The workforce data quest: Why we need it and why it helps companies as well

  • Workforce disclosure is essential for investors to better analyze companies’ social performance
  • Companies’ workforce disclosure is still limited, often referencing data gaps or lack of appropriate data gathering systems
  • BMO Global Asset Management encourages companies to respond to the Workforce Disclosure Initiative (WDI) annual survey to underline accountability to their social commitments
  • In 2019, we engaged 77 companies on workforce disclosure and their WDI submission; 17 of those have completed the survey

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.

While 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.

Response rates to the WDI are still comparably low in comparison to the investment universe or similar environmental initiatives, but numbers are increasing year after year.

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.

While WDI scorecards show a percentage relating to the share of disclosed information, these scorecards are not made public. Our own interest in the scores is limited, and we would welcome even partial disclosure for our assessments.

Limited resources are of course an all-time challenge. As the survey builds on existing reporting standards, with the ‘social’ element of sustainability gaining more traction and with the level of investor support the WDI experiences, companies should consider re-prioritizing. In addition, in 2019 the WDI has also offered participating companies to pre-populate its survey based on publicly available data.

Of the 77 companies we engaged, 10 had replied to the WDI survey in 2018. In 2019, of the companies we reached out to, 17 have submitted their responses to the WDI.

The 2019 evaluation of the quality of responses is ongoing and will be published by the WDI in the first quarter of 2020.

Outlook

Response rates to the WDI are still low in comparison to the investment universe or similar environmental initiatives, but numbers are increasing year after year.

However, despite widespread investor support for the WDI, social issues have yet to reach the prominence that environmental issues currently have, both with investors and companies. We believe this needs to change, for the sake of companies ensuring business continuity, for workers’ rights to be protected, for investors to see appropriate – and ultimately successful – human capital management approaches in the companies they invest in.

Corporates do acknowledge partial lack of data or internal data systems that can reflect their global operations and workforce. Nonetheless, for addressing workforce issues holistically and with a united investor response, as well as for the WDI to become “the CDP of social issues”, we need more companies to disclose. We will continue our engagement with those that have submitted and encourage their continuous commitment, as well as with those who haven’t yet, underlining the need for enhanced workforce disclosure.

Related Capability

Learn more about our Responsible Investing capabilities.

Subscribe to our insights

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned. Past performance should not be seen as an indication of future performance. The value of investments and income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested. The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

Related articles
No posts matching your criteria
June 2020

Modern slavery: Engagement update

In our last Viewpoint about modern slavery, we highlighted that as long-term investors, we encourage companies – particularly those in high-risk sectors – to identify and manage modern slavery risks.

April 2020

The meaty realities of food production

The growing global population is driving demand for protein, increasing the impact of the global food industry on workers and the environment.

March 2020

ESG implications of the COVID-19 pandemic

We are still in the early stages of understanding the impact that COVID-19 will have. However, some important implications are already emerging.

February 2020

A new life for old coal power?

As part of our 2020 climate-related engagement, we will tackle coal as it is the most carbon-intensive fossil fuel.

February 2020

Living wage in the retail sector

We are working with a group of companies, NGOs and an agency for international development cooperation to develop and pilot a methodology for ‘social opportunities scenario analysis’, which would help companies to consider the trade-offs between short-term cost management and long-term employee satisfaction and performance in a more structured way.

January 2020

Gender diversity: Are German companies keeping up?

Despite a 30% quota for Supervisory Board diversity, German corporations continue to lag peers on gender diversity at senior levels.

December 2019

Access for growth: Promoting responsible access to healthcare and finance in India

India’s vast untapped market for healthcare and financial services offers significant growth prospects for companies looking to serve it.

December 2019

Kristi Mitchem discusses opportunities in ESG

BMO Global Asset Management CEO Kristi Mitchem talks with BNN Bloomberg anchor Catherine Murray at the Canadian Sustainable Investment Forum in Toronto about how the company is working to advance sustainable finance initiatives.

December 2019

Energy transition in developing Asia: Critical to the success of addressing climate change

We traveled to Thailand, China and Hong Kong to engage with 10 Asian energy companies to encourage actions aligning emissions to Paris Agreement goals.

December 2019

Purpose & ESG: Transforming Corporations While Building Long-Term Profit

Studies show that adopting environmental, social and governance (ESG) principles is good for business, but doing it right requires companies to develop a proper framework that communicates their purpose with sustainability as a prominent driver.

November 2019

Antimicrobial resistance: An investor perspective on a pressing global threat

At BMO Global Asset Management, one of our key corporate engagement topics is antimicrobial resistance (AMR), which is a pressing global challenge.