Corporate decision-makers are aware that the current and future success of a business often hinges on the talents and motivation of its workers. But until recently it has not been clear that the way a company manages its workforce is a priority for one vital stakeholder: institutional investors.
This is changing rapidly as shareholders make significant strides on social issues. Concerted action by investors to understand and acknowledge better workforce practices is a key driver which is now falling into place. The result is that companies are increasingly expected to show investors that they understand the risks and opportunities associated with their workforce—both in their direct operations and their supply chains.
Environmental and governance risks have been on investors’ radars for years, but it has taken a while for the trio of environmental, social, and governance (ESG) factors to be rounded out. The “S” has only recently come to the fore, with headline issues including diversity, modern slavery, and supply chain safety driving social issues up the agenda.
Data disclosure
Workforce disclosure is a vital starting point for investors to understand and drive up performance in investee companies. For investors to encourage better workforce management, they need comparable data on which to base their decisions and inform engagement with boards. But currently this data is lacking or, where it exists, is often fragmented and inconsistent.
To plug this gap, enter the Workforce Disclosure Initiative (WDI). More than 110 investors with $13trn in assets under management (including UBS, Amundi, HSBC Asset Management, Legal and General IM, Nordea, OP Trust, Rockefeller & Co, Union Investments and AustralianSuper) are backing the WDI, coordinated by responsible investment charity ShareAction. The WDI provides a platform for companies to disclose key workforce information to investors via an annual survey. Crucially, it covers workers in both direct operations and the supply chain.
To kick off the second year of the initiative, in July this coalition sent the survey to more than 500 companies around the world. They included Coca-Cola, Dixons Carphone, Ford Motor Company, Glencore, LafargeHolcim, Qantas Airways, Rio Tinto, Sodexo, Sony and TOTAL. The WDI digs below the surface to provide investors with insights on the makeup of who is being recruited, trained and retained within companies, with an eye on how this links to company strategy.
Companies that participated in the WDI’s pilot year in 2017 found the process beneficial in terms of their own internal insight. For instance, Edward Dixon, sustainability insights director at Land Securities, says of the WDI: “This is pushing us to look at areas that we haven’t looked at before and is highlighting gaps in our knowledge.”
Decent work for all
Thanks to the WDI’s investor engagement, 45% of companies disclosed data last year. Respondents included Barrick Gold, British American Tobacco, Compass Group, Inditex, Microsoft, Nestlé, Sainsbury’s and Vinci. This year, investors expect companies to engage with the WDI request for workforce data and are keen for this information to be in the public domain.
Liza McDonald, head of responsible investment at First State Super, says: “We believe integrating ESG issues into our investment process will lead to favourable long-term outcomes for our members. By collaborating with other investors through the WDI we want to encourage companies, both in Australia and further afield, to improve their reporting on workforce and supply chain-related topics”.
The ultimate goal of the WDI is to ensure better-quality jobs, in alignment with the UN’s Sustainable Development Goal 8, which calls for decent work for all. Big-name companies can help to get the ball rolling by shining more light on their own workforce policies and practices, and those of their suppliers.
Company decision-makers can be confident that, now it has arrived on the agenda, investor interest in social issues is here to stay. The ball is now in the court of companies and engaging with the WDI is an important step in the right direction.
Clare Richards manages the Workforce Disclosure Initiative (WDI) as part of ShareAction’s Good Work programme.
