How does employee welfare impact ESG performance?

Higher employee satisfaction significantly contributes to improved productivity, which directly influences a company's Environmental, Social, and Governance (ESG) performance. When employees are well taken care of—whether through fair wages, benefits, work-life balance, or workplace safety—they tend to be more engaged and motivated. This heightened level of engagement generally leads to higher productivity levels, better employee retention rates, and lower absenteeism.

All these factors contribute to a stronger workplace culture, fostering innovation and efficiency, which align with a company's social responsibility initiatives under the ESG framework. Companies that prioritize employee welfare are also viewed more favorably by investors and stakeholders, enhancing their overall ESG rating. In contrast, stating that employee welfare has no impact on business performance or that it guarantees lower operational costs misunderstands the significant link between a satisfied workforce and improved business outcomes. Simply reducing regulatory policies cannot replace the intrinsic value that a happy workforce brings to a company’s performance. Therefore, the connection between employee welfare and ESG performance is clear; higher employee satisfaction indeed leads to improved productivity, positively affecting ESG metrics.