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Homeesg impactAmazon's biggest, hardest-to-solve ESG issue may be its own workers

Amazon’s biggest, hardest-to-solve ESG issue may be its own workers

  • The National Council on Occupational Safety and Health recently included Amazon in its "Dirty Dozen" list of the most dangerous employers in the U.S.
  • Amazon founder Jeff Bezos wrote in his last annual letter to shareholders that "we need a better vision for our employees' success."
  • As trillions from investors now rely on ESG metrics to evaluate the long-term financial outlook for companies, worker safety can get buried within broader workplace issues and within an overly broad ESG "social" category.

In this article

Amazon warehouse working conditions and worker injuries have been a constant source of tension between the corporate giant and its critics. A new safety and wellness program is rolling out to all U.S. sites by year-end as Jeff Bezos's company continues to add a massive amount of new employees.CHRIS J RATCLIFFE | AFP | Getty Images

Amazon founder Jeff Bezos raised a few eyebrows this summer when he returned to Earth after a historic space flight in July and gave a speech thanking company employees and customers, "because you paid for all of this.'' The comments came as Amazon, the second-largest employer in the U.S. after Walmart, has faced persistent allegations regarding workplace safety.

The National Council on Occupational Safety and Health included Amazon in its "Dirty Dozen" list of the most dangerous employers in the U.S. Earlier this year, New York Attorney General Letitia James filed a lawsuit against Amazon for inadequately protecting workers amid the Coronavirus pandemic. While Amazon just finished its third consecutive $100 billion quarter, showing customers continue to shop with the e-commerce giant and it is one of the trillion-dollar-plus tech companies that dominate the market, there is a question of whether more investors will start paying attention to worker safety.

At a time when environmental, social and governance concerns have become a focus on Wall Street, in C-suites and with investors, with global assets under management in ESG funds approaching $2 trillion, according to Morningstar, it is not clear to date that labor issues rate as highly with investors as other core ESG themes, including corporate climate change policies.

Workplace issues are being factored into Amazon's ESG ratings, but they don't tip the scales as much as other factors when compared with other large retailers. ESG analysis firm JUST Capital, which rates companies on how "justly" they treat their employees and on workplace safety, gives Amazon and Walmart similar scores. And on another key labor factor, Amazon ranks No. 1: local job creation.

Not all ESG rating models weight worker safety metrics equally across all sectors. According to an MCSI spokesperson, it includes workplace safety in its ESG analyses, but "for industries and companies that are most prone to health and safety concerns, we take a deeper dive into health and safety. These industries typically include extractive operations and heavy manufacturing."

How workplace safety factors into ESG ratings

Worker safety is an often overlooked element of ESG, and it is one of Amazon's biggest, hardest-to-solve issues.

Roxana Dobre, associate director of consumer goods research for Sustainalytics, a Morningstar company that calculates ESG risk, said while Amazon's ESG rating has improved on environmental metrics, it does need to improve in the social category, namely in terms of how it treats employees. Worker safety is a factor in Amazon's overall ratings and the company recently took a hit, Dobre said, because its response to Covid-19 was "not timely" and the company didn't do all it could to mitigate the spread of the virus.

One of the challenges with company ESG ratings is that they factor in a wide variety of metrics and aggregate them into an overall score, said Tensie Whelan, a professor of business and society at New York University and director of NYU Stern's Center for Sustainable Business.

"Even within one category, such as workplace matters, the ratings companies may be looking at wages, benefits, diversity and inclusion in addition to health and safety," Whelan said. She also noted that there are other categories, such as energy, packaging and consumer safety, that are all collected together into one number with different weighting depending on the rating agency methodology. 

Even if a company like Amazon scores low on worker safety, the company's overall score on workplace issues may still be in the middle of the pack because other factors such as pay and benefits may score higher than similar companies.

"That's one of the challenges in ESG ratings of Amazon, as it is a huge company with a great deal of complexity,'' Whelan said.

The importance of retaining workers

An Amazon spokesperson provided a statement that the company is on a journey "that requires constant innovation to address both new and persistent risks, and we're making progress — investing billions of dollars in new safety measures and technologies, and expanding our global workplace health and safety team to more than 6,200 employees."

Worker safety and satisfaction is a big issue for Amazon even if it hasn't shown up in a major way in the ESG ratings. It has faced increased turnover at a time when it has been hiring at a furious pace. Amazon employs more than 1.3 million people worldwide, and added 500,000 workers in 2020.

A recent New York Times investigation uncovered data showing that Amazon was losing about 3% of its hourly associates each week, even before the pandemic, implying an annual turnover rate of 150%, almost double the rate for its peers. Despite skepticism surrounding Amazon's increased focus on employees, occupational safety experts say its needs to address the issues to ensure it has the staff to support its business in the decades ahead as labor force demographics forecast a declining pool of available talent.

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