By Martin Buttle, Head of Good Work, ShareAction
2020 disrupted the lives of everyone.
But while many of us grabbled with the new reality of home working – and schooling – for frontline and key-workers the risks were far greater.
Human rights have been thrown into the spotlight. And as such the ‘S’ in ESG has been bought centre stage for investors.
Yet our latest report – Voting Matters 2020 – found that the rhetoric around human rights and workforce topics has not yet translated into action.
This is certainly the case in the food sector.
The meat processing sector: the canary in the coalmine for Covid-19
Let’s take meat processing as an example. By September, it was reported that some 42,534 workers at meatpacking plants in the US had contracted coronavirus. At least 203 of these lost their lives.
In fact, as far back as April, the Guardian reported that “almost half the current Covid-19 hotspots in the US are linked to meat processing plants where poultry, pigs and cattle are slaughtered and packaged.”
One such example of this is at a Tyson Foods poultry plant – one of the companies examined as part of our analysis.
This problem was not confined to the US, however. In the UK, there were also report of high incidences of Covid-19 infections at Pilgrim’s Pride owned factories – another company examined in our analysis.
And a recent report from the PIRC makes clear links between low pay and insecure work practices widespread in the food processing sector and the spread of the virus.
How did investors respond?
In 2020, some seven resolutions were filed at companies aimed at addressing risks caused by Covid-19.
These resolutions called on companies to enact stronger business and human rights due diligence processes.
The companies targeted included retailers such as Amazon, Kroger, Loblaw and Coles as well as meat and poultry producers such as Pilgrim’s Pride Corporation, Sanderson’s Farms and Tyson Food Inc.
The AGM season straddled the pandemic. Earlier meetings – including those at Sanderson Farms and Tyson Foods occurred before the WHO announced a global pandemic.
Nevertheless, improved human rights due diligence might have prepared companies for the crisis and reduced the risk of fatalities.
Many other votes took place during the peak of the pandemic. Yet – with the exception of Kroger – they received low levels of investor support. In fact, many saw less than 40 per cent of votes in favour.
Meanwhile, the Big Three Asset Managers – BlackRock, Vanguard and State Street – generally failed to support these resolutions. BlackRock – the world’s largest asset managers – supported just one resolution at Tyson Foods, while State Street supported just three.
The resolution at Kroger’s would have passed if it had been supported by the ‘Big Three’ – Blackrock, Vanguard or State Street.
When it came to retailers, investors hide behind existing responsible sourcing and human rights policies.
However, with many of these companies scoring low scores as part of the World Benchmarking Alliance, Corporate Human Rights Benchmark 2019, we would argue these policies are far from sufficient.
Has the Covid-19 pandemic made a difference?
Of the seven human rights resolutions filed at food companies, four were voted on after the WHO announced the pandemic.
When comparing social resolutions across different topics, those focusing on human rights received less support (59 per cent) than resolutions about diversity and inclusion (77 per cent).
We found little evidence to show that support for these resolutions increased after the WHO declared a pandemic. On top of this, no voting rationale provided by an asset manager referenced the pandemic.
It may be too early to tell, but the pandemic as yet provided a sense of urgency for investors when it comes to voting on social issues.
We will be watching the 2021 season closely to see the longer term impact the pandemic may have.
The need for better stewardship on Human Rights
The Covid-19 crisis has highlighted many public health and workplace challenges.
Many companies have been found wanting.
Longer term, the issues bought to the surface by Covid-19 – the impact of low-pay, zero-hour contracts, cramped working conditions, and a lack of basic health and safety – must be reflected on.
For investors, Human Right Due Diligence is not a nice to have concept. It is central to managing risk, for both companies and those that invest in them.
But not only this. The Covid-19 pandemic has put society front and centre. For an investor, managing risk should only be one piece of a wider puzzle. To have a positive impact, human rights must be a core pillar of their approach to stewardship.
Let’s hope we see a significant increase in the support of human rights due diligence resolutions next year, whether or not the Covid-19 pandemic is behind us.