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.
How investors look at worker safety
“We should be looking at it,” said Dan Romanoff, an equity research analyst who covers Amazon for Morningstar. “We see the headlines.”
But Romanoff said he can count the number of questions he’s gotten about the issue on one hand in the last few months — and most of those came from reporters.
“It’s not something that investors are really focusing on all that much,” he said.
Amazon is a tough place to work. An analysis released in June by the Strategic Organizing Center, a coalition of four labor unions, found that Amazon workers are twice as likely to be injured on the job as e-commerce workers for Walmart and that the injury rate for Amazon’s delivery drivers is 50% higher than drivers for UPS.
Some investors are speaking out on the issue. Nicole Middleton Holloway, CEO of Strategy Squad, a wealth management firm, said, “My view is that I am on this. I’m on the side of the fact that they need to have better humane practices with their workers.”
Judy Samuelson, executive director of the Aspen Institute Business and Society Program, said working conditions are increasingly important, but companies need to think about them in a strategic way and focus on what they need to do to be very successful over the long haul. “What are the inputs that are critical to our enterprise? There are things that ought to boil to the top. The thing that Facebook really needs to get right? It is different than what Amazon really needs to get,” she said.
Though no matter which company-specific labor issues need to be addressed, Samuelson pointed out that 91% of profits are being returned to shareholders every year. “We’re spending massively more money on share buybacks than we are on our workers,” she said.
ESG as a way to financially evaluate companies goes back as far as the 2006 United Nations Principles for Responsible Investing (PRI) report. Worker issues are growing in importance as part of the ESG equation, according to Betsy Atkins, the founder of the Baja Corporation, a venture investor which also provides corporate governance consulting on issues including ESG.
She said that worker safety already is part of the risk management that rests with a board’s audit committee, and often specifically focused on safety compliance regulations mandated by OSHA. And it has become a bigger part of the equation for good boards.
“As ESG has evolved, worker safety oversight is now also part of ESG,” she said.
Bezos: ‘We need a better vision’
Amazon’s labor issues haven’t dented its brand. In a ranking of global brands in 2020, Interbrand named Amazon No. 2, behind only Apple, which has for years faced more focused pressure from investors over labor practices at its giant Chinese contract manufacturing partner Foxconn. Amazon also topped Kantar’s list of the most valuable global brands in 2021.
“That is not only a strong brand, the strongest are among the strongest, but it’s one that we all use,” said Hayes Roth, principal of HA Roth Consulting. “I don’t see any vulnerability there.”
Yet Amazon has begun addressing worker concerns. In his last annual letter to shareholders as CEO, Bezos admitted that “we need a better vision for our employees’ success” and pledged to make Amazon “Earth’s Best Employer” and “Earth’s Safest Place to Work.”
In May, Amazon rolled out a safety and injury prevention program that it plans to extend to all U.S. operations before year-end, part of $300 million spend on worker safety. The company’s goal is to cut workplace recordable incident rates, an OSHA measurement covering injury and illness, by 50% by 2025.
Bezos noted in his last annual letter that the idea Amazon workers are “desperate souls and treated as robots” is inaccurate.
But the company’s critics in the labor movement continue to say that is what defines the company’s approach to workers.
“It all comes from the model Amazon has created for dealing with its human employees, which seems not to understand that these are human beings and not robots,” said Stuart Applebaum, president of the Retail, Wholesale and Department Store Union. Amazon was recently found to have violated labor law after warehouse workers in Bessemer, Alabama, tried — unsuccessfully — to join that union, according to the National Labor Relations Board.
“At Amazon, you’re managed by robots, you get your assignment from an app, you’re disciplined and even fired by text message,” said Applebaum. “I think that Amazon is unique by the extent they have gone to remove human interaction from the workplace.”
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