Shift is delighted to announce that, in partnership with the Capitals Coalition, the organization will launch a 21-month initiative to develop an accounting model for living wages.
Since 2018, Shift has explored accounting methods as one of the six focus areas of Valuing Respect, a three-year research and co-creation project to develop better ways to evaluate business respect for human rights. As Rebecca Henderson of Harvard Business School writes in Reimagining Capitalism, “It turns out that reimagining capitalism requires reimagining accounting… even tiny changes in accounting rules can change behavior in profound ways.”
In an expert roundtable, hosted in June 2019 by the Institute of Chartered Accountants in England and Wales, participants agreed that focusing on living wages is a sound starting point to make meaningful progress towards reflecting the value of respect for human rights in accounting practices.
“An initial focus on living wages made sense, both because wages are relatively easy to measure, and – more significantly – because a living wage has catalytic power to open the door to the realization of many other human rights.”
Caroline Rees President – Shift
Following the roundtable, Shift partnered with the Capitals Coalition in designing the new project. The aim is to develop an accounting model for companies to assess and disclose progress towards living wages in both their workforce and supply chains. The project will be based on broad and inclusive consultations with experts and stakeholders; and it will build on important work already done in the field, including respected methodologies for calculating living wages, which will provide an essential benchmark within any accounting model.
“This project is incredibly important for how companies understand the value created by people – social and human capital. By including a living wage in the accounts, we can address one of the biggest challenges of implementation – that it is seen purely as a cost, ignoring the fact that investing in living wages can generate a return for the individuals, the company and society.”
Mark Gough CEO – Capitals Coalition
The project has already attracted high levels of interest from companies, investors and civil society organizations. It will be launched in January 2021.
To learn more about the project and for any other inquiries, please email communications [at] shiftproject [dot] org
The UN Guiding Principles on Business & Human Rights are approaching the tenth year since their unanimous endorsement by the Human Rights Council. It is encouraging that their uptake continues apace, not only by businesses but beyond. For example, human rights factors make up the bulk of the S elements in ESG investing, with investors clamoring for more robust metrics. Also, global sports bodies, including the International Olympic Committee and FIFA, have made human rights a mandatory part of their host city agreements.
The UNGPs were conceived to generate an ongoing interactive dynamic of a smart mix of measures – voluntary and mandatory, national and international – that would strengthen the business and human rights regime over time.
But I confess that governments, with exceptions, have been a weak link in this dynamic. So, I am pleased to see action picking up on two significant fronts in the EU context.
The first is human rights due diligence. This is the foundational construct for businesses to identify, prevent, mitigate and account for their adverse human rights impacts – throughout their operations and business relationships.
The experience of the past decade has demonstrated that many multinationals understand the importance and utility of human rights due diligence. But the record also shows shortcomings and weaknesses in implementation.
In response, Germany, like several other governments, is giving serious consideration to making human rights due diligence mandatory, as foreshadowed in its 2016 National Action Plan. Similarly, mandatory human rights and environmental due diligence is on the legislative agenda of the European Commission.
…many details still need to be worked out. Perhaps none is more important than the question of liability. It may be helpful for me to recall that the UNGPs foresaw the possibility of liability…
I appreciate that many details still need to be worked out. Perhaps none is more important than the question of liability. It may be helpful for me to recall that the UNGPs foresaw the possibility of liability, and how it might play out in practice. The Commentary to UNGP 17 state that:
Conducting appropriate human rights due diligence should help business enterprises address the risk of legal claims against them by showing that they took every reasonable step to avoid involvement with an alleged human rights abuse.
Of course, case-specific facts would also be considered in any such assessment.
A second area that shows progress is the strengthening of non-financial disclosure requirements, including on human rights. Indeed, there is a rush into this space by private international standard setting bodies, large asset managers, alliances of consulting firms and the like, all wanting a piece of the ESG standards market.
The EU, as the world’s largest trading bloc, has a golden opportunity here to provide authoritative standards, which inevitably would have international spillover effects.
Here the EU, as the world’s largest trading bloc, has a golden opportunity to provide authoritative standards, which inevitably would have international spillover effects.
Perhaps there is still time for the Germany Presidency in collaboration with the Commission to establish a measure of policy coherence across the related EU initiatives, so as not to contribute to overwhelming businesses with potentially overlapping or, worse, inconsistent requirements.
Progress on these two fronts would contribute significantly to the overarching concern of this conference with promoting decent work in supply chains.
Indeed, I believe it would go even further and help inform the grand debate taking place on both sides of the Atlantic on the social purpose of the corporation, on the need for it to better serve a broad array of stakeholders in addition to shareholders.
So in conclusion, thanks again, and I wish you every success on the journey ahead.
John G. Ruggie, the Berthold Beitz Research Professor in Human Rights and International Affairs at Harvard’s Kennedy School of Government, has served as UN Assistant Secretary-General for Strategic Planning, and as the Secretary-General’s Special Representative for Business & Human Rights. He chairs the Board of Shift.
Everyone working to ensure that business acts with respect for people is in the business of behavior change. We want companies, and individuals within them, to act in ways that enable respect for human rights. That being so, it’s intriguing that we have not drawn on the vast range of existing psychological insights about how to influence behavior. In our first-of-its-kind experiment in the business and human rights field, we drew on the field of behavioral science to test how consumer choices might help to reduce pressure on couriers delivering online purchases. We found how best to nudge consumer behavior, which provided some surprising discoveries, data and evidence about what works.
We simulated an online shopping experience and asked 2,500 people to select their delivery options. Consumers’ delivery choices can place pressure on couriers handling the items. Using the latest psychological research, we designed six behaviorally-informed nudges to test what was most effective in nudging consumers towards choosing longer delivery times. This experiment and its revelations demonstrate the need for evidence and experiments of this kind for a number of reasons:
Experimental data are the only way of definitively knowing what works.
Anecdotal evidence and expert advice can only get us so far. Before we ran our experiment, we had a fairly strong contention (based on existing research) that the most powerful nudges would be defaults (pre-selecting our preferred option) and social norms (telling people how others are behaving). We were wrong. These nudges did not seem to work. Instead, other nudges that we tested were more effective. This is important to know in order to avoid promoting or investing in ineffective or inferior solutions. Testing our interventions enables us to either:
a) validate our intuitions, enabling us to scale-up with confidence in our predictions; or
b) disprove our instincts, thereby saving us money, time, effort and resources on solutions that do not work.
By evaluating and testing our behavior change interventions early-on we can create a symbiotic process of rapidly designing and testing as we roll-out or scale-up, confident in our knowledge that the intervention works.
Experiments allow us to understand attribution, cause and effect.
We were able to isolate the effects of our nudges by using control and treatment groups in a randomized control trial. This enables us to isolate the effects of any one intervention to know whether it works, as compared to the control group receiving no intervention. Other methods of evaluation are simply not able to say definitively that any effects are attributed to their intervention. For example, if we had used a before/after comparison that compared consumers’ delivery choices from March 2019 to March 2020, we would be unable to pinpoint our intervention as being responsible for any preference changes. Instead, other underlying variables might be responsible for any changes, such as changes in consumer awareness or the COVID-19 pandemic. By using control and treatment groups we are able to know whether our interventions work, and to what extent. For us to be more confident in the results, our evidence could be backed up by other researchers replicating the experiment via both online simulations and online retailers. (We would welcome this!)
Experiments test how people actually behave, and not simply what they say they will do.
What people say they will do and what they actually do can be different. Tracking behavior tells us more about action than what people say they will do, their intentions or self-perception. In our experiment, people were equally likely to describe themselves as ethical consumers. Yet, their behavior betrayed their intentions. The data showed that while younger and older people were equally fairly likely to describe themselves as ethical consumers, younger people were the least likely to choose the more ethical delivery option. Our experiment was an online simulation and so may not capture real-world behavior as accurately because the purchases are not real. Nonetheless, this shows why it is critical to measure behavior, and not simply rely on what people say they will do.
In the business and human rights field, efforts to assess what companies are doing typically focus on activities and outputs such as policies, processes, people trained, etc. It is often difficult to see whether or how those activities lead to different outcomes for people affected by corporate activity. This is because behavior change is often the critical missing link: what people are supposed to do (or even what they intend to do or believe they will do) often differs from what they actually do in practice. We need to pay much greater attention to the individual behaviors that need to change in order for corporate respect for human rights to be realized. These behaviors can be influenced, measured and tested using experimental methods to know whether we are succeeding.
We need to pay much greater attention to the individual behaviors that need to change in order for corporate respect for human rights to be realized.
We believe that behavioral science could be more widely deployed to transform business practices. Some areas that we see as particularly ripe for further experimentation and testing include:
Enabling employees across the business to speak up and raise issues when they spot potential human rights risks and impacts;
Ensuring that human rights training translates into actual changes in behaviors and practice;
Designing grievance mechanisms in ways that encourage intended users to use them in practice; and more.
Our vision is for more experimentation and testing in the real-world to demonstrate impact and outcomes for people. Indeed, this is the only way we can truly know what works.
If we want to make respect for people’s human rights the norm in how business gets done, we need to focus more on behaviors – what people actually do, not just what they intend to do.
If we want to make respect for people’s human rights the norm in how business gets done, we need to focus more on behaviors – what people actually do, not just what they intend to do. For that, we need more experimentation and testing – in real-world settings – to find out what makes the difference and delivers improved outcomes for people. Indeed, this is the only way we can truly know what works and therefore where companies should be focusing their efforts and resources. That’s the promise of a behavioral science approach.
Katryn Wright is a Shift Associate. As a researcher, Katryn focuses on leveraging behavioral science to address common business and human rights and behavior change initiatives.
Edward Gardiner works as the Behavioural Design Lead at Warwick Business School.
Dr. Umar Taj is a Research Fellow in Behavioural Science at Warwick Business School.
Following the presentation of the Green Deal last December, the EU Commission initiated the reform of the EU Non-Financial Reporting Directive (NFRD) with the objective to improve quality, consistency, comparability, as well as accessibility of critical information on sustainability disclosed by companies.
This legal framework provides companies and financial actors with much-needed rules and guidelines to report on the risks and impacts on people and the planet, and provide a basis for the EU Commission’s effort to scale up sustainable finance1. The severity of COVID-19 and its economic and social consequences have underlined the need to further and strengthen our efforts on creating a sustainable and resilient economic system.
The undersigned civil society organizations welcome this ambition and call on the European Commission to address the following two critical issues (…)
New York, NY.– Shift is proud to be supporting the Finnish Presidency of the Council of the European Union in convening its flagship conference ‘Business and Human Rights: Towards a Common Agenda for Action’, to take place in Brussels on December 2, 2019. This is part of Shift’s broader support to the Ministry for Foreign Affairs on advancing business and human rights as part of the Finnish Presidency.
The Conference will bring together high-level EU Member State representatives, members of key EU institutions, senior representatives from business and civil society to discuss the present and future roles of different stakeholders in accelerating the implementation of the UN Guiding Principles at Member State and EU level.
Key topics will include state financing for doing business abroad, the role of regulatory measures as part of a mix of state measures, and the use of collective leverage and cooperation to enhance human rights outcomes for those most vulnerable to harm, especially human rights defenders.
The keynote speaker will be Professor John Ruggie, Chair of Shift and author of the UN Guiding Principles on Business and Human Rights. The event will culminate in the release of a conference outcome document, an Agenda for Action, with the objective to strengthen the EU’s actions on business and human rights.
The full draft program may be found here and will be updated as speakers are confirmed.
Shift looks forward to working with all the key stakeholders involved, in line with our commitment to advocate for the meaningful implementation of the UN Guiding Principles, in order to build a world where business gets done with respect for people’s dignity.
About Shift
Shift is the leading center of expertise on the UN Guiding Principles on Business and Human Rights. Shift’s global team of experts works across all continents and sectors to challenge assumptions, push boundaries, and redefine corporate practice, in order to build a world where business gets done with respect for people’s dignity. Shift is a non-profit, mission-driven organization, headquartered in New York City. Visit shiftproject.org and follow us at @shiftproject.
About the Finnish Presidency of the Council of the European Union
Together with the European Parliament, the Council is the main decision-making body of the EU. Its presidency rotates among the EU member states every 6 months. Finland holds the Presidency of the Council from July 1 to December 31, 2019, with the motto ‘Sustainable Europe – Sustainable Future’. The Finnish Presidency will be the first to integrate the new priorities of the Strategic Agenda 2019 – 2024 into the Council’s work. Learn more at eu2019.fi
Tracking whether company efforts to prevent and mitigate risks to people from business activities are effective is an integral part of the Corporate Responsibility to Respect Human Rights. Many companies undertake a range of monitoring activities to this end, including assessment of human rights risks, impact assessments, audits and reviews of grievances. While these periodically-used instruments are sometimes successful in identifying abuses and violations, they do not help companies know which of their activities make a difference in the lives of communities, workers and consumers.
Evaluation practices, on the other hand, give companies evidence of why desired outcomes have not been achieved and how to achieve them.
Evaluation moves away from just collecting data to examining practices in order to learn and improve. As affected stakeholders are at the center of companies’ responsibility to respect, incorporating the voices of people affected by companies’ actions is vital.
Incorporating the voices of affected stakeholders in this evaluative process has several benefits. First, using insights from stakeholders affected by companies’ efforts has proven to lead to more reliable, trusted and meaningful data. It can reveal which aspects of an intervention have desired impacts on stakeholders, which are the most valued and which need further improvement. Second, paying attention to stakeholder experiences can also contribute to improving a company’s relationship with its stakeholders, and facilitate building trust and respect. Additionally, assessing the value of an intervention from the affected stakeholders’ perspective can help companies make informed choices when designing and implementing programs in the future, preserving valuable company time and resources.
The Valuing Respect Project has mapped three standout examples of companies using affected stakeholder insights to improve their practices, all with positive results.
Active listening. Phillip Morris International, in cooperation with Verite, conducted interviews with smallholder farmers in Malawi to learn about what aspects of its extensive Agricultural Labour Practices program had made greatest impacts on their lives. Using an applied method called Most Significant Change, they collected farmers’ stories. The stories, told and interpreted by farmers themselves complemented an extensive field monitoring system, which relies on field technicians regularly visiting tobacco-growing farms to assess management practices, environmental conditions and labour issues. The combination of periodic assessments with a deep level inquiry into farmers’ experiences brought to life impacts of the program in the voice of real people, and revealed effects of the program on complex issues like child labor.
Taking actions to improve stakeholder relations. A challenging relationship with local communities adjacent to its mining operations has led global mining company Gold Fields to use findings from regular assessments of stakeholder relationships to improve its community engagement strategy. By tracking changes in the communites’ perceptions over time, Gold Fields is able to measure which aspects of its community-company relationships have improved, and which need additional attention. The company has also used the data to redesign its community programs, and to focus energy and resources on what matters to their communities.
Ensuring that affected stakeholders stay informed about how their insights shape companies’ decision making can help companies continuously improve their programs and data.
Communicating the improvement. Ensuring that affected stakeholders stay informed about how their insights shape companies’ decision making can help companies continuously improve their programs and data. Constituent Voice, a methodology developed by Keystone Accountability builds a continuous feedback loop between a company and its stakeholders as a way to create quality company-stakeholder relationships. On the one hand, the “loop” (a cyclical process of data collection, analysis and reporting and finding solutions) increases stakeholder motivation to participate in the company’s evaluation process. On the other hand, the cyclical nature of the evaluation means that data is collected and analyzed in real time, allowing a company to predict if desired outcomes are likely to be achieved, or a course correction should be considered.
As you can see, well-designed evaluations generate knowledge around what works and what does not, which can then serve as a strong foundation for scaling up successful interventions.
To help expand available research around this concept, the Valuing Respect project team will be publishing a collection of case studies offering a spectrum of methods and lessons early next year. Furthermore, the Project is seeking to test new ways of using stakeholder voice with pioneering companies across different geographies and sectors. Identification, design and implementation of the pilots is currently under way. If you would like to become a part of this group of leading companies, please email me.
“SMEs lack the resources and expertise to manage human rights issues.”
“They’re too focused on small margins to invest in respecting people.”
“SMEs don’t have any leverage.”
“Without regulatory and reputational concerns, there’s no business case for small companies to care about human rights.”
“How can large multinational
companies possibly respect human rights when faced with so many
disinterested SMEs in their value chain?”
These refrains will be familiar to anyone with a passing interest in business and human rights. But our recent work with leading small and medium enterprises (SMEs) suggests they are wide of the mark. In fact, small and medium sized businesses can boast some significant advantages over their larger counterparts when it comes to realizing their responsibility to respect human rights. These include:
A focus on quality of relationships with business partners
SMEs tend to have fewer suppliers and customers, which enables deeper and better-quality relationships. Not only is it more feasible for SMEs to map the businesses in their supply chains, it is easier and more desirable to get to know them. From our discussions with SMEs interested in respecting human rights, we learned they tend to spend a lot more time selecting business partners that are the right fit, putting more up-front investment into finding those who share their values, and will rise with them to the standards they aspire to.
The preference for longer-term relationships tends to make them less transactional, and allows greater scope to integrate human rights issues. Because of their diversity, and often detailed knowledge of local contexts, SMEs may be better able to understand the idiosyncrasies of smaller business partners. Their smaller scale and inclination towards bespoke relationships can lead small businesses to engage directly with suppliers and their workers, in addition to their social audit and certification practices.
These stronger, more nuanced relationships can reap human rights rewards.
Some of the small businesses we talk to report that suppliers
proactively bring up (and seek to work together to address) issues like
child labor, rather than claiming full compliance with buyers’ standards
and hiding the problem.
Shift Advisor Anna Triponel presenting a workshop to SMEs, in collaboration with the International Organisation of Employers. Photo courtesy of IOE
A need to think creatively about leverage
SMEs often lack the cold, hard commercial leverage of larger multi-nationals, and must think more creatively. The business and human rights community talks frequently about moving from a policeman to partnership approach in supply chains. But for smaller retail businesses, partnership with suppliers is a necessity, not a choice, if business is to be done with respect for people.
One medium-sized business we know has rolled out programs on freedom
of association and worker voice in the most challenging contexts,
despite having less than 5% of the product buy from suppliers. They
achieved buy-in through explaining the benefits of the program, and
drawing on the trusted relationship they’d developed, rather than
requiring suppliers to participate.
For small businesses to get traction, prioritizing issues to address is crucial.
For small businesses to get traction, prioritizing issues to address is crucial.
We have spoken to businesses in apparel, food, retail and cleaning
sectors that have made progress by focusing on low wages, believing this
will have knock-on effects on a host of other rights.
Sometimes, such commitment implies a willingness to take business
risks. One small commercial cleaning company successfully re-negotiated
client contracts at a higher cost after the owner met personally with
customers to explain that this was the only way to raise wages. Another
CEO of a medium-sized business explained to shareholders that, while
sourcing their key agricultural commodity with higher social standards
would result in a hit to short-term profits, it was still the right
thing to do. This is another clear lesson from SMEs: when top leadership is committed to respecting human rights, there are fewer obstacles to navigate.
A culture focused on people and their empowerment
The old adage that people are a business’s most important asset is even more pronounced for SMEs. The very lack of resources and stretch that skeptics cite as reasons they may find it difficult to respect human rights means that smaller businesses have to respect, trust, motivate and empower their employees to succeed. Committed leaders are able to instill values of empathy and empowerment through face-to-face interaction with employees, listening to them and modelling desirable behaviors. One small business CEO we spoke to claimed doing so boosted creativity and productivity, and gave people confidence to make decisions themselves – not only in their operational roles, but also when it came to human rights.
Committed leaders are able to instill values of empathy and empowerment through face-to-face interaction with employees
Another small business owner told us that when workers feel
respected, and identify with managers and others, they will raise issues
and concerns with them. But creating this culture depends on workers’
awareness of their rights. This business owner introduced WhatsApp
groups to disseminate information on worker rights, as well as
fortnightly employee dialogue meetings without management to encourage
peer-to-peer learning and to provide a forum for discussion.
As people are so important to small businesses’ efforts to respect human rights, there is little margin for error in hiring. A number of medium-sized businesses told us they took the unusual step of hiring vocal critics of their companies.
These critics, often younger and greener in business, but with
experience in human rights, became passionate drivers of the agenda
inside the company, and provided a counterweight to their more
business-savvy colleagues.
Authenticity
Committed SMEs like these are able to approach human rights with the same authenticity they bring to doing business. This can be an asset when encouraging employees to treat each other with respect, or when communicating their values to business partners. But it does raise a challenge if larger clients expect SMEs to implement the UN Guiding Principles formulaically, with a rote policy statement referencing the appropriate international conventions, and a grievance mechanism that checks certain boxes. One SME we spoke to said that producing a policy statement on human rights felt stale and corporate, and was received with suspicion by employees and trusted suppliers. Likewise, interrogating the mother and daughter owners of a micro-business about whether their complaints procedure meets an expected template is hardly productive. Larger customers of SMEs need to enable their smaller business partners to build on their strengths in their own distinctive ways, whether it’s encouraging respect amongst workers, giving employees a voice, or building partnerships with suppliers. In short, we need them to reflect the spirit of the UNGPs.
It’s about changing the way business gets done, and the way people interact in the workplace and beyond.
This isn’t to suggest it’s always easy for SMEs to get it right. Lack
of resources can prove a problem; informality is an enduring conundrum.
Smaller businesses can easily fly under the radar of reputational risk,
and those outside of global supply chains have fewer incentives to act.
At scale, workers in small businesses face more challenging working
conditions and lower wages.
But respect for human rights is tough for all companies. It’s about
changing the way business gets done, and the way people interact in the
workplace and beyond. This isn’t straightforward for businesses of any
size, and those that claim it is are likely only scratching the surface
of what their responsibility implies. Respect for human rights
is not more or less difficult for SMEs than for larger businesses; it is
just difficult in different ways. It’s also easier in certain ways. SMEs should take advantage of that in their bid to respect human rights.
June 28 marks the 50th anniversary of the Stonewall uprising, the event that sparked the modern lesbian, gay, bisexual, transgender and queer (LGBTQ) movement. Ever since, queer communities have taken their fight for justice to the streets all over the world in their yearly Pride march. In a few (mostly Western) cities, Pride has become a celebration of diversity and inclusion. In some, it continues to be an outcry against hate and violence. And in many, where state persecution against gender and sexual minorities prevails, it is still a valiant, life-risking venture undertaken by a handful of activists in the name of visibility and justice.
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More and more, Pride is also becoming an annual reminder to companies both big and small to consider their role and responsibility with regards to LGBTQ rights. Too many companies opt for cautious pragmatism, centering their analysis around the opportunities and risks to their business. In markets where LGBTQ rights continue to be a contentious topic, companies usually shy away from demonstrating strong support, fearing that doing so could taint their brands, unleash political repercussions or even endanger their presence in a specific market. Conversely, companies can rush to be bold, loud and opportunistic where they see prospects of upping sales for a quarter by commodifying diversity, with targeted messages of supposed allyship and products washed with a rainbow veneer. This approach -also known as pinkwashing– naturally leads to unfortunate inconsistencies, with multinational businesses using one hand to wave rainbow flags in New York, London or Cape Town, and the other to censor or dismiss queer narratives in Jakarta, Nairobi or Sao Paolo.
Pride is also becoming an annual reminder to companies both big and small to consider their role and responsibility with regards to LGBTQ rights.
To prevent this dissonance, companies should take a principled approach to respecting and helping advance LGBTQ rights. The UN Guiding Principles on Business and Human Rights (UNGPs) offers a lens that can help companies think about sexual orientation, gender identity and gender expression (SOGIE) in a way that puts people -and not only share value- at the center of their thinking and their decisions.
Start with a stethoscope, not a bullhorn.
Most companies that decide to support LGBTQ rights take the ‘bullhorn’ approach. They target markets where they can be ‘loud and proud’, and look for ways to boost their queer allyship, through rainbow products, donations or ‘inclusive’ advertising. Not many companies, however, start their search from within. Using a ‘stethoscope’ approach means that, before a company considers making a public statement on LGBTQ rights, it should assess how its products, services, operations and practices are impacting (or could impact) LGBTQ people negatively.
Companies can take a stethoscope approach by asking at least these three questions:
How are we treating our own people?
Start by looking at your own policies, environment, and culture through a lens of inclusion and nondiscrimination. Does your company offer a safe, judgment-free environment for people to express and live their own identities? Does your business have recruitment, retention, promotion, representation and overall human resource policies that specifically prevent and address discrimination and harassment based on SOGIE? Does your health insurance provider offer support to transgender employees, same-sex couples, and other populations with particular health needs? Are there support and counseling mechanisms in place to address mental health needs? Is there a safe and effective channel to report grievances that LGBTQ staff feel comfortable using?
How do we conduct our business?
This question asks you to take a look at the nature of your business, and ensure there is no SOGIE discrimination in how you design, produce, offer, advertise, and sell your products and/or services. It also means performing proper due diligence to seek to ensure that there is no discrimination and/or violence against LGBTQ people along your value chain, or in how your products and services are made, delivered or used.
Where and how do we choose to invest?
Most of the world continues to be highly hostile to LGBTQ people. Currently, a third of all UN Member States criminalize same-sex consensual activity (including 11 where the death penalty is still on the books, one of them by stoning). Many others have legal barriers preventing LGBTQ people from exercising their rights, fail to recognize their families, or at the very least, lack comprehensive protections against violence and discrimination based on SOGIE. In this context, where and how a company decides to invest matters. This does not mean that companies should necessarily steer clear from adverse markets. However, they should make decisions with due attention to the severe human rights risks that exist in each market, and the way in which their investments could empower those who are persecuting LGBTQ people. In fact, some companies are realizing that, as investors, they have important leverage they can use creatively to reduce risk and advance LGBTQ rights.
Taking the ‘stethoscope’ approach does not mean that companies should not take a public stand in favor of equality.
These three questions can help companies start conversations to identify risks, put in place mitigation measures to address them, and design a principled process for decision-making. They offer a framework that should be informed by effective and ongoing stakeholder engagement. This requires an approach that understands both the similarities and vast differences that exist in the diverse sexual and gender identities encompassed by the LGBTQ acronym. Too many businesses fail to prevent risk to people (or even end up making things worse) because they had good intentions but misinformed solutions.
But, wait! Does this mean we should stop doing pride marketing campaigns?
Taking the ‘stethoscope’ approach does not mean that companies should not take a public stand in favor of equality. When used thoughtfully, a company’s voice can be transformational. However, when done haphazardly, it can be inadequate, detrimental and even put people’s lives at risk. Making the right call means understanding the context when assessing whether a company’s voice should be loud and public, subtle and targeted, collaborative and part of a coalition, or silent, ceding the space for others to have their voices heard instead.
Above all, companies should learn when and how to use their voice to spotlight LGBTQ rights, rather than using LGBTQ rights to cast a spotlight on themselves. Because as much as the support of a company can help move things forward, true allies know that respecting the history of a rights movement also means knowing when to lead from behind.
There is much debate about the roles and responsibilities of financial institutions when it comes to respecting human rights. But there is one point on which we can all agree: in too many cases, remedy is not available for people who are harmed by business activities, which are often connected in some way to the products and services of global financial institutions.
While there are many reasons for this remedy gap, two seem to emerge time and again:
First, impacts are often remote. Sometimes they occur in the global operations of clients or portfolio companies directly, but often they are even deeper within these businesses’ value chains. It can be challenging for a financial institution or any business that is far away and poorly-equipped to investigate allegations of impacts to establish facts on the ground, particularly when those facts might be disputed.
Second, the primary responsibility for providing remedy will often rest with other parties who caused or contributed to the harm, rather than the financial institution itself. Yet these parties are often less aware of their responsibilities, less committed to meeting them, and less equipped to do so. Meanwhile, businesses further up the value chain often default into thinking that remedy is less relevant for them because they did not cause the harm.
The Current Conversation on Financial Institutions and Remedy
In too many cases, remedy is not available for people who are harmed by business activities, which are often connected in some way to the products and services of global financial institutions.
At Shift, we have worked for several years with a wide range of financial institutions and their stakeholders, including commercial banks, export credit agencies, national development finance institutions and institutional investors. Throughout our engagements, we’ve seen how those making efforts to address the remedy gap often approach it through a well-intentioned yet limited lens.
Much of the focus has been on ensuring that financial institutions
establish their own grievance mechanisms to address impacts they are
connected to through clients and portfolio companies. Although such
mechanisms have an important role to play, they alone are unlikely to close the remedy gap in a meaningful way.
Most will face significant challenges in accessibility, even before
facing the related challenges around remoteness. For example,
stakeholders may not know which financial institutions are connected to a
business causing an impact when seeking to resolve complaints. Institutions
will also only be able to deliver remedy if the parties causing the
harm – clients, their supply chain partners, and other entities they may
be connected to – participate constructively in the mechanism.
We’ve also focused on the question of financial institutions’
responsibility, seeking to clarify the circumstances under which
contribution to a harm can be established (creating a clear
responsibility for contributing to remedy). This, too, is an important
conversation. However, these debates are often contentious, and even if
we establish criteria, will continue over how these apply to each
particular circumstance. And regardless, there will still be a
substantial number of impacts financial institutions remain linked to
where they will not have a responsibility to contribute directly to
remedy, but where they will be expected to use leverage to seek to address the impacts going forward.
Senior Advisor David Kovick presents a briefing paper on modern slavery in the financial sector to members of the Liechtenstein Initiative. (Courtesy of the Liechtenstein Initiative)
Expanding the Conversation: An Ecosystem Approach to Remedy
At Shift, we have been thinking about how to unlock current conversations on responsibility, remedy and financial institutions. And we have found it quite helpful to expand the focus of current conversations to ask an additional set of questions.
Rather than focusing solely on who is responsible for providing remedy, we are asking who can play what roles in enabling remedy.
Rather than concentrating solely on whether a global business or financial institution should build a grievance mechanism, we have been asking what roles a financial institution can play to strengthen the broader grievance architecture.
And, rather than focusing solely on who is responsible for providing remedy, we are asking who can play what roles in enabling remedy.
We call this a remedy ecosystem approach. It’s not
about shifting responsibility. Rather, it’s an integral part of meeting
responsibility by thinking about how financial institutions can use
their leverage differently to enable remedy in practice.
The ecosystem framing brings a focus to preparedness for remedy, by asking how financial institutions can use their leverage to strengthen the grievance mechanism architecture, and how they can build their leverage with clients at an early stage, before impacts occur. For example: What criteria could help financial institutions better prioritize those client relationships where effective grievance mechanisms are more critical? What set of questions could help financial institutions better assess the effectiveness of the pathways that exist to raise concerns about impacts? What type of support could financial institutions proactively provide to strengthen those mechanisms? What types of up-front commitments, contract clauses, and conversations with clients could help build more leverage for remedy if impacts should occur down the road?
It also transforms how we think about enabling remedy in specific cases, by exploring a range of ways financial institutions can use their leverage once impacts have occurred. For example: What roles could financial institutions play in bringing a greater focus to conversation about remedy when severe impacts occur? What steps could financial institutions take to support joint-fact finding between affected stakeholders and businesses when impacts are alleged to have occurred, but the facts are disputed? How could financial institutions best use their leverage to ensure quality of process when grievances are raised through various channels.
Putting the Ecosystem into Practice
We have been exploring the elements of this ecosystem approach over the past several years with a number of our partners, including individual financial institutions, industry associations, civil society organizations, and multi-stakeholder platforms. The way it shifts conversations from a purely adversarial and defensive posture into a constructive dialogue about getting to more meaningful outcomes for people has been eye-opening.
The ecosystem framing brings a focus to preparedness for remedy
We first started exploring this ecosystem approach in our 2014 report on remedy and grievance mechanisms. We have since introduced this approach in a briefing note for the Financial Sector Commission on Modern Slavery and Human Trafficking, and in some depth in the expert advice we provided to the Equator Principles Association to inform the Equator Principles update process in 2018. We have also been helping shape conversations in the Dutch Banking Sector Agreement, which will soon publish a paper starting to explore this ecosystem approach in asset-based financing and corporate lending.
We are excited to see how the remedy ecosystem approach can help
break through some impasses that have often prevented the financial
sector from meaningfully addressing remedy. We look forward to
continuing the dialogue with financial institutions and stakeholders,
and seeing how these concepts are applied in practice.
Learn more about our Financial Institutions work here.
In 2018, our work on the Valuing Respect project made one thing clear: better evaluation of business respect for human rights starts with reconnecting to what we are trying to achieve in the world.
That is, to remember that corporate policies, systems and programs
have always been the means, not the ends, of the responsible business
agenda. As we continue our research in 2019, we are field testing a new
approach by asking investors, civil society and businesses to step out
of their comfort zones and question their assumptions using the beta
version of our first Valuing Respect tool.
Valuing Respect Project Lead Mark Hodge facilitating a consult in Singapore Image courtesy ASEAN CSR Network
Looking Back
2018 was a fascinating year. We engaged with hundreds of people from business, civil society, government and the investment community, and held consultations in Europe, South-East Asia, Sub-Saharan Africa and North America. In parallel, we conducted empirical research to understand why the way we measure corporate human rights performance isn’t working. For example, we came to realize that 70% of the 400+ “S” indicators used across the major ESG tools, focus on policy commitments, inputs, and activities, not on actual results.
In sum, we confirmed our main hypothesis: when testing the
effectiveness of a company’s process or program, most people jump
straight to measurement. They develop indicators, agree on metrics and
start collecting data. This certainly offers more information about what
is happening. For example, data can tell us which companies are making
policy commitments, the general scale and location of forced or child
labor in a supply chain, the number and nature of local community
grievances at a mining location, or even the views of workers on their
workplace realities.
But measurement and monitoring alone do not help us to understand why and how things are happening, nor whether the things we measure are a sign that we are achieving desired outcomes. We end up flooded with information, but with no rigorous way of making sense of it. As one participant in our New York consultation noted, we end up “counting without context”. We have more knowledge, but not always more wisdom.
A New Logic
2018 helped us see the problem, but it also got us thinking about
what a better approach looks like. After much thought–and hundreds of
hours of consultation– we came up with an interesting proposition: what
if we looked at measurement using a theory of change (TOC) model?
TOC forces a focus on outcomes for the specific people affected by business activities. It also offers an additional component: building the connection between risk to people and risk to business.
We realized that a TOC model offers an interesting new perspective.
It moves away from ‘measuring for the sake of measuring’, and demands
that we think systematically and robustly about the necessary
requirements and conditions to achieve a desired outcome.
It also provides a way for companies and their stakeholders to develop
indicators with reference to the outcomes they want to attain, the means
by which they are trying to achieve them, and the assumptions their
approach depends upon.
Theory of change models are often developed in the fields of
international development and public policy, where they tend to include
the same core elements: inputs, activities, outputs, outcomes and
impacts, based on a cause and effect sequence. In the Valuing Respect
project, we have adapted the model to fit the particularities of
evaluating business respect for human rights.
Shift President Caroline Rees and Project Lead Mark Hodge beta testing the Theory of Change Tool with Pepsi
Whereas other models focus on a broader and more remote societal
impact, which may hide negative impacts on the most vulnerable groups
through appeal to overall social benefit, TOC forces a focus on outcomes for the specific people affected by business activities. It also offers an additional component: building the connection between risk to people and risk to business.
Perhaps the most important adaptation we made to the model is adding a deliberate focus on ‘practices and behaviors’ between ‘outputs’ and ‘outcomes’.
That is, to look beyond activities and their immediate outputs, and to
focus on the desired changes in human behavior (and thus, in outcomes
for people. )
We need to go from ‘it makes sense’ to, ‘it makes a difference’.
This changes the measurement paradigm. Rather than ticking boxes and counting actions, the TOC model tells us whether our approach to solving issues is resulting in positive outcomes. Whether, for example, audits, trainings, or policies are leading to better working conditions. Once a clear and replicable connection between certain practices/behaviors and outcomes is established, the former can become valuable indicators of the latter, as they can be more easily measured over time and at scale.
Field Testing
We know this makes sense in theory, but now we need to see it in
action. We need to go from ‘it makes sense’ to ‘it makes a difference’.
That is why, in 2019, we are working with companies and their stakeholders to field-test the beta version of our Theory of Change tool.
The tool aims to provide a simple step-by-step method for companies
and their stakeholders to develop and work with indicators in ways that
support learning about what is working and why, in relation to their
specific objectives for advancing business respect for human rights. We
will be testing it with practitioners both in the design phase of new
interventions, and to evaluate and improve existing interventions. We
will consider how to apply it to action taken by companies individually,
as well as with industry peers or via multi-stakeholder initiatives.
We’ll be sharing insights from practitioners on lessons learned, and how they affect decision making and resource allocation in favor of measures that deliver tangible outcomes for workers, consumers, and communities.
In early 2020, we will publish these insights along with the tested and refined methodology and supporting resources.
But wait! Don’t corporate policies, governance arrangements and business processes matter?
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