Collective bargaining is a process in which a group of employees negotiate contracts through a union with those who employ them. A union is an organization of workers that collaborate to improve the conditions of their employment. This negotiation between the union and company can cover aspects of employment such as working conditions, pay, and benefits. Collective bargaining agreements (CBAs) are an important aspect of human capital and fall under the “social” aspect of Environmental, Social, and Governance (ESG) reporting.
At the present time there are three sets of proposed standards for reporting collective bargaining agreements. These standards come from the Sustainability Accounting Standards Board (SASB), the Workforce Disclosure Initiative (WDI), and the Global Reporting Initiative (GRI). Each standard concurrently provides overlapping recommendations on disclosures related to collective bargaining agreements, and users can actively apply them together.
Current Proposed Standards for Collective Bargaining Agreements
Sustainability Accounting Standards Board
The Sustainability Accounting Standards Board is a non-profit that works to develop accounting standards for ESG issues. The SASB has issued guidance on the reporting of CBAs. The guidance applies to a variety of industries, such as the food retail and distributor, infrastructure, and transportation industries. The recommended disclosures are the same across industries.
The recommended disclosures are as follows:
- The entity shall disclose the percentage of its employees in the active workforce that were covered under collective bargaining agreements during any part of the reporting period;
- Number and total duration of work stoppages.
Per the SASB standards, companies should disclose the percentage of employees covered by collective bargaining agreements. This percentage should include all employees, whether full-time, part-time, or temporary. Companies should also report the number and length of CBA-caused work stoppages. The SASB recommends disclosing any stoppages that involve more than 1,000 employees or last longer than one full shift. Companies should disclose the length of stoppages in “worker-days idle”, calculated by multiplying the number of employees involved in the stoppage by the hours not worked due to the stoppage.
As an illustration, below are two examples of how companies recently reported this information.
These disclosures present information about workers participating in CBAs and the potential impact of CBAs on a business.
Workforce Disclosure Initiative
The Workforce Disclosure Initiative (WDI) is a platform that aims to enable companies to disclose workforce data involving business operations. Collective bargaining agreements actively govern the relationships between employees and employers, making them an integral part of direct business operations. The WDI provides a survey to help companies show stakeholders more information regarding ESG issues. A section of this survey titled Freedom of Association and Collective Bargaining provides five disclosures related to collective bargaining. These disclosures are the following:
- Describe the company’s process for consulting with workers, their representative bodies and trade unions, as applicable, and other steps to secure workers’ rights to freedom of associate and collective bargaining.
- Provide the percentage (%) of employees covered by collective bargaining agreements for all locations in the company’s direct operations.
- Provide the percentage (%) of employees covered by collective bargaining agreements by each of the company’s significant operating locations.
- How does the company secure the right to collective bargaining of non-employee direct operations workers?
- Has the company identified any risks or restrictions to employees’ right to freedom of association or collective bargaining in any of its direct operations?
The first disclosure is a qualitative explanation of how a company works with workers and unions. Companies should describe “the steps [they take] to gain input from workers, representative bodies and trade unions regarding freedom of association and collective bargaining.” Other important information includes the participants of consultation meetings and how frequently meetings are held.
The second disclosure is a quantitative disclosure of the percentage of a company's direct-business employees in a CBA. A company should disclose this information even if it has no workers that belong to a CBA.
The third disclosure is a broader version of the second, including information for up to 20 significant operating business locations. List each included location and disclose the percentage of employees covered by CBAs at each site.
The fourth disclosure is another qualitative explanation of the steps a business is taking to ensure that non-employee direct operations workers have the right to collective bargaining. Businesses should describe “whether collective bargaining rights are incorporated into [labor] provider contracts… [and] details of any external guidelines or relevant… initiatives which the company supports in line with securing worker rights to collective bargaining.”
The final disclosure is for the company to answer whether they identified risks to their employees’ right to collective bargaining. If the answer is yes, the company should describe “any specific instances where risks or violations have been identified and the process used to identify such risks/violations… [and] actions the company is taking or has taken to address identified risks or violations.”
Global Reporting Initiative
The Global Reporting Initiative (GRI) is an independent standards organization that focuses on helping organizations report on ESG related issues. In a document titled GRI 407: Freedom of Association and Collective Bargaining, the GRI outlined its recommended disclosures regarding CBAs. The two recommendations are as follows:
- Management approach disclosures
- Disclosure of operations and suppliers in which the right to freedom of associated and collective bargaining may be at risk.
According to the GRI, management approach disclosures are “a narrative explanation of how an organization manages a material topic, the associated impacts, and stakeholders’ reasonable expectations and interest.”
The purpose of providing management approach disclosures is to give a full disclosure of the organization’s impacts. The particular management approach disclosure for collective bargaining agreements is:
The reporting organization shall report its management approach for freedom of association and collective bargaining. The reporting organization should describe any policy or policies considered likely to affect workers’ decisions to form or join a trade union, to bargain collectively or to engage in trade union activities.
Additionally, disclosures required by the GRI focus on the risk that a company limits its workers ability to collectively bargain:
The reporting organization shall report the following information:
a. Operations and suppliers in which workers’ rights to exercise freedom of association or collective bargaining may be violated or at significant risk either in terms of:
- type of operation (such as manufacturing plant) and supplier;
- countries or geographic areas with operations and suppliers considered at risk.
b. Measures taken by the organization in the reporting period intended to support rights to exercise freedom of association and collective bargaining.
This disclosure helps companies identify areas of weakness in supporting workers' right to associate and collectively bargain. This is especially helpful for multinational corporations that have significant operations in areas with significant restrictions on collective bargaining. The disclosure also allows companies to showcase how they are proactively helping their workers exercise their rights.
The GRI provides guidance on how to identify operations and suppliers that may put workers’ ability to collectively bargain. It also lists several sources that can provide greater insight, including “the various outcomes of the [International Labour Organization] ILO supervisory bodies and the recommendations of the ILO Committee of Freedom of Association.”
Overall, collective bargaining agreements are an important component of the social pillar of ESG. Companies impacted by collective bargaining agreements should use the recommended disclosures accordingly to inform stakeholders on the potential business effects.