Measuring the 'Social' Component of ESG: A Critical Review of Methodologies for Assessing the Financial of Employee Well-Being
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| author | IJMSRT |
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| contents | <p>. Introduction <br>Environmental, Social, and Governance <br>(ESG) frameworks have emerged as pillars <br>of the modern corporate sustainability and <br>financial valuation, serving as a multifaceted <br>prism to the perspective of investors, <br>regulators, and organizations in the long<br>term performance appraisal. The ESG <br>paradigm has now become a quantifiable <br>force in determining enterprise value and <br>resilience in addition to ethical or <br>reputational issues (Baker et al., 2022; <br>Maaloul et al., 2021). Whereas the <br>environmental and governance aspects have <br>gained much focus because of their <br>quantitative and regulatory characteristic, <br>the social aspect of the pillar, the S in ESG <br>is relatively underdeveloped. However, this <br>aspect, which incorporates human capital, <br>labour practices, diversity, equity, inclusion, <br>and employee well-being is also getting <br>acknowledged to be crucial in sustainable <br>value creation (Deloitte, 2024; WEF, 2023). <br>The rising interest of investors in the social <br>aspect has gained pace in the recent years <br>fueled by the rising empirical research <br>evidence of the relationship between the <br>welfare of the workforce and organizational <br>performance, productivity, and financial <br>results. Research by McKinsey (2023) and <br>PwC (2023) highlight the fact that engaged <br>employees help a company to achieve better <br>innovations, lower turnover, and higher <br>returns. Likewise, the findings of research <br>works by De Neve et al. (2024) and Krekel <br> <br>et al. (2021) are large-scale evidence that <br>workplace well-being is significantly related <br>to firm-level profitability and stock <br>performance. This increased <br>acknowledgment has triggered the <br>introduction of human capital reporting <br>indicators into ESG reporting systems, <br>including the ISO 30414:2018 of Human <br>Capital Reporting, the global reporting <br>initiative (GRI) social standards, and the <br>IFRS/SASB Human Capital Project. All <br>these frameworks foster the transparency in <br>reporting on health and safety (GRI 403), <br>training and development (GRI 404), <br>diversity and equal opportunity (GRI 405), <br>and employee relations (ISO 30414, 2018). <br>In spite of this development, there are grave <br>and unresolved issues of how to quantify <br>and properly incorporate the monetary <br>element of employee well-being. A lack of <br>standardized approaches and a similarity of <br>definitions among the frameworks <br>compromises the comparability and <br>reliability of reported information (HEC <br>Paris, 2022; IFC, 2023). As examples, ISO <br>30414 offers extensive reporting items, but <br>does not give strict instructions on the <br>methods of value creation. In a similar <br>manner, both GRI and SASB differ in how <br>they tackle the concept of well-being-GRI is <br>more pro-disclosure, whereas SASB is more <br>materiality and financial connectivity <br>oriented. The resultant methodological <br>confusion has generated the uncertainty </p> <p>regarding the well-being to quantifiable <br>financial value (OECD, 2022; MDPI, 2025). <br>This absence of causality is twofold. <br>Financial markets have a problem with <br>quantifying the monetary value of well<br>being initiatives by researching and viewing <br>them as qualitative and intangible (Erasmus <br>University Rotterdam, 2023). Meanwhile, <br>HRM departments do not only struggle to <br>convert the social outcomes, which are <br>excellent at monitoring engagement or <br>satisfaction, into financial indicators that can <br>be included in investor reporting <br>(Northeastern University, 2023). This <br>human resource analytics/financial valuation <br>divide has in turn restricted the introduction <br>of the social indicators to the standard ESG <br>measurement and investment practices <br>(PwC, 2023; Deloitte, 2024). <br>The gap in the research, thus, is an overlap <br>among human capital management, <br>sustainability disclosure and financial <br>analytics. The current methodologies tend to <br>work independently: HR analytics tend to <br>focus on behavioural and engagement <br>results, sustainability reports are associated <br>with transparency and ethics, and finance <br>departments are associated with results on <br>returns. This dissection does not allow for an <br>integrated view of how the well-being of <br>employees creates economic value <br>(Sonnentag et al., 2023; Nielsen et al., <br>2017). The recent reviews specify that the <br>hypothesis of happy and productive worker <br>is still supported on an empirical basis but is <br>losing its methodological coherence, and <br>thus requires integrated models that could <br>correlate well-being information with the <br>indicators of performance (Yang et al., <br>2024; Frontiers, 2025). <br>As such, this paper will critically review the <br>approaches to measuring the social aspect of <br>ESG and how the well-being of employees <br>has been measured and attributed to <br>financial performance. It also juxtaposes and <br>integrates the main frameworks - such as</p> |
| format | Recurso digital |
| id | zenodo_https___doi_org_10_5281_zenodo_17658623 |
| institution | Zenodo |
| language | |
| publishDate | 2025 |
| publisher | Zenodo |
| record_format | zenodo |
| spellingShingle | Measuring the 'Social' Component of ESG: A Critical Review of Methodologies for Assessing the Financial of Employee Well-Being IJMSRT <p>. Introduction <br>Environmental, Social, and Governance <br>(ESG) frameworks have emerged as pillars <br>of the modern corporate sustainability and <br>financial valuation, serving as a multifaceted <br>prism to the perspective of investors, <br>regulators, and organizations in the long<br>term performance appraisal. The ESG <br>paradigm has now become a quantifiable <br>force in determining enterprise value and <br>resilience in addition to ethical or <br>reputational issues (Baker et al., 2022; <br>Maaloul et al., 2021). Whereas the <br>environmental and governance aspects have <br>gained much focus because of their <br>quantitative and regulatory characteristic, <br>the social aspect of the pillar, the S in ESG <br>is relatively underdeveloped. However, this <br>aspect, which incorporates human capital, <br>labour practices, diversity, equity, inclusion, <br>and employee well-being is also getting <br>acknowledged to be crucial in sustainable <br>value creation (Deloitte, 2024; WEF, 2023). <br>The rising interest of investors in the social <br>aspect has gained pace in the recent years <br>fueled by the rising empirical research <br>evidence of the relationship between the <br>welfare of the workforce and organizational <br>performance, productivity, and financial <br>results. Research by McKinsey (2023) and <br>PwC (2023) highlight the fact that engaged <br>employees help a company to achieve better <br>innovations, lower turnover, and higher <br>returns. Likewise, the findings of research <br>works by De Neve et al. (2024) and Krekel <br> <br>et al. (2021) are large-scale evidence that <br>workplace well-being is significantly related <br>to firm-level profitability and stock <br>performance. This increased <br>acknowledgment has triggered the <br>introduction of human capital reporting <br>indicators into ESG reporting systems, <br>including the ISO 30414:2018 of Human <br>Capital Reporting, the global reporting <br>initiative (GRI) social standards, and the <br>IFRS/SASB Human Capital Project. All <br>these frameworks foster the transparency in <br>reporting on health and safety (GRI 403), <br>training and development (GRI 404), <br>diversity and equal opportunity (GRI 405), <br>and employee relations (ISO 30414, 2018). <br>In spite of this development, there are grave <br>and unresolved issues of how to quantify <br>and properly incorporate the monetary <br>element of employee well-being. A lack of <br>standardized approaches and a similarity of <br>definitions among the frameworks <br>compromises the comparability and <br>reliability of reported information (HEC <br>Paris, 2022; IFC, 2023). As examples, ISO <br>30414 offers extensive reporting items, but <br>does not give strict instructions on the <br>methods of value creation. In a similar <br>manner, both GRI and SASB differ in how <br>they tackle the concept of well-being-GRI is <br>more pro-disclosure, whereas SASB is more <br>materiality and financial connectivity <br>oriented. The resultant methodological <br>confusion has generated the uncertainty </p> <p>regarding the well-being to quantifiable <br>financial value (OECD, 2022; MDPI, 2025). <br>This absence of causality is twofold. <br>Financial markets have a problem with <br>quantifying the monetary value of well<br>being initiatives by researching and viewing <br>them as qualitative and intangible (Erasmus <br>University Rotterdam, 2023). Meanwhile, <br>HRM departments do not only struggle to <br>convert the social outcomes, which are <br>excellent at monitoring engagement or <br>satisfaction, into financial indicators that can <br>be included in investor reporting <br>(Northeastern University, 2023). This <br>human resource analytics/financial valuation <br>divide has in turn restricted the introduction <br>of the social indicators to the standard ESG <br>measurement and investment practices <br>(PwC, 2023; Deloitte, 2024). <br>The gap in the research, thus, is an overlap <br>among human capital management, <br>sustainability disclosure and financial <br>analytics. The current methodologies tend to <br>work independently: HR analytics tend to <br>focus on behavioural and engagement <br>results, sustainability reports are associated <br>with transparency and ethics, and finance <br>departments are associated with results on <br>returns. This dissection does not allow for an <br>integrated view of how the well-being of <br>employees creates economic value <br>(Sonnentag et al., 2023; Nielsen et al., <br>2017). The recent reviews specify that the <br>hypothesis of happy and productive worker <br>is still supported on an empirical basis but is <br>losing its methodological coherence, and <br>thus requires integrated models that could <br>correlate well-being information with the <br>indicators of performance (Yang et al., <br>2024; Frontiers, 2025). <br>As such, this paper will critically review the <br>approaches to measuring the social aspect of <br>ESG and how the well-being of employees <br>has been measured and attributed to <br>financial performance. It also juxtaposes and <br>integrates the main frameworks - such as</p> |
| title | Measuring the 'Social' Component of ESG: A Critical Review of Methodologies for Assessing the Financial of Employee Well-Being |
| url | https://doi.org/10.5281/zenodo.17658623 |