Failing the Grade: Amazon Today

By Steven Heim, Managing Director at Boston Common Asset Management

On September 4th, for a brief time, Amazon became the second US company to reach $1 trillion in market value, just weeks after Apple surpassed it on August 2. While there’s a lot to like about Amazon as an investor and shopper, the company falls short with respect to working conditions, labor relations, and environmental stewardship. As we return from Labor Day celebrations and resume the routine of work and school, we thought it a good time to ponder the contributions of the American labor movement to a vibrant middle class — and why we give Amazon a failing grade.

We believe in healthy workers, vibrant communities, and environmental stewardship. That’s why we rely on a comprehensive set of environmental, social, and governance (ESG) guidelines to make decisions about where we invest and conduct in-depth research accordingly. Our conclusion: Amazon gets failing grades on working conditions, labor practices, carbon emissions management, and fair competition. In exchange for easy purchase and efficient delivery of low-cost products, it contributes to a bifurcated economy and takes little responsibility for its negative impacts on workers, society, and the environment. Here’s a rundown:

Unsafe work conditions

Amazon’s massive warehouses and “fulfillment centers,” often run by sub-contractors, often resemble high-tech, air-conditioned sweatshops. Federal safety regulators at the US Department of Labor’s Occupational Safety and Health Administration (OSHA) have levied judgments and fines on Amazon dozens of times within the past five years. Moreover, according to a report issued by the National Council for Occupational Safety (NCOS) earlier this year, Amazon displays “a disturbing pattern of preventable risks,” including seven deaths since 2013.

Amazon’s worldwide employee base has grown substantially in recent years, comprising 550,000 full-, part-time, and temporary workers. According to press reports, Amazon often deflects responsibility for workplace injuries, which was vividly portrayed in the story of Vickie Shannon Allen, a former Amazon employee, who now is homeless after becoming injured on the job.

Labor relations

Although labor practices at various firms can vary widely, there are numerous codes and conventions regarding worker health and safety, conditions, and wages — including freedom of association and right to collective bargaining, nondiscrimination, child and forced labor, and pay parity. Management commitment is key, but our ESG research reveals that Amazon fails to make the grade.

The company’s poor labor practices include Amazon’s history of anti-union actions and class action lawsuits filed by US “contractor” drivers. Last April, German workers protested the company’s low wages and tax policy. Amazon’s “just in time” approach to mail order delivery could be threatened by work stoppages due to strikes. This past July, during Amazon’s annual “Prime Day” sales period, warehouse workers in Germany, Poland, and Spain went on strike to protest unsafe working conditions, including oppressively high heat, timed bathroom breaks, and dehydration.

Most Amazon workers have little recourse other than lawsuits and strikes because they lack access to collective bargaining. In part, this has been due to high employee turnover and Amazon’s historic success in circumventing unions at its facilities in most countries since its founding in 1994. Perhaps 1% are unionized. Workers have no voice regarding incentive systems that call for workplace competition on order fulfillment, with penalty points and dismissal if employees do not meet production goals. High worker turnover and absenteeism due to illnesses caused by overwork and stress pose significant business risks.

To be clear, we have invested in companies that may oppose unions or have no unionized employees. But our “Prime” reason to avoid Amazon is its business model that fails to take worker safety, fair labor practices, responsible environmental stewardship, and stakeholder engagement seriously.

Room for improvement?

Responsible investors continue to advocate for positive change at Amazon, and shareholders have filed 35 proxy proposals in recent years on topics ranging from sustainability reporting, gender board diversity, pay parity, and criminal background checks to human rights risk assessment, free speech, privacy and data security, to corporate political activity and supplier labor standards. Some shareholder proposals have triggered corporate dialogue, but most have been opposed by management.

Amazon remains a formidable force but relies on a business model that externalizes enormous costs onto its workers, communities, the wider economy, and the environment. That’s a damaging tradeoff that undercuts whatever benefits it brings consumers and the greater good. That’s why we give it a failing grade. But we’d be inclined to give Amazon higher marks if the company did the following:

1. Improve working conditions for fulfillment center employees, allow time for more regular breaks, enact pay equity, relax productivity targets, and guarantee full workers’ compensation.

2. Allow collective bargaining among its workforce, like it did for Italian workers in May.

3. Address the high carbon and waste footprint inherent in its instantaneous shipping offers

In the meantime, we will focus our efforts on other firms. Over the years, we have built investor coalitions to successfully engage companies in the apparel, toys, and auto industries to end sweatshops and dangerous working conditions in supply chains. Maybe someday soon, Amazon will be among those leaders.

The information in this article should not be considered a recommendation to buy or sell any security.

Originally published on Medium.

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