In the middle of all the raging debates, exposure drafts, ESG wars and explosion in the number of ways you can say materiality, serious reporting companies are gearing up for their next reporting cycle. For those who report GRI, this includes getting ready for the introduction of the new GRI Universal Standards for reports published in 2023.
You may have noticed that there are some early adopters of the new Universal Standards applied in reports published in 2022. It’s good to see companies showing leadership in transparency and paving the way for use of the Universal Standards. We can learn much from how they do things. Thank you to all the companies I mention below.
The Universal Standards represent somewhat of a stretch for companies who have reported GRI Core Option in the past. Less so for Comprehensive Option reporters but still some adaptation is required. It’s not quite enough to continue to report as you were doing and just add new labels.
Disclosure 2-8 is a case in point. This disclosure is an upgrade to previous GRI 102-8-d (2016) which required reporting of “Whether a significant portion of the organization’s activities are performed by workers who are not employees. If applicable, a description of the nature and scale of work performed by workers who are not employees.” A sub-clause of 102-8, this disclosure was largely overlooked and reported only occasionally by companies. Disclosure 2-8 now requires a detailed disclosure:
Let’s start by trying to understand who the workers are who are not employees. This is a tricky one and not as clear-cut as you might think at first glance. My initial assumption was that this refers to agency employees or contingent workers – people who work for an employment agency who replace employees on leave, or supplement employees at peak times etc.
But, hey, wait, it’s not that simple.
Reading the GRI guidance in the Standards, you realize it’s all about who controls the work. If the company controls the work of the worker who is not an employee, that worker is in scope for Disclosure 2-8. The guidance says: workers who are not employees are those who perform work for the organization and whose work is controlled by the organization but are not in an employment relationship with the organization. Control of work implies that the organization directs the work performed or has control over the means or methods for performing the work.
But, hey, wait, it’s not that simple.
How do you define “control of work”? Control can be interpreted in different ways. Does control mean setting wage scales? Supervising the work? Prescribing the work methods? Monitoring attendance? Defining materials to be used? Scheduling hours of work and rest? All of the above? GRI guidance talks about workers of one of the organization’s suppliers, where the organization instructs the supplier to use particular materials or work methods to manufacture the products or deliver the services.
The “extent” of control plays a role here. If it’s control to a high extent, it’s control. If it’s control to a limited extent, it’s not control. Aaaaaaaaaaaargh. In order to solve this conundrum, I went straight to the source and would like to thank GRI's Bastian Buck, Chief of Standards, and Sharon Hagen, Senior Coordinator of Sustainability Reporting Standards, for their insights and guidance. Nothing like getting to folks who created the problem to sort it out for you 🤣. Ultimately, companies will have to define and declare the scope of control they apply in when using Disclosure 2-8. That’s comparability out of the window as reporters will inevitably report in different ways. But heck, comparability is a myth anyway.
So now we know. Disclosure 2-8 is sort of a DIY disclosure. Make it up as you go along.
Applying the insights above, here are examples of workers who are not employees, and how Disclosure 2-8 applies to them or not.
INCLUDE Employees of high-control outsourced operations: An example is people employed by a contract manufacturer that provides a dedicated manufacturing operation (but not necessarily in a dedicated facility), employing a team of trained people to deliver defined products in accordance with a company’s specification. The company prescribes the work in quite some detail, defines the materials to be used, the nature of the work and even some or all of the work processes. Let’s call this high control.
EXCLUDE Employees of low-control outsourced operations: There are several examples – outsourced warehousing, outsourced logistics, outsourced call-centers etc. In these cases, although a company might prescribe an overall approach to the work, for example, safety standards, a Code of Conduct, ISO certification, or certain processes, generally it is the outsourced operation (supplier) that controls the practice of work on a day-to-day basis to meet contractual requirements. The outsourcing provider sets wages, manages employee terms and conditions, hours of work, shift patterns, training, discipline etc. In this case, the company has low control over the work itself.
INCLUDE or EXCLUDE Employees of hard-to-define control outsourced operations: In some cases, operations may be outsourced with a high level of prescription about the work to be done and the processes to be used without detailing day-to-day specifics. It really depends on how much freedom the supplier of the service has to choose the way it instructs its workers to perform he work. Less freedom = more control. More freedom = less control. The rule of thumb here is: if in doubt, make a decision and explain it, and then apply it consistently.
INCLUDE Employees of on-site service providers: Employees of contracted services usually performed onsite such as cleaning, catering and security services are usually required to perform their work under a high level of control by the company. Hours of work, place of work, type of work – generally it’s the buyer that decides.
INCLUDE Agency or third-party contingent workers: These are individuals who are supplied by external employment agencies to do specific jobs in the organization, in place of or in addition to the permanent workforce. For example, cover for maternity leave or sick leave, additional resource on packing lines or in laboratories etc. They join the team and do the work required, directed by the Team Manager or Supervisor. Clearly high control is at work here. Haha. A pun.
INCLUDE Contractors: Contractors manage and/or deliver construction or engineering-type projects. Often a General Contractor will bring in its own team and specialist sub-contractor companies and their employees to complete a project. They work on the company site or help build new sites, under the guidance and responsibility of the General Contractor who meets the contractual obligations of the contracting company who agrees the work plans and prescribes aspects of the work.
INCLUDE Independent workers: This may include what GRI refers to as self-employed workers or home workers. They are generally considered an extension of the internal workforce, doing work an employee might do. For example, an independent laboratory worker who joins the team for a specific period of time to do work directed by the Lab Manager, or a homeworker who provides call-center services on contract to the company directed by the inhouse Call-Center Manager.
INCLUDE Interns/Apprentices: These are included in GRI’s definition or workers who are not employees, even though, in many instances, interns and apprentices are not performing full work roles, but provide supplemental project work as they learn in the organization. For good orders’ sake, these we count these as in scope for 2-8 as control is with the company.
INCLUDE Volunteers: If the reporting organization is a nonprofit or non-commercial entity, volunteers may be the primary providers of work in the organization, and may be managers, staff or occasional volunteers. Their work is determined by the organization.
EXCLUDE Employees of general suppliers: Suppliers employ people to make and deliver goods and services. The people employed in the broader supply chain (excluding outsourcing examples above) are managed by their own organizations with no control of the procuring company. They would not be considered part of a company’s extended workforce unless they are specifically dedicated to providing custom work as noted in the examples above.
EXCLUDE Employees of providers of professional service providers: Employees in legal and accounting firms, auditors, compliance organizations, manpower agencies, design firms etc. While these individuals provide a dedicated, custom service, their work is not controlled by the company.
EXCLUDE Independent consultants: An external consultant who works on contract to supply a service against a Statement of Work or other contract. Similar to providers of professional services.
EXCLUDE Robots: A robot performs work but is not an employee. But a robot is not a person. Well, not really.
EXCLUDE Non-Human Animals: If you use animals to perform work, for example, horses to pull carts, cats to catch mice, dogs to guard the yard, these would also be outside the scope of Disclosure 2-8. But you can report about them anyway. We love non-human animals.
Complicated, isn’t it?
But you get the picture. In order to understand a company’s full employment impacts, the categories to include above, in addition to the direct workforce, represent the overall number of people involved in a company’s activities. This number could be significantly larger than the direct workforce, especially in the case of organizations that outsource many operations.
Take a company like Inditex. All garment sourcing is outsourced. Inditex employees 165,000 people directly. But has more than 1.3 million people employed in its supplier factories around the world. Although not yet using GRI Universal Standards 2021, Inditex reports extensively on workers in its outsourced factories and even publishes a special report: Workers at the Centre.
Given the close control Inditex exerts over its garment suppliers, and the detailed strategies and due diligence deployed to drive responsible employment practices in the supply chain, with my new understanding of GRI’s guidance, I would expect these workers who are not employees to be in scope for Disclosure 2-8 when Inditex reports using the Universal Standards next year.
Workers who are not employees – the invisibles
Whichever category of “workers who are not employees” companies adopt, it seems that in any case, a lot of them are invisible in the disclosures of companies using the new Universal Standards. I have looked at reports from early adopters (selected randomly) and, in my analysis, in 16 reports:
One company disclosed in compliance with the requirements of Disclosure 2-8
Six companies provided some kind of information but not all required details or clarity
Two companies omit Disclosure 2.8 from the GRI Content Index
Two companies hide the disclosure
Three companies advise that the information is not available
One company provides the wrong information
One company just doesn’t report
So, a one-in-sixteen (7%) hit rate for complete disclosure on workers who are not employees.
93% are more or less invisible.
Let’s take a look:
One company disclosed in compliance with the requirements of Disclosure 2-8
Hong Kong power company CLP Holdings Ltd does a great job. CLP is no stranger to strong sustainability reporting and always delivers highly transparent, well considered reports. In this latest report using GRI Universal Standards 2021, CLP clearly identifies direct employees and different categories of non-employees where labour supply refers to people provided by manpower companies. See CLP’s GRI Content Index.
Six companies provided some kind of information but not all required details or clarity
Singapore-based City Developments Limited (CDL) is a global real estate company and another leading-light reporter and multiple times winner of the Asia Sustainability Reporting Awards over the years. No surprises that CDL is an early adopter of the GRI Universal Standards.
CDL references construction workers in the 2021 Integrated Sustainability Report as workers who are not employees. No mention is made of other categories of workers, such as those involved in site services such as cleaning or security, nor whether this is a typical year or if there is significant fluctuation from year to year.
Diageo discloses against 2-8 in the GRI Content Index of its 2022 ESG Report. This disclosure describes different categories of workers who are not employees, but makes no reference to workers in outsourced production operations. If any of Diageo’s outsourced plants operate under “high control”, they would need to be included. Also, no reference to year-on-year fluctuation.
As with many global garment manufacturers, transparency of the supply chain is more common, whether or not the reporter uses GRI. H&M is however a GRI Reporter and Universal Standards early adopter and provides an overview of workers who are not employees in the supply chain in its 2021 Group Sustainability Disclosure. H&M also discloses much detail about the conditions of employment through their supply chain including wages paid to workers in supply factories in different countries. But as far as Disclosure 2-8 is concerned, there appears to be no mention of other agency or contractor workers at H&M’s own sites.
Korean tire maker Hankook Tire & Technology’s ESG Report 2021/22 includes a brief response to GRI 2.8 in the GRI Content Index. Short and to the point. Not clear whether subcontractors includes all types of services or only production-related work at the plants. But it’s something.
Levi Strauss & Co’s 2021 Sustainability Report (with reference to GRI Standards, does not claim to be In Accordance but includes a GRI Content Index) includes a response to GRI 2.8 that is similar to the approach of H&M, referencing workers at supply chain factories but not other categories of workers.
Houston-based chemical company Westlake’s 2021 ESG Report’s GRI and SASB Appendix includes a GRI 2.8 disclosure that explains the company’s approach but provides no data. Better than no response at all. What’s an insignificant portion of the workforce? Less than 100? Less than 1,000? Westlake employees 14,000 people.
So far, all the companies mentioned have made some attempt at responding to GRI 2.8, even if all but one failed to provide a complete disclosure.
The following companies did not provide any information or data, or provided the wrong information:
Two companies omit Disclosure 2.8 from the GRI Content Index
U.S. based specialty food ingredients company Darling Ingredients' 2022 ESG Report GRI Content Index has a neat way of dealing with GRI 2.8. Just omit it from the Content Index.
Galaxy is a digital asset and blockchain leader providing institutions, startups, and qualified individuals access to the crypto economy. Hmmmm. There’s a business I don’t know much about. In any event, Galaxy had the same idea as Darling Ingredients. Just skip it. Galaxy’s Annual Sustainability Report 2021 includes a GRI Content Index.
In fairness, both Darling Ingredients and Galaxy reference GRI Standards and do not claim to be In Accordance.
Two companies hide the disclosure
These companies claim their reports are “In Accordance” and include a page reference for Disclosure 2.8 in the GRI Content Index. But, the disclosures are actually nowhere to be found is nowhere to be found in the reports. Hide and seek, anyone?
Three companies advise that the information is not available
AT&T’s fiscal 2021 ESG Report GRI Content Index notes:
AT&T is not able to provide this data, as it is proprietary and confidential.
Hmm. I wonder what’s so proprietary and confidential about that?
Ford Motor Company's 2021 ESG Data Book notes:
Information unavailable – this data is not readily available and is not tracked today.
THREDUP’s 2021 Impact Report notes:
This data is currently unavailable. We are working to expand how we report out these metrics in future reports.
One company provides the wrong information
Under Armour’s “In Accordance” 2021 Sustainability Impact Report responds to Disclose 2.8 by referencing the Human Capital section of the company’s Annual Report which provides data on employees who are employees and not workers who are not employees.
One company just doesn’t report
PepsiCo simply advises in the 2021 GRI Content Index:
Not reported.
But PepsiCo does not claim to report "In Accordance". Otherwise a reason for omission would be required.
Clearly, then, the Universal Standards may require a little extra consideration and in some cases, this is not so simple. Disclosure 2-8 in particular is a headache for most companies, as it requires securing data from sometimes complex supply chains. Not surprising then that in this first year of use of the Universal Standards, there are some inconsistencies and some gaps. It's all part of the learning curve and thank you again to all the sixteen companies who have already entered the GRI Brave New World and allowed me to see how it's going down and hopefully allow others to learn.
Clearly, if GRI offered a free supply of ice cream for reporters for full and accurate reporting against Disclosure 2-8, I would have had nothing to write about.
And if you are a worker who is not an employee. Don't despair. I am pretty sure you will become visible in future reporting cycles.
No comments:
Post a Comment