People and stakeholder issues
In this section
The issues
Equal opportunities
Community involvement
Health and Safety
Relationships with customers and suppliers
Supply chains
Trade unions
Training and development
Its relevance for charities
Incorporating the issues into investments
Business activities have a variety of impacts on people. These can include providing meaningful employment and good working conditions; support for charities, or significantly improving the quality of the goods and services available to customers. Conversely, some company activities may involve negative impacts on groups, for example by exploiting unsafe or poorly paid working conditions.
Such impacts are often described in terms of stakeholder issues. A stakeholder can be defined as a party who affects, or can be affected by, the company's actions.
For some investors, the value a company attaches to stakeholder issues is increasingly seen as being as important an indicator of its long-term sustainability as its approach to environmental issues.
Consideration of the treatment of stakeholders can encompass a variety of issues including:
- systems, policies, reporting and engagement
- advertising complaints
- community Involvement
- equal opportunities
- health and safety
- job creation and security
- relationships with customers and suppliers
- supply chains
- trade unions and employee participation
- training and development
The stakeholder issues that may be of particular interest to charities are:
Equal opportunities
An increasingly important element of labour conditions is a company's attitude towards equal opportunities and diversity. Despite the many strides made globally in combating discrimination during the last century, much remains to be done to achieve true equality in the workplace.
Equal opportunity is increasingly an issue of global concern. However, progress towards equality is often at different stages of development in different countries. Social practices, legislation, and public opinion all differ around the world.
Community involvement
The giving of money by companies to worthy causes is generally accepted as self-evidently ‘a good thing.’ Certainly, there are strong arguments in favour of identifying and encouraging companies that make a positive effort to contribute to the communities they work in and to society at large, whether via donations or other means.
Health and safety
Having a thorough, regularly reviewed system regulating health and safety is essential in order to be seen to be pro-active in addressing concerns over the treatment of staff and other stakeholders.
Relationships with customers and suppliers
Given the increasing importance attached to corporate reputation issues, it is vital that companies do all they can to actively engage with their stakeholders to improve the quality of their products and services.
Without effective systems in place to monitor and improve a company’s practices on this issue, it can often be difficult for the company to affect real change for the better. The existence of adequate monitoring systems therefore, is also important to investors seeking quantitative evidence of the company’s performance on this issue.
Supply chains
The quality of working conditions and the use of child labour in global supply chains is a high profile issue.
An ever growing number of products are being assembled or processed in many different countries. More attention is now being paid to the working conditions prevalent in developing countries and/or those with poor human rights records. These countries are less able, due to factors including lack of resources, to ensure that basic minimum standards are maintained in all workplaces.
Whilst many cases of abuse and exploitative conditions have been located in poorer countries, it is also widely acknowledged that trade and foreign investment generate far more employment and wealth in developing countries than is provided by foreign aid projects. Hence, many development organisations consider it vital to ensure that raising concerns about working conditions does not unduly undermine such benefits or lead to 'back door protectionism' by wealthy countries.
Trade unions
Trade unions and collective bargaining can provide workers with a valuable safeguard against exploitation and victimisation. This is particularly so in less wealthy countries and in less profitable industries which usually have poorer employment conditions. It is not of course always necessary for trade unions to be recognised by a company in order for it to provide good or above average working conditions.
Training and development
Companies that provide good training and development opportunities to their workforce have a competitive edge over rivals, because not only is productivity increased as a result of improved training, but the business becomes more successful at both retaining and attracting high quality workers.
This issue has relevance for all charities. Some charities may view issues such as community involvement and equal opportunities as fundamentally positive issues that companies should adopt. The good management of stakeholder issues can avoid or minimise potential reputational and litigation risks. It is also seen by some as a proxy for good management, as human resources management is deemed to be critical to the success of a company.
The treatment of stakeholders may be of particular interest to charities working on issues of human rights, equal opportunities, labour standards and health and safety.
Alleged breaches of labour rights in company supply chains tend to be high profile. Any charity that is concerned about the potential financial risk attached to their investments might want to consider ensuring that companies with a high exposure to this area – like retailers and clothing makers – have properly managed these risks.
This issue may be of most relevance to development and human rights charities, and those working to alleviate poverty in developing countries.
Incorporating the issue into investments
It is possible to assess companies on their treatment of stakeholders. Such information could be used to screen out the worst performing companies, or screen in the best performers. Specific criteria could include:
- evidence of policies, systems and reporting on
- stakeholders, including engagement and relationships
- equal opportunity and diversity issues
- job creation and security
- maintaining good relations with customers and/or suppliers
- global supply chain standards
- employee relations
- employee training and development
- health and safety
- the company's commitment to community or charitable work
- advertising complaints against the company
- the proportion of share value owned directly by or on behalf of, employees
- the level of health and safety convictions
A charity may be able to screen out companies with no policy, or an inadequate policy, on any of the above issues. It may also be possible to screen out companies which have allegations of breaches of international labour standards in their supply chains.
It may be possible to engage with companies on stakeholder issues.
Some pooled investment funds include stakeholder issues within their criteria. The Database of funds and fund managers gives some examples.
