ICGN Viewpoint 

Occupational Safety and Health:  

The Pandemic, the Changing World of Work and How Investment Stewards Can Engage to Enhance Corporate Performance  

18 October 2022  

In growing numbers, investors believe human capital management leads to enhanced corporate performance, and supports efforts to deliver long-term sustainable value creation.¹ As a core component of this belief, effective occupational safety and health (OSH) programs designed to protect workers from sickness, disease, and injury arising from their employment, are viewed as central to human capital management.² There is no effective human capital management without robust OSH performance. Failure to establish and implement strong OSH programs leads to lost productivity, strikes, fines and legal challenges, diminished worker trust and performance, increased costs, reputational damage, reduced company performance, and possible corporate dissolution.³ 

In this context, this ICGN Viewpoint aims to: (1) highlight ongoing challenges to workplace safety and health and how these have been altered, amplified, and accelerated by the Covid-19 pandemic; (2) raise awareness of rising OSH expectations as contained in widely-promulgated international conventions and commitments that target business and finance; and (3) describe how investment institutions can respond to these developments through their stewardship practices. It concludes with a call to action with a focus on both companies and government to improve overall OSH disclosure and performance and better prepare ourselves for the next pandemic.  

The Issue: An Unacceptable Track Record 

Prior to the Covid-19 pandemic the International Labour Organization (ILO) estimated that 2.78 million work-related deaths were being recorded every year, of which 2.4 million were related to occupational disease. This equates to 7,500 deaths from unsafe and unhealthy working conditions every day.⁴  

Beyond these brutal numbers, hundreds of companies pay fines for breaches of safety and health regulations every year. Poor safety practices can be disastrous not just for workers but also their families, communities, and the environment.⁵ In extreme cases, poor OSH can threaten a company’s social licence to operate: that is, the ongoing acceptance of a company’s business practices and operating procedures by its employees, customers, regulators, and communities of interest. Acquiring and maintaining a social licence to operate typically recognises that companies often need to go beyond their strict legal obligations to meet societal expectations and avoid the activities that society deems unacceptable.⁶  

Rapid Change: How the Pandemic is Impacting the Workplace 

Although the requirement for good OSH management is far from new, the Covid-19 pandemic has amplified and accelerated at least four key changes to the workplace, many of which enabled by digital transformation of business.  

First, the pandemic has accelerated the growth of the gig economy. Gig work is characterised by short-term working relationships where services are delivered to customers on task-by-task basis. At the centre, in many, cases lies a company with an online platform driven by a proprietary algorithm. The platform allocates, monitors, evaluates, and delivers payment for the work performed. The workers’ behaviour and performance are constantly monitored via task completion tracking, geolocation, video surveillance, and customer rating mechanisms. Platform work, provided by companies such as TaskRabbit, can be on-location (e.g. cleaning services, delivery, furniture assembly), or desk-based, such as Amazon’s Mechanical Turk on-line business (e.g. data validation, survey participation, content moderation).⁷ 

On-location gig work can bring OSH risks similar to more traditional workplaces, characterised by physical work (injury, exposure to workplace hazards, etc.) but often lack OSH programs and effective training. Desk-based gig work carries OSH risks typical of office work environments (poor ergonomics, sedentary lifestyle) but without the kind of OSH/human resources support that typically seeks to ensure the office environment is properly set. Both forms may be increasing OSH risks related to mental health as work becomes unpredictable, irregular, contingent, and temporary. Tight deadlines, lack of sick pay and job security, constant surveillance, and interaction with a system that does not allow for negotiation — all this can contribute to fatigue, isolation, stress, anxiety and depression.⁸ 

Second, more conventional workplaces are also experiencing digital transformation and the adverse OSH impacts these technologies present. In the warehouse or factory, for example, workers are interconnected with task assignment and task completion algorithms, surveillance technologies (closed-circuit cameras or wearable tech), robotics, and artificial intelligence — all designed to accelerate efficient production. These workplaces may exacerbate existing safety risks as workers are required to work at an unrelenting pace without breaks, while also introducing mental health risks similar to those experienced by gig workers.⁹ 

Third, for businesses characterised by the conventional office environment, the pandemic has accelerated the adoption of communication technologies that allow for remote work. The future of the centralised office familiar to previous generations is now an open question. Some companies are demanding a return to the office; others are making accommodation for remote work and expect this to remain a permanent feature of the twenty-first century workplace.¹⁰ The impacts, thus far, are unclear. Some people have embraced working from home. Others are experiencing increased stress brought on by increased isolation from co-workers, reduced opportunities for learning on the job, lack of mentoring opportunities, and the family conflicts that can result when the home cannot accommodate an office.¹¹ 

Finally, along with these new workplace arrangements, the pandemic itself has increased the prevalence of anxiety and depression and given rise to significant anti-vaccination sentiments.¹² Many workplaces have become battlefields with potentially deep divisions negatively impacting morale, teamwork, collaboration and target culture, as many workers strongly favour mandated vaccinations while others strongly oppose both the mandate and receiving their own jab.¹³ Further, healthy workplaces in the future may face increasing threats as the pandemic and misinformation campaigns have interrupted childhood vaccination programs that target a wide range of debilitating diseases.¹⁴  

At this stage, the full range of implications of these developments for OSH are not fully known, and may not be known for a generation. But they are emerging in the context of an existing regime of law, standards, expectations, cultural norms, and rising expectations.  

Rising Expectations 

Global concerns about inadequate workplace conditions have been expressed for more than a century by the ILO.¹⁵ Significantly, in June 2022, the ILO formally adopted a safe and healthy working environment as a Fundamental Principle and Right at Work, joining the four existing principles (freedom of association and the right to collective bargaining, the elimination of forced or compulsory labour, the abolition of child labour, and the elimination of discrimination).¹⁶ This development significantly reinforces 20 existing industry-specific conventions and 21 recommendations promulgated by the ILO.¹⁷  It also impacts other business-oriented international instruments that directly reference the ILO Fundamental Principles. This includes: 

• The UN Global Compact is a non-binding pact to encourage businesses to work towards more sustainable practices. The current version directly references the four original ILO fundamental rights. Created in 2000, the UN Global Compact’s 13,000 signatories should anticipate an updated version to include safety and health.¹⁸ 
  
  

• The Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises, advances responsible business conduct for multinational companies operating in 50 countries and includes specific reference to worker health and safety. Each signatory country maintains a National Contact Point with a mission to promote the Guidelines through grievance mechanisms.¹⁹  
  
  

• The UN Guiding Principles on Business and Human Rights are internationally-accepted global standard for preventing and addressing the risk of adverse impacts on human rights linked to business activity. The Principles directly reference and call upon companies to uphold the ILO Fundamental Principles. As with the Global Compact, market participants should anticipate an update to include specific reference to safety and health.²⁰ See also ICGN’s 2015 Viewpoint on human rights through a corporate governance lens²¹  
  
  

• The UN Sustainable Development Goals (SDGs), 17 goals and 169 targets adopted by the UN General Assembly in 2015, and which are designed to be a “shared blueprint for peace and prosperity for people and the planet” to be achieved by 2030. Though not the initial focus for the SDGs, investment institutions are taking up the challenge.²² In this context, OSH can be linked to SDG 3 (ensure health lives and promote well-being with specific reference to 3.9: reduce illnesses and deaths from hazardous chemicals and pollution), SDG 8 (decent work including a safe and secure workplace with specific reference to 8.8: protect labour rights and promote safe working environments) and SDG 16 (promote peace, justice and strong institutions with specific reference to 16.6: develop effective, accountable and transparent institutions).²³ 
  
  

There may be evidence to suggest that expectations regarding a healthy workplace are rising among rank-and-file workers too. This is potentially evidenced by the “Great Resignation”, “Quiet Quitting”, and increased support for labour unions in the US.²⁴ Some sources have expressed the view that the pandemic has led to profound labour shortages as people exit the workforce.²⁵ Regardless of the durability of these trends, CEOs regard a labour skill shortage as one of the top external threats facing their company.²⁶ 

The Investor Response: Stewardship for OSH 

In recognition of these developments, investment institutions, as stewards, may consider ramping up efforts to sharpen their understanding of existing and new OSH risks to workers, the potential impacts on corporate performance and the role of the board in implementing robust OSH programs to mitigate these risks.²⁷ In this section, we offer some ideas on how investors might frame their engagements with investee companies on the subject and suggest key questions to be posed. 

Framing the Engagement 

When entering into dialogue with a company on OSH, investors may consider emphasizing the benefits of a sound program, presenting how a focus on safety and employee wellness can reduce absenteeism and employee turnover, increase retention and help to attract and retain a workforce that has become more demanding of the workplace environment over the course of the Covid-19 pandemic.²⁸ If thought appropriate to the circumstances, framing could also include a description of the emerging developments in international conventions (ILO principles, OECD, Global Compact, UN Guiding Principles, SDGs) to present a picture of a rising tide of concern. Only if dealing with ‘hard cases’ might investors reference the harsh evidence of worker deaths provided by the ILO evidence of OSH, the more tragic and high-profile cases referenced in this ICGN Viewpoint and, if accurate, the challenges that the company has experienced itself.  

Questions for engaging with management and the board 

1. How does the company and its board integrate OSH into governance structures? How has the board been briefed on, expressed concern about or interest in new OSH challenges, particularly in light of the pandemic? 
   
   

2. How is the board informed about OSH? Is there an Employee Health and Safety or Human Resources Committee to report  to the full board? How often is this addressed and how much time is typically allocated to these reports? 
   
   

3. Does the company have an OSH policy covering all risks and hazards, including mental health? Do staff have access to wellness resources? How are such physical and mental health risks identified and how often is this risk assessment reviewed and updated? 
   
   

4. Has the company and its board considered how its business model and strategy are connected to new forms of work (gig, platform, remote) and, if relevant, incorporated into the OSH program? 
   
   

5. Does the board have sufficient OSH expertise? What adjustments have been made in response to the pandemic to ensure appropriate expertise has been tapped by both board and line management to ensure appropriate actions are taken? 
   
   

6. What role does OSH have, if any, in setting target culture for the company? In assessing the OSH program, how does the company engage workers in design, execution, reporting and revision? 
   
   

7. Does the CEO take a lead role in communicating OSH priorities? Has the board appointed an OSH champion to demonstrate corporate commitment at the highest level?  
   
   

8. How does the company’s whistleblower program incorporate OSH issues? How many times has this been used? What are the best and worst cases and how have these experiences led to improvements? 
   
   

9. Has the company considered integration of OSH performance metrics into executive compensation? What has been the experience, good and/or bad, of incorporating OSH performance metrics into executive compensation (for cases where OSH metrics are in use)? 
   
   

10.  How does the company’s crisis management program ensure prompt and effective action in the event of severe injury or death? Are there any example of when this has occurred? 
    
    

11. What OSH performance indicators are most useful and what are the challenges of gathering this data and ensuring its value? Do these include lost time incidence rates, injury frequency rates, recordable incident rates, fatalities? How are leading indicators of safety performance such as worker participation in training programs or hazard identification used and prioritized? 
    
    

12. Does the company subject its OSH program to external review an audit and, if so, what were the main findings? How could the current program be improved? 
    
    

13. How does the company report on its OSH program and performance? Is this aligned with standards such as the Global Reporting Initiative 403, Occupational Health and Safety²⁹,the Sustainability Accounting Standards Board Human Capital Framework,³⁰or the NASDAQ ESG Reporting Guide?³¹ Has the company been subject to (or reviewed responses of companies addressed by) the Workforce Disclosure Initiative?³² 
    
    

14. How does the company stay apprised of updates in the OSH regulatory environment?³³ To what extent does the company engage regulators on OSH regulation? What are the main steps governments should take to improve regulation, particularly in protecting the economy and the workforce against future pandemics? 
    
    

Conclusion 

Investor engagement with companies on these questions can provide insights about the company’s OSH practices and the quality of its human capital management more broadly. Insights gained from these discussions can help influence investment decision making as well as highlight themes for further engagement.  

As with other sustainability-related issues, integrating OSH data into investment decision- making models is a challenge that will vary from investor to investor and will likely remain largely proprietary. Stewardship efforts, however, may benefit from joint action, such as that characterised by the Workplace Disclosure Initiative.  

In addition, investment stewards may wish to join forces to engage governments on the adequacy of existing regulation. In many countries, OSH has suffered for a backlash against labour unions and inattention from government.³⁴ In almost all places, legislation needs to catch up to new workplace conditions as workers experience both the physical and mental stress brought on by the digitalisation of the workplace and the pandemic.³⁵  

Finally, investment institutions may wish to consider working with each other and governments to plan for future systemic events, such as a potential further pandemic.³⁶ In less than three years since the onset of the Covid pandemic, more than 17 million people have died globally and the toll continues to rise. The future of the workplace is unclear. A whole society approach is needed to mitigate the impact of future pandemics and investors can play an essential role in a way that supports good corporate governance and sustainable value creation.³⁷ 

About ICGN Viewpoints  

ICGN Viewpoints provide opinion on emerging corporate governance issues and are intended to generate debate, whilst not defining a formal ICGN position on the subject. ICGN Viewpoints are produced by our member-led Policy Committees and we encourage dialogue by contacting Committee chairs directly or the ICGN Secretariat as follows:  

Karin Halliday, Co-chair ICGN Human Capital Committee  halliday.karin@gmail.com 

Michela Gregory, Co-chair ICGN Human Capital Committee mgregory@neiinvestments.com  

Robert Walker, ICGN Sustainability Manager Robert.walker@icgn.org