Why poor working conditions are a risk to animal protein producers’ operations 

The impact of COVID-19 on production-line workers worldwide has exposed the materiality of employment conditions in the food sector. This includes supply-chain disruptions, reputational risks, fines, prosecutor investigations and lawsuits from employees. Meat production and processing companies face 15-16% staff shortages in the UK, while job postings for meatpackers in the US increased by 86% between 2017 and 2021.^[1][2]  

Harsh working conditions increase workers’ absence due to injuries. In turn, this further drives labour shortages. Most companies do not assess, monitor or review human rights risks in the protein supply chain. Like many businesses, speed and efficiency are essential for meat-processing companies. Efforts to meet these objectives usually translate into finding ways to make production lines operate ever faster – a solution that can impact not just food safety but worker safety.^[3]

Not addressing issues around poor and unsafe working conditions can result in serious operational and reputational risks for companies involved in animal agriculture. For example, FAIRR analysis has shown meatpacking workers were disproportionately impacted by COVID-19,^[4] yet the pandemic merely highlighted the suboptimal conditions that existed long before 2020. The industry’s labour management practices and risk reporting are generally insufficient to sustain a reliable, healthy and productive workforce and are now exacerbating labour shortages for meatpackers in the face of today’s highly competitive job market.^[5]

The lack of workers in some countries has also been driven by national-level changes, including Brexit’s effects in the UK and the Trump administration’s immigration restrictions in the US, as many companies rely on an immigrant workforce.^[6] In 2021, in the UK alone, labour shortages in meatpacking plants led to the culling of an estimated 30,000-120,000 pigs.^[7],[8] Indeed, many workers had left the country, and recruitment was slow because of harsh working conditions and restricted post-Brexit immigration.^[9]  

FAIRR’s Working Conditions Engagement has found that meatpacking companies, like many other industries, are investing in automation to tackle labour shortages, processing efficiency and health and safety risks.^[10] For instance, Tyson Foods plans to invest USD $500 million in robotics and IT infrastructure to collect data.^[11] It may be of interest to investors that companies are not including workers in discussions about the transition or conducting social risk assessments for their transition to more automated processes. 

A key lesson for companies and their investors is that incorporating workers’ interests into a company’s business strategy to create better conditions is likely to result in higher retention rates.^[12] Crucially, it is also likely to mitigate risk. 

Regulators are stepping in to protect workers 

Following the pandemic, meatpacking companies including Tyson Foods, JBS SA and BRF, faced a number of litigations from shareholders and workers or their relatives.^[13],[14] Further, sector-specific regulatory developments around labour risk have begun to arise.  

A COVID-19 outbreak at a German slaughterhouse revealed the problematic practices of subcontractors, who provide the bulk of the labour force – mostly eastern European workers – to meat producers.^[15] The German government reacted quickly by implementing protective measures for workers and banning subcontracted employment for meat companies with 50 or more employees.^[16] In Germany, before the 2020 restriction on subcontracting, directly employed workers had a maximum 48-hour week, while subcontractors worked up to 68 hours a week on wages that were about 40%-50% lower than their directly employed counterparts.^[17]

In 2021, the Hong Kong Stock Exchange introduced ESG reporting rules and guidance, which include “comply or explain” requirements on an extensive set of social parameters covering employment and labour practices, operating practices, and community investment.^[18]  

As of September 2022, the European Commission is proposing an EU market ban on all products made using forced labour, a longstanding issue in the animal agriculture sector.^[1] This ban would cover all imports, exports and domestically produced goods and apply to all industries. 

How FAIRR assesses working conditions 

FAIRR assesses disclosure on human rights policy and due diligence, health and safety, fair working conditions and worker representation. Disclosure levels test corporate transparency on existing policies and evidence of enforcement, monitoring and data collection.  

The methodology focuses on working conditions risks at the slaughtering and processing sites. However, to reflect the fact that human rights issues extend across the supply chain, companies are also assessed on supplier policies, due diligence and monitoring.

Next steps for top ranking companies 

FAIRR’s analysis shows freedom of association is increasingly recognised by companies. Furthermore, evidence is starting to be seen of companies putting these pledges into practice, with the number disclosing unionisation rates increasing from 18% in 2022 to 33% in 2023. There has been little change in the disclosure of collective bargaining agreements and measures to support worker rights since 2019. 

The Index focuses on human rights risks directly associated with company and supplier operations by analysing a company’s human rights policies, as well as risk assessment, preventive actions and remediation. Since 2019, there has been a positive trend in terms of human rights commitments disclosed by Index companies. The number of companies with a policy to recognise human rights has steadily increased, but there are significant differences across regions, with companies in Europe and Latin America leading and North America, Oceania and Asia lagging. The majority of companies are slower to assess actual and potential human rights risks. Monitoring and reviewing respect for human rights is equally rare, with little progress across the majority of protein types since 2019. That said, some Index companies are starting to adopt techniques based on UN Global Compact and Ethical Trading Initiative best practice guidelines.^[20],[21]

Examples of Human Rights Monitoring among Index Companies 

The majority of Index companies have consistently disclosed policies prohibiting child labour, forced labour, discrimination and harassment/inhumane treatment, with 90% of companies disclosing at least three of these policies in 2023. Moreover, although the number of companies also applying these policies to their suppliers is smaller, this number has steadily improved since 2019. However, few companies disclose that they audit for compliance with these working conditions policies across their operations and even fewer report monitoring compliance in their supply chain. Indeed, policies alone are not a sufficient risk mitigation measure. 

Health and Safety 

Workers in the animal agriculture sector are exposed to a variety of health and safety risks due to the nature of their work, which often involves operating dangerous machinery, physically demanding labour, working with large animals and exposure to environmental, biological and chemical hazards.^[22],[23] As highlighted in FAIRR’s working conditions engagement, protein-producing companies are not sufficiently safeguarding against these risks and, as a result, they are struggling to fill labour shortages.   

Progress on health and safety metrics amongst index companies has been limited since 2019 despite clear issues in the sector. Since 2019, average performance across KPIs relating to safety and turnover data has shown a much smaller increase than the average increase in performance across all risk factors.