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RiskMetrics Group Finds One in Five Large Firms Set Labor Supplier StandardsSubmitted by: Peter DeSimone, Head of Labor and Human Rights Research

RiskMetrics Group just completed a year-long pilot project assessing more than 1,800 global companies-the S&P 500, the Toronto Stock Exchange 300 and the Morgan Stanley EAFE index excluding Japan?on more than 200 policy and performance indicators, including more than 60 on supplier labor standards. Findings from the report reveal a fifth of all large cap companies have codes addressing their suppliers? compliance with labor standards. Still fewer, though, monitor their suppliers on their adherence to these standards.

The labor issues most frequently addressed by companies in their supplier codes were child and forced labor and workplace discrimination; 15 percent of all the companies surveyed set standards for their suppliers on these points. The next most common provisions in supplier codes were freedom of association (12 percent) and harassment, health and safety and wages (all tied for 10 percent). However, far fewer companies set standards for their suppliers on these labor issues that were as stringent as the corresponding core conventions of the International Labor Organization (ILO) with regard to barring child labor, forced labor, and discriminatory practices, and upholding freedom of association, the right to organize and collective bargaining.

For example, while 15 percent of the companies RiskMetrics analyzed had anti-discrimination policies, only 3 percent met the standards outlined in ILO conventions 100 and 111. Most fell short of ILO 100 by not specifically stating in their supplier EEO policy that it applies to pay. On ILO 111, those disqualified for meeting this standard did not include all of the classifications listed in the convention (i.e., race, color, sex, religion, political opinion, national extraction or social origin).

While 20 percent of the surveyed companies set labor standards of some kind for their suppliers, only 14 percent mentioned that they actually monitored their suppliers for compliance. Even fewer?12 percent?outlined consequences for suppliers found in violation, or whether they would engage the facilities in implementing corrective actions (11 percent). Meanwhile, fewer than half of the companies with supplier codes acknowledged training workers on these policies and programs (7 percent) or reporting on the findings from these efforts (4 percent). Likewise, 10 percent of the firms had supplier codes with a health and safety statement, but only 2 percent addressed workers? contact with hazardous chemicals.

Full post as published by Institutional Shareholder Services -- Corporate Governance Blog on May 05, 2008 (boomark / email).