Why is better workforce data disclosure important?
For most companies, their workers are the biggest asset. Investors are keen to understand how companies treat their employees. Poor treatment can become a competitive disadvantage if workers underperform, leave for other employers, or file lawsuits. Conversely, good workforce management can support higher retention rates and enhanced customer satisfaction.
We at BMO Global Asset Management, alongside many other investors, are frustrated at the current stage of workforce data. A lack of detail and consistency makes it difficult and time-intensive to assess companies and compare them with their peers, leading to inconclusive assessments. At the same time, companies often tell us they are unclear what type of disclosures investors want, and have to spend time dealing with ad hoc queries.
This mismatch between the materiality of workforce issues and the ability of investors to assess them was the driver behind our commitment to a collaborative engagement with the Workforce Disclosure Initiative.
What is the WDI?
The Workforce Disclosure Initiative (WDI) is a project run by UK-based NGO ShareAction that aims at improving data from listed companies on how they manage workers in their direct operations and supply chains. Launched in 2017, the WDI brings together over 130 investors with around US $15 trillion AUM, to call on companies to complete an annual survey giving disclosure on their workforce practices.
The WDI is unique in its breadth and depth. It also aligns with many other reporting standards, including the Global Reporting Initiative, Ethical Trading Initiative and the Corporate Human Rights Benchmark.
The survey includes more than 200 questions on companies’ governance of workforce issues for their own operations and supply chain. Questions cover issues including human rights, diversity, pay ratios to overall wage levels, turnover rates, training, occupational health and safety, freedom of association, whistleblowing, structure of the company’s supply chain, as well as sourcing procedures.
Whilst the survey appears daunting in length, mandatory public responses across all themes are limited to 28 questions: companies can choose to submit all other responses solely to investor signatories and the WDI team. Going through the process of completing the survey can also, investors hope, be beneficial for companies, as the gaps identified can be the first step towards more comprehensive future data collection and policies.
Our WDI-related engagement
BMO Global Asset Management has been a signatory of the WDI since its inception around three years ago. We reinforced our commitment at the beginning of 2019, becoming a member of WDI’s Advocate Group. This group assembles a set of 20 investors that collaboratively engage a subset of companies for enhanced disclosure.
In 2019, BMO Global Asset Management’s Responsible Investment team reached out to 77 companies to encourage them to respond to the WDI, often in the context of wider engagement on other labour-related issues such as diversity and living wages. In some cases, this led to a dialogue on the reasons for our WDI support, as well as feedback from companies on the challenges they face in responding.
Among those challenges were:
- a lack of data, meaning a company could only make a partial completion;
- fear of being retaliated against for partial disclosure with a public low score;
- an overall lack of resources, particularly given the length of the survey; and
- other reports being higher on their priority list.
The challenges are real, though their weighting in deciding for or against a WDI submission needs to be evaluated.