Why are the world's most influential companies failing to meet fundamental societal expectations?

Insights

The figures are alarming: 90% of the world's 2,000 most influential companies (the "SDG2000") fail to meet half of their fundamental societal expectations. And of these, 30% score between 0 and 2 out of 20, demonstrating little or no recognition of their impact on people's lives. These are the findings of the first World Benchmarking Alliance study published last July.

Less than 10% of companies have anticipated their compliance with the CS3D directive

First finding: 91% of companies surveyed do not consult their stakeholders. This figure reflects a lack of understanding of the issues at stake in the 2030 sustainability agenda adopted by United Nations member states in 2015. What's more, this result means that barely 10% of companies have anticipated their compliance with the European CS3D directive [although not all will be subject to the obligations of the directive published this summer, the scope of which is not however confined to EU companies only, editor's note] which requires, among other obligations, exchanges with stakeholders for the development and implementation of duty of care action plans. Yet, according to the WBA, dialogue improves companies' respect for human rights and decent work practices. And with good reason: the study reveals that companies that engage in dialogue perform better:

• on each benchmark indicator, and more specifically on human rights and due diligence commitments;

• on the provision of decent work (particularly in terms of respect for workers' health and safety, as well as gender equality and women's employment).

To achieve their objectives, the WBA invites companies to act by giving priority to collaboration with the stakeholders most likely to be affected by their activities and their legitimate representatives (trade unions, human rights and women's rights organisations, etc.). In addition, it calls on governments to require companies to implement meaningful stakeholder engagement at all stages of the due diligence process. This is to ensure that they effectively identify and address their human rights risks.

A gap between what companies publish and society's expectations

Secondly, over 60% of companies publish information on adequate wages and over 45% on working hours. However, only 4% are committed to paying, or currently pay, an adequate wage to their employees, and only 3% have a working hours policy in line with International Labour Organisation standards.

In other words, "there is a gap between what companies disclose about decent work and what society expects of them", says the WBA.

To remedy this, the international organisation calls on states to give priority to reducing the gap between the minimum wage and the living wage, by implementing policies guaranteeing regular reviews and adjustments of the minimum wage to bring it into line with the cost of living. It also suggests fostering inclusive wage-setting processes, promoting collective bargaining, implementing complementary social policies and providing support for SMEs.

5% of SDG2000 disclose their lobbying expenses

Further figures: 11% of SDG2000s have a policy in place that publicly outlines a lobbying approach, and just 5% disclose the cost involved. Thus, on average, lobbying expenditure amounts to $14.4 million per year, "demonstrating the substantial investment companies make in policy influence", says the WBA.

And yet, according to the international organisation, transparency in this area is far from being a marginal issue. Indeed, "Stakeholders lack the information they need to hold companies to account on whether their commitments and efforts are out of step with their lobbying practices", says the WBA. "In addition, legislative pressure is increasing. The European regulation on corporate sustainability reporting requires companies subject to it (75% of SDG2000) to disclose information on their lobbying activities, including expenditure."

Results 60% higher in countries with human rights legislation

Thus, "regulation, guidance and pressure are essential to promote change", concludes the WBA. According to the report, companies headquartered in countries with human rights legislation score 60% higher on due diligence. Yet only 6% of companies have fully implemented these regulations. Among them, the WBA points to two trends. Companies:

• "are predominantly from regions with strong government guidelines and human rights regulatory frameworks";

• "tend to operate in high-impact sectors that have been subject to greater public scrutiny, and are better equipped with detailed human rights tools and guidelines".

Unsurprisingly, the WBA thus calls on governments to introduce and enforce minimum legal standards clarifying the responsibility of companies, irrespective of their size and activities, to take an effective approach to human rights compliance in line with the UN Guiding Principles and OECD Guidelines.

This document is auto translated by Deepl.