Ethical Corporation is now Reuters Events - LEARN MORE
ShareAction’s Aine Clarke explains how the investor-led Workforce Disclosure Initiative is seeking to protect vulnerable workers and promote SDG8 on decent jobs for all
Investors are waking up to the effects that wage inequality, in-work poverty and precarious work have on workers and business. Coalitions of forward-thinking shareholders are now forming to address it.
The Workforce Disclosure Initiative (WDI) is made up of 127 investors, who collectively manage $14 trillion in funds. They are supporting a survey that asks 750 major international companies to disclose more standardised data on topics including health and safety, workers’ rights, diversity and wage levels.
Co-ordinated by ShareAction, these investors have already secured disclosures from many of the world’s largest listed firms – and 21 of the world’s 100 largest – including Mastercard, Nestlé, BHP, Toyota, HSBC, Adidas and AT&T. Disclosers to the WDI in 2018 employed over eight million people, with millions more working in their supply chains. The phenomenal response rate shows that companies are supportive of increased disclosure and transparency in workforce data, and despite reporting gaps, there were encouraging examples of leadership from companies across all sectors.
Many companies reported they were unaware of pay conditions for workers located outside their headquarters
Overall, however, the findings from the 2018 report indicate there is still a long way to go. The report showed that there was lack of clarity in submissions about the selection and prioritisation of workforce-related risks and opportunities, and almost no detail on how these risks were being managed. Answers relating to governance were also surprisingly ambiguous, showing uncertainty about board member responsibility for workforce-related risks and opportunities, or how responsibility for the workforce was cascaded through to management.
Disclosure was higher in mandated areas, ie issues of legal compliance, with around a third of responders reporting executive pay ratios and gender diversity. But there was little data on workers on the lowest pay. Many companies reported that they were unaware of pay conditions for workers located outside their headquarters, and there was significantly less information on compensation for the contingent workforce and the supply chain.
Indeed, supply chain questions were the least well answered, showing that companies were still reliant on conventional, but now discredited, social audit approaches. Data submitted didn’t show an understanding of the link between workforce-related risks and human rights due diligence, ie that human rights due diligence must be the starting point for any meaningful identification of risks to workers. And while it is encouraging that over half disclosed union coverage across their operations, the majority did not want this information in the public domain. There was also weak or absent data on due diligence on enabling rights such as freedom of association and collective bargaining.
The lowest disclosure was in sections where there was an emphasis on quantitative data, for example, turnover, training and development, some aspects of the supply chain and quantitative areas within composition and workers’ rights. Here companies often said they did not collect, or aggregate the data, and cited various reasons including lack of resources, outdated systems, or that they didn’t see the question to be material to their business.
Lack of resources and survey fatigue were the primary pushback from companies during the 2018 reporting cycle, but investors are encouraging companies to disclose to the WDI as a starting point for continuous engagement.
And indeed, from the report, it was clear that better responses came from companies disclosing to the WDI for a second time, suggesting companies were potentially learning to capture the information and use the guidance materials. Investors have indicated that completing the survey sends a signal to the market that the company is listening to its shareholders and conducting appropriate due diligence on its workforce.
Shedding light in the darker corners of the corporation is vital to protecting the interests of vulnerable workers
It is also a telling sign of the attitude adopted in relation to employees: do companies see the latter as costs or drivers of value? This is increasingly important in the context of a just and inclusive transition to a low-carbon economy. A company that ignores its workforce in this transition risks failure.
Building on the success of last year’s survey and an ever-growing coalition of investors, the WDI has expanded its remit to 750 global companies. Strong global partnerships with SHARE in Canada and the Responsible Investment Association Australasia have also enabled the expansion of its US and Australasian presence and target list. While disclosure is the first step, the ultimate goal is to improve the quality of work for millions of workers globally, in line with SDG goal 8 “decent work for all”.
If we’re going to reach this goal, investors need to mobilise companies in support of good workforce reporting. It might sound arduous, but shedding light in the darker corners of the corporation is vital to protecting the interests of vulnerable workers. It’s also just good business.
Aine Clarke is engagement officer for the WDI at ShareAction.
This article is part of the in-depth Human Rights briefing. See also:
WDI ShareAction SDG8 ESG