ESG RISK 2: Labour and Working Conditions

Overview

ESG Risk 2 - Labour and Working Conditions evaluates factors influencing workforce availability and project success, including local skill levels, training capacity, labour laws, and potential competition for workers. It considers the impacts of large construction workforces, long schedules, and reliance on contractors, with special attention to vulnerable groups like migrant and temporary workers. Protecting labour rights and aligning with local conditions is key to mitigating risks like delays, cost overruns, strikes, or reputational damage. Early assessments help identify skill gaps, plan for training, and address workforce stability to support smooth project development.

Additional Guidance

As well as engineers, administrators and sustainability specialists, hundreds or thousands of construction workers are often employed in a project’s development phase. Hydropower projects require many kinds of workers, and these may be hired via different channels including by the project company, its contractor, sub-contractors, service providers and supply chain companies. Workers may be skilled, semi-skilled or unskilled.

Sources of information that can help inform ratings for ESG Risk 2 Labour and Working Conditions as well as potentially help reduce the risks for a project option include:

• HSA How-to Guide for Hydropower Labour and Working Conditions;

• Government departments focused on labour and industry that may have data on workforce availability and skill levels;

• Regional industry associations or engineering bodies;

• Consulting firms that may have research reports or forecasts on labour availability, particularly in renewable energy sectors like hydropower;

• Market research platforms such as IBISWorld, Statista, or similar platforms that provide market analysis, including workforce insights for various industries;

• Regional analysis of technical universities and vocational schools and their offerings; they may also be able to provide data on the potential skilled labour in the region;

• Job portals and recruitment agencies;

• Specialised recruitment agencies such as NES Fircroft or Airswift that can provide current labour market data and availability of skilled professionals.

Major global references on international labour rights include:

• The conventions and recommendations of the International Labour Organization (ILO) that shape labor practices worldwide. ILO is a specialised agency of the United Nations. Key conventions include:

  • ILO Convention No. 87: Freedom of Association and Protection of the Right to Organise (1948);

  • ILO Convention No. 98: Right to Organise and Collective Bargaining (1949);

  • ILO Convention No. 29 & No. 105: Forced Labour (1930 & 1957); and

  • ILO Convention No. 138 & No. 182: Minimum Age and Worst Forms of Child Labour (1973 & 1999).

• The United Nations Universal Declaration of Human Rights (UDHR) includes key labour rights in Article 23 and 24:

  • Right to work, to free choice of employment, and to just and favorable conditions of work; and

  • Right to equal pay for equal work, protection against unemployment, and the right to rest and leisure.

• Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises on Responsible Business Conduct . These guidelines include labour rights for multinational enterprises, including areas such as worker rights, occupational safety, health, and wages.

Particular labour rights risks arise if workers are obtained via a labour broker. A labour broker is an intermediary who supplies temporary or contract workers to companies, often handling recruitment, payroll, and administrative tasks, while the workers remain employed by the broker rather than the company they work for. This can sound very appealing, as it allows businesses flexibility in staffing without having to directly manage employment. However, concerns arise with the use of large migrant labour forces who, in too many cases, are given questionable living and working conditions.

If a hydropower project developer has a poor track record in large-scale employment and contractor management, several significant concerns can arise which may jeopardise the project's success. Poor management of a large workforce can lead to inefficiencies such as low productivity, miscommunication, and delays. Poor coordination between labour and contractors, lack of clear work processes, and ineffective monitoring of expenditures can lead to unnecessary costs such as penalties, overtime wages, and increased material costs. Poor contractor management can cause delays in sourcing materials and services, and substandard construction quality. A lack of proper training, inadequate supervision, and failure to enforce safety protocols can lead to workplace accidents and injuries, creating serious liabilities and reputational damage. Poor employment practices such as delayed payments, lack of worker protections, or inadequate working conditions can lead to workforce dissatisfaction, including strikes and protests.

A poor track record can damage the developer’s reputation with stakeholders, including government agencies, local communities, NGOs, and investors. Reputation is critical in infrastructure development, as it influences trust, cooperation, and the ability to secure future projects.

Opportunities also exist in the area of labour and working conditions for hydropower projects. Hydropower projects are often realised in remote areas, and for local people they can provide a unique opportunity for improvement of livelihood and capacity building. Many employees who come from remote nearby communities will have high expectations from projects, both as employees and local people, and the developer should plan for extra measures to support local workers and manage expectations. Incorporating a high percentage of local content in the workforce can benefit hydropower project developers by improving economic and social outcomes, ensuring compliance with regulations, reducing costs, and enhancing operational efficiency. It can build stronger community ties, mitigate risks, and create a lasting positive legacy for the region, ultimately contributing to the project's long-term success.