Investments aligned with this Strategic Goal aim to improve equity of opportunity and treatment by ensuring that employment opportunities are not restricted on the basis of sex, race, ethnicity, or belief. Investments may also aim to improve mechanisms for engaging workers and giving them ‘voice’ through effective representation by trade unions and similar organizations, as well as by promoting channels to communicate, raise concerns, and collaboratively find solutions together with management. Finally, investments may also go beyond ESG compliance and risk mitigation to invest in companies that positively contribute to the respect and support of fundamental human rights (for example, by improving transparency or addressing root causes on topics such as forced, bonded, and child labor).

What

Dimensions of Impact: WHAT

Investors interested in deploying this strategy should consider the scale of the addressable problem, what positive outcomes might be, and how important the change would be to the people (or planet) experiencing it.

Key questions in this dimension include:

What problem does the investment aim to address? For the target stakeholders experiencing the problem, how important is this change?

The ILO has laid out four universal principles which apply to all workers, regardless of whether the country they are in has ratified the relevant binding international labor standard: (a) freedom of association and effective recognition of the right to collective bargaining, (b) the elimination of forced or compulsory labor, (c) the abolition of child labor, and (d) the elimination of discrimination in respect to employment and occupation (1).

Nevertheless, any workers around the world face multiple challenges exercising their rights and achieving respect and cooperation in the workplace in accordance with labor standards. Union and social leaders are frequently oppressed, with reports in 2019 in 80% of countries around the world of breaches in the right to collective bargaining (2). Forced labor persists in many supply chains (such as cobalt, cotton, seafood, cocoa, and coffee), as does child labor, which is especially prevalent in agriculture, among other sectors. Discrimination based on migration status, social origin, religion, and ethnicity—including indigenous and tribal status—as well as race, gender, sexual orientation, and caste, is a reality for workers in specific contexts. Beyond simply managing labor-related risks, this Strategic Goal encourages investors to actively address issues of rights, respect, and cooperation in the workplace, including by supporting sustainable business models and practices that can create long-term solutions in their direct operations and supply chains.

Investments aligned with this Strategic Goal can drive impact by:

  • ensuring equitable opportunity for all workers;
  • supporting measures for deprived communities and disadvantaged groups to progress and advance in their careers, for instance through women’s career advancement initiatives or initiatives to attract more minority-owned businesses as suppliers;
  • encouraging management to create spaces for employees to play a greater part in decision-making, for example through mechanisms to meaningfully involve workers in operational and strategic discussions, board representation, and ownership models; and
  • supporting measures to actively address the underlying causes of human and labor rights violations in exposed sectors and supply chains, for example by addressing issues of inequality, poverty, or education.

Target stakeholders can then experience the following common outcomes, among others:

  • More workers are accepted and valued
  • Improved equality of employment outcomes

What is the scale of the problem?

The scale of the problem varies by specific topic area, for example: 

  • Social dialogue: Unionization and cooperatives have long been used as tools to organize and represent workers, negotiating prices, providing services, or even engaging in lobbying activities on behalf of members. However, the global rate of trade union membership declined from 25% in 2000 to 17% in 2017, and even employers’ organizations have struggled to increase their own membership to act as the collective voice of business and propagate good labor practices (3).

  • Discrimination: In many workplaces, workers can still not access a job or are still not rewarded according to merit because of their race, ethnicity, or gender affiliation, among other dimensions. Such discrimination not only leads to social and economic disadvantage but also generates unequal outcomes. Inequalities may persist in income, asset generation, and career opportunities. The nature of discrimination varies by geography and specific cultural setting.

  • Gender equality: In 2018, 45.3% of women had a job, versus 71.4% of men, a gender gap of 26.1 points. Over the past 27 years, the proportion of female managers and leaders has changed little globally, with women holding only 27.1% of those positions. The gender pay gap, or the difference in average earnings between men and women, is a global phenomenon, currently standing at a world average of 20.5%, that varies by country, sector, and income group (4).

  • Child labor: Worldwide, there are still 152 million children in child labor, of whom 73 million are in hazardous child labor. In terms of prevalence of child labor by economic sector, agriculture, services, and industry comprise respectively 71%, 17%, and 12% of all child labor (5).

  • Modern slavery: In 2016, around 40.3 million people were in modern slavery, of whom almost 25 million are in forced labor and 15.4 million are in forced marriage. One in four victims of modern slavery are children. Debt bondage accounts for half of all victims of forced labor imposed by private actors; four million persons were in forced labor imposed by state authorities (6).

Who

Dimensions of Impact: WHO

Investors interested in deploying this strategy should consider whom they want to target, as almost every strategy has a host of potential beneficiaries. While some investors may target women of color living in a particular rural area, others may set targets more broadly, e.g., women. Investors interested in targeting particular populations should focus on strategies that have been shown to benefit those populations.

Key questions in this dimension include:

Who (people, planet, or both) is helped through investments aligned with this Strategic Goal?

Improving rights, respect, and cooperation could positively impact workers, their families, and enterprises, with the following groups most directly impacted.

  • Workers: As rights are universal, all workers (including entrepreneurs) benefit from investments aligned with this Strategic Goal, though the groups below that often struggle to realize their rights may benefit most. Workers especially benefit from improved organization in cooperatives or representation by unions, as well as from increased awareness and action on issues related to child or forced labor.
  • Workers in Precarious Employment: Many workers face an uncertain duration of employment, multiple possible employers, or a disguised or ambiguous employment relationship, often characterized by an informal nature of work or caused by nonstandard forms of employment. Such workers are less frequently represented by unions, and addressing rights, respect, and cooperation in the workplace would give them a voice on topics that concern them.
  • Working Poor and Vulnerable Workers: Many workers are either underemployed or employed in low-quality jobs and cannot earn enough to lift themselves out of poverty (7). These workers risk debt bondage as they incur (often informal) debt to cover their household expenses, and they may also accept coercive job offers. Families may also use family workers, such as children, putting them at risk for child labor. Vulnerable workers may be reluctant to join a union or other form of representation out of fear of losing their income. Investors should consider these issues when engaging with investees.
  • Women: Women account for 71% of modern slavery victims and 99% of victims of forced labor in the commercial sex industry and 58% in other sectors (6). Women are 84% of victims of forced marriages (6). While women are responsible for producing the majority of the world’s food, they only own between 10% and 20% of the land (8). Investments can actively address discrimination against women and support their empowerment by helping companies to develop improved processes and procedures to manage their workforce.
  • People with Disabilities: Often perceived as unproductive, unable to perform a job, or too costly to employ, people with disabilities are frequently excluded from the workplace. The proportion of people with disabilities participating in employment is much less (36%) than those without disabilities (60%); moreover, in most countries, people with disabilities tend to be in vulnerable employment or are paid less than persons without disabilities (9). Investments can support investees to upgrade their human resources procedures to avoid discriminating against people with disabilities, for instance by implementing workplace adjustments, among other measures (10).
  • LGBTQIA+ Workers: People whose sexual orientation does not conform to traditional patterns can targeted for harassment, abuse, and violence (11). Homosexuality is still considered illegal in many countries and transgendered individuals may similarly be unprotected by law, leaving these individuals legally unprotected from such abuses. Studies have shown salary gaps of 3% to 30% between gay and non-gay employees (12). Investors should work with investees to support changes to traditional behaviors in the workplace that lead to discrimination and hinder businesses from enjoying the benefits of workforce diversity.
  • Individuals from Deprived Communities and Disadvantaged or Marginalized Groups, Including Migrants, Incarcerated Populations, and Disadvantaged Ethnic Groups: Indigenous and tribal peoples comprise 6% of the world’s population (476 million), and 80% live in middle-income countries. They account for a disproportionate 19% of the extreme poor (less than USD 1.90 per day) and often experience poor working conditions and discrimination (13). Migrants can be more vulnerable to human trafficking, and they are sometimes exposed to more discrimination than other local population (14, 15). Depending on geography and sector, investments can support measures to actively offer opportunities and representation to these stakeholders, including across supply chains, where rights, respect, and cooperation might be lacking.
    The following additional, intermediary stakeholders can benefit from investments in this Strategic Goal.
  • Broader Society: Improving rights, respect, and cooperation with workers, as well as diversity in the workplace, could increase social cohesion and welfare and would prevent the marginalization and exclusion of any group in the population (16).
  • Employers: More engaged workers deliver better results, increased productivity, and reduced churn (17). Improving supply chain transparency in terms of rights can improve management and reduce business continuity risks. A diverse workforce may innovate more and improve a firm’s adaptability and flexibility, leading to higher profits (18, 19).

What are the geographic attributes of those who are affected?

Social Dialogue: The ITUC (International Trade Union Confederation) has classified the following regions as high-risk for workers and trade unionists: North Africa and the Middle East, Latin America, and Asia. Western Europe presents the lowest risk (20). In terms of representation for those self-employed and entrepreneurs, Asia has a very high number of cooperatives, reflecting its larger share of the global population. The Self-Employed Women’s Association (SEWA), a trade union based in India, is a network of cooperatives, rural producer groups, social security organizations, and savings and credit groups with more than two million members, which makes it the largest national organization of informal workers in the world (21).

Discrimination: Discrimination varies by geography or group. Some examples follow.

    • Employment outcomes are often experienced along racial or ethnic lines. In the United States, for example, Black workers are twice as likely to be unemployed (6.4%) as white workers overall (3.1%). Even with a college degree, Black workers are more likely to be unemployed (3.5%) than similarly educated white workers (2.2%). Regarding skill level, employed Black workers with a college or advanced degree are more likely than their white counterparts to be underemployed (22). In South Africa, Black workers are more than four times more likely to be unemployed (33.8%) compared to white South Africans (8.1%) (23).
    • On average, indigenous peoples earn 18% less than their non-indigenous counterparts (24).
    • A study in the U.K. looking at pay gaps accross characteristics (e.g. gender, diability, ethnicity) found that the pay gap between men with no disability and men with a disability was 10.5%. Comparing men with no disability to women was even more significant: for women with no disability, the pay gap was 15.5%, and for women with a disability, it was 22.3% (30).

Gender Equality: The highest women’s labor participation gap is found in the Arab States (57.3%), followed by Asia and the Pacific (31.1%), the Americas (19.8%), Africa (17.8%), and Europe and Central Asia (15.1%). The gender pay gap is larger in both high-income countries (25.6%) and low-income countries (28.2%), while it varies in middle income countries between 15.8% and 19.8%. Data from publicly listed companies in 2018 showed very low shares of female Chief Executive Officers, varying from 0% in Germany to 4.6% in the United States (26).

Child Labor: ILO statistics show that 72.1 million children labor in Africa, 62.1 million in Asia and the Pacific, 10.7 million in the Americas, 1.2 million in the Arab States, and 5.5 million in Europe and Central Asia (27).

Modern Slavery: According to the latest (2017) ILO report on this issue, the Asia and Pacific region accounted for 62% of all victims of modern slavery worldwide (6). This was followed by Africa (23%), Europe and Central Asia (9%), the Americas (5%), and the Arab States (1%). The Asia and Pacific region has the highest share of victims across all forms of modern slavery, accounting for 73% of victims of forced sexual exploitation, 68% of those forced to work by state authorities, 64% of those in forced labor exploitation, and 42% of all those in forced marriages.

Contribution

Dimensions of Impact: CONTRIBUTION

Investors considering investing in a company or portfolio aligned with this strategy should consider whether the effect they want to have compares to what is likely to happen anyway. Is the investment's contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How much and Who?

Key questions in this dimension include:

How can investments in line with this Strategic Goal contribute to outcomes, and are these investments’ effects likely better, worse, or neutral than what would happen otherwise

Organizations can consider contribution at two levels — at the enterprise level and at the investor level. At the enterprise level, contribution is “the extent to which the enterprise contributed to an outcome by considering what would have otherwise happened in absence of their activities (i.e. a counterfactual scenario).” To learn more about methods for assessing counterfactuals, see the Impact Management Project.

At the investor level, organizations investing in projects that improve rights, respect, and cooperation in the workplace can contribute toward solutions as follows.

  • Signal that impact matters. By investing in projects targeting improvements in rights, respect, and cooperation in the workplace, investors signal that measures to provide opportunities to those usually neglected matters within their portfolios. This will help investees to improve workers’ engagement, decrease churn rates, improve productivity, and increase profits. Investors can further signal their willingness to compromise to promote investees that value human capital.
  • Engage actively. Investors can use their leverage on investees to actively implement measures to improve rights, respect, and cooperation in the workplace and in supply chains. Knowledge transfer and Technical Assistance can enable the acquisition of technologies to transparently trace supply chains. Investors can also enable partnerships with knowledgeable service providers in specific topics to improve workers’ collaboration. In one example, asset manager Aviva (EUR 402 billion assets under management) actively addresses issues of workers’ rights in their investees’ operations and supply chains, interacting with their employees and suppliers. They identify gaps during due diligence and create action plans, as well as increasing awareness of modern slavery in training sessions. In another example, the asset manager Trillium exercises shareholders rights to file proposals asking companies to implement specific policies or actions. Among the topics they raise include workplace labor management relations, board and workforce diversity, and human rights.
  • Grow new or undersupplied capital markets. Companies, entrepreneurs, and supply chains that require the implementation of measures to improve rights, respect, and cooperation in workplaces sometimes face constraints on financing. Businesses in the informal sector or which are women- or minority-led are often both prone to capital constraints and may face challenges related to rights, respect, and cooperation in the workplace, presenting an opportunity for investors to offer them needed financing while engaging to improve workers’ rights. A study estimated that between 63% and 69% of women-owned SMEs in developing economies are underserved by financial institutions, leading to a credit gap as high as USD 320 billion (29).
  • Provide flexible capital. As underserved companies or entrepreneurs receive capital for the first time or implement new procedures, they will likely require concessional capital. Recognizing this, the IFC launched its Global Trade Supplier Finance program to provide short-term financing to garment suppliers of big buyers. Interest rates are based on a combination of the buyer’s cost of credit and suppliers’ performance against buyer’s environmental and social standards.

How Much

Dimensions of Impact: HOW MUCH

Investors deploying capital into investments aligned with this strategy should think about how significant the investment's effect might be. What is likely to be the change's breadth, depth, and duration?

Key questions in this dimension include:

How many target stakeholders can experience the outcome through investments aligned with this Strategic Goal?

Investments in line with this Strategic Goal can benefit all workers (3.5 billion), but they can especially benefit those who cannot exercise their rights, such as those in child labor (152 million), modern slavery (40.3 million), suppressed union or social leaders, and those who are usually discriminated against, which varies by region (5,6).

How much change can target stakeholders experience through investments aligned with this Strategic Goal?

The potential change from investments in this Strategic Goal varies with the specific activities undertaken by investees and the specific areas of improvement. The following are examples of the impact of improving rights, respect, and cooperation in the workplace.

  • A study on inclusion and diversity regarding more than 1,000 companies in 12 countries found that those in the top quartile for ethnic or cultural diversity on their executive teams were 33% more likely to have industry-leading profitability, and companies in the bottom quartile for both gender and ethnic or cultural diversity were 29% less likely to achieve above-average profitability compared to other companies in the dataset (27).
  • The Freedom Fund invests in frontline organizations in “forced labor hotspots” in northern and southern India, helping them to protect communities from exploitation, liberate and rehabilitate survivors, and ensure the prosecution of perpetrators. Their programs have reduced households in bonded labor from 56.2% to 11.4% over three years, and the proportion of households with a child in bonded labor dropped from 13% to 1.1% in southern India and from 12.1% to 2.9% in northern India (28).

Risk

Dimensions of Impact: RISK

Key questions in this dimension include:

What impact risks do investments aligned with this Strategic Goal run? How can investments mitigate them?

The following are impact risk factors in line with this Strategic Goal.

  • Execution Risk: Investees’ measures (such as transparency in supply chains and operational labor committees) to align with this Strategic Goal may take time to show results. Frustration among investees and investors may lead either to abandon implementation. To mitigate this risk, investors can develop timelines and intermediate indicators to evaluate progress.
  • Endurance Risk: Certain measures require ongoing awareness and a long-term approach to avoid reverting to initial conditions with respect to workers’ rights. Investors can mitigate this risk by engaging actively with investees’ management to engrain the needed measures in investees’ cultures, encouraging managers to report on relevant operational changes.
  • External Risk: Not only do policies and regulations but also their implementation and enforcement differ in each country and context. In some cases, policies may favor measures aligned with this goal; in others, they can hinder them. To mitigate this risk, investors must remain aware of regulatory implications in their areas of investment and leverage their networks of knowledge to overcome obstacles in this respect.
  • Stakeholder Participation Risk: Stakeholders’ expectations or experiences may be misunderstood, leading interventions to fail to produce the desired results. To mitigate this risk, investors and investees should develop clear communication channels, clear implementation plans, and monitoring measures.
  • Alignment Risk: The measures implemented could become a one-off, unsustained activity, limiting their impact potential. Investors should aim to engrain practices within the investees’ culture and procedures in order to ensure the impact is embedded in their business model.

What are likely consequences of these impact risk factors?

These risk factors could leave workers in the same or worse condition in terms of rights and respect, harming them and even potentially their families if not mitigated. Investor consequences could include reputational risks that can lead to reduced shareholder value.

Illustrative Investment

The foundation Humanity United’s Working Capital is an early-stage venture fund that invests to meet the growing corporate demand for scalable solutions to protect and empower vulnerable workers in global supply chains. They partner with innovative entrepreneurs to accelerate the development and deployment of new tools. One of their portfolio companies, Provenance, has developed software for businesses to easily gather and present information and stories about products and their supply chains, including verified data to support those stories. For example, they can trace fish caught with verified social sustainability claims in Indonesia from catch to consumer.

The Corporate Human Rights Benchmark assesses 200 of the largest publicly traded companies in the world on a set of human rights indicators. In 2020, companies producing agricultural products were rated on topics including women’s rights, freedom of association, and collective bargaining. The Benchmark scored Unilever as the highest performer, noting its commitment to respect the human rights of workers, with both responsible sourcing and human rights policies in place, as well as systems to operationalize human rights issues on the ground.

Draw on Evidence

This mapped evidence shows what outcomes and impacts this strategy can have, based on academic and field research.

NESTA: 2
Can better working conditions improve the performance of SMEs?

Can better working conditions improve the performance of SMEs?: an international literature review /
Richard Croucher, Bianca Stumbitz, Ian Vickers, Michael Quinlan, Wendy Banfield, Michael Brookes, Thomas
Lange, Suzan Lewis, John Mcllroy, Lilian Miles, Daniel Ozarow, Marian Rizov, International Labour Office. –
Geneva: ILO, 2013

NESTA: 2
Do Unions Affect Labor's Share of Income: Evidence Using Panel Data

FICHTENBAUM, R. (2011), Do Unions Affect Labor’s Share of Income: Evidence Using Panel Data. American Journal of Economics and Sociology, 70: 784-810. doi:10.1111/j.1536-7150.2011.00792.x

NESTA: 2
Labor Unions and Life Satisfaction: Evidence from New Data

Flavin, P., Pacek, A.C. & Radcliff, B. Labor Unions and Life Satisfaction: Evidence from New Data. Soc Indic Res 98, 435–449 (2010). https://doi.org/10.1007/s11205-009-9549-z

NESTA: 2
Stalled Progress?: Gender Segregation and Wage Inequality Among Managers, 1980‐2000 Cohen, P. N., Huffman, M. L., & Knauer, S. (2009). Stalled Progress?: Gender Segregation and Wage Inequality Among Managers, 1980‐2000. Work and Occupations, 36(4), 318–342. https://doi.org/10.1177/0730888409347582
NESTA: 1
Getting to Equal: The Disability Inclusion Advantage, 2018

Getting to Equal 2018: The Disability Inclusion Advantage

Each resource is assigned a rating of rigor according to the NESTA Standards of Evidence.

Define Metrics

Core Metrics

This starter set of core metrics — chosen from the IRIS catalog with the input of impact investors who work in this area — indicate performance toward objectives within this strategy. They can help with setting targets, tracking performance, and managing toward success.

Additional Metrics

While the above core metrics provide a starter set of measurements that can show outcomes of a portfolio targeted toward this goal, the additional metrics below — or others from the IRIS catalog — can provide more nuance and depth to understanding your impact.