ESG – Extension of the ILO Core Labour Standards

The relationship between ESG and ILO core labour standards

The topic of ESG is currently on everyone's lips. But it is more than just a trend. No major German company will be able to refrain from addressing the issue of sustainable investments and business ethics from now on – unless this has always been part of the corporate philosophy anyway.

While environmental and governance standards have already been better outlined, it is often not clear which social standards a company should use as a basis for an ESG analysis, especially when referring to non-EU countries. The so-called core labour standards of the ILO provide orientation here. The ILO is the UN's special organisation for labour and social law. The core labour standards are the central component of its internationally recognised value system of international protection standards. They are referenced by numerous other international standards: in addition to bilateral and multilateral trade and investment protection agreements, for example, the UN Guiding Principles (cf. Social Development Goal - SDG 8), the OECD's Guiding Principles for MNEs and International Framework Agreements of many internationally operating corporations refer to the ILO core labour standards. ISO 26000 of the International Organization for Standardization (ISO) (published in Germany as DIN EN ISO 260000), which set out requirements in the field of corporate social responsibility (CSR), also has close links to the core labour standards. Accordingly, it is no surprise that more recent ESG rating standards, such as those of the Global Reporting Initiative, have references to core labour standards (see Waas, "The 'S' in ESG and international labour standards" International Journal of Disclosure and Governance 18, 403 ff. (2021)).

So what exactly are the ILO core labour standards all about? The following blog post is intended to shed some light on the subject and at the same time draw attention to a red-hot development in the ILO. The International Labour Conference (the equivalent of the UN General Assembly in the ILO) recently agreed, in June 2022, on the addition of a fifth core labour standard, which should now also be referred to. It should also be mentioned that German legislators are following developments in the ILO very closely and have, for example, already drafted the Supply Chain Act in line with the current status of the ILO core labour standards. This also shows that many developments in the field of ESG cannot be classified without (rudimentary) knowledge of ILO law.

Content of the ILO Declaration of 1998

In 1998, the International Labour Conference of the ILO adopted the "Declaration on Fundamental Principles and Rights at Work and its Follow-Up" against the background of the onset of globalisation. This commits all current 187 ILO member states to "respect, to promote and to realize" the following principles, cf. Art. 2 of the 1998 Declaration:

• freedom of association and the right to collective bargaining,
• the elimination of all forms of forced or compulsory labour,
• the effective abolition of child labour,
• the elimination of discrimination in respect of employment and occupation.

These four principles are further elaborated in eight core conventions. Conventions are treaties under international law that can be ratified by member states. They are: Convention No. 87 (Freedom of Association and Protection of the Right to Organise Convention), No. 98 (Right to Organise and Collective Bargaining), No. 29 (Forced Labour, note also the 2014 Protocol thereto), No. 105 (Abolition of Forced Labour), No. 100 (Equal Remuneration), No. 111 (Discrimination in Respect of Employment and Occupation), No. 138 (Minimum Age) No. 182 (Prohibition and elimination of the worst forms of child labour). However, since these eight conventions concretise principles from the ILO constitution, they are, in the view of the ILO bodies and a majority of the member states, binding on the latter simply by virtue of membership in the ILO – even without ratification. Since they are binding anyway, it is not surprising that a large number of member states – including the EU member states – have ratified all eight conventions. Convention No. 182 has even been ratified by all ILO member states.

The importance of the core labour standards and the eight conventions is particularly evident in the fact that the monitoring committees of the ILO, including in particular the Committee of Experts (CEACR), monitor them with particular frequency. On this basis, the monitoring committees came up with a ruling on the core labour standards, which provides more precise information on how the provisions of the convention are to be understood. For example, the practice on Convention No. 111 provides more clarity as to when unequal treatment can be justified and when it cannot.

Declaration of 2022 

As of a few days ago, this international minimum standard, which has been decisive since 1998, has now been supplemented by a fifth core labour standard, occupational health and safety. The extension and its timing is due to three reasons:

• First, occupational health and safety is an area that clearly relates to the protection of workers' lives, health and dignity and is thus in the spirit of the original declaration. Not least the Coronavirus pandemic demonstrated how important occupational health and safety is to the organisation of work.
• Second, labour protection is already part of many other international human rights instruments, both at an international level (cf. Art. 7(b) ICCPR) and a regional level (Art. 22 of the Rev. European Social Charter; Art. 2 ECHR), on which the ECtHR based decisions on labour protection, cf. judgment dated 24 July 2014 - 60908/11 (Brincat v. Malta).
• Third, the centenary provided the ideal moment, as the ILO received the maximum attention – from the ILO's perspective – from the international community of states on this occasion. Accordingly, the so-called "Centenary" Declaration accompanied a resolution that initiated the groundwork for the extension of the core labour standards. The demand for this had been made in particular by the trade union side, which is also represented institutionally in the ILO, but was also pushed by the EU group (International Labour Office, ILC 110th Session 2022, Report VII, para. 5; Stolzenberg, ILO and EU, p. 60 et seq.).

The official title shall be "ILO Declaration on Fundamental Principles and Rights at Work (1998), as amended in 2022" from now on. By Resolution I of the 110th International Labour Conference of 10 June 2022, the wording of Article 2 of the 1998 Declaration has now been amended as follows:

• "A safe and healthy working environment"

This new fifth core labour standard is also given concrete form by two conventions, according to the will of the International Labour Conference. These are Convention No. 155 on Occupational Safety and Health of 1981 and Convention No. 187 on the Promotional Framework for Occupational Safety and Health of 2006. Other of the more than 40 standards of the ILO, on the other hand, do not count as core labour standards. The same applies to the content of the more than 40 ILO Codes of Practice in the field of occupational health and safety.

Impact 

The immediate impact of the amendment to the 1998 Declaration is that in the future, ILO Committees – first and foremost the CEACR – will monitor compliance by all ILO Member States with the principle of a safe and healthy working environment and Conventions No. 155 and No. 187.

Indirectly, the amendment should also lead to a higher level of ratification of the two conventions. Germany has so far ratified only Convention No. 187. Ratification of Convention No. 155 was not pursued in 1984, as this would have necessitated amendments to existing law, since the Convention does not provide for any exceptions for small businesses and religious communities with regard to the participation rights of employee representatives (BT-Drs. 10/2126 of October 16, 1984). The Convention also presumably grants trade union confidants, in addition to works and personnel councils, rights of participation, consultation, investigation and refusal of performance. It is not yet clear how Germany intends to implement the extension, which has been pushed for even in the EU group, in national law. At another level, German lawmakers have already (consciously or unconsciously) taken the expansion of the core labour standards into account. For example, the human rights due diligence obligations provided for in the Supply Chain Act also include "the prohibition of disregarding the occupational health and safety obligations applicable under the law of the place of employment" (sec. 2 para. 2 no. 5 Supply Chain Act (Lieferkettengesetz "LkSG")). The explanatory memorandum to the draft bill accordingly also mentions Conventions No. 155 and No. 187.

But what will change in the area of ESG criteria? Most of the known ESG standards already include specifications on occupational health and safety. It remains to be seen here whether the increased importance of modern occupational health and safety will also be reflected in the ESG rating criteria. In any case, occupational health and safety standards should also be given special consideration in the company's own ESG ratings in the future. It may be useful to take a look at the current reports of the ILO committees. If, for example, a member state has been reprimanded for years by the committees for violating the conventions on freedom of association in special economic zones, it should be carefully considered how a company with direct or indirect activities in the special economic zone can meet its own ESG requirements. The same applies if a state has violated conventions on equal pay for years. In this case, inquiries should be made particularly clearly with domestic subcontractors and investigations should be carried out to determine whether corresponding conditions also prevail at this company. In this context, pressure should be exerted to pay women workers the same wage for work of equal value (Art. 2 Convention No. 100), unless unequal treatment is justified under Art. 3 Convention No. 100.

Conclusion 

The ILO core labour standards form an important starting point for ESG analyses, especially in non EU countries. Since June 2022, ensuring modern occupational health and safety has formed a new fifth principle alongside the protection of fundamental union rights, the prohibition of child labour, the prohibition of forced labour, and the principle of the elimination of discrimination in respect of employment and occupation, which should always be taken into account in ESG considerations.