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• People are the core business of employment and recruitment agencies. As such, labor providers can positively or negatively impact the direct hire employees they recruit for client companies and the agency workers they place, as well as their families, and local communities in the migrant worker’s home state.
• Negative impacts can occur at all stages of the recruitment and employment process and affect workers’ rights, including their freedom from all forms of forced or compulsory labor; their right to just and favorable conditions of work; their right to privacy, women’s and migrant workers’ rights; the right to non-discrimination; the right to form and join a trade union and the right to collective bargaining; and the right to an adequate standard of living.
• Cross-border recruitment of migrant workers intersects with heightened vulnerability where individuals experiencing extreme poverty may feel their choices are limited and/or lack knowledge about their rights in the host state. Moreover, regulation that ties a worker’s immigration status to a particular employer (who acts as a sponsor), or which requires the worker to gain employer permission to exit the country, places the worker in a position of particular vulnerability: if the worker experiences abuse or exploitation, or sees his/her personal documents retained, it can be difficult to seek redress out of fear of losing a job and immigration status.

Operational, Reputational and Financial Risks: Companies are increasingly subject to scrutiny for their own labor practices and practices in their supply chains, including around fair recruitment. For example:

• Europe’s largest hotel group, Accor, has been the subject of reports linking it to the plight of its workers in the United Arab Emirates during the COVID-19 pandemic. While the group notes that it respects all local laws by continuing to provide workers with food and accommodation during furlough, it was reported that migrant workers are “trapped” in the country with no pay, making it impossible for them to reimburse the money owed to cover recruitment fees.
• UK apparel brands ASOS and John Lewis were criticized after a supplier factory closed down in Mauritius, leaving the Bangladeshi migrant workers stranded, with no severance pay, or proper accommodation and food after the factory cut their supplies and electricity. ASOS had to intervene by working with the local government to restore basic necessities, and with a local labor union to facilitate wage payouts.

Legal and Regulatory Risks: Companies sourcing low-paid labor from labor providers in circumstances in which they do not have oversight over treatment of workers may also expose themselves to lawsuits and formal complaints. For example:

• Criminal groups behind recruitment agencies in the UK supplying Sports Direct and major supermarkets were convicted of modern slavery after exploiting Polish migrant workers. The individuals convicted had sent migrants to work through agencies to pack shoes and clothes in warehouses, while they retained over half of their weekly wages.
• Woolworths in Australia agreed to conduct independent audits of cleaning contractors on an annual basis and rectify underpayment of cleaners after a Fair Work Ombudsman investigation uncovered rampant exploitation referred to as workers being “systematically ripped off.” The company accepted that “in the past” its governance of contract cleaning had not “fully prevented an environment where employees have been vulnerable to exploitation.” The company has committed to ensuring contract prices going forward are sufficient to meet minimum employee entitlements.

*For an explanation of how companies can be involved in human rights impacts, and their related responsibilities, see here.

Addressing impacts to people associated with this red flag can contribute to, inter alia:

• How does the company ensure protection of workers’ rights for outsourced labor? To what extent do policies and protections apply to temporary/agency workers?
• Have we reviewed the labor provider’s Code of Conduct and other relevant policies to check whether they include commitments not to charge recruitment fees to workers and not to retain their identity documents? Are there any “red flags” present, e.g. where the labor provider is unwilling to provide details about their processes or where there are historical complaints or negative findings against the provider?
• Is the labor provider offering “too good to be true” rates that would not allow it to meet minimum total wage costs. (including sick pay and statutory holidays), business overheads, management costs, etc.?
• Do we have a clear service agreement with the labor provider, including clauses on social compliance (no recruitment fees, no unlawful retention of documents and valuables) as well as detailed charge rates, a confirmation that workers will be paid, a clear agreement to ensure the health and safety of all workers as a shared responsibility between the labor user and provider?
• Do we conduct checks or audits of our labor provider to check that proper recruitment and contractual arrangements are in place; wages paid are correct, on time and without improper deductions; there is no debt bondage, harsh treatment or intimidation; workers’ accommodation is of an acceptable standard, etc.?Are the auditors and our staff equipped to detect the potentially complex pressures, abuses and exploitation of workers by labor providers?
• Are the workers on our site who work for labor providers aware of who to report problems to and are they likely to feel safe doing so? Are we sending the message that we take these issues seriously and are available to the workers who would want to raise issues? What is our process to handle any concerns or problems raised?

*Mitigation examples are current or historical examples for reference, but do not offer insight into their relative maturity or effectiveness.

Alternative models generally involve avoiding third party labor providers in circumstances of higher risk, in favor of direct employment relationships, to ensure greater visibility and control over hiring practices and working conditions.

• In response to reports of forced labor linked to migrant recruitment practices in the electronics industry supply chain in Malaysia, HP released its Foreign Migrant Worker Standard in 2014. The standard goes beyond general industry practice in addressing forced labor – which primarily focuses on implementing policies banning recruitment fees – to require that the company’s suppliers directly employ any foreign migrant workers in their workforce. See Shift’s analysis here.
• One example of producer-led practices aimed at tackling forced labor in the form of Sumangali schemes in Southern India, is Penguin Apparel’s Program. The garment manufacturer has eliminated labor brokers and recruitment fees from its hiring processes, ensures local language translation of employment documents, provides training to workers on their rights, conducts audits of its own suppliers and contractors in the search for Sumangali schemes and educates its partners on social management systems. See Shift’s analysis here.
• Unilever is continuing to review the employment of temporary workers within its operations and extended supply chain. Through the Joint Commitment on Sustainable Employment in Unilever Factories with the International Union of Food, Agricultural,
  Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations (IUF), the company agreed to strictly limit the use of non- permanent manufacturing employment to non-recurring tasks. Moreover, the use of “zero-hours contracts” is excluded. The rights- based commitment affirms that “temporary contracts and third-party agency employment relationships can potentially deprive workers of the protections and worker rights outlined in the ILO’s Declaration on Fundamental Principles and Rights at Work and the OECD Guidelines for Multinational Enterprise.”

• Employment & Recruitment Agencies: Sector Guide on Implementing the UN Guiding Principles on Business and Human Rights, published by European Commission, developed by Shift and Institute for Human Rights and Business (2013).
• Responsible Recruitment Gateway.
• Responsible Labor Initiative of the Responsible Labor Alliance.
• Vérité, Fair Hiring Tool.
• Temporary agency work in the electronics sector: SOMO (2012) Discriminatory practices against agency workers.
• Business and Human Rights Resource Center (2019) Inhospitable: How hotels in Qatar & the UAE are failing migrant workers.
• Löning (2018) How Companies can deal with Labour Exploitation in the Agricultural Sector.
• Dhaka Principles for Migration with Dignity.
• International Labour Organization (2016) Regulating International Labour Recruitment in the Domestic Work Sector: A Review of key issues, challenges and opportunities.

Gig economy

According to McKinsey, 20-30% of the workforce in the US and EU-15 countries is involved in the gig economy (although estimates vary).

Classifying an employee as an independent contractor can reduce costs to the company – like payroll taxes and premiums for workers’ compensation – by as much as 30%.

Non-traditional employment can have benefits for some workers, allowing them flexibility in choosing where, when and for whom they work.

However, where these relationships are exploited, it can exacerbate the vulnerability of already vulnerable individuals by shifting costs and risk to workers (without commensurate increase in financial compensation).

Some groups have referred to excessive use of non-traditional employment relationships as a “misclassification business model,” whereby the company “engages the people who actually carry out the core business, and over whose work significant control is exerted, as independent contractors instead of employees.”

When used inappropriately or in geographies without regulatory protections for non-traditional workers, the structure can deny workers access to the benefits that are tied by domestic law to a traditional employment relationship, including:

Financial risks

In December 2019, it was reported that,“venture capitalists are pulling back from [gig economy] start-ups … as the companies face pushback from workers and policymakers critical of their business models.” The Covid-19 outbreak of 2020 exposed inequalities experienced by those in non-employed positions and “moved the issue to the top of the agenda.” In April 2020 the FT noted that Jim Chanos, the US investor, had warned in March that “he was shorting the stock of companies that relied on “gig workers,” on the basis that the crisis would change social and political attitudes to businesses relying on this precarious workforce.”

Operational risks

Commentators have noted that notwithstanding business advantages, some companies also consider “major drawbacks” related to the gig economy, particularly “for employers who need a reliable, collaborative work force.” Moreover, the structure can make it difficult for companies to undertake interventions to increase hourly compensation of workers: research by economists employed by Uber found that when Uber raised the rates drivers are paid, the higher prices to riders led to a drop in demand for rides and therefore left hourly earnings little changed.

Staff recruitment/ Retention risks

Organizations that rely heavily on unpaid or temporary labor, especially where it replaces entry-level jobs, face risks associated with lack of retention of staff with progressively increasing knowledge/skills. Further, the may miss opportunities associated with a more diverse workforce (age, family responsibilities, socio- economic status) by only drawing on a pool of talent with the means to remain unpaid for the period of work.

*For an explanation of how companies can be involved in human rights impacts, and their related responsibilities, see here.

SGD 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all, in particular Target 8.8 Protect labour rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment.

• Do we or our supply chain partner(s) use substantial numbers of non-employed workers (e.g. gig workers, contract workers)?
• Does we have clear guidance to managers on the appropriate use of non-employed workers?
• Do contract workers have the same protections under the law and regulations as our own employees?
  • Consider: Access to anti-harassment and discrimination protections, Minimum wage and overtime protections, Access to unemployment insurance and workers’ compensation
• If not, do we apply its policies to contract workers in order to bridge this gap?
• Do contract workers have the same opportunities to organize as our own employees?
• Do we or a supplier have a deliberate strategy to use contract laborers in order to limit union organization?
• Do we use paid or unpaid interns?
• Can the primary beneficiary of the internship be considered to be the intern? Or is it rather is it us?
• Are interns undertaking similar work to paid employees?

*Moreover, some examples listed below are proposals for mitigating actions that have come from data science and engineering research institutes.

In a groundbreaking step for the gig economy, logistics provider Hermes Parcelnet engaged in a recognition deal with GMB Union under which self-employed workers can choose to become “self-employed plus” and receive benefits such as holiday pay, negotiated pay rates and union representation. In exchange, workers agreed to follow delivery routes specified by Hermes Parcelnet rather than delivering parcels in any order. (See IHRB 2019 for more information).

On gig workers

• Business and Human Rights Resource Centre (2019), “The Future of Work: Litigating Labour Relationships in the Gig Economy”, Corporate Legal Accountability Annual Briefing 2019: Briefing focuses on the “misclassification of workers as “independent contractors” in the gig economy – and the resulting erosion of labour rights.”
• Gig Workers Collective (a non-profit organization of gig worker activists).

On internships

• Fair Internship Initiative.

On contract workers

• Shift/Mondiaal’s “Respecting Trade Union Rights in Global Value Chains: Practical Approaches for Business” (2019) contains diagnostic questions on outsourcing and contract Labor.
• Company example: Oxfam reports on Unilever operations in Viet Nam analyzed Unilever’s efforts to address precarious labor in Unilever’s operations and supply chain in 2013 and again in 2016.
• ITUC Report: Living with economic insecurity: women in precarious work also references submissions by IMF and IUF to SRSG John Ruggie on precarious work.

There are a range of reasons why companies in diverse sectors are collecting and holding data. For example, private hospitals and pharmaceutical companies may do so to improve diagnoses, improve treatment plans and develop medicines; banks may use personal and transaction data to identify fraud; and autonomous vehicle companies may seek to monetize data about customer driving habits to enable individuals to improve insurance premiums. Even so, in order to fully realize these benefits for businesses and people, the following risks must be managed.

• Right to Privacy: Where a company collects, holds or provides third parties with access to data about customers or users, there are inherent and widespread privacy risks. Examples include:
  • Where information about an individual is collected, sold or shared without their consent. This includes when data are used for purposes beyond those originally consented to by a “data subject.”
  • Where data breaches result in individuals’ personal financial or health data being publicly accessible.
  • Breaches of sensitive personal information, such as racial or ethnic origin, political opinions, religious or other beliefs, trade union membership, sex, gender identity or sexual orientation, genetic data, biometric data, or data concerning health.
• Freedom from Arbitrary Attacks on Reputation and Right to an Adequate Standard of Living: Where the personal data becomes accessible to the public, this data can be used to threaten individuals or tarnish their reputations, which can in turn impact victims’ mental health, job prospects and livelihoods.

• Regulatory Risks and Fines: Failure to protect user or customer privacy can lead to investigations, scrutiny and sanction, and many jurisdictions around the world are debating and enacting stricter laws to govern privacy, affecting multinational companies domiciled all over the world. The most notable of these are the EU’s General Data Protection Regulation which governs how personal data must be collected, processes and erased, and sets two-levels of fines.
  • In 2020, British Airways was fined €22 million when their website diverted users’ traffic to a hacker website, impacting the data of over 400,000 customers.
  • In 2019 Marriot International was fined €110 million related to a cyber-attack through which personal data from over 339 million guest records were exposed.
  • In 2019, Google was fined €50 million due to a lack of meaningful consent about how data was being collected and used for the purposes of targeted advertising.
  • In the United States, individual states have also put in place privacy regulations that apply to all industries. One such example is California’s Consumer Privacy Act.
• Legal Risk and Financial Settlements or Penalties: An increasing number of companies have been subject to lawsuits over inadequate action to address risks to people throughout the data lifecycle. Examples include:
  • Facebook paying $550 million to settle a class action lawsuit from Illinois Facebook users accusing the company of violating an Illinois biometric privacy law.
  • An £18 billion class action claim against Easy Jet in which the data of 9 million customers was accessed by third parties in a cyber-attack.
  • Equifax, the US consumer credit score company, paying $425 million following a data breach affecting 147 million people in 2017, some of whom suffered identify theft, fraud and related legal or other costs.

*For an explanation of how companies can be involved in human rights impacts, and their related responsibilities, see here.

Data about individuals can be used to advance a number of SDGs such as those listed below. Addressing impacts to people associated with this red flag can contribute to ensuring that this is done in ways that do not simultaneously increase discrimination, or erode the privacy, reputation and well-being of vulnerable communities.

• Do we have policies, processes and practices that follow the principle of data minimization such that we only collect or purchase data to the degree that is absolutely necessary to accomplish specific tasks we have in mind?
• Have we conducted an assessment, and where necessary put in place mitigation plans, for privacy and other risks to people that may arise across the data life cycle including generation, collection, processing, storage, management, analysis and interpretation?
  • Have we done this for all stakeholder groups that may be at risk including employees, contract workers, prospective employees, customers and users?
  • Are we engaging expert groups and potentially affected groups to ensure we understand the risks they perceive or experience?
  • Do we assess whether and how our terms of service or policies for gathering and sharing customer data might increase human rights risks?
• Do we ensure that customers or users consent to how we gather and use their data, and that their consent is free and informed, including that they:
  • Know that we gather and are in control of data about them.
  • Are informed about how the data will be obtained and held, and for how long.
  • Understand the operations that will be carried out on their data.

*Mitigation examples are current or historical examples for reference, but do not offer insight into their relative maturity or effectiveness.

• Consumer Products and Services: A number of companies have launched privacy-oriented alternatives such as:
  • Messaging App Signal: One of the only apps that has its privacy-preserving technology always enabled and ensures that there is never a risk of sharing moments or sending messages to a non-intended recipient. For more on messaging apps see this article.
  • Search Engine Swisscows: Swisscows does not collect any of their visitors’ personal information such as an IP address, browser information, or device information. They do not record or analyze search terms. The only data that Swisscows records is the total number of search requests it receives each day.
• Enterprise Solutions: A 2020 World Economic Briefing, A New Paradigm for the Business of Data, profiles a small number of Enterprise and consumer solutions that place privacy, user consent and data security at the core. These include:
  • Hewlett Packard Enterprise (HPE) and Continental: HPE and Continental have created the Data Exchange Platform as a marketplace for mobility data. “It provides a secure, transparent, decentralized architecture for trusted vehicle sensor data sharing and payment, based on blockchain technology and smart contracts. It offers data sovereignty and includes a consent- management system for drivers.”
  • Inrupt: “Instead of a company storing siloed snippets of personal data on their servers, users store it in interoperable online data stores giving them unprecedented choices over how their data is shared and used. They can, for example, share their fitness data with their health insurance company, or allow sharing between their thermostat and air conditioner. They can set time limits on sharing and change their choices at any time.”

• Ranking Digital Rights Investor Outlook (2021) Geopolitical risks are rising—and regulation is coming.
• Institute for Human Rights and Business, Data Brokers and Human Rights.
• Global Network Initiative resources:
  • Implementation Guidelines.
  • 2018/19 Report on Independent Assessments of GNI Members.
• Harvard Data Science Review, Jeanette Wing, The Data Life Cycle.
• Human Rights and Big Data Project, Developing an Online consent manifesto based on human rights.
• Information is Beautiful, Map of Data Breaches/Hacks: An interactive tool showing the world’s largest data breaches and hacks since 2009 up until the present. The map includes examples from 15 industry sectors and multiple well-known corporations including.
• Data Guise, Data Minimization in the GDPR: A Primer.
• UN Secretary-General’s Roadmap for Digital Cooperation.

The way in which companies decide to structure their business relationships can have an effect on their ability to meet their human rights responsibilities. In particular, companies may routinely structure relationships in ways that limit their leverage over business partners.

Below are examples of ways in which companies structure relationships that may lead to a reduction in their ability to identify, prevent, mitigate and account for human rights impacts, or may reduce their perception of their responsibility to do so.

• In a syndicated loan, this may arise where the bank:
  • relies on human rights due diligence conducted or commissioned by another participating bank in the syndicate;
  • has little (direct) interaction with the E&S coordinating bank and/or the other participating banks on human rights impacts;
  • has little interaction with stakeholders potentially affected by the project or those representing their interests
  • has no influence over the creation or effective management of grievance mechanisms for affected stakeholders.
• In a JV partnership, this may arise where one party takes sole or primary responsibility for communication and dispute resolution with third parties, or where a company situates control over decisions on land and employment with the partner. This can be particularly problematic where the partner with this responsibility is an enterprise wholly or partially owned by a government that has a history of causing or ignoring impacts on vulnerable groups in the country, and the company has little practical leverage available to it.
• In a franchising relationship, this may arise where contracts retain franchisor control over businesses’ methods, procedures and standards, but not set out requirements on – nor accept responsibility for – rights-related issues such as employment practices, land acquisition, and environmental issues.

• Operational, Financial and Reputational Risks: A company’s understanding and implementation of its own responsibility in relation to impacts can be undermined when it structures a relationship in ways that limit its own scope for action and its accountability.
  • For example, risks can arise where there are mistaken assumptions that due diligence conducted or commissioned by the E&S coordinating bank in a syndicated loan for project finance is sufficiently thorough. High profile examples of community conflict halting projects have highlighted that each financier is expected to know (and to show) that the HRDD conducted meets expectations: according to Banktrack, banks participating in the financing of the Dakota Access Pipeline “found themselves on the receiving end of the #DefundDAPL divestment campaign after the project violated Indigenous People’s rights – estimated to have cost them between US$8 and $20 billion in deposit withdrawals.”
• Legal Risks: The have been several lawsuits seeking to hold US company McDonald’s responsible for the treatment of franchise workers. In the United States the responsibility of franchisors to assume responsibility for employment conditions is a contested area. The company has stated that “franchisees are independent businesses that want to make their own decisions about hiring, pay and other matters.” Worker advocacy groups have “argued that many companies use contracting and franchising as ashield from responsibility for workers who make their business possible.” In 2020, a complaint was brought to the Dutch National Contact Point against McDonald’s on the basis that the company had not met OECD guidelines which “require due diligence by institutional shareholders in companies to ensure responsible business conduct.” The complainants alleged that due to “systemic sexual harassment” at franchised restaurants, the company had “neglected to act to create a safe workplace” for franchise employees.

• Business Opportunity Risks: Where advisors do not advise clients appropriately on the human rights risks associated with corporate decisions or activity, they risk losing repeat business when that advice proves inadequate in practice. The International Bar Association notes that:
  • “There is growing recognition that a strong business case exists for respecting human rights and that the management of risks, including legal risks, increasingly means that lawyers, and particularly business lawyers, need to take human rights into account in their advice and services. The UNGPs are relevant to many areas of business legal practice, including but not limited to corporate governance, reporting and disclosure, litigation and dispute resolution, contracts and agreements, land acquisition, development and use, resource exploration and extraction, labour and employment, tax, intellectual property, lobbying, bilateral treaty negotiation, and arbitration.”

*For an explanation of how companies can be involved in human rights impacts, and their related responsibilities, see here.

Where a company retains and uses leverage with business partners to strengthen respect for human rights, it can contribute to various SDGs. It may also build the capacity of its partners to contribute to the SDGs, by helping them understand and implement their own responsibilities, thereby contributing to:

SDG 17: Partnerships for the Goals, in particular: Target 17.6 Enhance the global partnership for sustainable development, complemented by multi-stakeholder partnerships that mobilize and share knowledge, expertise, technology and financial resources, to support the achievement of the sustainable development goals in all countries, in particular developing countries. Target 17.17 Encourage and promote effective public, public-private and civil society partnerships, building on the experience and resourcing strategies of partnerships.

• Do we clearly communicate our human rights expectations to our partners?
• For joint ventures with significant human rights risks, do we ensure that legal and other agreements underpinning the ventures provide the necessary basis to ensure that human rights are respected in their operations? (See OHCHR and Business Dilemmas Forum)? For example:
  • How do our agreements with partners allocate roles with relevance to the human rights of stakeholders, such as decisions on land,employment or dispute resolution with third parties?
  • How do we ensure our partners carry out these roles in ways that respect human rights?
  • Do we have pre-agreement on how human rights incidents and disputes will be dealt with, once they arise?
  • Do we have the right to conduct audits of overall human rights compliance?
  • Do we have the right to terminate the agreement in the event that human rights non-compliances are identified during such audits and are not rectified within a reasonable amount of time?
• How thorough are our due diligence procedures and do they include human rights risks? Do we tend to defer to or rely on processes of another partner without our own investigations? Are we prohibited from making contact with stakeholders by our agreements with business partners? How do we identify gaps between others’ processes and international human rights standards? How do we address these gaps? Do we look for early opportunities (e.g. at point of market entry) to create leverage? Do we include a leverage mapping into our due diligence procedure?
• Does the structure or duration of the relationship significantly limit our leverage?
• Do we have or participate in an effective grievance mechanism through which affected persons can raise human rights issues related to our partners’ activities?
• Do our agreements with partners contain confidentiality or consent requirements that constrain our ability to disclose information about our operations in higher risk areas? If so how do we ensure that stakeholders have access to information relevant to understanding how they may be affected and to claiming their rights?

*Mitigation examples are current or historical examples for reference, but do not offer insight into their relative maturity or effectiveness.

There may be opportunities for increasing leverage to address actual and potential human rights impacts in a joint venture context through a coordinated approach. For example, in 2016 BHP created the Non-Operated Joint Ventures (NOJV) Asset within Minerals Americas in order to establish effective engagement with its joint venture partners and companies in line with BHP’s Charter. The Asset creates a single point of accountability with responsibility for all non-operated joint ventures in Minerals Americas and its purpose includes having transparency over JV companies’ risks and opportunities, in an active feedback process, whilst maintaining the JV company’s management independence.

General:

• Shift (2015) Human Rights Due Diligence in High Risk Circumstances: Practical Strategies for Businesses: highlights strategies and practices that certain businesses have found most effective when conducting human rights due diligence in high risk circumstances. It includes “higher risk business relationships” such as those with business partners.
• Shift (2013) Using Leverage in Business Relationships to Reduce Human Rights Risks addresses various business relationships, including joint ventures.

Joint Ventures:

• IHRB (2012) Chapter 5: Respect for Human Rights in Joint Ventures Relationships of State of Play – Human Rights in Business Relationships: assists, inter alia, with identification and mitigation of human risks arising in connection with JV partners.

Finance:

Project Finance:

• Shift (2018) Enhancing the Alignment of the Equator Principles with the UN Guiding Principles on Business and Human Rights: A Public Summary of Shift’s Advice to the Equator Principles Association.
• Equator Principles (2020) Equator Principles EP4.
• Equator Principles (2020) Guidance note on Implementation of human rights assessments under the Equator Principles.

• IHRB notes that commodities can be associated with adverse human rights impacts “at the point of production or extraction e.g. unfair working conditions, activities taking place in absence of adequate community consent, child and forced labor, health and safety abuses, discrimination of migrant workers, resettlement of communities without Free, Prior and Informed Consent (FPIC), abuses of public/private security forces infringing workers’, indigenous peoples’, and communities’ rights.” In addition, where lowest cost is the largest business driver, e.g. in the commodities market, farmers, fishermen and smallholders have limited influence in negotiating terms of trade and receive an ever-diminishing share of the fruits of their labor. (See further Red Flags 1 and 19).
• As just one example, sheet mining of mica is a labor-intensive process, and is predominantly carried out by the very poor and vulnerable in low-wage countries. Mica mining, particularly in illegal small-scale artisanal mines, has been associated with child labor; 22,000 child laborers were identified in two areas of India, which, geographically, covered less than half of the so-called “mica mining belt.”
• Where commodities of unknown provenance are bought, sold, traded and hedged, purchasing companies in the value chain focus on price, defined specifications and quality standards rather than where the materials came from or under what conditions they were produced. It becomes difficult for companies upstream in the value chain to influence these decisions so as to address potential negative impacts on the rights of people in the value chain.
• Transparency, shortening of supply chains and longer-term commitments from buyers can “demystify complex supply chains,” and allow “different actors [to] identify and minimize risks and improve conditions on the ground and inform whether and where progress is being made.”

• Business Continuity Risks: Extreme price pressure on farmers and other workers at source can undermine availability of product and stability of supply.
• Reputational, Operational and Legal Risks: The company risks being involved in business relationships with disreputable organizations or individuals, including groups using forced or child labor or providing unsafe working environments, or may be financially supporting conflict. Operational challenges and even legal risks can arise where such connections come to light and the business must act reactively to exclude such sources from their value chain. Where traceability to individual companies is limited, entire industries can face civil society pressure to improve (e.g. in the case of palm oil).
• Business Opportunity: Focusing on improved livelihoods for people within the supply chain helps to bring them into the consumer base; failure to do so foregoes this opportunity. Opportunities for price reduction and new sources can be unlocked:
  • Barry Parkin, Chief Procurement and Sustainability Officer of Mars, has noted that supply chains are “broken.” In an article arguing that the “commodity era is over,” he identifies win-win opportunities to “mov[e] beyond commodities that are bought and sold in markets where the lowest cost is the largest business driver,” and “[shift] to long-term models for corporate buying that are anchored on building mutuality, reliability, resilience and risk management into the core of our buying patterns.”

*For an explanation of how companies can be involved in human rights impacts, and their related responsibilities, see here.

Addressing impacts on people associated with this red flag indicator can contribute to a variety of SDGs, depending on the impacts associated with the commodities. This may include, for example:

SDG 1: Eradication of poverty in all its forms.

• Which commodities that we use may be of higher risk from a human rights perspective, based on known information about potential source countries?
• Where information about impacts associated with the commodity is scant, how can we learn from known information about human rights impacts associated with other commodities sourced from the same area?
• Which partnerships, including with peers, international organizations, academics or NGOs, can we leverage to gain greater transparency or ensure traceability? Where no initiatives exist, can we create one?
• What opportunities exist/ can we create to build longer-term sourcing relationships?

• In 2018, the BMW Group and Codelco, a Chilean copper mining company, signed an agreement to cooperate on a sustainable and transparent supply of copper. In the “decommoditized” copper market, prices reflect differences in levels of certification.
• Many large consumer goods companies are disclosing the source of their palm oil through the Roundtable on Sustainable Palm Oil, including Unilever, which, in 2018 announced that it was “the first consumer goods company to publicly disclose the suppliers and mills it sources from” (both directly and indirectly), and Nestle, which has committed to achieving RSPO sustainable certification for 100% of its palm oil by 2023. In November 2019, the RSPO announced “shared responsibility” rules, that will require RSPO members who buy palm oil to increase the proportion of their sustainable purchases by 15% every year or face fines and possible suspension.
• Rather than prioritizing short-term electricity contracts, Mars is establishing long-term, country-level contracts in Mexico, the United Kingdom and the United States in an effort to contribute to addressing the environmental and social impacts of climate change. In this way, “electricity is no longer a commodity, but a long-term investment within which business is a market maker not simply a price taker.”

• A growing share of food commodities are now marketed as value-added (sustainable) products. California-based B-Corp Uncommon Cacao supplies raw cocoa beans to artisan chocolate makers disconnected from world market prices. It aims to provide a transparent alternative to commodity exchange and certified cocoa by setting fixed farm gate and export prices annually to help farmer incomes grow.

• An impact investing fund created by Danone, Firmenich, Mars and Veolia with respect to vanilla, offers a 10-year commitment, cooperative and a minimum price, through an “innovative model where formers and industry players share both the benefits and risks.” The project estimates that 60% of cured vanilla’s value will go back to farmers (compared to initially observed shares of 5% to 20%).

• IHRB (2018) The Commodity Trading Sector: Guidance on Implementing the UNGPs is a tool for the commodities trading sector as a whole in developing a shared practice of responsible trading which is consistent with international standards relevant for the respect of human rights.
• Parkin (2018) Is the Commodity Era Over? is an article by the Chief Procurement and Sustainability Officer of Mars discussing the need for companies to “move beyond commodities that are bought and sold in markets where the lowest cost is the largest business driver.”
• SOMO (2018) Global Mica Mining and the Impact On Children’s Rights is a mica-focused report that maps global production of a commodity and seeks to identify direct or indirect links to child labor or any other relevant children’s rights violations.
• OECD-FAO Guidance for Responsible Agricultural Supply Chains provides guidance for enterprises across the agricultural supply chain, from the farm to the consumer, anchored by a “framework on risk-based due diligence.”

• Impacts on people through resource depletion or emissions into air and watersheds can occur as a result of individual or collective corporate activities.
  • The activities of individual companies may, for example, overtax a resource, particularly in an existing context of scarcity. While individual corporate activity is more typically regulated than cumulative impacts (see below) this is not the case in all geographies (e.g. rural areas in some geographies).
  • A company may also contribute to cumulative impacts (a total impact that is the result of the actions of more than one actor) where it is one of several actors involved in an impact that depletes, destroys, pollutes or otherwise damages a resource or access to that resource.
• In both cases, this can lead to impacts on people’s health and livelihoods. People most commonly affected by corporate resource include those in physical proximity to sites of corporate activity, such as in the vicinity of extractive projects, hydropower and construction projects, large farms or plantations or large corporate headquarters in urban areas.
• Government authorities “frequently fail to undertake cumulative/ strategic impact assessments, and even where such assessments are undertaken, human rights information relevant to such assessments is not taken into account” (OHCHR).
• Corporate activities may be associated with:
  • Reduced water availability for local communities (Right to health).
  • Long-term health problems amongst local people as a result of their own emissions, or as contributors to cumulative air and water emissions from multiple industrial facilities concentrated into a single area (Right to health).
  • Water emissions from a single factor or several factories that flow into a single waterway – reducing fish stocks and undermining local livelihoods and nutrition (Right to adequate standard of living (right to food).
  • Price inflation, pressures on social services and affordable house and increased levels of anti-social behaviour in towns near to or hosting extractive projects that attract a large influx (“in-migration”) of actual/aspiring workers and their families (e.g. housing, rents and access to medical services). (Right an adequate standard of living (right to housing)).
  • Scarcity of resources for indigenous or other local communities, where a company contributes to harvesting of, e.g. a plant for use in products (Indigenous peoples’ rights).

• Reputational Risks: Cumulative impacts often generate considerable attention and multinational corporations can be targeted for criticism, particularly where people believe that approaches to governments may have little effect.
• Legal Risks: Companies that do not address their impacts can face legal action for their contribution, or preemptive action to prevent it (as has been seen in the case of concerted action to prevent multinational companies from creating bottling plants – and drawing on water – in India).
• Regulatory Risks: Where management of a resource is unsatisfactory, public pressure can lead to regulation creating taxes, limits or prohibitions on use of the resource.
• Operational Risks: The IFC notes that:
  “[o]ne of the biggest risk management challenges currently facing project developers in emerging markets is the appropriate assessment and management of cumulative impacts” and cites factors such as “climate change and unpredictability of climate patterns, increasing and competing water use demands, decline of species biodiversity, degradation of ecosystem services, and changing socio- economic circumstances” which it notes “add complexity to risk assessment and management.”
• Financial Risks: Concerns over corporate resource use or emissions can lead to shut-downs with significant financial impacts. A multi-billion dollar mine expansion in Peru was abandoned over community concerns about water stress.

• Business Continuity Risks: In the mid-2000s, protestors blocked a bridge over plans by two companies to build two pulp mills on the Uruguayan side of the Rio Uruguay, citing concerns that the plants would generate pollution which could harm health of communities and destroy their main sources of income, including tourism and agriculture. One company ultimately decided to relocate its pulp mill to a different area of Uruguay and the remaining pulp mill was the subject of a 2010 ICJ judgment.

*For an explanation of how companies can be involved in human rights impacts, and their related responsibilities, see here.

SDG 6: Ensure availability and sustainable management of water and sanitation for all, in particular: Target 6.3 By 2030, improve water quality by reducing pollution, eliminating dumping and minimizing release of hazardous chemicals and materials, halving the proportion of untreated wastewater and substantially increasing recycling and safe reuse globally. Target 6.4 By 2030, substantially increase water-use efficiency across all sectors and ensure sustainable withdrawals and supply of freshwater to address water scarcity and substantially reduce the number of people suffering from water scarcity.

• How do we assess whether our use of resources, including natural resources, could impact vulnerable populations that need to benefit from those same resources?
• Do we include in our assessments, the potential for contributing to these kinds of harm through cumulative impacts?
• How do we assess baseline conditions and measure the incremental impact of our activities, products and services, including when added to other existing or planned projects and developments?
• How do we engage with regulatory authorities and others to understand whether and how they mitigate these risks and measure the results?
• Where these risks exist, what sort of leverage do we have to influence the situation and how might we increase that leverage at the start of any project or investment? Have we considered ways of increasing our leverage by acting in collaboration with others?

• Emissions and Waste (various): Closed-loop business models “keep products, components and materials at their highest utility and value – reducing the need for extracting and processing new resources and, in the process, cutting the related impacts on the environment” and people. See further UNGC Project Breakthrough.
• Danone treats three key resources – water, milk and plastic – as part of closed loops, with a senior executive overseeing Danone’s cross-divisional, cross-functional, Strategic Resources Cycles Unit.

*Mitigation examples are current or historical examples for reference, but do not offer insight into their relative maturity or effectiveness.

• UN Global Compact (2014) Cumulative Impacts on Human Rights: UNGC webinar addressing the “challenges and best practices in respect of cumulative human rights impacts.” Includes contributions from UNU, Shift, First Peoples’ Worldwide, Rio Tinto and Anglo American.
• Cumulative Human Rights Impacts in the Maplecroft/ UN Global Compact Human Rights and Business Dilemmas Forum: Contains scenarios, examples, case studies and suggestions for business in relation to the question, “How should a responsible company identify and address its incremental contribution to a cumulative human rights impact, particularly an impact on an individual or a community that is the result of the combined actions of several actors?”
• IFC (2013) Good Practice Handbook Cumulative Impact Assessment and Management: Guidance for the Private Sector in Emerging Markets: Contains guidance concerning cumulative impact assessment in the context of an ESIA (environmental and social impact assessment) or stand-alone CIA (cumulative impact assessment). Powerpoint summary also available.
• UN Working Group on Business and Human Rights Expert Roundtable on Cumulative Human Rights Impacts.

Sector Specific Examples

• As stated by the UN Office of the High Commissioner for Human Rights (OHCHR), “[l]and is not a mere commodity, but an essential element for the realization of many human rights.” As a source of livelihood and a strong element of indigenous peoples’ identities, land is a fundamental aspect of economic, social and cultural rights.
• Companies can be involved with negative impacts where they acquire land rights in geographies in which rights to land are contested, relying on assurances from sellers, whether governments or private individuals, without further due diligence to identify whether competing claims exist. Human Rights Watch released a detailed report documenting illegal land confiscation from farmers in Myanmar, some of which was sold to companies.
• Impacts on land rights, including those arising from corporate activities, affect people differently, with disproportionately negative effects on individuals and groups who are traditionally discriminated against and marginalized, including women, indigenous peoples, rural communities and small-scale farmers. Where tenure is insecure, business activities can inadvertently cause these groups to lose rights to lands and resources, triggering a range of negative social impacts.
  • Rural Poor: “We don’t even have enough for a daily meal. When we were farmers, if we didn’t have any money, we could eat some corn or beans. But when we have no farm, we can’t eat.” – Farmer, 66, Myanmar, March 2017. For the rural poor, access to land is the most critical way to make a living. Farming lands, forests, water and fisheries are essential resources for the enjoyment of their right to an adequate standard of living, including the right to adequate food and nutrition, water, and sanitation.
  • Indigenous People: Indigenous peoples have specific human rights to own, use, develop and control the lands, territories and resources that they possess by reason of traditional ownership or other traditional occupation or use, as well as those which they have otherwise acquired. In line with their land-related human rights, set out in the UN Declaration on the Rights of Indigenous Peoples, any project that affects their territories and resources should only be undertaken with their Free, Prior and Informed Consent (FPIC). The lack of recognition of indigenous peoples and of their land rights by some governments, a lack of proper land titling, and debates over what evidence demonstrates proper consultations and FPIC have led to the dispossession and forced evictions of indigenous peoples from their ancestral lands.
  • Women: Women also face severe challenges regarding access, use and ownership over land and its resources in many regions, with statistics showing that women are less likely to own or control land than men. Discrimination in inheritance, and/or the lack of proper land tenure and control can affect women’s livelihoods, food security, economic independence and physical security, making them more vulnerable to poverty, hunger, gender-based violence and displacement.
  • Ethnic Minorities: Ethnic minorities are disproportionately affected by low access to and ownership of land, often because of wider societal discrimination. “Land grabbing” is compounding the vulnerability of minorities.
• Land-related conflicts are getting more violent. In 2018, an average of more than three land defenders were murdered every week, with half of the killings linked to mining, oil extraction and logging.
• The BHRRC has noted that while indigenous peoples are “among the first and worst affected by climate change,” and there are important indigenous-led initiatives for sustainable development and a just transition to low-carbon economies, at the same time “there is a growing resistance to large renewable energy projects among many indigenous communities.” The BHRRC has observed a “troubling trend” of an increase in allegations of displacement, harm to livelihoods, and violence against communities since 2010 with respect to renewable energy projects. BHRRC outreach to 50 wind and hydropower companies around the world revealed that most renewable energy firms do not yet have adequate due diligence practices –including identifying whether a project will impact indigenous peoples and reaching consent prior to the start of a project – to prevent human rights abuse.

Operational, Reputational and Financial Risks: Research shows that company-community conflicts may generate the same broad impacts on companies as technical problems, contractual or regulatory disputes, or environmental or safety breakdowns, although they typically do not receive equivalent attention or resources. Protests, blockades, property damage, public campaigns can lead to increased staff time on crisis management, lost productivity and value, work stoppages, project suspension or abandonment, that all increase costs for the business, including through the loss of future opportunities. For a world-class mining project, community conflict will cost roughly US$20 million per week of delayed production.

*For an explanation of how companies can be involved in human rights impacts, and their related responsibilities, see here.

A company may contribute to negative impacts where it acquires land from a State or a third party in circumstances in which it is, or should be, aware that there may be competing claims to the land and does not conduct proper due diligence to investigate land ownership and consult with affected groups. It may also contribute to impacts where it makes it more difficult or impossible for the rightful owners to access and benefit from the acquired land.

According to the Voluntary Guidelines on the Governance of Tenure, published by the UN FAO, securing land tenure rights and ensuring responsible land governance is key to achieving the SDGs. Addressing impacts to people associated with this red flag can contribute to, inter alia:

• Are the State policies and laws that ensure tenure rights non-discriminatory and gender sensitive? Does the State ensure equal tenure rights for women and men, including the right to inherit and pass on these rights?
• Does the State recognize as indigenous any groups that claim indigenous status and does it recognize indigenous people’s rights with regard to land, as set out in the Declaration on the Rights of Indigenous peoples?
• Before purchasing land, did we investigate all existing claims and conflicts and consult with all affected parties, including both legal and customary owners, and if indigenous peoples are involved, did we obtain their free, prior and informed consent?
• Considering that government maps do not always accurately reflect the traditional land usage of indigenous peoples, are we verifying this information, such as with the help of a person with deep expertise in and understanding of indigenous cultures and local tenure arrangements?
• When purchasing or leasing property from governments or large- scale land owners, did we investigate past occupation of the land to ensure that no forced relocations had been performed, unless done in conformity with international standards?
• Do we conduct due diligence with regard to the ownership and usage of land from which we derive key commodities or services through our supply chain, where such land is in regions with weak protections for traditional land rights or a history of land- related conflicts?
• Do we ensure that we do not participate in or benefit from improper forced relocations, and that we adequately compensate inhabitants involved in voluntary relocations?
• Does the company honor the rights of local or indigenous peoples on company-controlled land?
• Are our employees and security personnel trained to interact appropriately with indigenous and other local communities, allowing safe and unimpeded use of the land and its resources without harassment or intimidation?
• Do we have on-going processes in place to engage with local communities in order to understand any land-related impacts that may arise from our activities? Are we confident that local communities – women as well as men – feel able to raise issues with the company as part of those dialogues?
• Does the company have a broader community engagement or indigenous people’s policy and process, which includes the principle of Free, Prior and Informed Consent?
• Do we have processes in place to integrate issues raised by communities into company decision-making in a timely fashion?
• Does the State provide access to impartial and competent judicial and administrative bodies to resolve disputes over tenure rights, including effective remedies where appropriate?
• Do we have mechanisms for hearing, processing, and settling any grievances of local communities? How confident are we that communities trust those mechanisms and feel able to use them in practice?

*Mitigation examples are current or historical examples for reference, but do not offer insight into their relative maturity or effectiveness.

• Some of the alternative models that companies have explored are joint land ownership between communities and companies, as well as options for combining lease and profit-sharing. Land management contracts that prioritize profit-sharing may be an improvement on flat-rate leases. Outgrower arrangements can function as a method of compensation or an alternative to outright land purchase or lease; Landesa offers various resources including a review of best practices literature.
• Land-based joint-ventures may encourage entry into more competitive commercial agriculture by disadvantaged smallholders and community landowners. However, strong support is needed to ensure their capacity to make business decisions and realize sufficiently near-term returns or livelihood benefits. Canada offers several examples of joint ventures between First Nations businesses and logging companies. See this guide on benefit sharing agreements written for indigenous peoples, businesses and governments.

Guidance for Companies

• Landesa Business Enterprise Supporting Materials.
• Shift (2018) The Human Rights Opportunity: Land Rights.
• The Indigenous Peoples Major Group, with contributions from the Danish Institute for Human Rights (2018) Doing it right! Sustainable Energy and Indigenous Peoples.
• Business Guide to the UNDRIP (2013) UN Global Compact.
• UN Food and Agriculture Organization (FAO) (2014) Respecting Free, Prior and Informed Consent: Practical Guidance forGovernments, Companies, NGOs, Indigenous Peoples and Local Communities in Relation to Land Acquisition, Governance of Tenure Technical Guide No. 3.

Speed is a key element of the value proposition and value chain in many business models. For some, speed is “the most important thing for [a] business”; it is “everything in business.” Speed in product innovation, speed to market, speed in delivery, speed in the preparation of targeted marketing campaigns that react to cultural events: the importance of speed as a competitive advantage is said to be increasing, with commentators stating that “with the pace at which society progresses, companies have to do whatever it takes to stay relevant.”

Demands for speed in the business model become problematic from a rights perspective when they are absorbed in ways that place undue pressure on vulnerable people in the company’s operations and value chain. Demands for speed can have effects across the value chain, often on the most vulnerable people – such as young workers; factory workers, including migrant workers and women workers; and small-holder farmers. Some examples of impacts are below, with impacts on workers’ right to health, right to just and favorable conditions of work (including rest, leisure and adequate limitation of working hours), right to a family life, and in some cases where excessive hours are demanded, right to fair wages or right to a living wage for hours worked.

• Financial and Business Continuity Risks:
  • Where taken to the extreme, speed of roll-outs has been noted as a factor in “tech product launch fail[ures].”
  • Where workers reach the limits of their capacity to absorb demands for greater speed, continued demands risk injuring and/or alienating the workforce. Employees may resist through the only means available where appropriate avenues to discuss the impacts of speed are unavailable: in the poultry processing industry, following injuries and unmet requests from workers to slow line speeds, “workers began jamming chicken bones into the machinery to stop the processing line. It was the only way they could get some relief from the frantic pace.” (See Southern Poverty Law Centre).
• Operational and Reputational Risks: Where excessive speed is built into the business model, it can undermine sustainability efforts at the operational level. Moreover, increasingly savvy consumers, advocacy organizations and investors are looking beyond individual sustainability initiatives and programs and are quick to label them “greenwashing” if they perceive that the business model continues to increase risk of negative impacts.
• Reputational Risks: The prefix “fast” has developed negative connotations when associated with products (and industries producing such products) due to concerns about both environmental impacts and impacts on supply chain workers, as well as community and worker health.

*For an explanation of how companies can be involved in human rights impacts, and their related responsibilities, see here.

Addressing impacts to people associated with this red flag can contribute to, inter alia:

• Can we map where demands for speed are originating – both internally and externally to our business?
• How are demands for speed absorbed within our value chain and by whom? How do we know whether or to what extent those pressures are passed onto vulnerable workers in our value chain?
• How do we attempt to avoid or reduce such impacts and how do we know whether we are succeeding?
• What channels do we have for hearing concerns from our own workers, and workers in our value chain, related to any impacts from demands for speed, and to hear their views on how we could reduce these impacts? How do we know whether people feel able to use them?
• Do we involve internal human rights experts at the R&D stage to help identify potential risks to people from rapid product roll-outs and adaptations?

*Mitigation examples are current or historical examples for reference, but do not offer insight into their relative maturity or effectiveness.

• In the tech world, some have called for alternative business models, particularly for start-ups, that reframe success as long-term or organic growth.
• In apparel and FMCG, various “slow” movements have recognized the social and environmental advantages of reducing the speed imperative from the business model.
• The “slow food” movement encourages the consumption of organically grown regional produce at accessible prices for consumers and fair conditions and pay for producers.
• The “slow goods” movement applies slow movement principles to the concept, design and manufacturing of physical objects. It focuses on “low production runs, the usage of craftspeople within the process and on-shore manufacturing. Proponents of this philosophy seek and collaborate with smaller, local supply and service partners.” (Wikipedia).
  • Slow Fashion: Slow and Steady Wins the Race is a US clothing collection that creates classic garments and accessories made using simple, durable materials. The company introduces new styles at a regulated pace year-round, rather than the usual accelerated pace of the seasonal fashion schedule.

On Production Lines

• Human Rights Watch (2019) When We’re Dead and Buried, Our Bones Will Keep Hurting: Workers’ Rights Under Threat in US Meat and Poultry Plants.
• South Poverty Law Centre (2013) Unsafe at These Speeds.

On Technology-based Start-ups

• Medium, Stanier (2019) Silicon Valley’s Grow-or-Die Culture Is Costing Us: Startup founders must set a new tone instead of burning through their employees.

• Risks to people are heightened by the nexus between products that are vulnerable to misuse and sales to entities likely to misuse them.
• Interviews with business and civil society representatives conducted by the UN Global Compact “underscored that one of the biggest challenges in conceptualizing product misuse as a human rights issue is the vast array of ways, including non-obvious ways, a product or service can be misused and inflict human rights harm.”
• Several examples are listed above and include severe impacts, such as:
  • sale of pharmaceuticals misused for the administration of the death penalty (right to life; right to freedom from torture, cruel, inhuman or degrading treatment);
  • sale of tracking or facial recognition technologies that may be misused to surveil civil society or arbitrarily imprison, e.g. ethnic or political groups. (Freedom from arbitrary arrest, detention or exile and/or freedom from torture and inhuman or degrading treatment).

• Reputational Risks: Links between well-known companies and the impacts of product misuse are more easily spread through the 24/7 news cycle and the sharing of incidents and photographs facilitated by mainstream and social media. During the Arab Spring, the role of Western Technology firms in “helping Arab dictators” was highlighted in US media. Popular opinion increasingly places some degree of responsibility on the companies concerned, and not just on those misusing the product or service, or on regulators.
• Financial Risks: These may include investor divestment or customer boycotts where companies are seen to be failing to address product misuse. In 2012, construction machinery company Caterpillar was removed from three MSCI indexes for factors including “an ongoing controversy associated with use of the company’s equipment in the occupied Palestinian territories.”
• Legal, Financial and Operational: Risks also arise, for example, where end users include repressive regimes. Blacklisting of Chinese technology companies by the US Government on the grounds of rights violations against Muslim minority groups in Xinjiang, China, disallows US companies from selling technology to these companies without a US government license. In 2019, Sony and Sharp faced scrutiny for the alleged supply of parts to a Chinese video surveillance company blacklisted by the United States over human rights violations of ethnic Uyghur people in the Xinjiang Autonomous Region of China. The blacklisted company had “previously stated on its website that it could identify members of the Uighur ethnic minority group.”

*For an explanation of how companies can be involved in human rights impacts, and their related responsibilities, see here.

Addressing impacts to people associated with this red flag indicator can contribute to a range of SDGs depending on the industry and impact concerned, for example:

• How do we assess the potential risk of product misuse? How do we understand and address the ways in which “specific variables in design, components or materials used, and markets and customers targeted” may lead to product misuse resulting in human rights impacts?
• How do we know which of our end users/customers are high risk from a product misuse perspective? How do we stay abreast of developments that affect the level of risk? What systems do we have in place to identify and address such risks, prior to sale? Has the company considered how it might work with others – regulators, industry peers, customers, civil society organizations etc. – to seek ways to minimize the potential misuse of its products?
• Do we build safeguards against product misuse into our agreements with business customers, end-users and intermediaries involved in the sale of our products/services? Have we considered how we could use contract clauses or service provisions to monitor usage?
• How do we track and report internally or externally on our efforts to ensure responsible use of our products and/or services?

* Mitigation examples are current or historical examples for reference, but do not offer insight into their relative maturity or effectiveness.

• UN Global Compact Good Practice Note, prepared by Meaghan Malloy (2017) Addressing Adverse Human Rights Impacts Connected to Product Misuse.
• Human Rights and Business Dilemmas Forum, Product Misuse dilemma sets out common product misuse scenarios, case examples, risks to business and suggestions for responsible business.
• Bureau of Democracy, Human Rights, and Labor, U.S. Department of State Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities.

• Several examples of the impact of overuse on people are listed below. The first three have the potential to impact the right to the highest attainable standard of health and further, where overuse intersects with certain vulnerable groups (children’s rights, or rights of minorities).
• High-salt, High-sugar, High-fat Foods: High levels of consumption are associated with increased health risks, including obesity and other noncommunicable diseases, diet-related diseases in minority communities and rising costs of healthcare where those costs are passed on through higher premiums. Corporate activities that bring about an intersection of vulnerability and potential harm include:
  • Marketing to children, including online (esp. via social media) and SMS campaigning to school children at lunch time
  • Disproportionate targeting of minorities of low average income, including through selective advertising in specific language media and/or billboards in minority communities. The University of Connecticut Rudd Centre for Food Policy and Obesity has conducted a brand by brand analysis of targeting of black and Hispanic youth by major food and beverage companies in the United States and found that, “food-related marketing continues to disproportionately target youth of color with harmful products and contributes to health disparities affecting their communities.” They found that this was the case even where companies offer diverse portfolios of healthy and unhealthy brands in multiple categories.

• Social Media and Young People: In the UK, a parliamentary committee released a report on the Impact of Social Media on Young People’s Mental Health and Wellbeing. After noting the range of positive effects of social media, it also highlighted “very damaging” effects, including, “feelings of low self-esteem and negative body-image, resulting in harmful behaviours to achieve, ‘results’… the publicising of self-harm methods…[and] cyberbullying” and called for further research into the potentially “‘addictive’ nature of social media.”
• Alcohol: Overconsumption of alcohol can lead to well- documented health impacts in the short and long term. Moreover the US CDC notes that binge drinking is linked to, for example, “motor vehicle crashes” as well as “violence, including homicide, suicide, sexual assault, and intimate partner violence.” Any consumption by children is not recommended due to health impacts. The exposure of children to alcoholic beverage industry marketing is one key challenge.
• High-interest Pay-day Loans: When loan repayments balloon in size and they have difficulty keeping up, recipients may be forced to choose between loans and basic needs, affecting their right to an adequate standard of living (see Human Rights Watch article). There can be a disproportionate effect on minority communities when lenders cluster in those areas, or target minorities through online platforms. Corporate activities that bring about an intersection of vulnerability and potential harm include:
  • Targeting potentially vulnerable individuals who are unlikely to meet repayment obligations.
  • Offering fin-tech services charging fees for access to advances, which, if regarded as interest, would equate to annualized interest payments many times higher than legal limits (See Nikkei Asian Review article).

• Reputational Risk: Where companies target vulnerable groups in the marketing of products that are harmful when overused, reputational risk may arise. The University of Connecticut report cited above warned that while companies may “view advertising of nutritionally poor brands to multicultural consumers as a business opportunity,” the public may rightly focus on the resulting costs to these communities. Researchers and consumer groups have expressly compared such practices with companies’ public commitments to health, and apparent contradictions are noted and publicized. Moreover, increasingly sophisticated consumers and watch-dog NGOs:
  • Identify and publicly call-out companies seeking to focus blame for overconsumption on individuals, without acknowledging the impact of marketing practices.
  • Scrutinize non-profit or research bodies set up by industry members for evidence of intent to avoid responsibility for impacts associated with their products.
• Legal and Regulatory Risk: As consumers and international bodies increasingly scrutinize companies selling products or services linked to impacts from overuse, lack of meaningful industry action increases the likelihood of further regulation in this area. For example, six [US] localities had enacted a “soda tax” in 2019, levying a per volume excise tax on drinks sweetened with sugar, and one government levied a per volume tax on all sweetened drinks. As scrutiny leads to consumers seeking to hold companies responsible for impacts, legal risks arise: one US-based pay-day loan company, for example, ceased operations to deal with legal challenges.
• Financial Risks: Understanding of health impacts associated with overconsumption of products has been associated with decreased sales among certain demographics. However, at the same time, the link between overconsumption and profit remains in several industries. For example, a 2018 UK study concluded that the alcohol industry appears to be highly financially dependent upon heavy drinking, and might face significant financial losses were consumers to drink within guideline levels.
• Business Opportunity Risk: Business partners may choose to disengage from companies with business models that are seen as carrying too high a risk from a human perspective. In August 2019, Google banned high-interest lenders from its Google Play app store.

*For an explanation of how companies can be involved in human rights impacts, and their related responsibilities, see here.

Addressing impacts to people associated with this red flag indicator can contribute to a range of SDGs depending on the impact concerned, for example:

• What systems do we have in place to identify and address the potential risk of product overuse?
• How do we know which of our end users/customers are highest risk from a product overuse perspective? How does our marketing strategy intersect with these vulnerabilities?

On Food Marketing:

• How does the nutritional quality of the products we advertise correlate with the age/ethnicity breakdown of our target consumers?
  • What percentage of our advertising expenditure is to media viewed predominantly by children? By minority communities?
  • Do we disproportionally target food of poor nutritional quality to particular groups?
• Do we take a compliance approach to national labelling laws, or do we always conform to the highest international standards, including relevant human rights? Have we investigated whether there are gaps between voluntary industry self-regulatory programs and international standards?

On Pay-day Loans:

• Would our “fees” be considered exorbitant or illegal if annualized as interest rates?
• Are we operating in a legal grey zone? If so, are we comfortable that we are not profiting from such opportunities to the potential detriment of our customers’ rights?
• What processes do we have in place to ensure that recipients of loans are able to meet repayment obligations?
• Are we confident that our decisions on customer targeting/ shop front locations do not exacerbate or exploit existing vulnerabilities?
• Are we carefully weighing the benefits of making credit more readily available (including through smartphone technology) with the potential negative impacts of greater availability on vulnerable consumers?

* Mitigation examples are current or historical examples for reference, but do not offer insight into their relative maturity or effectiveness.

• Alcoholic Beverages: With motivations ranging from the ethical, personal health, to purely commercial (noting that the number of people who consume alcohol in the world has decreased by nearly 5 percent since 2000), several brands and start-ups have begun offering non-alcoholic alternatives: Diageo (the world’s second largest distiller and parent of Guinness, Smirnoff and Johnnie Walker) recently funded a nonalcoholic spirits company called Seedlip.

• Food Marketing: University of Connecticut Rudd Centre for Food Policy and Obesity has several reports including a brand by brand analysis of targeting of black and Hispanic youth by major food and beverage companies in the United States. See also WHO (2019) Reducing the impact of marketing of foods and non-alcoholic beverages on children.
• Social Media: UK parliamentary committee report on the Impact of Social Media on Young People’s Mental Health and Wellbeing.