The way a company treats its workers and suppliers is critical in understanding impact – but published metrics fall short of what we need to understand the quality of labour management.
Collectively, the companies in our strategy employ over 3.5 million people, and influence the livelihoods of millions more through supply chains. In 2017, almost 400,000 jobs were created by companies in our strategy. Whilst this is encouraging, what we really want to understand is the quality of the jobs created.
The way in which companies manage labour issues is fundamental to understanding impact, particularly in relation to SDG8 – Decent Work and Economic Growth. We see it as essential to try to assess this type of impact, particularly in a world where inequality is prevalent. We are particularly conscious of the shift in labour markets being caused by the trend towards automation. Whilst there may be benefits in the reduced need for high-risk manual labour, the displacement of workers could lead to even deeper inequality, exacerbating social tensions and undermining efforts to end poverty. There are good ways and bad ways to automate – and measures such as retraining programmes can go a long way to addressing negative societal impact.
We expect all of our companies to respect fundamental principles and rights at work, as laid out by the International Labour Organization (such as freedom of association, and the prohibition of forced labour, child labour and discrimination), in both their direct operations and supply chains. Any significant breaches in standards are identified through our screening processes.
In attempting to assess companies’ labour performance, commonly-reported metrics such as employee turnover, board gender equality and lost-time injury rates give only a partial and fragmented view. Many companies of course go well beyond this, but reporting is not standardised or comparable. To help address this, we have supported the Workforce Disclosure Initiative, which aims to improve standards of reporting.
Investor engagement has proven a powerful tool for encouraging improvements in companies’ labour standards. In 2018, we will focus particularly on how companies are tackling modern slavery and human trafficking – which, according to the United Nations, is currently the second largest criminal industry in the world.