Reducing inequality

Is your business committed to reducing inequality?


No EXCELLENT answers have been published for this question.

OKAY Answers

No OKAY answers have been published for this question.

POOR Answers

No POOR answers have been published for this question.

Rising income inequality and the polarisation of societies pose a risk to the global economy in 2017 and could result in the rolling back of globalisation unless urgent action is taken, according to the World Economic Forum .

Geographically, inequality is a global, national and local issue. Outliers in mature economies include the US and the UK - which have some of the highest GINI coefficients and accompanying manifestations of socio economic disparity. Similar patterns can be seen in the share of income distribution.

The share of the global population defined as “poor” — those making less than $2/day — has fallen since 2001 by nearly half, to 15 percent. Notably, those in the middle-income bracket making between $10 and $20/day have nearly doubled their global presence, from 7 to 13 percent. However, after falling for much of the 20th century, inequality is worsening in rich countries today. The top one percent is not only capturing larger shares of national income, but tax rates on the highest incomes have also dropped.

The OECD notes that high inequality makes for a less efficient and less productive economy, and it has used this fundamental starting point for a variety of its studies. The IMF also finds that countries with greater inequality tend to be “marked by lower growth and greater instability”.

Business policies and practices can impact inequality in society. More and more businesses are realising they have a role to play and are reviewing their practices and strategies accordingly. There are a wide range of common practices through which businesses can exacerbate or reduce inequality from executive pay, to average and low pay, to tax, the emergence of the ‘gig economy’, to the types of goods and services sold, to terms of payment for suppliers, and more.

Payment terms provide a good example of both how business practices have changed in recent years, and how increased inequality can often be a result - and be an unintended consequence - of such changes. Only a decade or so ago, payment terms between businesses in the UK were almost always 30 days. However, in recent years, larger firms have begun to force much longer payment terms on smaller firms, in some cases 100 days or more. While cash flow and operating margins are improved for larger businesses, this comes at the expense of small suppliers, which are often SME and family owned and run businesses. Such firms are frequently relied upon for income from employees and other dependants from lower income groups and geographies. As a result of larger firms extending payment terms, SMEs and family firms are more financially vulnerable, less able to invest and grow, and in some cases their very existence is thrown into jeopardy.

Income inequality

'Income inequality' is the extent to which income is distributed unevenly in a group of people.

Gini coefficient

The 'Gini coefficient' is a measure of statistical dispersion intended to represent the income or wealth distribution of a nation's residents, and is the most commonly used measure of inequality.

Pay inequality

'Pay inequality' describes the difference between people’s pay and this may be within one company or across all pay received in the UK.

Wealth inequality

'Wealth inequality' refers to the unequal distribution of assets in a group of people

Gender inequality

'Gender inequality' refers to unequal treatment or perceptions of individuals based on their gender. It arises from differences in socially constructed gender roles.

Answering YES

All Businesses MUST

Describe how and where they reference inequality as a responsible business issue

Describe the policies and practices they have adopted in an effort to reduce inequality

Describe what information they publish in respect of low, medium and high pay within their business and explain whether or not they reveal any pay ratios which may serve to aid comparison with peer businesses and/or across business sectors

All Businesses MAY

Explain whether they have calculated their gender pay ratio, if and how they will be reporting on it, and any actions they are taking to reduce it

Explain whether they have Living Wage accreditation and whether those terms are also enjoyed by all contractors

Outline their commitments to a responsible tax policy, where public available details can be found including the details of the outcomes of these policies, or explain why this is not done

Provide complete and clear details as to dividends paid as a percentage of turnover and profit over time, and wages paid to employees as a percentage of turnover and profit over time, ideally over several years, or explain why this is not done

Explain their supplier payment terms and whether they have signed up to the Prompt Payment Code

Explain if and how employees are represented on the board

Describe whether all employees are able to earn performance related bonuses

Explain whether they, or they contractors, use zero-hours contracts

Explain whether they voluntarily recognise any unions

Answering NO

All Businesses MUST

Explain why they do not or cannot answer YES to this question

All Businesses MAY

Make disclosures against any of the answering requirements for a YES answer even though all such requirements are not met

Mention any future intentions regarding this issue

Provide any other relevant information

DON'T KNOW is not a permissible answer to this question

NOT APPLICABLE is not a permissible answer to this question

Version 1

To receive a score of 'Excellent'

Reducing inequality is a clearly stated business aim and success in doing so can be evidenced

Examples of policy and practice which may support the EXCELLENT statement:

e.g. 1. explains how business aims, values or mission relate to inequality
e.g. 2. makes clear its determination to contribute to development of better business practices vis a vis inequality
e.g. 3. provides detailed explanation of relevant policies and practices
e.g. 4. fully describes governance and oversight procedures
e.g. 5. invites trusted third parties such as NGOs and/or other ‘critical friends’ to feedback on and help improve policies and practices
e.g. 6. discloses which organisations (e.g. other companies, government, regulators) it has sought to influence towards supporting efforts to reduce inequality
e.g. 7. describes how it adopts a leadership position on reducing inequality
e.g. 8. clear, bold business statement regarding inequality, its impact on society and the role of business in reducing it
e.g. 9. lobbies government on relevant inequality issues (e.g. raising the national minimum wage, curb excessive exec pay, progressive taxation)
e.g. 10. pays living wage at a minimum and ensures this extends to all tier one suppliers
e.g. 11. company specific program to create gender equality
e.g. 12. supports relevant campaigns and petitions (e.g. The Robin Hood Tax campaign)
e.g. 13. reports on top/median and top/bottom pay ratios
e.g. 14. pay ratios are explained and justified, plans for their reduction are set out
e.g. 15. voluntarily sets an internal maximum ratio
e.g. 16. is Living Wage accredited
e.g. 17. ensures living wage extends to all contractors as well as employees
e.g. 18. employee representation on the board
e.g. 19. uses blind application forms and/or pursues positive discrimination in recruiting employees
e.g. 20. does not unnecessarily restrict job opportunities to graduates
e.g. 21. pays interns and apprentices a Living Wage
e.g. 22. ensures all internships and apprenticeships are genuine training roles
e.g. 23. invests significantly in skills and training
e.g. 24. all employees are able to earn bonuses for high performance
e.g. 25. does not use zero-hours contracts
e.g. 26. demonstrates tax transparency
e.g. 27. offers employees childcare vouchers and crèche facilities
e.g. 28. offers flexible working arrangements
e.g. 29. recognises and supports unions and co-operatives
e.g. 30. invests in new areas and skilling local workers to alleviate economically impoverished areas
e.g. 31. details net impact on inequality by disclosing its positive and negative impacts

To receive a score of 'Good'

The business is committed to reducing inequality and pursues various relevant, useful policies and practices

Examples of policy and practice which may support the GOOD statement:

e.g. 1. publishes aims, values or mission statements relating to reducing inequality
e.g. 3. provides good explanation of policies and practices
e.g. 4. provides detailed description of governance and oversight procedures
e.g. 5. clear indication that it recognises inequality as a responsibility issue
e.g. 6. consults with independent third parties re inequality
e.g. 7. adopts a leadership position on inequality
e.g. 8. committed to paying the living wage
e.g. 9. supports government initiatives on promoting equality and fairness in the workplace
e.g. 10. gender parity program in place
e.g. 11. ensures equal opportunities for all applicants and/or employees regardless of gender or economic background
e.g. 12. considers investing in new areas and skilling local workers to alleviate economically impoverished areas

To receive a score of 'Okay'

Inequality is an issue the business recognises and it adopts relevant policies and practices on an ad hoc basis OR the business explains how and why inequality is not a material issue to its operations

Examples of policy and practice which may support the OKAY statement:

e.g. 1. provides some explanation of policies
e.g. 2. provides some explanation of governance and oversight procedures
e.g. 3. recognises inequality as a responsibility issue
e.g. 4. supports appropriate pay for all employees based on living wage recommendations
e.g. 5. makes an effort to hire employees from disadvantaged backgrounds

To receive a score of 'Poor'

The business makes no statement in regards inequality, it appears that the business could adopt some relevant and useful policies or practices to reduce inequality but chooses not to

Examples of policy and practice which may support the POOR statement:

e.g. 1. lack of meaningful disclosure
e.g. 2. no explanation of lack of disclosure
e.g. 3. no statement of future intent
e.g. 4. no measures in place to support the reduction of inequality
e.g. 5. does not pay the living wage
e.g. 6. does not support initiatives to combat gender inequality
e.g. 7. exacerbates inequality
e.g. 8. targets low income and vulnerable consumers with exploitative products and services