Vegan canteen food and e-bikes for employees – The role of the works council in implementing ESG concepts

While there is no shortage of good concepts for implementing ESG criteria, companies are not always free to implement sustainability concepts. In particular, the works council often has a right of co-determination in this context, with which it can influence company initiatives, but also delay or even prevent them.

The following article highlights the role of the works council in the implementation of ESG concepts.

Sustainable corporate policy and strategy - not a case for works council co-determination!

First of all, when it comes to corporate decisions on the orientation of a company according to ESG criteria, the works council is in principle not entitled to participate – with the exception of narrowly defined exceptions, the significance of which is extremely low. The core area of corporate freedom of decision, which is covered, for example, when a bank decides to offer only sustainable funds from now on or an automobile manufacturer switches its production to e-cars, is free of co-determination. Instead, such decisions are to be regularly discussed with the supervisory board – if existing. In particular, the works council cannot derive co-determination rights in this area from sections 111 et seq. Works Constitution Act (Betriebsverfassungsgesetz "BetrVG"), which contain regulations on operational changes. These require a specific reference to measures. So-called "codetermination without cause" is not covered.

Concrete measures for the implementation of ESG concepts: Examples of works council co-determination

On the other hand, the works council must regularly be involved in numerous concrete, company-related measures for the implementation of ESG concepts.

This already applies to relatively low-threshold regulations:

If, for example, vegan dishes are included in the menu in the canteen or concepts for avoiding plastic dishes and disposable coffee cups are to be implemented, this can already trigger works council co-determination in the administration of social services pursuant to sec. 87 para. 1 no. 8 Works Constitution Act.

Social

At first glance, the letter "S" (Social) appeals to employment law experts in the context of ESG. In fact, aspects such as

• ensuring high standards of occupational health and safety (sec. 87 para. 1 no. 7 Works Constitution Act),
• promoting and ensuring equal opportunities and diversity, for example through quotas (sec. 92 para. 3 s. 1 Works Constitution Act), special promotion programs (sec. 92 para. 3 Works Constitution Act), pay transparency (sec. 87 para. 1 no. 10 Works Constitution Act) and compatibility solutions through flexible working time models (sec. 87 para. 1 nos. 2, 3 Works Constitution Act), sabbaticals (sec. 87 para. 1 nos. 2, 5 Works Constitution Act), lifetime accounts (sec. 87 para. 1 nos. 1, 2, 6 Works Constitution Act) and new work aspects (mobile working, home office, open space concepts, BYOD, etc.) (sec. 87 para. 1 nos. 1, 6, 14 Works Constitution Act),
• the implementation of ESG concepts in pension systems and corresponding investment concepts, and
• in general, the granting of fair working conditions,

play a very decisive role in HR work and are predominantly subject to mandatory co-determination pursuant to sec. 87 para. 1 Works Constitution Act.

Governance

However, the letters "E" and "G" are also of considerable importance in employment law:

The keyword "Governance" includes

• anchoring sustainability at all levels, in particular at management level, for example by introducing sustainably oriented compensation structures and models (sec. 87 para. 1 nos. 10, 11 Works Constitution Act), as well as
• ensuring compliance, risk management and the prevention of corruption, e.g. by establishing a functioning whistleblowing system (sec. 87 para. 1 nos. 1, 6 Works Constitution Act)

which are also subject to mandatory co-determination.

Environmental

The term "Environmental" covers, for example, the introduction of concepts for environmental protection subject to co-determination through

• measures and policies relating to home office (sec. 87 para. 1 no. 14 Works Constitution Act), paperless office (sec. 87 para. 1 no. 6 Works Constitution Act), avoidance of waste, for example through the abolition of disposable tableware (sec. 87 para. 1 no. 8 Works Constitution Act) or
• the promotion of sustainable mobility through e-bike leasing models (sec. 87 para. 1 no. 10 Works Constitution Act) or the granting of job tickets (sec. 87 para. 1 no. 10 Works Constitution Act).

In fact, the Works Constitution Act specifically emphasises environmental protection in numerous places and standardises the works council's own rights and obligations in this area. This is referred to as "environmental protection in the establishment". The term "environmental protection in the establishment" is legally defined in sec. 89 para. 3 of the Works Constitution Act and comprises all personnel and organisational measures as well as all measures relating to the establishment’s buildings, rooms, technical equipment, working methods, working processes and work places that serve the protection of the environment.

• Pursuant to sec. 80 para. 1 no. 9 Works Constitution Act, it is the task of the works council to promote measures for the protection of the environment in the establishment. Pursuant to sec. 89 para. 1 s. 1 Works Constitution Act, the works council has to endeavour to ensure that the provisions on environmental protection are observed in the establishment.This duty of commitment substantiates the general sec. 80 Para. 1 no. 9 Works Constitution Act.
• In addition, pursuant to sec. 89 para. 2 s. 1 Works Constitution Act, the employer has also to consult the works council concerning all inspections and issues relating to environmental protection in the company, and has to inform it immediately of any conditions imposed and instructions given by the competent bodies relating to environmental protection in the establishment.
• It is important to note that the Works Constitution Act does not provide for any enforceable right of co-determination in the field of environmental protection. The catalogue of sec. 87 para. 1 Works Constitution Act does not mention environmental protection in the establishment. Consequently, the works council cannot force the conclusion of a works agreement. However, there is the possibility of concluding a voluntary works agreement (sec. 88 no. 1a Works Constitution Act).
• In addition, the economic committee is granted a right of consultation in the field of environmental protection in the establishment in accordance with sec. 106 para. 3 no. 5a Works Constitution Act. The economic committee is an auxiliary body of the works council, which has the task of discussing economic matters with the employer and informing the works council.

The Works Constitution Act thus standardizes a large number of concrete rights and duties for the works council in the field of environmental protection in the establishment. At first glance, these are not as obvious as the regulations on mandatory co-determination from sec. 87 para. 1 Works Constitution Act. Nevertheless, they should not be neglected either.

Conclusion and recommendation for action: What companies must now consider

The works council plays a key role in the implementation of ESG concepts. The examples mentioned above provide only a very first insight into the application cases of works council co-determination. Countless other cases are conceivable. There are virtually no limits to creativity in the area of ESG.

In summary, companies should therefore pay attention to two essential aspects:

First, when actually implementing ESG concepts and concrete measures, it should always be examined on a case-by-case basis whether works council participation rights exist. Not only and in particular in the area of corporate environmental protection numerous regulations exist which define the rights and obligations of the works council. Other measures are also subject to co-determination, primarily on the basis of the provisions of sec. 87 para. 1 Works Constitution Act.

Secondly, the time factor must always be kept in mind in connection with the implementation: This is because co-determination can sometimes cause considerable delays in the implementation of measures and concepts: Depending on the complexity of the regulatory issues at stake and the quality of the relationship between employer and employee representatives, the implementation of individual measures - and even more so the implementation of entire packages of measures - can sometimes take several rounds of negotiations and often even necessitate going through the conciliation body. Even the most sensible ideas and concepts can therefore often not simply be implemented "overnight".

The works council is therefore a constant companion on a company's path to a sustainable future.