to feel relevant need to make their benefits offering more inclusive, accessible and practical.

A more ESG-aligned employee benefits strategy starts with inclusion and relevance. In practice, employers can make meaningful progress by focusing on three areas:

• Segment benefits to reflect different life stages and needs.
• Ensure accessibility, clarity of communication and what the employee experience looks like.
• Recognise that financial wellbeing, including Workplace Pensions, can no longer be a one-size-fits-all approach.

This also means thinking about sustainability in a broader sense – not just environmental, but whether benefits are genuinely valued, used, and capable of delivering long-term impact.

Making ESG more meaningful for employees

At the centre of this issue is a broader shift in how ESG is understood. It is moving away from being something employers simply report on and towards something employees actively experience. In that context, employee benefits, workplace pensions and financial wellbeing support are central to how credible and effective an organisation’s ESG strategy feels in practice.

Sources:

Sinclair, A. and Suff, R. (2025) Health and wellbeing at work. London: Chartered Institute of Personnel and Development.

Young, J. and Gifford, J. (2021) Employee engagement: an evidence review. Scientific summary. London: Chartered Institute of Personnel and Development.

Pensions and Lifetime Savings Association (2025) Retirement Living Standards. Available at: retirementlivingstandards.org.uk (Accessed: 2 June 2026).

Gallup (2024) State of the Global Workplace: 2024 Report. Washington, DC: Gallup.

Important information

Attivo Financial Ltd (FRN 497130) is authorised and regulated by the Financial Conduct Authority (FCA) for the provision of regulated financial advice. Some services we provide, such as employee benefits advice, are not regulated activities and are therefore not covered by the FCA regulatory framework.