Measuring the 'Social' Component of ESG: A Critical Review of Methodologies for Assessing the Financial of Employee Well-Being

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🔬研究者:Provides a comprehensive overview of methodological gaps in linking employee well-being to financial performance, useful for shaping future research agendas.

🏢実務担当者:Helps corporate sustainability teams understand existing frameworks and their limitations for measuring and reporting on employee well-being.

🏛政策担当者:Highlights the need for regulatory guidance on social metrics to ensure comparability and reliability in ESG disclosures.

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

• openaire https://doi.org/10.5281/zenodo.17658623first seen 2026-05-05 19:08:47