Our thinking

The sustainability wage gap

10 November, 2023

A recent article in the Financial Times highlighted research from European academics that uncovered a compelling phenomenon: smart, skilled employees are more likely to accept lower wages for work they think is meaningful.

Research found that employees at environmentally friendly firms earned between 9 and 15% less than those doing the same job in oil companies, mining companies, or other less sustainable businesses. In fact, in a study of nine countries, two-thirds of workers were found to be more likely to take jobs with environmentally and socially conscious organisations than other organisations. This disparity is consistent across sectors and has widened since 2001, becoming known as the ‘sustainability wage gap’.

The concept of the wage gap carries a slew of negative associations, which can mistakenly suggest that the responsibility for pursuing meaningful work falls squarely on individuals with sustainable intentions. Research also showed that employees in sustainable sectors worked longer, more extreme hours, often working 50-to-60-hour weeks. We recommend looking at this from a different angle, considering it as a premium that companies must pay for being environmentally or socially harmful. It’s not a tactic for sustainable businesses to underpay or overwork their top talent. It’s almost always more expensive to hire new people than it is to retain existing staff, so it’s possible (although the survey doesn’t explore this) that a large part of the wage premium comes from disillusioned staff going elsewhere when they find themselves engaged in work that doesn’t align with their values.

In an era when both businesses and governments alike are backtracking on their ESG commitments, this research underscores the persistent appetite from the best workers for engaging in purpose-driven, sustainability-oriented work. If you fail to do provide this to them, you may miss out on attracting and retaining top-tier talent.

 

By Meg Seckel