- A new research report from Just Capital on Russell 1000 companies shows that disclosure on worker issues remains very low.
- It's hard to call any sectors leaders in this area, according to Just, and on issues like minimum number of paid sick days and child-care support, the vast majority of firms make no disclosures.
- Diversity policies are the only disclosures made by more than 75% of firms.
Workers have the balance of power in the labor market, and in some obvious ways, gains have been made during the pandemic, notably in wages and number of job opportunities. The rising tide of labor unionization too shows a more powerful tilt against management.
But some other big metrics regarding the changing relationship between employees and employers remain lacking in detail from the corporate sector.
Take, for example, minimum paid sick days, a job benefit that received significant prominence in the past few years as a result of the health risks posed by Covid to front-line workers and essential employees.
How many companies disclose that they offer minimum days of paid sick leave to workers? According to a new analysis of Russell 1000 companies by ESG research nonprofit Just Capital, just 9%. It's not clear if that means other companies in the Russell 1000 don't offer the benefit, or for some other reason, just have not disclosed it.
The same goes for subsidized childcare, another benefit that Covid brought to the forefront. Only 12% of Russell 1000 companies disclose this benefit.
"That's part of the problem" said Shane Khan, head of research at Just Capital. "It's much easier to understand that 12% than interpret the 88%," he said. "And paid sick leave and childcare, we would have expected to see much more offer that."
Just Capital undertook a review of the Russell 1000 on worker metrics because public polling consistently shows these issues receive strong, bipartisan support from the public, and because in the early history of ESG, environmental issues like greenhouse gas emissions reduction have received much more focus than social issues like labor policy.
"The lessons from the pandemic are beginning to catch up with this topic and lots of investors are interested in 'social' capital and workers, and how it affects value, and to what extent do we have data that can answer these questions," Khan said.
"The area of 'S' hasn't been fully developed and fleshed out," he added.
Just Capital has tracked a significant increase in disclosures related to diversity, equity and inclusion in the workplace. "That's unsurprising and companies have been intentional and public on that," said Alison Omens, chief strategy officer at Just Capital. But it's also not enough. There is the expectation companies will talk about job quality metrics, such as wages and paid time off, as much as DEI.
"It is still to a degree the 'wild west' on what comparable data should be out there," Omens said. "We know how companies are treating workers is material, so what are disclosure mechanisms to share that holistic performance on jobs?" she asked.
With the Securities and Exchange Commission moving closer to a human capital disclosure requirement, what Just Capital describes as "the persistent lack of disclosure standards around worker issues," needs to be addressed by C-suite leaders.
Companies may be tracking this data internally, even if they are not disclosing it publicly.
"The C-suite does need to be looking at the actual numbers, turnover and average wages and the number of workers getting ahead or just getting by, the upward mobility rates and what makes a good job," Omens said. But it is imperative to disclose the data to track progress, she said, and increasingly companies that understand the importance of workers as a social issue are aligning it with broader business strategy.
What's most concerning in the data compiled by Just Capital on Russell 1000 companies is that it's hard to call any firms leaders in this area. Across most of the 23 total worker policies and performance metrics it researched, less than half of firms were making disclosures. The only disclosure made by more than 75% of firms was having a diversity and opportunity policy in place. "Table stakes DEI," according to the report. But only 19% disclose actual diversity and opportunity targets.
"There is a scarcity of data in this area," Khan said.
In fact, the research shows that even the leaders are not doing well. Just Capital research on environmental disclosures shows that leaders are sharing metrics across a wide range of relevant issues. But when it comes to the new data on worker issues, even the firms disclosing the most — which tend to be industries where scrutiny was highest even before ESG boomed, such as oil and gas and utilities — are still making a relatively low number of disclosures.
Khan said there are understandable reasons why firms would be moving slower on worker metrics, as they have to manage the ESG disclosures that they are making across categories, and may take their lead from competition as well, with climate being a big focus across companies. There is also cost to the process, and an internal review infrastructure that needs to be built over time, so the ESG budget has likely been more focused on issues like climate where the attention has been greatest.
But with the SEC mandate on human capital in the works, and pressure from investors and the public, the need to disclose more on worker issues will increase, Khan said, though he stressed that the disclosure itself "isn't the end game."
"When we know what's going on in a company, you can manage it," he said.
C-suite leaders should be thinking of these disclosures as useful only in the sense that it helps to make decisions and frame business strategy. "It comes down to the individuals in those companies saying, 'We believe this to be material and we want to take action,'" Khan said.
Omens said as skepticism has increased about ESG, the best way to push back against the "lip service" argument is to be more transparent. "Transparency can address the broader ennui we see from Americans, asking what's actually happening and what do we believe is real?" she said.
This is an area where HR leaders and other C-suite leaders who have been more front-and-center in ESG, such as CFOs, need to interact.
"We talk to a lot of HR folks who have been nowhere near the ESG conversation at work," Omens said.
There may be more or less budget currently devoted to specific ESG issues and specific team work on those issues, but with workers becoming a big part of the story for investors and other stakeholders, Omens said cross-team collaboration on measuring these policies and metrics is where the C-suite needs to be evolving.
Full details and breakdowns of the worker disclosures metrics across companies and sectors from the new Just Capital research. Also see its analysis from last fall on human capital disclosures from large corporations.