CSR and worker voice: from engagement to empowerment
September 19, 2021
Multinationals and their various stakeholders have become increasingly focused on employee rights and well-being in the workplace in recent years. Since the onset of the COVID-19 pandemic, these considerations have intensified, as companies have struggled to implement testing, vaccination and social distancing while maintaining oversight over multi-tiered supply chains that have become subject to disruptions, shortages and confinement orders across international operations.
The challenges posed to companies during the pandemic have highlighted how important effective worker voice and engagement is when organisations attempt to navigate these issues, often with a considerably more geographically dispersed workforce. As companies begin to adjust to the ‘new normal’ and look to a post-pandemic world, there are numerous lessons that can be learned to make the most of the benefits that effective worker engagement can offer companies and workers themselves.
Worker voice: state of play
Companies are taking steps to improve worker voice, but progress is inconsistent.
The Workforce Disclosure Initiative (WDI), ShareAction’s yearly survey of companies’ workforce practices that is supported by 57 investor signatories with $7.5 trillion AUM, provides several insights into companies’ current practices when it comes to worker voice.
Data from the 2020 WDI survey showed some positive steps companies are taking when it comes to understanding how they are engaging their workforces. 82 per cent companies can describe how workers are involved in decision making and 84 per cent of companies explained how the company obtained worker feedback. This also extended to union engagement: 80 per cent companies could describe process for consulting with workers and steps to secure freedom of association/collective bargaining.
However, these levels of data were uneven, and companies’ answers revealed some significant gaps when it came to putting workforce engagement into practice. Despite companies being able to clearly articulate the mechanisms for engaging their workforce, a third of companies could not provide an example of how workers have influenced a decision of substance.
When it came to the proportion of workers covered by collective bargaining agreements, a key example of genuine engagement with tangible outcomes for workers, some sectors particularly lagged behind. IT companies had an average collective bargaining coverage rate of 26 per cent, while real estate companies had an average rate of 0 per cent, compared to an average of 52 per cent for all responding companies.
Companies also appear to be approaching engagement inconsistently, with certain groups of workers less likely to be considered. Over a third of companies could not explain how the company secured the rights of non-employee direct operations workers (such as contractors, agency workers, subcontracted service workers and third-party contract workers) to freedom of association and collective bargaining.
The WDI data demonstrates that while some companies are attentive to worker voice, the depth and breadth of this focus is inconsistent. This may be driven by variations in labor laws from country to country, making it difficult to establish a uniform global approach with respect to all employees. Additionally, many multinationals rely extensively on temporary or contracted workers, whose less direct employment relationship may make usual engagement mechanisms more difficult to deploy and monitor, particularly outside the company’s home jurisdiction.
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Failing to properly implement workers voice is a missed opportunity for businesses and their workers.
Worker voice and engagement allow companies to benefit from employees’ invaluable insights into the operations, organisational culture and workforce of a company, as well as the morale, productivity and performance gains associated with a dialogue-based workplace.[1] There are also potential regulatory repercussions for failing to engage. Collective bargaining and freedom of association are fundamental rights, with protections enshrined in international treaties and national laws in most countries around the world.
There are also increasing legislative developments that, when introduced, will be significantly easier to comply with when companies have effective worker engagement mechanisms in place, such as the introduction of mandatory human rights and environmental due diligence in the European Union. For example, in March 2021, the European Parliament adopted a resolution that is expected to form the basis for a future human rights due diligence directive. The resolution proposes a requirement for multinationals to adopt and communicate a human rights due diligence strategy, including extensive stakeholder consultation. Workers’ rights are one of the key themes discussed in the resolution, which states that trade unions must be given the necessary resources to exercise their rights, including to establish connections with trade unions and workers in the supply chain.[2]
Data from the 2020 WDI shows us that conducting human rights due diligence is already widespread, and that the practice correlates with better performance on workers’ rights. In the survey, organisations that conducted due diligence were better able to identify risk, suggesting that due diligence acts as an important enabling factor for a more detailed understanding of how companies are managing their workforce. These companies were more likely to be able to identify any salient human rights issues and to identify more salient human rights issues: companies that do not publicly state whether they conduct due diligence were twice as likely to only identify one salient human rights issue. The impact of due diligence also extends beyond companies’ ability to identify risk and correlates with the extent to which organisations explained the steps they are taking to respect human rights. In the 2020 survey, companies that publicly stated how they conduct human rights due diligence were also more likely to explain the action they have taken to address the salient human rights issues identified, as well as the steps they are taking to improve supply chain workers’ rights.
Given these benefits of due diligence (in addition to impending regulatory requirements), it is all the more important that companies take steps to engage workers more fully.
From engagement to empowerment
The evolving landscape of rules and regulations across jurisdictions may leave companies confused as to what approach to take, particularly as a number of these remain pending or do not go into effect until late 2021 or thereafter. Nonetheless, there are numerous actions that companies can take in the interim to ensure that they taking a comprehensive approach to worker engagement that leads to genuine respect for workers’ rights, including those listed below.
Culture of respect: What has the company done to ensure that a culture of respect emanates throughout the organisation? This is not necessarily measured by large-scale corporate communications campaigns or how many cases of harassment are reported, but how employees feel at work and treat each other. Conducting an employee survey that includes active workshop participation from all employees is a good step towards assessing company culture and what steps can be taken to improve it, including how employees experience the overall workplace, interact with co-workers and ensure a healthy work/life balance.
CEO / employee pay ratio: There is a tendency for CEOs of multinationals to compare their compensation with those of similarly situated companies in order to justify the nature and scope of the package. Companies should instead focus on providing additional information on the ratio between the CEO’s compensation and the median annual total compensation of employees. While this is often done by companies that are publicly listed in the United States and Europe, the information may not necessarily include information for employees located outside the company’s home country or information for part-time or independent contractors. Publishing this information and soliciting employee feedback on its fairness is an interesting exercise that can help companies better assess culture (perhaps more so than surveys or online platforms such as Glass Door that ask for employee reviews).
Freedom of association, labor unions and collective bargaining: Employees should be free to join organizations of their own choice and should not be subject to intimidation or harassment in doing so. This includes engagement with trade unions and organizations that protect employee and consumer rights. There have been a number of reports of U.S. tech companies that have engaged in anti-union activity by interfering with labor organizing. However, social dialogue is critically important following the pandemic. Companies should actively engage in identifying and addressing the most pressing needs of workers, particularly those who are the most vulnerable, such as informal or temporary workers, migrant workers, pregnant or nursing workers, single parents and those who have significant caretaking responsibilities.
Forced labor and human rights risks: Companies should refrain from using or contracting with any company that uses forced labor, prison labor or any other compulsory labor. By its very nature, forced labor is predicated on a lack of worker engagement, with workers ability to input, decide and exercise agency being taken away. While this rule is clear in principle, it may be harder for companies to detect in practice, particularly with respect to third-party contractors. For example, practices such as denying requests for breaks, insisting on overtime hours, engaging in harassment or retaining identification documents may ultimately amount to forced labor, even though contractors may have policies prohibiting such practices. While human rights due diligence is one way of addressing these issues, it is important that such diligence include regular site visits and audits, including discussion with all levels of management and inspecting records on employment actions, hours worked, wages paid and charges to workers for housing, transportation and meals. In this respect, employee engagement also includes maintaining rigorous oversight over not only a company’s own labor practices, but also those of all of the companies that are present in the company’s supply chain. Equally, workers that are employed by companies in the value chain of a multinationals should be able to access reporting mechanisms and remedies that are available to the employees of the multinational. In this respect, companies should consider revisiting their labor and due diligence policies and procedures to extend such protections to supply chain workers, and ensure that robust on-site review is conducted, ideally by the company itself and not merely a third-party advisor. Equally, publishing the detailed versions of the policies as opposed to a short summary allows for greater transparency and a better means for employees and other stakeholders to evaluate the company’s engagement on human rights issues.
Acting in the long-term interest of employees. As the European Parliament’s resolution[3] on sustainable corporate governance notes, companies must take a more long-term approach to defining and achieving their objectives, avoiding decision-making that privileges short-term dividends at the expense of long-term shared value. Employees have a critical role in corporate decision-making, as is underscored by requirements for works council consultation and employee representation at the Board. While these are minimum requirements, companies should consider taking a more active approach to soliciting employee feedback on key decisions, not only on specific issues relating to employee well-being, but also soliciting employee feedback on key projects, troubleshooting safety and operational issues and continually ensuring that the impact of operations is suitable to employees and communities. This is very much echoed in the spirit of the European Parliament’s March 2021 resolution discussed above.
The momentum on worker voice is certainly encouraging and goes towards a true shift towards a more sustainable form of governance and operation for multinationals. That said, issues relating to data measurement and comparability make it difficult to truly discern which companies are outperforming others in this respect. The current model of employee engagement is one that has been widely embraced by multinationals, as the WDI data suggests. In seeking to establish their engagement strategies going forward, companies should consider looking beyond the minimum requirements of the law and think about how to meaningfully implement the feedback received from employees, particularly with respect to remuneration, benefits, work-life balance, managing caregiving responsibilities, career evolution, training and reskilling. The post-pandemic period will be a true test to see which companies take the lead in moving from an approach based on disclosure and dialogue to one that seeks to truly empower employees as the companies’ greatest assets.
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Caroline Petruzzi McHale, in coordination with ShareAction
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[1] Ethical Trading Initiative, “Freedom of Association in Company Supply Chains”, page 5, https://www.ethicaltrade.org/sites/default/files/shared_resources/foa_in_company_supply_chains.pdf.
[2] European Parliament resolution of 10 March 2021 with recommendations to the Commission on corporate due diligence and corporate accountability (2020/2129(INL)), available at www.europarl.europa.eu/doceo/document/TA-9-2021-0073_EN.html.
[3] European Parliament resolution of 17 December 2020 on sustainable corporate governance (2020/2137(INI)), available at https://www.europarl.europa.eu/doceo/document/TA-9-2020-0372_EN.html.
