Healthy and safe working conditions are important everywhere in the world. This is why they form a key component of APG’s engagement with the companies in which it invests. Debanik Basu, Senior Manager of Global Responsible Investing & Governance Asia Pacific, investigated working conditions in India, and how they are managed. “Workers can’t afford to be choosy, and companies are taking advantage of that.”
In India, the mortality rate is 11.4 per 100,000 workers; in the Netherlands, it is 1.5. In absolute terms, every year more than 48,000 people die while working in India, and less than 100 in the Netherlands. In studying the annual reports of Indian companies, Basu stumbled upon the fact that while some Indian companies are open about fatal accidents in the workplace, they do not take any further action. There was no accountability, which prompted APG’s Global Responsible Investing & Governance (GRIG) team to further investigate workplace safety regulations in India and the extent to which they are followed.
“Much attention today is focused on climate change, but safe working conditions are also an essential aspect of responsible investing as far as we are concerned. This is why we want to take action in this area,” Basu said. GRIG selected some of APG’s biggest holdings in India, including car manufacturers, chemical companies and oil and gas producers. Basu and colleagues reviewed their annual reports, looking for information on health and safety policies in general and whether they made any references to workplace accidents and fatalities.
What did you find there?
“What we found was rather worrying. There seems to be a trend that is not changing, which seems to indicate that companies are not doing enough in terms of safe working conditions. Most have policies, but they don’t seem to be following through in terms of taking action. At least not in a way that is clear to us, as an outside party. If we see high accident rates, we want more information about what the company is doing to make the workplace safer and whether a proper investigation was conducted. We also want to know whether injured victims were compensated, or in the case of fatal accidents, the next of kin. But there was hardly any information on this.”
Is the situation in India worse than in similar countries in the region?
“There is lack of transparency around this area in most of the emerging markets, India included. There are few incentives for companies to do more about safe working conditions, and sanctions are few and far between. At the same time, India has a large labor force that is generally not unionized. Workers therefore have a poor bargaining position. They just want to earn a living, and if that means ignoring safety regulations, so be it. Also because if they have a problem with it, someone else will take over their job. They can't afford to be picky, and companies take advantage of that. If we extend our study to other emerging markets in East Asia, we are likely to see similar trends. At least the problems are similar.”
The investigation was step one. Next quarter, you want to confront companies with your findings. How do you think they will respond?
“Some companies will go on the defensive, knowing that there is a real risk of reputational damage if they admit that their policies are not having the desired effect. Some will put the onus on workers, as in: ‘we have clear protocols for safe working conditions, but the workers are not following these.’ That may be partly true, but the responsibility to ensure that employees follow the rules properly lies with the employer. If they don’t, the company should take action by providing them with adequate training.”