A Growing Framework for Corporate Transparency: The Workforce Disclosure Initiative

Rosie Mackenzie is the Senior Company Engagement Manager of the Workforce Disclosure Initiative (WDI). The WDI is an initiative of the non-profit, ShareAction, to promote corporate transparency on workforce issues as well as to provide stakeholders with comprehensive and comparable data.

Learn about our partnership with ShareAction.

How did the Workforce Disclosure Initiative get started?

Back in 2016, ShareAction were talking to investors, mainly in the UK because that's where we have the strongest relationships, and asking them to speak to companies about the possibility of paying the living wage. The investors’ response was positive and they were keen to help. However, the information that companies traditionally report publicly isn't sufficient to provide enough insight and enough context. On top of this, the information in company reports and on their websites isn't standardised within sectors let alone across sectors. Therefore, investors didn't feel informed enough to have those conversations with companies.

ShareAction sat down with the stakeholders, including investors, companies, trade unions, academics, and other players in this space, and came up with a survey that would provide all the data that investors, or anyone else trying to scrutinise a company, could possibly need.

What is the WDI and how does it compare to other ESG frameworks?

The WDI is an investor-backed initiative to improve the quality and quantity of corporate workforce information. An annual survey is the primary tool for doing this, it is detailed and complex, but also designed to help companies improve. Alongside the annual survey, ShareAction has workshops and webinars throughout the year to bring together companies and investors to explore topics of interest.

In terms of how the WDI compares to other frameworks, there are a few unique things about it. 

1. Sector Agnostic - The WDI is not sector specific, whereas most other frameworks in this space are. The WDI asks the same questions to all companies, so all questions are shaped to be relevant to everyone.
2. Multiple Verticals - The WDI covers both direct operations and supply chain; this is quite rare in a framework. The biggest emphasis for most other frameworks is the supply chain because this is where there tends to be the biggest problems. 
3. Investor Readiness - Companies submit their WDI response via the Nossa Data platform. Other frameworks are often a set of standards to which companies refer in their own reporting, such as in annual reports and sustainability reports. Having the companies formally submit their WDI response means it's accessible to investors in one place, in an easily standardised, comparable format.
4. Detail - The WDI goes into lots of detail whereas other frameworks are more high-level, having fewer metrics. In having more metrics, the WDI allows companies to provide relevant context and gives investors the nuance needed to fully understand what a company is doing. Because the WDI asks for so much detail, companies have to disclose information that they haven’t published anywhere else; therefore, the WDI generates lots of brand new data. Again, this is different from other frameworks that only use already public information. To give you a sense of the level of detail, companies who actively submitted a response in 2020, could complete about 61% of the survey. Those that didn't actively submit information, but for whom SustainoMetric collected information just from their reports and website, had 21% of the survey filled out. So, there's a big difference between what companies publish traditionally, and what they disclose through the WDI.
5. My final point is that the investors have lots of input into the survey. Other stakeholders also have a lot of input, but the investors are our primary audience. This is not the case with other frameworks as the investors aren’t the primary people shaping the questions.

What is the importance of corporate transparency for stakeholders?

It’s important for investors to have that transparency - as we’ve touched on. Corporate transparency and company willingness to disclose, is very much appreciated by investors; it’s a key element of investor engagement.

However, it’s also very important for the companies as they're the ones who are investing their time and resources. We hear from companies that corporate transparency is good for displaying their willingness to be open to scrutiny. This is a great affirmation of the WDI having an impact on the companies who are actively submitting responses. Also, the more companies take part, the more they can learn from each other. By companies being honest about certain issues, they will realise that every company faces the same kind of problems. One example is the increasing acknowledgement that every company will have modern slavery somewhere in their supply chain; whether this is quite close or further down, there will be some kind of forced labour. The more companies are open and honest about their issues, the better they can be at addressing these themselves, but also collectively as a sector. Tackling these problems collectively typically makes for a longer-lasting solution.

In terms of how corporate transparency is important for other stakeholders such as employees, the WDI provides a whole lot of data that they wouldn't get from their HR team. For wider society, any element of corporate transparency means that society, CSOs, charities, and vulnerable workers have greater access to company information and can hold it to account.

How does the company data inform investors?

The investors use the WDI data in their discussions with companies. Investors will look at a company’s answers to the WDI before heading into ESG meetings. For example, Achmea is one of our signatories, and they use the living wage data when they're talking specifically to garment and retail companies. Achmea are interested in wage levels that those types of companies pay but are also interested in the ‘Worker Engagement’ questions when they're talking to hospitality companies. Signatories like Achmea, will hone in on one section of the survey and then use a company's answers to shape their conversations.

ShareAction’s friends at SustainoMetric collect lots of information for non-responders, so investors actually get a data set with just over 300 companies to compare. The National Employment Savings Trust is also using the data to inform their voting decisions. The Trust checks that the data submitted by companies is actually aligning with company actions. Newton Investment Management really likes the fact that the WDI allows them to act collaboratively with other investors, so that they can make coordinated asks of companies and thence drive change. Our signatories appreciate that the WDI generates new data which is not published anywhere else by companies. The company data produced by the WDI also helps investment managers identify which companies will suit their Future of Work Aims. This is basically trying to show which companies are going to be good employers for the future. It highlights whether companies are thinking about their sustainability and responsibility.

How has COVID-19 impacted both investors and companies in their support for the WDI?

There's much more interest from both investors and companies this year than ever before. This includes investors signing up to be signatories and companies getting in touch to request more information. Last year, the WDI experienced a 20% increase in the number of responders, and we're hoping that that pattern is replicated in 2021.

We’ve seen a really good response rate to the questions that are specific to COVID. It's a good opportunity for companies to talk about what they're doing as well as provide investors with that insight. There is much more interest shown by both companies and investors because COVID has shone a spotlight on how companies look after their workforce and manage their supply chains.

What were the main trends in 2020’s WDI?

I'll give you the three most interesting trends.

1. Worker Protection, post COVID-19: Companies recognise that it's had a big impact and that better management practices will help them manage the situation in real time, but also building back afterwards. But COVID did really shine a light on the fact that provisions for different types of workers are not equal. The majority of companies explain their approach to managing their workforce and how that affects business resilience during the pandemic. They also explain how they protect their employees' mental and physical health. But, when you look in detail at the figures of who those policies cover, it's not great. For example, every company said that their policies covered permanent employees, but it dropped to 87% when it looked at temporary workers, and then down to 26% when it looked at non-guaranteed workers. Therefore, companies weren't taking full responsibility for all their workers, just the ones that were most under their care.
2. Pay Transparency: We found that whilst transparency is improving, inequality is still rife in the data. To give you a sense of how things have improved. In 2020, 78% of companies reported their CEO to median worker pay ratio compared to only 48% in 2019. But when you contrast that to companies giving data around their employees who are paid around the national minimum wage, only 37% of companies could report that. Thus, there’s less of a spotlight on those lower paid people, and much less detail around it. This isn’t good because these people are most likely to be the most vulnerable. In terms of inequality still being rife, diversity and inclusion is still a big issue; the majority of companies said that they do have plans to address diversity and inclusion, but when you look at the WDI data there is much less detail on how they intend to implement said plans. There are issues within this as well, relating to the legal restrictions in some countries on collecting ethnicity data, but even so, very few companies showed this ethnicity pay gap. We also looked into discrimination and harassment incidences; very few companies provided the number of how many were reported, and even fewer gave the number for how many were resolved.
3. Gender Gap at the Top: The most common gender data point that companies reported was the breakdown of leadership positions. Many companies disclosed the percentage makeup of the board and senior leadership by gender. However, much fewer companies provided for the overall breakdown of the workforce. Again, there's that emphasis on certain high-up members of the workforce versus those lower in the organisation.

Can you talk about the growth of the WDI both globally and across industries?

The growth of the WDI has been a great affirmation of the unique qualities of the framework, especially regarding its applicability to all sectors. Ever since 2017, when we launched the first survey, we have had responders from every single sector. Interestingly, the top two sectors in terms of number of respondents consistently are the financial sector and the consumer discretionary sector. We think that this could be because financial companies are very used to reporting on various things and consumer discretionary is quite a varied sector, so it tends to be subject to the most scrutiny in their supply chains.

In terms of the WDI growing globally, we started with 8 countries in 2017 and we were up to 19 countries last year. Usually, it goes up by one or two every year; ideally, we want them to be outside of Europe because most of the responding companies are based in Europe. Last year we had our first Mexican responder which was great! The main area of focus for us, in terms of trying to grow as much as we can, is the US. This is because the US is where the biggest names are based. Last year, the US had the biggest absolute increase in the number of responders - at 16 companies. Hopefully it will increase this year again.

What is the future of the WDI?

Ultimately, we want as many companies actively submitting information as possible. We want to get the same number of responders as the CDP, we see ourselves as the social corporate data equivalent. We ideally want to be the biggest source of corporate workforce data in the world, and with that comes a unique insight into what companies are saying, reporting, and doing around their workforce. We seek to establish ourselves as a thought leader on all these issues with the analysis and reports that we are planning to publish through our fab research manager, Charlotte Lush.

From the investor side, we really want more investors to be actively and willingly engaged with companies. We’d like investors to be ready to push the companies to disclose more and act more responsibly. Our current investor signatories are already doing this fantastically, so we just want to see more of that from different investors who are yet to become signatories. We want to see investor signatories using the WDI data in their investment tools, analysis and research. Ultimately, this means better working lives for everyone, more responsible companies, and a better future for all.

Zooming out, how does the WDI feed into ShareAction’s overall mission?

ShareAction’s mission is to harness the power of investment to build a world where the financial system serves our planet and its people. The WDI’s piece in that puzzle is to make companies better employers in the long term.

If a company would like to respond to the WDI, how can they get in touch?

They can email me at: Rosie.Mackenzie@shareaction.org or can fill out the form on our website.

Is there anything else you would like to talk about that you feel is important?

I think the fact that Nossa Data is providing the platform for this year’s WDI, means that we're aligning with big players in the ESG space. The technology that Nossa Data provides is great! I’m excited to see what the future holds there in terms of making the data more easily accessible to companies and investors, as well as easier to analyse and drill into.