Companies engage on human rights but lack supply chain focus

Workforce Disclosure Initiative finds 96% publicly point to policies and undertake due diligence

Increasingly the focus of investor attention, human rights issues appear to be on the radar for more companies this year, according to ShareAction’s Workforce Disclosure Initiative (WDI).

The annual report received 167 responses from companies this year, down from 173 the year before. Rosie Mackenzie, senior company engagement manager at ShareAction, described the fall in responses as “disappointing” but said those submitted contained “more data than ever”.

The WDI aims to “improve corporate transparency and accountability on workforce issues, provide companies and investors with comprehensive and comparable data and help increase the provision of good jobs worldwide”.

The initiative is backed by 63 investors with more than $10trn assets under management. Last year it was backed by 62 investors, with $8.6trn in assets under management – up from 52 investors with $6.5trn in assets the previous year. These include Aviva Investors, Schroders and Italian asset manager BancoPosta Fondi.

This year’s survey found wide levels of engagement from all companies when it came to overarching human rights practices both in terms reporting and practice. Some 96% of respondents provided links to their publicly available polices on human rights. Similarly, 96% of respondents provided evidence they undertook ongoing human rights due diligence, which they use to identify risk and mitigate for adverse impacts.

However, when it comes to companies’ supply chains, where most human rights violations occur, monitoring drops off. In the financials, industrials, materials and real estate sectors, less than half of companies said they monitor whether supply chain workers have access to a grievance mechanism.

Mackenzie added: “Human rights will deliver life changing opportunities for millions of people worldwide. The test now for these companies will be not to just read this report but act on the findings.”

Only 40% of IT companies described the approach for incentivizing supplier performance on workers’ rights, compared to 75% of companies from all other sectors, and almost half of IT companies (47%) provided no data on efforts to map their supply chain.

Similarly, just 50% of responders provided some information on the number of discrimination and harassment incidents raised or resolved. At one in five companies, grievance mechanisms weren’t accessible to companies’ non-employee direct operations workers.

Contract workers are also less covered by things like sick leave, with just 32 companies providing this compared with 141 who provide this for permanent employees.

Equitable workplaces

Differences in treatment on the basis of identity were also found. For example, on average, male workers received more training hours than female workers and had higher internal hire rates, despite 98% of companies saying they recognize the value of training.

Gender disparities are also not being reported on sufficiently when it comes to pay. Despite legislation in the UK requiring gender pay gaps to be calculated and reported, only 89% of companies provided this.

More encouragingly, 54% of companies provided ethnicity pay gap data, more than 13 times the proportion of companies that provided it just two years ago.

Another positive finding was that 90% of companies have wellbeing programs and almost every respondent (99%) gave an example of how they had improved workers wellbeing, although just over a third of respondents didn’t have board level oversight of mental health.

Mackenzie noted: “We are immensely grateful to all those companies that took part in this year’s survey. The information they provide enables us to see where companies are making real and tangible progress and the areas where they need to improve.”