Standards Review Puts Labour Issues Centre Stage

GRI takes a human-rights based approach that will form the basis for a wider revision of its Labor Topic Standards.

Inconsistent and insufficient reporting from companies on workforce pay and conditions is a long-term source of frustration for investors, but standards-setters’ and policymakers’ increasing focus on the issue could change the game.

Last week, the Global Reporting Initiative (GRI) published exposure drafts for the first phase of its Topic Standard Project for Labor, aiming to improve transparency and accountability on companies’ employment practices and working conditions.

The review of labour-related disclosure standards is due to be developed in three thematic phases – employment practices and conditions, working life and career development, and workers’ rights and protection. It is part of the voluntary standards body’s wider Topic Standard Project for Human Rights, which aims to align with the UN Guiding Principles on Business and Human Rights and reflect companies’ growing understanding of their responsibilities and impacts on workers.

“The backdrop for this major review is the disproportionately low attention the subject receives in corporate reporting,” said Carol Adams, Chair of the Global Sustainability Standards Board (GSSB), which develops and approves the GRI standards. “Labour issues are central to how an organisation understands and discloses its most significant impacts, with employees being essential to business success. Better information and disclosure are key to achieving the UN Sustainable Development Goals (SDGs) and improving decision-making.”

The suite of changes proposed in the exposure drafts address policies on employment relationships, pay and working hours, and how businesses handle significant changes for workers. Specifically, the GRI is seeking feedback on the redrafted versions of three of its standards: GRI 402: Labor/Management Relations, GRI 401: Employment, and GRI 202: Market Presence.

“When companies do report [on labour issues], the data tends to be patchy and inconsistent,” Adams told ESG Investor. “A further driver for these revisions is the reality that hundreds of millions of workers globally are denied a decent income or secure employment. That is a major risk, especially for multinationals with diverse value chains.”

The GSSB commissioned the project to redress the balance, she explained, with the aim of raising the bar for how labour-related disclosures are addressed throughout the GRI standards to ensure meaningful, standardised and quantifiable reporting.

The review process has been guided by an expert group comprising tripartite representation of workers through the International Trade Union Confederation and the Global Unions Federations, of employers through the International Organization of Employers, and of the International Labour Organization (ILO).

“A key aspect of the review is to more closely align GRI’s labour-related standards with authoritative intergovernmental instruments for business and human rights – including those set by the ILO, the UN and the OECD,” Adams added. “All GRI stakeholder constituencies are represented in the project advisory group, which will give reporting entities, workers, investors and other stakeholders reassurance that our standards remain comprehensive and globally relevant.”

Emily Sims, Senior Specialist at the ILO, welcomed the GRI’s efforts to align its reporting standards with the organisation’s principles, saying it would contribute to business transparency on labour-related impacts and help companies strengthen their contribution to SDG 8 on inclusive economic growth and decent work for all.

“Workforce is a source of competitive advantage, but also a major risk for adverse impacts regarding workplace human rights and broader sustainability,” said Peter Colley, National Research Director at Australia’s Mining and Energy Union, and a labour constituency representative on the GSSB. “The substantial revision underway to the GRI Labor Standards will be a major tool for organisations to manage risk and improve their performance in this critical area.”

The GRI’s review of labour-related reporting standards also follows confirmation by the International Sustainability Standards Board (ISSB) in April that it would prioritise disclosures on human and nature capital in the next stage of its standards development programme. The ISSB said it would build on standards from legacy bodies incorporated its structure – such as the Sustainability Accounting Standards Board.

Boosting investor engagement

Speaking to ESG Investor, members of the asset owner and management community broadly welcomed the changes proposed by the GRI. Some also backed the inclusion of union and employer representatives in the drafting process, underscoring the importance of open dialogue and collaboration between various stakeholders on sensitive issues such as labour standards.

“As established through our work on the UK Department for Work and Pensions’ Taskforce on Social Factors, social considerations are fundamental to investment strategies that consider long-term systemic risks and opportunities,” said Maria Nazarova-Doyle, Global Head of Sustainable Investment at IFM Investors. “Robust and transparent labour disclosures are needed to support investors in their portfolio construction and stewardship activities. These improvements will provide further granularity on the labour-related impacts of businesses.”

In March, the taskforce published its final guidance to UK pension fund trustees on how to embed social factors – including labour-related themes – into their investment decisions and stewardship policies.

The GRI blueprint also provides reporting metrics on a range of topics covering the intersection between employment practices and human rights, which should standardise disclosures and help investor better compare companies’ performance.

“Speaking broadly, standard business disclosures on workforce and labour impacts to date have been insufficient for investors to truly understand how workforce practices affect performance – or indeed impact workers,” said Martin Buttle, Better Work Lead at CCLA. “Mandated reporting requirements vary by jurisdiction, so voluntary standards such as GRI have filled the gap.”

Although transparency does not necessarily lead to improvement, having consistent data in the public domain for investors and others to scrutinise will build the pressure for change, Buttle argued.

“We’re pleased to see this comprehensive review and blueprint to advance accountability for labour impacts,” he added. “Now that the Corporate Sustainability Due Diligence Directive has passed and sustainability reporting is required thanks to the Corporate Sustainability Reporting Directive, there will be increased pressure on businesses to disclose those impacts.”

The GRI’s fresh focus on remuneration and working time, with proposed metrics on cost-of-living estimates, should also help investors engage on living wages, Buttle argued. Although gender pay gap and social protections metrics are already mandated in certain jurisdictions, seeing them in a global framework is useful, he said.

“The suggested metrics will promote consistency in reporting on some important labour market issues where corporate practice and human rights intersect,” he added. “There will no doubt be complaints that the new blueprint increases the reporting burden on companies, but the framework is voluntary. We will need to wait to see if they start using these new metrics.”

The exposure drafts are open for public comment until 4 October, with the next two consultation phases in the labour standards review – on working life and career development, and on workers’ rights and protections – due in the next 12 months. Overall, the GRI expects to make updates to 11 of its standards as part of the process.

“Moving forward, it would be good to see more companies embracing these voluntary standards, and in parallel, to see the ISSB accelerating its work on social disclosures, drawing on the work of the GRI,” said Nazarova-Doyle.

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