Social Key Risk Indicators in the workplace are substandard or missing
Freddie McMahon
Driving Workforce Democratisation through AI-Powered Machine Interactions | Championing Equality and Inclusivity in the Workplace
On the 13th June 2023, the European Commission (EC) announced a new proposal to regulate ESG Rating Agencies. The primary pressure is coming from ESMA (European Securities and Market Authority). They are concerned about the potential risk to investors from ‘unregulated’ ESG Rating Agencies.
The EC regulatory proposals are for the ESMA to supervise the quality and reliability of services provided by ESG Rating Agencies.
Yet we know Social Key Risk Indicators across every sector are substandard or missing. Bullying, abuse, and discrimination (BAD) persist. This means the methodologies for identifying and measuring social risk in the workplace are typically not holistic, rigorous, timely, and auditable.
Even the most rudimentary risk scenario would include external media exposing social risks in the workplace, outside the control of the leadership team. When media exposures occur then retrospective reasoning prevails in terms of the effectiveness of internal procedures and controls, and the reasonableness of the associated ESG Ratings provided by different Agencies. At the same time, going forward is the assessment of the reputational damage, the impact upon value, and the adequacy of the balance sheet provisions for litigation and regulatory fines.
In 2020, an international coalition of labour unions filed a complaint against the fast-food chain McDonald’s Corporation, with the OECD (Organisation for Economic Cooperation and Development) in the Netherlands. The complaint accused McDonald’s of systemic sexual harassment globally, citing numerous incidents in the US, Brazil, and France (source: Guardian 16th August 2022). Not surprisingly similar issues were happening in the UK.
In February 2023, McDonald's based in the UK signed a legally binding agreement with the UK’s EHRC (Equity and Human Rights Commission) in which it pledged to protect staff from sexual harassment. Part of this pledge included training all staff. McDonald’s Hamburger University is said to be one of the world’s leading corporate business schools. If McDonald’s could not make training work to stop sexual harassment, then it should no longer be the primary solution cited by leaders in other organisations.
After a five-month period, the BBC reached out to McDonald's workers to ask about their experiences of working there. On the 18th July 2023, the BBC reported their investigation findings. Insights from more than one hundred current and recent staff found a toxic culture of sexual assault, harassment, racism, and bullying. The EHRC were so concerned they have launched a new email hotline for other McDonald’s past and present staff to report their experiences. Within days, the EHRC had received 150 lines of enquiry for investigation. ??
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McDonald’s legalised platitudes are already being espoused. As with other organisations that have been similarly exposed, their commoditised narrative contains rich moral content, sprinkled with assuring messages that lessons have been learnt, and corrective actions are underway.
On the 18th July 2023, the McDonald’s corporate website promoted ESG social factors that included:
The quality of McDonald’s ESG narrative is extensive and first-class. However, the gap between corporate narrative and perception, compared to the actual social risks in the workplace continues to be a concern for investors, regulators, ESG Rating Agencies, and other stakeholders.
More training, better recruitment, and improved processes are standardised commits to stop social risks in the work place. These commoditised corrective actions have been used too often to be credible. Following convention, McDonald’s have set-up a full-time investigation team based on internal HR and legal professionals. Already concerns have been raised that the investigation should be independent. ?
Across every sector, it is a credible argument that the leadership framework for making decisions is compromised. Their reliance upon data they receive to mitigate against social risks in the workplace is bias, distorted and mostly missing compared to reality. Until leadership accept their data is not fit for purpose then the door remains firmly closed for fresh, innovative thinking. However, the pressure from stakeholders, regulators, and media exposures means a tipping point is much closer. ?