Decent work is in crisis, investors could start by driving corporate disclosure
Pressure on disclosure has helped climate change become a serious consideration for companies. It’s time to apply those same lessons to SDG 8, says ShareAction’s Simon Rawson.
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Even before the COVID-19 pandemic unleashed economic turmoil, warning lights were already flashing about the challenges of achieving SDG 8: Sustainable economic growth and decent work for all.
Global growth was slowing and risks to workers across the world, particularly the poorest and most vulnerable, were on the rise. 16 million people remained victims of modern slavery.
Now, as we reflect on the fifth anniversary of the SDGs, and with 10 years to go to achieve the 2030 agenda, hundreds of millions of jobs look set to be lost as the global economy contracts in the worst recession since the Great Depression.
It is not only a drop in the number of jobs that is concerning. This will inevitably be accompanied by a fall in the quality of employment.
Following the financial crisis in 2008, the number of people in low-paid insecure work rose. The US Bureau of Labour Statistics calculated that, by 2017, 10% of workers relied on ‘alternative employment arrangements’ for their main job. And in the EU, between 2011 and 2016, most net new employment created was in non-standard forms of employment.
Only 30% of companies report whether they had identified any risks to workers’ rights in their tier one supply chains – even to report that none were identified. If oversight of companies' direct suppliers is so poor, how can there be any expectation of good work for the hundreds of millions of workers in tier two and beyond?
This year, garment factories and slaughter houses have been the site of coronavirus clusters as vulnerable, low-paid workers, unable to afford to take unpaid time off to self-isolate, work in conditions that are not COVID-safe.
Now, these workers are most likely to lose their livelihoods, with some 1.6 billion informal workers – many in global supply chains – at risk, according to the International Labour Organisation.
Responsible investors have an opportunity to ensure it is different this time.
Reflecting on investors’ response to climate change is instructive. While there is still some way to go to deliver the action we need, there are also things we can learn from how investors got to this point.
Despite the pandemic and the economic pressure that has come with it, climate action appears to be resilient and shareholder support for climate change resolutions at annual meetings rose by about half this year, according to Proxy Insight.
Today we have common metrics and reporting frameworks, such as those advanced by CDP and the Taskforce on Climate-related Financial Disclosures, we have accepted standards like those from the Climate Disclosures Standards Board and Sustainability Accounting Standards Board, and we have clear goals, notably the Paris Agreement, all of which act as unifying objectives. These have enabled both investor and corporate action, and also driven consumer behaviour and regulation, which further reinforce progress.
While there has been much talk of the need for investors to focus on the ‘S of ESG’, in response to societal vulnerabilities that COVID-19 has exposed, in reality we are still a long way behind the climate movement.
Recent ShareAction research[SR1] found that while 76% of the world’s largest asset managers say they have a commitment to human rights in their policy documents, when you look closely, it becomes clear that these efforts do not go nearly far enough. Just 4% of managers have a dedicated policy on human rights.
We need to develop our system of metrics, reporting frameworks, standards and targets to respond rigorously and robustly to pressing social issues, such as decent work.
We may have some way to go on the ‘S of ESG’ to reach the movement we’ve started to see on climate, but there is nothing stopping us from doubling down on disclosure today. It played a critical role in advancing action to tackle climate change.
Since 2016, the Workforce Disclosure Initiative [SR2] (WDI) https://shareaction.org/wdi/ has been working to shape this system. It has developed a meaningful and comprehensive framework for salient workforce issues that stands to enable real impact in peoples’ lives. For example, it takes a broad definition of worker, including all types of employment, both in direct operations and in the supply chain – critical, since global supply chains account for 94% of workers.
The framework is also universal, or sector-agnostic, because crucial workforce issues are relevant in every single company.
With the backing of a diverse and growing coalition of investors, WDI calls on increasing numbers of the world’s biggest companies to disclose this information.
There are signs that this is working. Companies disclosing to the WDI make 23% more data available to the public than those that don't complete the survey. They also make progress over time, moving from being able to complete an average of 36% of the survey in the first year, to 40% in the second year and 48% in the third year.
And what companies already disclose is giving us insights into the challenges we face to achieving the aims of SDG 8.
The vast majority of companies report having a human rights due diligence process in place, but just over half provide data on how they monitor the implementation of their commitment to respect supply chain workers’ rights. Only 30% of companies report whether they had identified any risks to workers’ rights in their tier one supply chains – even to report that none were identified. If oversight of companies' direct suppliers is so poor, how can there be any expectation of good work for the hundreds of millions of workers in tier two and beyond?
We may have some way to go on the ‘S of ESG’ to reach the movement we’ve started to see on climate, but there is nothing stopping us from doubling down on disclosure today. It played a critical role in advancing action to tackle climate change. Just 38% of companies responding to the CDP supply chain survey for the first time report having an emissions reduction target in place. By the third year of responding this increased to 69%.
Only when we have data can we start to translate the SDG 8 targets into business commitments, like today’s Net Zero climate pledges. With a framework to measure against, companies could commit to become net positive contributors of decent work.
Workforce disclosure may be the step we need right now, to keep advancing good work and economic opportunity in this moment of global crisis.
Investors interested in supporting WDI can contact email@example.com
Simon Rawson is Director of Corporate Engagement at NGO ShareAction