Why are workforce and human rights issues important for investors?
Safeguarding human rights is vital for businesses to build long-term sustainability. Aside from the terrible human impact of human rights abuses, poor practices can also expose companies to significant reputational and financial risk. It is widely accepted that companies have a responsibility to respect the human rights of any people they impact, including their workforce, communities, customers and end-users.
Ensuring the protection of human rights also creates opportunities for companies, which include improving relationships with key stakeholders, reducing the potential for conflict, and creating a company culture that attracts talent.
There is growing evidence that poor labour standards can create financial risk to companies, and that a motivated, well-supported workforce can improve business performance.
Failure to uphold workforce rights can cause significant damage to a company’s reputation, leading to material financial costs. With the rise of informal and increasingly globalised workforces, there are growing risks involved in precarious and casual employment.
Workplace safety is a part of this, and there are wide divergences in the safety information disclosed by companies, even among those where it is a more material risk factor. A lack of transparency may mask the extent of workplace harm and slow the identification of systemic risk. Comprehensive reporting by companies helps to demonstrate to investors that they are managing health and safety effectively.
Modern slavery is also part of these wider issues. It occurs around the world and has a devastating human impact. It also represents a material investment risk because of its potential to undermine shareholder value. Australia’s Modern Slavery Act defines modern slavery to include eight types of serious exploitation – trafficking in persons, slavery, servitude, forced marriage, forced labour, debt bondage, the worst forms of child labour and deceptive recruiting for labour or services.
How do we engage on workforce and human rights?
We expect companies to ensure that their human rights risks are mitigated, whether in the company’s direct operations or in their value chains
We encourage companies to recognise all relevant human rights impacts that can arise in their operations or value chains. Human rights risks may impact workforces as well as other people, for example through community harm, displacement or undermining the right to personal safety and security.
A company’s board should oversee and have ultimate accountability for the company’s human rights practices. To do so, the board should ensure that it receives sufficient information to be able to assess and manage the risks.
Public reporting is important across the board – whether on workplace safety, modern slavery or other risks. It allows investors to assess their level of investment risk and supports investors’ compliance with their own obligations under the Modern Slavery Act.