Week of 27 April 2020
While companies are starting to integrate workforce related issues into financial incentive structures, they are also (i) confusing living wage with minimum wage, (ii) reluctant to provide data on contingent workforce and social dialogue mechanisms and (iii) less able to provide data on implementation of responsible sourcing commitments (according to the Workforce Disclosure Initiative – WDI)
The Workforce Disclosure Initiative (WDI), coordinated by responsible investment charity ShareAction and backed by 137 investors with over $14 trillion of AUM, asks companies for workforce information and data – both in their direct operations and in their supply chains. Investor members include Amundi, Aberdeen Standard, PKA Denmark, Achmea, Vision Super, Candriam and Nest.
In its third iteration in 2019, the investors asked workforce data from 750 of the largest publicly listed companies from around the world (based on market capitalisation; significance of the company in terms of the sector, local market and scale; exposure of the workforce to risks; and specific interest to the investor group). Of these, 118 companies responded (15 per cent), including companies such as BT, Microsoft, Unilever, Nestle and Glaxo Smith Kline. Of these answers, 40 per cent of the survey was completed. The WDI remarks that the “survey is designed to challenge companies workforce data collection”, to help trigger reflection on the data they could collect on their workforce in the future.
Speaking about transparency: I’m on the WDI Advisory Group with Alison Tate, Bettina Reinboth, Dieter Waizenegger, James Gomme, Janet Williamson, Sumi Dhanarajan and Will Pomroy.
The 2019 report, released this week, highlights six findings:
1. Companies provide data on their workforce governance structures, but share limited information on the internal accountability mechanisms. Of particular note, “[w]hile the numbers are still low, the WDI can see a growing number of companies integrating workforce related issues into their financial incentive structures. This suggests that more companies recognise the centrality of workers to the success of the business, and are prepared to reward performance that is geared toward longer term timelines and generating positive outcomes for all stakeholders.”
2. Companies are reluctant to provide data on staff turnover. The WDI notes that “[l]eading companies should live up to their wider social responsibility by being transparent about potential changes to business models so that workers, unions and investors are well informed of the impact” and can then work with companies “to develop effective mitigation strategies to protect workers and their livelihoods.” This is particularly important since we are “[a]t a time of unprecedented economic and environmental upheaval [in which] dramatic changes to the size and composition of workforces are likely.”
3. The concept of a Living Wage is not universally understood by companies. The answers received suggest that a number of companies confuse living wage with local minimum wages requirements. Furthermore, “[w]ith 40 per cent of companies choosing not to respond when asked if they paid a Living Wage to workers in their direct operations, it can be inferred that companies are reluctant to disclose whether they pay these rates.”
4. Companies are willing to submit more data against workforce metrics for permanent employees than for their contingent workforce (i.e., employment that relies on temporary contracts, non-guaranteed hours, and third-party contractors). While 75% of companies disclosed the percentage of their direct operations workforce engaged on a permanent contract, only 25% of companies were willing to disclose the percentage of workers on non-guaranteed or short hour contracts.
5. Companies do not appear to be collecting detailed data relating to social dialogue mechanisms, undermining their ability to monitor labour relations. “Only five companies gave the rate of collective bargaining coverage for over 40 per cent of their direct operating locations.” The study also finds that although the majority (94 per cent) of companies provided details of their grievance mechanisms, less than half (48 per cent) revealed the number of grievances raised by direct operations workers.
6. Companies generally have in place policy-level commitments on responsible sourcing and supply chain workers’ rights but are less able to provide data on how these commitments are implemented. The study finds that “[o]nly 15 companies suggest they critically reflect on the limitations of supplier audits, or disclosed whether non-conformance issues are evaluated as part of a wider internal assessment, to identify drivers of supplier non-conformance within the company’s own sourcing practices.”