Transcript by Kensho.

Lindsey Hall: Hi. I'm Lindsey Hall, Head of Thought Leadership at S&P Global Sustainable1.

Esther Whieldon: And I'm Esther Whieldon, a senior writer on the Sustainable1 Thought Leadership team.

Lindsey Hall: Welcome to ESG Insider, a podcast hosted by S&P Global, where we explore environmental, social and governance issues that are shaping investor activity and company strategy.

We cover a lot of topics on this podcast that run the gamut of environmental, social and governance issues. One thing we don't talk about much though is happiness. And here we are in the height of summer. Lots of my colleagues are going on vacation. Esther, I think this is a perfect time to talk happiness. 

Specifically, we're going to be talking about how companies approach this topic. How do you manage and measure employee wellbeing. And is there a business case for happiness? To learn more, I spoke with Jan-Emmanuel De Neve. Jan is Director of Oxford University's Wellbeing Research Center, which recently published research on just this question.

Esther Whieldon: I have to say, looking at his resume, Jan seems like the person we want to talk to, to understand happiness. He's Professor of Behavioral Science and Economics at Saïd Business School and a fellow of Harris Manchester College at the University of Oxford. 

He is a co-editor of the World Happiness Report, and he is Co-Founder of the World Wellbeing Movement. This is a coalition that launched in 2022, where global leaders from business, civil society and academia came together to help put wellbeing at the heart of decision-making in both business and public policy. And S&P Global is one of the founding members of that coalition.

Lindsey Hall: Yes, he wears a lot of hats and we're going to hear about all of them. But first up, here's Jan explaining why worker wellbeing can be difficult to manage relative to some other aspects of ESG. By the way, you'll hear him mention KPIs. That stands for key performance indicators. Okay. Here's Jan.

Jan-Emmanuel De Neve: Metrics for the E, the environmental impact or companies just carbon emissions are a lot better defined. G, governance standards is also more easily measured. 

A lot of people have a lot of trouble or difficulties, or find it challenging, to find good ways of measuring the social impact of an organization. And so typically then that includes -- do you have child labor and supply chain or fatalities on the workforce, very much health and safety oriented. But here, we have an opportunity, I think, to be -- to raise the bar on the S. And one of the major social impacts that an organization has is obviously the one that's most immediate. It's on workers for their typically from 9 to 5 throughout the week. And what is the impact of, the social impact they're having on their staff and their team on their workers. 

And that has not been easy to measure because there's not been much comparable metrics between companies. Employee wellbeing is about how you feel at work and about your work and that gets measured through 4 metrics that we've designed at the University of Oxford, which is has satisfied with your job. Are you happy at work, do you feel stress at work, do you find a sense of purpose and the work you do. And that really captures the outcome of the KPI around how people feel or these 4 items put together, give you really good holistic sense of how people feel at work and about their work. 

And what's exciting to me is the data scientist squashed is that there is another company out there, which is also a founding member of the World wellbeing movement, and that's Indeed the world's largest job search platform. And they're crowdsourcing in exactly those 4 items on workplace wellbeing.

Lindsey Hall: Despite some of those difficulties in measurement that we just heard about, Jan recently authored research on this topic, asking, "Is there a business case for worker wellbeing?" Here is talking about the findings of that report that I mentioned at the start of the episode, which is titled Workplace Wellbeing and Firm Performance.

Jan-Emmanuel De Neve: The crowd source effort that I just described, we now have 17 million people in the U.S., U.K., Canada and beyond who respond to how they feel at work at their current or past employers. And so the obvious thing to do is to match it to the financial performance, financial metrics, and stock market performance of the listed companies. 

So with my colleague, George Ward, and the team that Indeed, we've really set out to do this, and Micah Kaats at Harvard University is a wonderful Ph.D. student there. We spent a lot of time matching essentially the crowd source works wellbeing data to see whether it was a leading indicator for the very strong correlation with the financial performance of companies. 

And we had enough data for about 1,700 listed companies in the U.S., which makes essentially the world's largest study or the most comprehensive study matching workplace wellbeing to a firm performance. And that's also the title of the paper that then came out. And what we're finding is actually really exciting. We find a very strong correlation between workplace wellbeing as picked up through our crowdsource measures and the hard financial data, whether it's Tobin's Q, which is -- which will be familiar to the financial -- the finance aficionados, but essentially the book value of a company, return on assets, grows profitability. 

So classic financial metrics are very strongly correlated with how people feel at the company. Now this is correlation, not causation. But we're obviously digging a bit deeper and seeing whether it's the wellbeing data that we pick up is a leading indicator for some of the performance. 

So one thing that got a lot of attention is the the stock market performance. So what we did was a portfolio analysis where we look at look, the best places to work for according to our crowdsource workplace data. And what we find is that a portfolio just based on that outperformed the traditional indices, including the S&P 500, I'm sorry to say, but also the Nasdaq and the Dow Jones industrial average by quite a margin, both in 2021, 2022, the bear market and the volatile market that we're currently in 2023, our portfolio just based on these crowdsourced data is outperforming the benchmark indices. And so there's something there. 

There's a lot of interesting signal to this subjective notion of how people feel as work. And if you wish you can capture it, we can now -- which we now can, for the first time properly and comparably across all major companies that are listed, it's really exciting. And I think there's rightfully so a lot of interest in it. And it sort of presents the business case or maybe even the business imperative for why one should invest in workplace wellbeing and why investors should take more care and look into this intangible that is how people feel it work as it picks up on a whole host of things that the financial metrics typically don't.

Lindsey Hall: In this report, you pose what I think is a fascinating question. Is there a business case for happiness? So what's your answer to that question? It sounds like a yes, but tell me more.

Jan-Emmanuel De Neve: Yes. So I mean, I think this paper makes it very clear there is a business case because to make a business case, you need both to have the benefits of the intervention as well as the cost of it to see whether, on balance, net there's a positive impact on the organization performance.

What's so exciting about this particular work is that whatever these companies do to make their workers have higher levels of wellbeing, to feel better at the company, it seems to pay off. So the companies that do well they put things in place that generate a culture, an environment, where people feel better than the average company. And whatever they do, whatever the cost is of raising the bar on wellbeing, it pays off. 

Because if we look on average, those companies that do better on wellbeing then also perform better financially, both in the hard financial metrics as well as predicting stock market performance. So there's definitely something there. So I think the business case is kind of proven because whatever the costs are or whatever these companies do, it pays off. That is exciting. 

Now another question is like why is there -- why is there this effect? Why is wellbeing, why does wellbeing matter for ultimately organizational performance? And there, again, with colleagues, we've really put in a big effort and there's a number of pathways. 

So if you, Lindsey feel better today, you will be performing better today, especially in the more complex tasks that require social and emotional intelligence, if you feel better, you'll just do better on those. And we have causal field evidence on this front now. So we published a paper ... where we've got the first causal in collaboration with British Telecom, U.K.'s largest private employer, we tracked all the call center employees from 1 week to another about how they felt, and then we studied the immediate impact on their performance, and it was really mine-blowingly positive and more than I actually personally expected, anticipated.

But there's other pathways for why it makes sense, why that wellbeing matters for the bottom line and the business case is strong and retention and recruitment are obvious candidates to look at. And so we know there's some really good data now that if you are a great place to work and people feel good, well, your talent stays longer. So say, on average, you'll say 7 years rather than 4. 

And any Chief HR Officer will know all too well that losing your talent and having to replenish it over and over and again at a faster rate than another company, there's real drain on the budget and the performance of the company. And then there's also now wonderful evidence by my colleague, George Ward, showing that, again, I think it's the first causal field evidence, showing that a good company to work for, and it's made clear to a job applicant, they're more likely to apply to those places. 

So being a good place to work for also makes you a more attractive employer. And so you get better talent in the door. And that also, in the end, feeds as a way through to your bottom line, and that's exciting. And so I think -- I mean, the business case is kind of -- I mean, the philosophical case, moral case, has been made a lot a long time ago, we should obviously care about each other. But the business case was sort of -- was felt intuitively by a lot of people, but I think now there's overwhelming causal field evidence for it and people should care. 

Lindsey Hall: And for our audience who might not be familiar with the term causal field evidence, how would you explain that just briefly?

Jan-Emmanuel De Neve: Yes. No. So there's 2 types -- if you will, if you see like a 2x2 matrix, you can have correlational evidence, which just saying like, okay, if you, Lindsey feel better today and then your performance is better today, that's correlational because it might well be that you feel better today not because your performance has been good, ay you've been on the call with people and you've got great reports back from customers, that feeds into your wellbeing. 

So it's sort of -- it goes -- it's a chicken and the egg problem, is it are you performing better because you feel better? Or are you feeling better because you've performed better or there's good feedback coming back to you? 

And in this study with BT, we've been able to disentangle the arrows going in the other direction. So we've been able to really nail the evidence moving from how you feel on to how you perform and not their feedback loop, if you will. So that is moving from correlation to causal. 

And then they're from lab to field. So the field evidence is stronger because we're working with actual people in the field, actual workers, whereas there has been causal evidence before but just in the labs. And so what's nice about the evidence now around the business case and the pathways for why workplace wellbeing impacts performance, is that we're moving into a level of evidence, a quality of evidence that is causal and is done derived from the field itself, so actual situations. So that's exciting. Like we're -- it's a different ball again now than it was, say, 5 or 10 years ago.

Lindsey Hall: And now is there anything in this study and the results that surprised you?

Jan-Emmanuel De Neve: Well, in the BT study, which what I really like is that when we observe these call center employees and they're doing their calls and we observe how they feel from 1 week to another and how well they perform, well, the effect of how they felt is dependent on the kind of tasks that we're doing. 

So wellbeing matters more for subtasks than others. So we classified the tasks in sort of 3 levels of intensity. One was just order taking. And maybe not a surprise, but there we didn't find much of an impact. So if you're just -- if somebody -- if a client calls you and ask you to take note of an order, how do you feel at that moment doesn't matter how much because you're just order taking. 

However, when you're dealing with a client and it's a complex issue, such as there's a disgruntled customer and you're trying to retain their business. At that point, it matters a great deal how you felt that week. Or if you're dealing with a more complex task like selling a package deal of some kind, which requires more clever thinking and upselling, that had a big impact. 

So the headline result that came back from this causal field study was there's, if you feel better this week 1 point on skilled from 0 to 10, that moved the needle by 12% on weekly sales. So it's massive.

But that's just the average effect across all types of tasks. So for the low-level tasks like order taking, it was pretty much 0. But for tests that require more social and emotional intelligence, it was a lot more than 12%, the impact. 

So most of people in white-collar jobs might be listening to this podcast will have a lot of creative work that actives their emotional, social intelligence all the time, brainstorming sessions dealing with clients, complex tasks during the day. So my sense is that the results from the BT study are a lower bound average treatment effect of wellbeing on to how productive you are. So I think for people who do more complex tasks, more of the time, the effect is actually larger.

Lindsey Hall: The BT field study that you're referring to, is that -- did that feed into this broader workplace wellbeing and performance report that you put out?

Jan-Emmanuel De Neve: Yes, Lindsey. Yes, it does feed into because what I've just told you that we now have causal evidence for the link between how you feel today and how you perform, that doesn't yet present a business case because it may to move you up 1 point on scale from 0 to 10 it may cost a fortune. 

Maybe I as the employers if I were S&P Global, you're a line manager, it might take a fortune to try and move you up like from a 7 to an 8. So while it may increase your sales, your performance by 12% in the case of the BT call center employee, the cost might be more. And so the reason why the big study that we started the conversation with is so important is because it takes into account the cost to improve employee workplace wellbeing. 

So while we've nailed the causal link between how you as an individual feel and how productive you are, the business case itself needs to bring it to the picture of the cost side of things. And that's what we've done in the study that you've just alluded to called Workface Wellbeing and Firm Performance.

Lindsey Hall: Okay. Thank you. And I'm just wondering if the takeaways apply to our listeners, you might work for start-ups or smaller companies, not for like the behemoths.

Jan-Emmanuel De Neve: Yes. No, Lindsey, thank you. Absolutely. So this is -- why I mentioned the larger corporates is because we have a lot of crowd-source data for them. It's a great place to do big studies. But the insights derived that we just discussed are universal.

So whether you're even a self-employed individual or you're a startup of 3, how you feel today will really impact your quality of the work you do today. And how people feel generally at the organization, whether you're 10, 5, 25, 100 will impact your attractiveness as an employer will impact the retention power you have on your talent.

Lindsey Hall: Okay. And now that you put this out into the world, what are your hopes or your expectations for how these findings might be used?

Jan-Emmanuel De Neve: Well, I think when I speak with senior leaders and corporates, a lot of them get it. Some of those will have actually implemented and really invest in their own time, and it doesn't necessarily have to be financial resources, into trying to do the very best it can for their employees and make them feel at home and feel good about work and at work.

But there's still a large chunk of senior execs while they talk to talk, they don't necessarily walk the walk. And so my hope is that the business case now being so forcefully shown will, I think, help nudge senior leaders into really taking more note of this, better measure it and hopefully also intervene and improve this.

Lindsey Hall: Okay. From your perspective, what is the biggest hurdle to getting companies to embrace this more fully?

Jan-Emmanuel De Neve: There's one particular item that I think is a real hurdle is that ultimately, wellbeing is about feelings. It's how you and I feel at work and about our work, so the experience of work and the reflection of our job. So hence, why job satisfaction or purpose as well as are you feeling happy right now, or are you feeling stress, negative stress? So there's both an evaluative and an emotional component to it. But they are feelings. And so senior leaders have a real tough time, we think, giving up control to some extent and handing over a KPI to essentially everybody else saying like, I feel good about my job or at work.

That is, senior leaders prefer a dashboard or an index with objective criteria that they master, that they can control, they have more influence over. It's a bit of a leap of faith, to be honest, for a senior leader to say, okay, a KPI for me will be workplace wellbeing and that gets measured through how happy people are at work or satisfied they are with their job because it feels a bit like distant from them and their control and senior leaders like to be in charge. And so that's a real challenge I found. 

But my hope, and it's been a challenge sort of convincing people to put sort of feelings. And that's ultimately what matters, like why do people stay in a job? Well, it's because they're happy in the job, not because of a dashboard of 10 objective indicators. They will feed into how it will feel, but the ultimate KPI is how people feel at and about their job. And that's -- so you should measure that as a senior leader, but senior leaders again are a bit hesitant about this because it's subjective. 

But I think what's so nice about the studies we've done is that we showed these subjective indicators, how people feel at work, that there's real objective consequences or objective correlations to very highly objective data, including their financial performance of companies. So my hope is that leaders will say, okay, fine, I can handle a question about people's feelings because we've now shown that the subjective indicators have objective consequence.

Lindsey Hall: Another question I have is, so when I finished my masters at London School of Economics and entered the workforce as a journalist in London during the 2008 financial crisis. I have to say, I was not hearing any discussion of this topic. And I'd love to know from your perspective, how has corporate understanding of, or focus on, worker wellbeing changed over time?

Jan-Emmanuel De Neve: Thank you, Lindsey. It has changed quite a bit. I mean, it's always been present, although admittedly, it's been mostly about Pecuniary incentives and quite transactional, if you look back at industrial revolution onwards. 

So I think the non-pecuniary elements of work have come to the fore gradually. And some players have a sort of partner DNA to care more to care also about a large set of stakeholders and looks somewhat beyond just profitability. And, in turn, look at their workforce in a slightly different way, it's just a transactional human resource or human capital. 

That being said, I think everybody came on board during the pandemic. And so I think the pandemic really shone a limelight on workplace wellbeing and mental health, which is sort of on the bottom end of the distribution. And then I think what the other force alongside the pandemic and mental health and sort of a reconsideration of one's priorities, is also the fact that we're in a tight labor market. 

Employers are fighting for talent. And so there's a bit of what we call it the great resignation, but it's also kind of the great realization. And it has meant that employees or workers are a bit more demanding and they're asking more than just a paycheck. They're also making -- wanting to make sure that they have decent work life balance, being treated like human beings, et cetera, et cetera. 

So my sense is there's sort of like there's a general evolution, but that has accelerated, thanks to the pandemic. If there's one silver lining, it's probably that. And the fact also that we've got a tight labor market, so employers need to take care and provide too some of the needs beyond the pecuniary of their employees.

Lindsey Hall: And I don't want to say post COVID because obviously, it's an ongoing challenge. But as some of the COVID pressure has abated, have you seen that focus on worker wellbeing decreasing as well? Or would you say it's firmly here to stay?

Jan-Emmanuel De Neve: I think it's here to say. If you'll also look at the sort of generational gaps and if you look at sort of the service of the workforce, you see that the newest intake into the labor force are a lot more aware and a lot more demanding on this front. 

So whether it's diversion, inclusion initiatives or work-life balance or the opportunity to work from home or some kind of hybrid. That is even stronger amongst the younger cohorts of workers. So I think it's here to stay. 

Also, we're still in a tight labor market. There are still more jobs out there than people to fill them, and that gives power to the labor force. And so I think as long as those, I think workplace wellbeing is here to say -- it was always there. And the impact was always there, but I think the focus on it is here to stay and actually grow.

Also, if I may, now thinking back to what we were saying about some of the insights coming back from the BT study, is the type of jobs that people are doing are increasingly reliant on social and emotional intelligence. All the rest is taken over by machines or are automated. So the types of jobs that we're doing increasingly are increasingly contingent on feeling good. And so I think that will also drive to the future of work and the kind of jobs that are coming along are more reliant on us feeling good about ourselves in order to be able to perform at our best.

And that was perhaps less the case because the kind of jumps you were doing 10 years ago, 20 years ago, 40 years ago, 50 years ago, was more mechanical. And as I noted, more mechanical-type jobs, there was less, we see less of an impact on how you feel on your performance. But we see a hell of a lot of impact on the more creative tasks, the social, emotional intelligence demanding tasks. They do rely on how you feel.

Lindsey Hall: We've been talking about wellbeing in the workplace. But you also mentioned, you look at the question of wellbeing in other contexts. Can you tell our listeners about the World Happiness Report that you're part of?

Jan-Emmanuel De Neve: Lindsey, thank you. So the World Happiness Report is sort of a landmark survey thanks to the Gallop World Poll. I think it's 154 countries, represents the samples of the population. And what we've done with the team of academics over the past 10, 11 years now, actually, is essentially report on the average levels of wellbeing, life satisfactions. 

So not job satisfaction, which is what we've been talking about, but life satisfaction of general populations across all -- across most of the nations around the world. And then we rank ordered with them. 

And what we find is Denmark or Finland came first with the highest levels of life satisfaction. And at the bottom, we found places like Afghanistan and others who were doing really poorly in terms of life satisfaction of their citizens. And then in the report every year, we did have a number of chapters to digging into these data providing specific perspectives on them. 

So the World Happiness Report for us really become quite something. And I mean, we always publish it on March 20 each year, which is International Day of Happiness. And so we've got the world's media then sort of looking at us saying, okay, which country has reported the highest life satisfaction and the highest wellbeing from one year to another and that leads to wonderful conversations, journals, articles and so on and so forth. 

And I think it has helped really peak interest in this as well. So we've seen downloads to World Happiness Report increase year-over-year-over-year. I mean there's now -- there's about 10 million, believe it or not, individual IPs coming to the website around March 20th to download the report to read bits and pieces of it. So it's really -- it's quite something.

Lindsey Hall: How did you get into this line of work? How did this become your field of study?

Jan-Emmanuel De Neve: It's a bit by accident really because I did my work in political economy, and I was at the London School of Economics like you, back in 2008-9, doing my Ph.D. on medium voter therum and the welfare state and comparative political economy.

And then there was this data set, and they had an item like, "oh, scale from 0 to 10, how satisfied are you with your life these days? And it's just blew my mind, like wait a second. This item is weird, it's subjective. But isn't this the kind of answer that would provide you a sense for what ultimately matters most. 

So all put together, all the things that we're looking and studying, we're all hoping that they will ultimately improve how we feel about life as a whole. And so I really got taken by a particular question and entered the world and haven't looked back of essentially using the life satisfaction in the context of the World Happiness Report or general science, or job satisfaction in the context of workplace, sort of became my workhorse items. And I also discovered the wonderful world of amazing scholars who actually had been digging into these items before, both in psychology, positive psychology, economics, labor economics, and philosophy. 

And yes, I've not looked back over the past 10, 15 years now. We now have a wonderful group of researchers here at the University of Oxford called the Wellbeing Research Center. And I think we're doing extraordinary work on the empirical science of wellbeing and some of it we've discussed today.

Lindsey Hall: Well, thank you for being, I believe, our first guest on this podcast in over 4 seasons to come on and talk to us about happiness and wellbeing in this way. So it's great to talk to you. Is there anything that I haven't asked about that you would like to share that you feel is important for our listeners to understand about what we've been discussing.

Jan-Emmanuel De Neve: Well, I think we've covered a lot, but let me just reemphasize the importance of measurement, measure what you treasure, because what gets measured, gets done. We all treasure, I think how we feel about life because when we see the other, we always ask how are you? And we we wish the best to everyone else. So we need to try to capture that. It's kind of the ultimate KPI in life. As it turns out, the domain KPI within the context of work, which is job satisfaction or work happiness, turns out to be really important also from a business perspective. And so it's nice to see things come together. It's like thinking about workplace wellbeing, it's just the right thing to do, and it's nice to all to be able to show that's the clever thing to do from a business perspective.

Lindsey Hall: Esther, I really liked what we just heard from Jan: measure what you treasure.

Esther Whieldon: Yes, I don't think I've heard it phrase like that before. But the sentiment is definitely one that comes up quite a bit in the sustainability and financial worlds. This sort of related idea we've heard from past guests that what gets measured, gets managed. Basically, it's not enough to say you value your workers or you care about the climate. You can't manage something if you aren't measuring it.

Lindsey Hall: We often hear this idea also that the S in ESG or social topics like employee wellbeing are too difficult to measure. So it's definitely interesting to see this approach and this quantification. This is something we'll continue to cover in future episodes. So please stay tuned, and have a great summer. 

Thanks so much for listening to this episode of ESG Insider and a special thanks to our producer, Kyle Cangialosi. Please be sure to subscribe to our podcast and sign up for our weekly newsletter, ESG Insider. See you next time.

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