Increasingly, investors are becoming interested in understanding to what extent companies are respecting human rights, and whether their efforts are likely to improve the lives of affected people. A good place to start is by reading a company’s human rights disclosure. But company reports are often hard to analyze. On the surface, many companies will seem to be doing the right thing. But, how can investors tell whether what they are reading is meaningful and in line with what the UN Guiding Principles expect? This collection of resources was designed by Shift to help investors apply a people-centered approach to gain deeper insights from company disclosure.
In each issue, we have selected a number of excerpts from different companies that have generally taken a forward position on business and human rights and are considered leaders in reporting in their sector. We provide a brief analysis of each excerpt, highlighting strengths in the insights it offers, and note some elements that could make it stronger.
In March 2020, Shift published the first two issues of the series:
ISSUE 1 – Engagement with Vulnerable Stakeholders
______ This resource is meant to serve as a guide for investors and others in analyzing companies’ disclosure on their stakeholder engagement practices. The aim is to help readers identify potential strengths and gaps in the underlying performance of the company in engaging vulnerable groups.
This resource uses company reporting from Marks & Spencer, Best Buy, Teck, Adidas and Rio Tinto.
_____ This resource uses excerpts from companies’ reporting on their efforts to tackle gender-based impacts. In particular, it looks at whether a company’s disclosure indicates that it sees gender impacts as relevant for business; whether a company’s disclosure suggests it has real insights into women’s experience in the workplace; and whether a company’s disclosure suggests it is alert to other dimensions of gender-based discrimination.
______ This resource focuses on excerpts from company reporting on setting targets and tracking performance. Specifically, it examines whether the company only reports on issues it deems material to the business; if the only indicated external input for the human rights issues the company prioritizes is a generic survey; if a company’s list of material issues includes both individual human rights and a category of ‘human rights’; and whether human rights issues are listed in company disclosure without further explanation of how these relate to the business’s own operations and value chain.
Issue three uses company reporting from Total, Nestlé, ABN AMRO, Newmont and Pepsico.
ISSUE 4 – Taking Action on Systemic Human Rights Challenges
______ This resource focuses on excerpts from company reporting on systemic human rights challenges. Specifically, it looks at whether the company positions itself solely as part of the solution to the human rights challenge concerned; whether the company only reports its membership in groups or collective initiatives that tackle certain systemic human rights risks without describing its engagement with these initiatives and how this contributes to change; and whether the company reports on any actions it has taken unilaterally to address its own potential involvement with that issue.
The fourth issue uses company reporting from H&M, ASOS, Mondelez, Anglo American and Microsoft.
______ This resource focuses on examples from companies of targeted action. It delves into whether the company only reports generally on its process for identifying and addressing human rights impacts; whether the company reports on how the perspectives of affected stakeholders informed its understanding of the impact and its decisions on what action to take; and whether the company talks about engagement with suppliers or other business partners on human rights-related issues in terms of compliance.
This resource uses company reporting from ING, M&S, FMO, ASOS and Unilever.
ISSUE 6 – Setting Targets and Tracking Performance
______ The final issue focuses on excerpts from company reporting on setting targets and tracking performance. It looks at whether the company’s targets set and track in reporting are limited to activities or outputs; whether the company follows up on the extent to which all of targets set in one reporting period were met in the next; and whether data on human rights performance is aggregated such that meaningful insights cannot be drawn from the disclosure.
This resource uses company reporting from Unilever, Nestlé, Teck, M&S and C&A.
Increasingly, investors are becoming interested in understanding to what extent companies are respecting human rights, and whether their efforts are likely to improve the lives of affected people. A good place to start is by reading a company’s human rights disclosure. But company reports are often hard to analyze. On the surface, many companies will seem to be doing the right thing. But, how can investors tell whether what they are reading is meaningful and in line with what the UN Guiding Principles expect? This collection of resources was designed by Shift to help investors apply a people-centered approach to gain deeper insights from company disclosure.
In particular, this resource uses excerpts from companies’ reporting on their efforts to tackle gender-based impacts. In particular, it looks at:
Whether a company’s disclosure indicates that it sees gender impacts as relevant and important for its business;
Whether a company’s disclosure suggests it has real insight into women’s experience in the workplace;
Whether a company’s disclosure suggests it is alert to other dimensions of gender-based discrimination.
This may also be a useful tool for practitioners within businesses who want to improve how they report on these issues, and for other stakeholders who are interested in analyzing and assessing the quality of a company’s human rights disclosure.
Increasingly, investors are becoming interested in understanding to what extent companies are respecting human rights, and whether their efforts are likely to improve the lives of affected people. A good place to start is by reading a company’s human rights disclosure. But company reports are often hard to analyze. On the surface, many companies will seem to be doing the right thing. But, how can investors tell whether what they are reading is meaningful and in line with what the UN Guiding Principles expect? This collection of resources was designed by Shift to help investors apply a people-centered approach to gain deeper insights from company disclosure.
In particular, this resource uses excerpts from companies’ reporting on their engagement with vulnerable stakeholders. We have selected five excerpts from companies that have generally taken a forward position on business and human rights and are considered leaders in reporting within their sector. We provide a brief analysis of each excerpt highlighting strengths in the insights it offers and noting elements that could make it stronger.
This may also be a useful tool for practitioners within businesses who want to improve how they report on these issues, and for other stakeholders who are interested in analyzing and assessing the quality of a company’s human rights disclosure.
Seguido, las empresas tienen dificultades para identificar e implementar acciones significativas que atiendan los riesgos a los derechos sindicales en sus cadenas globales de valor. Ello por distintos factores:
Externos, como los que surgen del contexto en el que operan y en el que se extienden sus cadenas de valor. Ello incluye las leyes y regulaciones, el estado de derecho, las prácticas sociales que enmarcan las percepciones culturales sobre los sindicatos y la capacidad local de sindicatos y empresas socias para llevar a cabo acciones en la práctica.
Modelos de negocio, que pueden resultar en riesgos exacerbados a los derechos sindicales si no son propiamente administrados. Ello incluye el tener insumos de mercados de alto riesgo (o bajo costo), el uso intensivo de trabajadores contratistas o temporales, y las propias práctiacas de adquisición de las empresas.
La cultura corporativa y las prácticas empresariales, lo que puede incluir suposiciones y actitudes hacia los sindicatos por parte de las oficinas centrales, así como debilidades en el proceso de debida diligencia.
En la parte 2.2 de esta publicación se incluye también una herramienta de diagnóstico, que puede servir para que las empresas entiendan cómo y dónde pueden existir los riesgos para los derechos sindicales.
Asimismo, se delinean algunos ejemplos de pasos que pueden tomar las empresas dependiendo de los riesgos que existen, y ocho casos práticos de casos reales en los que otras empresas han logrado sobrepasar estos retos.
In December 2019, Shift and the Finnish Presidency to the EU Council co-organized the conference ‘Business & Human Rights: Towards a Common Agenda for Action’, a space where businesses, government representatives and civil society organizations engaged in a multi-stakeholder dialogue to discuss business and human rights and, in particular, a collaborative and constructive way forward on this critical agenda.
In his initial remarks, Professor John Ruggie emphasized that while we often hear the term ‘smart mix’ being employed to mean voluntary measures, the concept is broader and should be understood to include mandatory measures. (Watch the full video)
During the conference, participants discussed the role of state financing in promoting human rights due diligence; the role of regulation in a smart mix to foster business respect for human rights; and the use of collective leverage and cooperation to improve human rights outcomes. The conference concluded with the launch of Agenda for Action -the outcome paper of the conference.
Shift worked with ICMM in 2018 and 2019 to update the guidance they provide to their members on how to put in place effective operational-level grievance mechanisms, in line with the effectiveness criteria of the UN Guiding Principles. Our role included co-facilitating workshops with ICMM members; developing case studies with the support of ICMM members and inputting into the new guidance.
These remarks were originally delivered by Professor John Ruggie at the Conference ‘Business & Human Rights: Towards a Common Agenda for Action’, on December 2, 2019. The Conference was co-organized by Shift and the Finnish Presidency of the Council of the EU.
Many thanks to the government of Finland for convening this timely and important conference.
It is timely because a new European
Parliament has been elected and a new Commission selected. It is
important because we live in a turbulent world that challenges
foundational premises we had been able to take for granted. The European
Union is one of the most significant governance innovations in modern
times. It all began modestly, with six countries coordinating their coal
and steel sectors in the wake of World War II. Today, the EU – whether
it is 27 or 28 – constitutes an economic and social superpower. Now more
than ever, the EU needs to think of itself in those terms.
I am pleased that Finland chose business
and human rights as the focus of its EU Presidency and of this
conference. It leads us to address the people part of the people and
planet challenges faced by all humanity. The conference agenda asks the
question: How do we most effectively advance action on the EU level? My
job this morning is to sketch out the backstory to our discussions and
suggest some strategic directions.
Let me begin with the most basic question:
What is business and human rights all
about? The answer varies depending on the vantage point. In big-picture
terms, it is about the social sustainability of globalization. Some
years ago, my favorite boss, Kofi Annan, said: “if we cannot make globalization work for all, in the end it will work for none.”
Today, people around the world are telling us that we have fallen
short, that the benefits and burdens of globalization have been
unequally distributed within and among nations. The result is public
resentment and loss of trust in institutions of all kinds.
When seen from the perspective of
enterprises, business and human rights is about ways they can recover
trust and manage the risk of harmful impacts. Undeniable progress has
been achieved by individual firms, business associations, and even
sports organizations. But not enough, and not by enough of them.
For governments, business and human
rights is at the core of new social contracts they need to construct for
and with their populations. This includes decent work and living wages,
equal pay for work of equal value, social and economic inclusion,
education suitable to the needs and opportunities of the 21st century, and effective social safety nets to buffer unexpected shocks to the economy or the person.
For governments, business and human rights is at the core of new social contracts they need to construct for and with their populations.
For the individual person whose rights
are impacted by enterprises, business and human rights is about nothing
more – but also nothing less – than being treated with respect, no
matter who they are and whatever their station in life may be, and to
obtain remedy where harm is done.
My second point is to remind us that
formal international recognition of business and human rights as a
distinct policy domain is relatively recent. At the UN level, the first
and thus far only formal recognition dates to 2011, when the Human
Rights Council unanimously endorsed the Guiding Principles on Business
and Human Rights.
The state duty to protect against human rights harm by third parties, including business; the responsibility of enterprises to respect human rights, regardless of whether states meet their own obligations; and the need for greater access to remedy
by people whose human rights have been abused by business conduct. The
OECD Guidelines on Multinational Enterprises quickly incorporated Pillar
II virtually verbatim.
The UNGPs comprise 31 Principles and
Commentary on what each means and implies for all actors: states,
enterprises, as well as affected individuals and communities. They are
not merely a text. They were intended to help generate a new regulatory
dynamic, one in which public and private governance systems, corporate
as well as civil, each come to add distinct value, compensate for one
another’s weaknesses, and play mutually reinforcing roles—out of which a
more comprehensive and effective global regime might evolve.
That brings me to the key issue of
strategy – how to reinforce and add to this transformative dynamic. The
Guiding Principles embody two core strategic concepts: advocating a
“smart mix of measures,” and using “leverage.” I’ll take them up in
turn.
We often hear the term “smart mix of measures” being employed to mean voluntary measures alone. But that gets it wrong. Guiding Principle 1 says that states must have effective legislation and regulation in place
to protect against human rights harm by businesses. Guiding Principle 3
adds that states should periodically review the adequacy of such
measures and update them if necessary. They should also ensure that
related areas of law, for example corporate law and securities
regulation, do not constrain but enable business respect for human
rights. So, a smart mix means exactly what it says: a combination of
voluntary and mandatory, as well as national and international measures.
We often hear the term “smart mix of measures” being employed to mean voluntary measures alone. But that gets it wrong. (…) A smart mix means exactly what it says: a combination of voluntary and mandatory, as well as national and international measures.
A number of EU member states and the EU
as a whole have begun to put in place mandatory measures that reinforce
what previously was voluntary guidance to firms on corporate
responsibility. These include reporting requirements regarding modern
slavery, conflict minerals, and non-financial performance more broadly,
as well as human rights and environmental due diligence. Such
initiatives are aligned with the spirit of the UNGPs, and they are
important steps in adding “mandatory measures” into the mix. Still, many
leave a lot to the imagination – of company staff, consulting firms,
and civil society actors among others. More should be done to specify
what meaningful implementation looks like, in order to avoid
contributing to the proliferation of self-defined standards and
storytelling by firms. Also, with limited exceptions currently no direct
consequences follow from non-compliance. Nevertheless, the ascent of
Pillar I is underway.
Using leverage
A second key strategic concept embedded in the UNGPs is “leverage.”
Here are three examples of how leverage can play into the core question
of how most effectively to advance implementation at the EU level.
First, individual member states and the EU as a whole are economic actors: they procure goods and services, provide export credit and investment insurance, issue official loans and grants, and so on. Each agency involved has particular objectives of its own, to be sure. But in all cases, they should consider the actual and potential human rights impacts of beneficiary enterprises with which they engage.
Second, the UNGPs state that the responsibility of enterprises to respect human rights requires that they avoid causing, contributing to, or otherwise being linked to adverse impacts, and to address them when they occur. This extends throughout their value chains. Of course, all firms, including the suppliers of goods and services within global value chains, have the same responsibility to respect. But parent companies and companies at the apex of producer- or buyer-led value chains should also use whatever leverage they have in relation to their subsidiaries, contractors, and other actors in their network of business relationships. They should establish clear policies and operational procedures that embed respecting rights throughout their entire value chain system. Where leverage is limited it may be possible to increase it, for example by providing incentives or collaborating with other actors.
In turn, home, as well as host states of multinational enterprises, have significant roles to play through laws and regulations that enable and support private international ordering of this sort. Global value chains are exceedingly complex. If parent or lead companies fear that they may be held legally liable for any human rights harm anywhere within their value chains, irrespective of the circumstances of their involvement, it would create the perverse incentive to distance themselves from such entities. It is important that regulation gets the balance right.
A third way in which leverage can play into effective implementation at the EU level is by reinforcing positive trends already underway in the business community, but which need strengthening. Perhaps the most important instance today is ESG investing – investment decisions that combine environmental, social, and governance criteria with financial analytics. ESG investing now accounts for $31 trillion of all assets under management worldwide, or one-quarter of the global total. And while it may not be known to many investors themselves, the S in ESG is all about human rights. It seeks to assess how firms conduct themselves in relation to the broad spectrum of internal and external stakeholders – workers, end-users, and communities. It typically includes such categories as health and safety, workplace relations, diversity and social inclusion, human capital development, responsible marketing and R&D, community relations, and company involvement in projects that may affect vulnerable populations in particular.
But here is the problem: it is now
generally agreed that a major impediment to the further rapid growth in
ESG investing is the poor quality of ESG data provided by raters. Common
taxonomies and templates are still in their infancy and evolving
haphazardly even as demand for ESG products is increasing. This poses
problems for investors who seek ESG opportunities and may be paying a
high price for flawed data, as well as for companies striving to improve
their practices that go unrecognized. The problem is especially severe
in the S category – addressing human rights-related issues.
In short, a great variety of opportunities exists for exercising leverage in order to generate further positive developments in business and human rights.
The EU has developed a comprehensive
taxonomy for investment on climate-related standards, indices, and
disclosure. That should have a significant impact for strengthening the E
in ESG. Also issuing official guidance to the S in ESG investing,
making clear its human rights bases, could have a transformative effect
on global capital markets.
In short, a great variety of
opportunities exists for exercising leverage in order to generate
further positive developments in business and human rights.
Allow me briefly to add two thoughts in closing.
The first is that business and human
rights, by definition, is a domain that requires horizontal vision and
cross-functional collaboration – whether within companies, governments,
or the EU. Within the European Commission the task has been largely left
to the External Action Service, with the support of other
directorates-general. That is too narrow a lens to do justice to the
broad array of challenges, and to have the impact that could be
achieved. One of the singular contributions of National Action Plans for
implementing the Guiding Principles is that they have required the
whole of governments, for the first time ever, to consider business and
human rights as a single policy space. The same holds true at the EU
level.
My other concluding thought concerns the
ongoing negotiations on a binding business and human rights treaty in
Geneva. International legalization is both inevitable and desirable to
help level the playing field in a world of global business. In fact, at
the conclusion of my mandate in 2011, I proposed that governments
negotiate a targeted legal instrument addressing business involvement in
gross human rights violations, coupled with the need for greater
cooperation between states to provide remedy. Some parties objected on
the grounds that this did not go far enough, others that it went too
far. It became the only one of my recommendations that did not get
adopted.
International legalization is both inevitable and desirable to help level the playing field in a world of global business.
The current treaty process began in
2014. From the outset, I expressed my doubts about attempting to
shoehorn the entire business and human rights domain into a single,
overarching treaty. In my judgment, this is far too complex and too
contested a domain for such an endeavor to produce meaningful results.
Indeed, the risk is that if it were to “succeed” in the sense of being
adopted by some minimum required number of states, it would be by
locking in lower expectations and fewer incentives for innovative
practical approaches than exist today. Nothing I have seen in the five
years of negotiations suggest otherwise.
Having said all that, I do find it
puzzling that the EU has taken no substantive position in these treaty
negotiations. It is puzzling because the EU was an early supporter of
the “smart mix of measures” idea. This leads me once again to thank the
government of Finland for bringing business and human rights to the
forefront of its EU Presidency, with the aim of contributing to a common
agenda for action. I very much hope that Finland’s successors – as well
as the Commission and Parliament – will continue on this path.
Thank you for your attention, and I look forward to our discussions.
Au cours de la phase 1 de cette étude, Shift a analysé le reporting en matière de droits de l’homme des 20 plus grandes entreprises françaises de 2017 et début 2018, avant que les entreprises ne soient tenues de se conformer à la loi sur le devoir de vigilance. Dans cette deuxième phase, nous examinons leurs premiers plans de vigilance et leurs rapports de mise en œuvre de 2018 et 2019.
Cette étude en deux parties avait pour objectif de déterminer si la loi française sur le devoir de vigilance, qui impose une obligation de divulgation et de diligence raisonnable en matière de respect des droits de l’homme, aurait une influence sur la maturité du reporting des sociétés, par rapport aux attentes des Principes directeurs des Nations Unies relatifs aux entreprises et aux droits de l’homme (UNGP). Étant donné que le processus d’amélioration du reporting attire souvent l’attention des sociétés sur leur performance sous-jacente, nous avons également considéré si des améliorations pratiques pouvaient être déduites de leur reporting.
Nous espérons que les conclusions de cette étude guideront les entreprises vers un meilleur alignement avec la loi sur le devoir de vigilance et les UNGP, tout en soulignant les opportunités pour des lois similaires de mieux obtenir l’impact escompté.
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