Workers will increasingly demand that employers take stands on social and geopolitical issues, whether businesses like it or not.
In 2019 almost half of employers expected ESG concerns to be a magnet for employee activism in the future. The momentum for stakeholder capitalism and purpose over profit was growing, the view that sections of society had seen no benefit from globalisation was fuelling populism, and several companies (including Google) had seen their employees protesting decisions that they felt were not in keeping with the company’s mission statement.
This was indicative of a paradigm shift underway to values and ESG-powered activism. "Workplaces have become the frontline in culture wars and social activities such as #MeToo," says Gillian Miao, Counsel, Employment at Herbert Smith Freehills Kewei Joint Operation in Shanghai, PRC.
The protests have not stopped; as recently as May 2021, thousands of school children in 110 countries took part in a coordinated school strike, calling for more action on climate change. The corollary is as younger generations come through to employment, they may show a much greater understanding of the importance of the issue, "posing risks for corporates taking stands on some areas where the 'correct' view is more debated and, or the difficulties where pressure to take a certain stance might adversely affect profitability and shareholders value and more importantly the reputation of corporates," says Miao.
Had life carried on as normal we would expect to see this discussion rise up the agenda, yet in 2021 only 31% of employers (rising to 35% in EMEA and 36% in Asia) identify societal and environmental issues as a potential trigger for activism. Even so, respondents identify sustainability and environmental issues as the biggest potential risk to corporate reputation. “We are seeing more questions about politics and values during the recruitment process,” says a head of human resources at a global investment bank. “Subjects such as climate change and diversity are big subjects, increasingly coming up during candidate interviews which the bank is responding to, changing mindsets and through change management, including via CEO communications.”
Political activism at a major airline carrier
In October 2020, LH Technik maintenance workers refused to repair a Boeing 737 that had landed at Hamburg airport because the plane was part of the governmental fleet of Alexander Lukashenko, the President of Belarus. The trade union Verdi released a statement which said: ‘Although we, the activists of the Lufthansa Technik campaign, are having a hard time negotiating with the employer in the face of the economic crisis, we do not forget the long tradition of international solidarity and stand side by side with Belarusian workers.’ The Union added that it expected the LH Technik management to ‘refrain from any sanctions if employees refuse to work with the relevant aircraft.'
While 46% of respondents see sustainability and environmental issues as a risk to corporate reputation, only 31% (compared with 46% in 2019) see this as a trigger for activism. This may be a consequence of stronger environmental policies and communication from many organisations, but the fall in emissions during the pandemic may also have played a part.
We believe that if it were not for the pandemic, activism around social and environmental issues in some regions would be a bigger concern for employers, both as a trigger for activism and a risk for corporate reputation. The fact that the Black Lives Matter protests made such an impact during a global pandemic is a strong indication of the strength of feeling. “After the BLM protests we saw a material shift in discussions around diversity and inclusion internally, which I’ve never seen before,” says Doug Evans, General Counsel at Hays Group. “That awakened everyone to the issue, and that’s a good thing. It was the milestone event during lockdown."
Country by country, local issues have also triggered a heated community response, from London, New York and Belarus to Bangkok, Hong Kong and Sydney. For employers, the position on each issue will vary, and the challenge is to manage local workplaces in line with both local regulation, cultural sensitivity and with global corporate standards.
"Opinions on issues like diversity tend to be polarised, which creates a dilemma for employers,” says Tony Wood, Partner, Employment, IR & Safety Australia, Herbert Smith Freehills. "Whilst, superficially, it's difficult for employees to disagree with most employers' general statements in support of 'diversity', many employees are wanting to advance causes by going harder, faster. This creates the scope for friction. Some employees might not agree with a company’s public voice (or inaction) on a particular topic. How do you navigate that? Could that result in activism among a minority? And if a company speaks out on a subject, employees will look at whether it is ‘walking the walk’. If the employer’s actions aren’t consistent with what it says, the risk of activism or public criticism will be higher."
Tension during Myanmar protests
In March 2021 Myanmar's incumbent government, the Junta, suspended 212 Central Bank staff for going on illegal strikes as part of the civil disobedience movement against the regime. This ranged from assistant directors to cleaners for failure to perform their duties.
The Central Bank, as well as other regional agencies and employers, dismissed a number of employees for attending nationwide general strikes that had not been approved by the incumbent government and warned its employees of its zero-tolerance approach.
BEWARE OF THE ‘S’
One of the biggest hidden risks for employers is in the ‘social’ aspect of ESG, partly because legislation in this area is less developed than environmental and governance regulation. The #MeToo, #StopAsianHate and #BlackLivesMatter movements have propelled diversity up the corporate agenda. Regulators, too, are beginning to take action; for example in order to "accelerate the pace of meaningful change, the UK’s financial services regulators are consulting on a number of initiatives, including the introduction of targets, and, more controversially, assessing candidates for approval as a senior manager taking into account their individual diversity within the context of the diversity of the board/senior management they plan to join", says Jenny Stainsby, Partner and Global Head of Financial Services Regulatory, Herbert Smith Freehills.
As an added complication, the pandemic amplified the role that companies play in society and their responsibility for the safety and wellbeing of the people who work for them (the share price of Deliveroo, for example, fell by over 30% in the first day of trading, partly attributed to investor concerns about its ESG policies). It also highlighted the societal value of some professions, such as healthcare and elderly care, and food distribution and delivery, creating the potential for unrest over relative pay.
These are emotive issues. Companies are becoming drawn, willingly or unwillingly, into political and social discussions, and this raises complicated ethical and moral dilemmas. The concern is that many employers are not taking active steps to address the potential for activism before it spills into public discourse. Less than three quarters, for example, have a formal mechanism for employee consultation – and for contract workers, barely half.
"Forums established by employers to consult with employees on general workplace issues can raise thorny issues, including; requests for voluntary recognition of trade unions or other employee representative bodies, especially if the workplace forum has limited powers in the event of a dispute, comments Andrew Taggart, Head of Employment UK, Herbert Smith Freehills. Another interesting statistic coming out of our survey is that 50% of respondents indicated that they are considering consulting with non-permanent (contract) workers as well as employees.
This potentially raises a wide range of novel issues and has further implications for employers. Organisations will need to consider these issues and implications carefully. Andrew also states, "Employers should regularly review their industrial relations situations and consider whether they need to update their communication and consultation strategies in light of developments and trends in workforces and workplaces."