Archives: Resources

Financial or advisory services can enable companies to act in ways that increase the risk of impacts on people. Further, risks to people can arise even where financial or advisory services are provided in compliance with applicable laws and regulations. Some examples of human rights impacts connected to such services are listed below.

• Providing finance, insurance or advice for large infrastructure or other projects requiring relocation of communities can, without proper mitigation measures, be associated with forced relocation, the loss of adequate housing and livelihoods, the destruction of sacred indigenous sites, environmental damage and violence against community members. Where the advice relates to a project or facility in a geography undergoing conflict, there is a risk of connection to impacts on the right to life. In the case of finance, risks can be exacerbated where a financier is a non-lead bank in cases of multi-bank syndicated loans for project finance. (See Red Flag 15).
• In February 2021, the Telegraph reported that “consulting firm McKinsey has agreed to pay $573 million” in order “to settle claims by US states that the consulting company helped fuel the opioid epidemic by providing marketing advice to drugmakers including Purdue Pharma and Johnson & Johnson.”
• Accounting and Taxation advice on aggressive, but legal, taxation minimization strategies can deprive governments of the resources needed to address poverty and to finance programs seeking to protect and fulfil rights. (See also Red Flag 24).
• In relation to legal advice, risks can arise where there is a gap between domestic laws and international human rights standards. For example, advice to employers in relation to legal tactics to undermine labor rights can negatively impact the practical enjoyment of those rights, e.g. the right to collective bargaining. Advice on bringing certain claims under stabilization clauses in investment agreements with host governments (which provide protections for investors against future changes in law) can interfere with a State’s bona fide efforts to implement laws, regulations or policies in a non-discriminatory manner in order to meet its human rights obligations.

• Reputational Risks: Connection to severe human rights impacts can have reputational effects for financial and advisory service providers; where such connections are repeated or persist over time, it can lead to public questioning of the company’s social license to operate. In 2018 a Forbes opinion article cited connections to human rights impacts as the basis for asserting that “McKinsey & Co fails as a global leader.” At worst, it can bring an entire industry into disrepute. In 2020 an investigative article relying on the Luanda Leaks asserted that “consultants, accountants and lawyers provided vital support at each step of the way” and argued for the need for greater regulation over the “key role Western professionals play in maintaining an offshore industry that drives money laundering and drains trillions from public coffers.” Civil society is increasingly highlighting the connection between finance and advisory services and impacts, most visibly in campaigns for divestment by banks from companies or projects associated with human rights impacts, such as in the case of banks lending to the private prison industry.
• Financial Risks: In February 2021, the Telegraph reported that “consulting firm McKinsey has agreed to pay $573 million” in order “to settle claims by US states that the consulting company helped fuel the opioid epidemic by providing marketing advice to drugmakers including Purdue Pharma and Johnson & Johnson.” Banks can be required to compensate communities for adverse impacts connected to their finance: in 2020 an Australian bank agreed to contribute the money that it earned from a loan to a sugar company to Cambodian families that were forcibly displaced by the company, as a form of contribution to remedy. This followed a decision in which the Australian National Contact Point found that it was “difficult to reconcile” the bank’s decision to take on the client “with its own internal policies and procedures” as the risks would have been “readily apparent.” Financial risks can also arise where banking clients are unable to repay loans due to the high costs associated with conflict with communities proximate to projects. Finally, pressure associated with a service provider’s connection to a human rights impacts can lead to them finding it necessary to end a business relationship, (e.g. in the case of the Dakota Access Pipeline), with financial consequences for the company.
• Business Opportunity Risks: Where advisors are unable to advise clients appropriately on the human rights risks associated with corporate decisions or activities, they risk losing business of increasingly sophisticated clients seeking these insights. The International Bar Association has noted that “lawyers, both as in-house counsel and as members of law firms, are increasingly asked to help businesses understand what the responsibility to respect human rights implies.” The Working Group on Business and Human Rights has noted a “[l]ack of understanding by some lawyers of the links between human rights risks, legal risks, commercial risk and reputational risks and, specifically, a failure to appreciate that, even where no material legal risks can be identified, that there can still be commercial and reputational consequences coming from a company’s behaviour, especially since the endorsement of the Guiding Principles and the growing focus … on the company’s performance on managing human rights risks.”

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

Providing financial or advisory services to companies or governments in a way that supports human rights standards – by helping them to understand their own responsibilities or by seeking to use leverage with the client where risks to people arise – can contribute to various SDGs, including, but not limited to:

Adapted from Shift’s, Human Rights Due Diligence in High Risk Circumstances: Practical Strategies for Businesses: Identifying potentially higher risk customers/clients.

Example Diagnostic Questions:

Concerning the customer/client

• Do customers/clients have known and effective internal governance and accountability structures?
• Do they have known and effective processes for managing environmental, social and human rights risks?
• Do they have a record of, or reputation for, breaching the law?
• Do they have a record of, or reputation for, negatively impacting human rights?
• Are they known or likely to engage in corrupt practices?
• Are they in conflict with stakeholders?
• Is this a government owned or connected entity and does that suggest greater or lesser risk to human rights?

Does the structure or duration of the relationship significantly limit the business’ leverage?

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

• 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 customers/clients.

Finance:

• The Dutch Banking Sector Agreement’s paper on Enabling Remediation gathers some of the most recent thinking in relation to:
  • how to understand the responsibility of a bank when connected to an impact through the activities of a client.
  • the practical roles banks could play and actions a bank could take to enable remedy in practice, across all forms of responsibility.
• The Equator Principles Association’s EP4.

Legal Advice:

• A4ID’s The UN Guiding Principles on Business and Human Rights: A guide for the legal profession provides an analysis, with case examples, of:
  • a law firms’ implementation of rights and responsibilities in client relationships.
  • the relationship between the UNGPs and codes of professional conduct for the legal profession.
• International Bar Association’s Practical Guide on Business and Human Rights for Business Lawyers and Business and Human Rights Guidance for Bar Associations.
• IBA’s Handbook for company and commercial lawyers on Business and Human Rights, which provides an explanation for lawyers about the links between different kinds of risks.
• Principles for responsible contracts: Integrating the management of human rights risks into state-investor contracts.
• UNGC’s Good Practice Note Meeting the Responsibility to Respect in Situations of Conflicting Legal Requirements.

Hate Speech, Harassment and Illegal Content
(Right to equality and non-discrimination; Right to life, liberty and security; Right to freedom of thought, conscience and religion; Right to Just and favorable conditions of work; Right to highest attainable standard of physical and mental health):

• Online classified ads platforms have been accused in recent years of facilitating human trafficking, including sexual exploitation of children.
• Hate speech and other forms of harmful communication can incite violence, including attacks on targeted individuals or communities. UN Human Rights investigators looking into the genocide in Myanmar confirmed that social media had played a “determining role” in the spreading of hate speech and the campaign of ethnic cleansing against the Rohingya minority.
• Social media platforms can be used for practices like “doxing” and harassment, particularly where platforms fail to prevent or manage gender-specific harassment and overtly toxic interactions.
• Some adult websites allow for non-consensual content to be posted. Some companies have been reluctant to (or refused to) take down content when requested by victims while profiting from the harm through ad revenue.
• Companies can facilitate the harmful practices of online platforms through provision of “back-end” services, such as building custom tools to support platforms that impact rights.

*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 positively contribute to a range of SDGs depending on the impact concerned, for example:

Online Platforms:

• In the run up to the 2020 US elections, Facebook announced a range of steps they were taking to ensure the integrity of the elections including by removing misinformation, violence-inciting posts, the creation of a Voting Information Center, the development of a new hate speech policy, as well as political advertising blackout periods the week before and after the election.
• Social media companies have been developing stronger moderation systems to flag, escalate and make decisions about discriminatory or otherwise abusive behavior (e.g. employing monitoring staff that are trained on the local context; convening groups of experts to monitor important topics, especially where hate speech or fake news can lead to serious harm). For example, Facebook has announced the use of AI to limit the spread of hate speech and improve the speed of its removal and, with others including Twitter, has joined the global pledge to fight hate speech online.
  • Content moderation: monitoring and removing content is, in principle, a viable risk mitigation strategy and many social media companies employ moderators to manage the related risks to people. However, a number of additional risks to people are inherent to this work: (1) privacy risks related to having your content, personal information and private interactions monitored; (2) censorship if companies make inappropriate or incorrect decisions; and (3) risk to the mental health of the content moderators who are regularly exposed to harmful, toxic and violent content.
• Facebook and Twitter have created lead roles for human rights experts, and Facebook has reportedly commenced “making sure that people with human rights training are in the meetings where executives sign off on new product features.” Facebook has also created an Independent Oversight Board to take final and binding decisions on whether specific content should be allowed or removed from Facebook and Instagram. The Board considers content referred to it by both users and Facebook. Members contract directly with the Oversight Board, are not Facebook employees and cannot be removed by Facebook.
• Online recruitment companies, such as LinkedIn, use a “multitude of tools and systems to proactively monitor content and identify activity that may be in violation of [their] policies,” deploying human reviewers where users identify and report discriminatory content in job postings.

• Fast Company (2020), What data experiments tell us about racial discrimination on Airbnb.
• European Commission against Racism and Intolerance, Combating Hate Speech, General Policy Recommendation.
• OpenCanada (2019), Bringing human rights standards to content moderation on social media.
• Human Rights Watch (2018), Social Media’s Moral Reckoning.
• Investor Alliance for Human Rights, Information, Communications and Technology (ICT) Briefing: Discrimination.
• New America (2020), Getting to the Source of Infodemics: It’s the Business Model.
• New America (2020), It’s Not Just the Content, It’s the Business Model: Democracy’s Online Speech Challenge.
• The Atlantic (2016), Facebook And The New Colonialism.
• The Conversation (2019), Digital Colonialism: Why Some Countries Want To Take Control Of Their Peoples Data From Big Tech.

Right to non-discrimination and associated impacts on economic, social and cultural rights, such as housing, employment opportunities, livelihoods and healthcare. The use of algorithms to automate decision-making in industries as diverse as online advertising, recruitment, healthcare, retail, and consumer finance is rarely – if ever – intended to undermine individuals’ right to non- discrimination. In fact, these tools have the potential to reduce or remove human bias from decision-making. Nonetheless, the opposite can also be true. Examples include:

• Social media, search and websites selling targeted advertising where:
  • Landlords have been enabled to exclude users based on race, age or gender. This has occurred when tools allowed agents to explicitly exclude certain groups from seeing housing ads. It can also happen in more subtle ways when companies allow targeting based on categories, such as age, marital status, and ZIP code, that are de facto proxies for certain groups. A series of court cases have led to many companies, including Facebook, committing to change their policies.
  • Ads for jobs placed on search platforms result in higher paying jobs being shown to more men than women, as in a 2015 case involving Google, reported in the Washington Post. Google has since taken steps to seek to address these, and similar examples, by updating its ad targeting policies.
  • Elderly populations have been targeted with fraudulent products or services to trick them out of cash or savings, ranging from anti-ageing products to funeral insurance and reverse mortgages. In one case, retired, politically conservative individuals in the United States were tricked into using much of their retirement savings to buy marked up gold and silver coins to “protect their money from the deep state.” Even though this broke the company’s rules, Facebook showed ads supporting this scheme more than 45 million times over a 21-month period.

• Discrimination in credit and insurance decision-making, for example:
  • Where loan providers rely on algorithms to analyze credit worthiness. In 2020, a report from the US-based Student Borrower Protection Center found that two lending institutions were effectively raising the cost of credit for students at academic institutions serving predominantly Hispanic and Black students.
  • Where insurance companies use algorithms to set the price of cover. 2018 reports alleged that UK car insurance firms were using algorithms that quoted higher premiums to people with non-Western names. The International Association of Insurance Providers published a paper cautioning the industry about these risks.
  • Where individuals’ credit limits are influenced by their social connections. Some companies are requesting mobile phone data and social media records in order to make judgements about credit worthiness. Where individuals’ do not have a credit history this can be one way to positively increase financial inclusion. But is also risks bringing down minorities’ scores if, for example, an individual has friends and family members who have not paid past debts.

• Recruitment industry tools that discriminate. The recruitment industry increasingly integrates automated decision-making as part of its value proposition to employers. In this context, discrimination can occur in a range of ways that have been well highlighted by researchers. High profile examples have included companies offering tools that:
  • Examine social media timelines and online postings about candidates with the risk that data which should not legally or ethically exclude an individual from a job – such as political opinion, sexual orientation or having family members convicted of a crime – ends up doing so.
  • Use Natural Language Processing to screen out candidate resumes that don’t fit an employer’s prior hiring patterns, which can perpetuate, racial, gender and other discrimination.
  • Allow employers conducting video interviews to grade verbal responses, tone, and facial expressions against high- performing employees potentially reinforcing biases and being unable to interpret non-white faces.
• Discrimination in healthcare. Healthcare professionals are increasingly looking to leverage the power of artificial intelligence to achieve breakthroughs in disease detection, diagnosis and patient care plans. The WHO has begun to flag associated ethical risks. In one case, an algorithmic tool sold to hospitals and insurers to predict health care needs was found to underestimate the needs of Black patients.

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

Companies that make decisions and pursue actions based on algorithmic profiling and predictions can cause adverse impacts on human rights. An example would be a bank denying credit based on a tool that makes discriminatory recommendations.

Companies whose value proposition is to sell the capability to profile and predict to public or private third parties can contribute to adverse human rights impacts that those actors cause where their tools embed discriminatory biases. Contribution might arise due to the ways that customers are empowered to use these tools (such as by excluding certain groups) or may be more subtle such as when an algorithmic system has bias built into the data set.

An added complexity is that a single algorithmic system may integrate a number of inputs from different actors. For example, a data broker might provide training data; an AI research firm might license an algorithm and a developer might design the customer interface. Depending on the specific circumstances, each of these companies could contribute to adverse impacts.

In situations where companies have taken reasonable steps to prevent their tools contributing to discrimination and other human rights harms, they may nevertheless be linked to adverse impacts that business or government customers are causing.

Algorithmic systems may 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 impact people’s rights to non-discrimination, privacy and physical and mental health and well-being.

Unless otherwise indicated, the following questions draw heavily on Ranking Digital Rights’ Best Practices: Algorithms, Machine Learning and Automated Decision-Making, and the World Economic Forum’s White Paper on How to Prevent Discriminatory Outcomes in Machine Learning.

• Do we have a clear policy that describes how the company identifies and manages human rights risks related to the algorithmic system(s) we use?
• Do we inform customers or users about the existence of algorithmic profiling, describe how this works, explain the variables that influence the algorithm, and explain how users and customers may be impacted?
• Have we mapped and understood if any particular groups may be at an advantage or disadvantage in the context in which the system is being deployed? Do we have a method for checking if the output from an algorithm is decorrelated from protected or sensitive features?
• Do we seek a diversity of views about the potential risks of proposed models, especially from specific populations affected by the outcomes of algorithmic systems we use?
• Have we established robust diversity and inclusion policies at every level of the company, and notably in teams that develop algorithms, machine learning models, or other automated decision-making tools?
• Have we consulted with all the relevant domain experts whose interdisciplinary insights allow us to understand potential sources of bias or unfairness, and to design ways to counteract them?

• Do we assess whether any uses or use-cases of our algorithmic tools pose risks to human rights? Where we identify these, are we:
  • Creating clear and enforceable terms of use?
  • Engaging enterprise and government customers/users to educate and train them about how to use the tools without increasing human rights risks?
  • Do we have systems in place to monitor and review how customers are using our tools?
  • Are we clear about the actions we will take if we discover that our tools are being used in ways that lead to, or increase the likelihood of, adverse human rights impacts?
• Do we apply “rigorous pre-release trials to ensure that algorithmic systems will not amplify biases and error due to any issues with the training data, algorithms, or other elements of system design?”
• Have we outlined an ongoing system for evaluating fairness throughout the life cycle of our product? Do we have an escalation/emergency procedure to correct unforeseen cases of unfairness when we uncover them?
• Are we clearly committed to only buying and/or using training datasets that comprise data whose data subjects have provided informed content to having their data included in datasets used for this purpose?
  • Are we making dataset(s) used to train machine learning models, terms of use, and APIs available to allow third parties to provide and review the behavior of our system?
  • What reporting, grievance or redress processes and recourse do we have in place? Do we have a process in place to make necessary fixes to the design of the system based on reported issues or concerns?

Mitigation examples are current or historical examples for reference, but do not offer insight into their relative maturity or effectiveness. Moreover, some examples listed below are proposals for mitigating actions that have come from data science and engineering research institutes.

• Racial Discrimination and Emerging Digital Technologies: A Human Rights Analysis (A/HRC/44/57), Report from the UN Special Rapporteur on contemporary forms of racism.
• European Union Agency for Fundamental Rights (2018) Big Data: Discrimination in data-supported decision making.
• Harvard School of Law and Corporate Governance Artificial Intelligence and Ethics: An Emerging Area of Board Oversight Responsibility.
• UK Information Commissioners Office GDPR: Rights Related to Automated Decision-Making including Profiling.
• UN Secretary-General’s Roadmap for Digital Cooperation.

• Risks to people can arise where vulnerable populations require access to goods or services of adequate quality in order to realize their human rights. In such a context, decisions to reduce costs carry an increased risk of human rights impacts when compared with other goods and services.
• Human rights risks that have been highlighted in relation to private sector participation in water and sanitation include lack of equality in provision and discrimination against users (Right to non-discrimination). Further, where serious impacts to quality of service have occurred, there have been accusations that the profit motive has interfered with crucial transparency. For example, a water crisis in Flint, Michigan ”exposed residents to high levels of lead, a potent neurotoxin” and “children and infants who consumed the water are likely to suffer lifelong learning disabilities.” The Guardian reported that, according to internal company emails, the water company Veolia knew about a “problem with lead” at the time that it was “interested in securing future work with Flint.” The article notes that “Veolia disputes that its recommendations in Flint might have been colored by the prospect of future business with the city.”
• Without proper mitigation of risk, the provision of for-profit services to dependent resident populations can place vulnerable people at risk of impacts where cost-cutting leads to understaffing, insufficient staff training and oversight and pressure to streamline operational costs.
• In detention centers, reducing qualified staff, cutting maintenance and eliminating programs for detainees risks egregious living conditions, increased violence and overall neglect of prisoners’ human rights. (See Human Rights Advocates submission). (Right to security of the person; Right to adequate standard of living; Children’s rights; Right to Health). For example, private contractor G4S was the subject of a BBC exposé showing “alleged assaults, humiliation and verbal abuse of detainees by officers at [an immigration detention] centre.” Following the scandal, the company increased staffing and training, leading the chairwoman of the UK Home Affairs Select Committee to state that the subsequent reduction in profits that followed the changes “raises very serious questions about G4S’s running of the centre to make higher profits whilst not having proper staffing, training and safeguarding systems in place.”
• In residential care facilities, understaffing and insufficient provision of training can lead to unacceptable standards of hygiene; resident-to-resident aggressive behavior; restrictions on movement or social interaction; or systematic administering, without consent, of drugs to render residents more “docile” and manageable. (See Human Rights Watch report). (Right to bodily integrity (e.g. in the case of drugs administered with free, prior and informed consent); Right to health).

• Financial Risks, Especially Loss of Investment:
  • Investors in a company to whom the Australian government outsourced the operation of offshore detention facilities for asylum seekers, came under pressure to divest due to allegations of inhumane conditions at the camps.
  • A sustained campaign by faith-based investors and investment networks from 2017 to 2019 focused on investment in the private prison industry. The investors “raised questions about human rights abuses in the companies’ prisons that were uncovered by investigations and identified in lawsuits”, and cited “inmate deaths, poor medical care, allegations of physical and sexual abuse of detainees, and violence.” JPMorgan Chase announced in March 2019 that it “will no longer bank the private prison industry.”
• Business Opportunity and Continuity Risks: Risk of loss of government contracts, increased scrutiny and reconsideration of the social license to operate of the entire industry, potentially leading to government intervention, including renationalization or “remunicipalization” of services.
  • Following the G4S immigration center scandal mentioned above, the Independent newspaper ran an article by the paper’s Chief Business Commentator with the headline “Private companies should not be doing this sort of work.” The company later announced it would end its involvement in the immigration and asylum sector but remain involved in the private prison sector.
  • In 2016 following mounting criticism on conditions, the US Justice Department ended its use of private prisons. Civil society noted that the move “should prompt other federal departments and state governments” to follow suit (see Human Rights Watch).
  • In 2017 the Australian government closed its main offshore immigration detention processing center on Manus Island following allegations of inhumane conditions at the center, operated by a private company.
  • A “significant global trend” has been observed involving the “rejection of the private sector, due to its failures to provide adequate services” in water and sanitation, leading to renewed public ownership of those services (see UN Special Rapporteur for Special Rapporteur on the human rights to water and sanitation). Civil society has produced guides for remunicipalization of water for communities and policy makers, premised on claims that “PPPs turn out to be worse for public budgets in the long term, and lead to poor services and a loss of democratic transparency.”

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

Providing products and services in the sectors addressed in this flag can contribute a range of SDGs, including:

• How is the company accessing insights into the experience of people who rely on our services, including through direct engagement with those populations?
• How does the company identify who may be particularly at risk from low or inadequate levels of service provision?
• How can both internal staff and affected individuals raise concerns through formal channels regarding service levels, without retaliation, and how does the company ensure that these are taken seriously and escalated within the company where they indicate severe risks to people.
• How are decisions about cost-cutting or changes to service provision scrutinized for their potential impacts on the rights of dependent populations, and how are independent experts brought into those processes?

Example in Focus: Nursing Care Facilities

• Do we have staffing levels adequate to provide care? Do we see a correlation between staffing levels and drug administration to patients?
• How do we ensure we obtain and document free, prior and informed consent to the administration of drugs?
• Do we limit residents’ access to judicial avenues of remedy in our contracts?

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

Private Water and Sanitation Services:

• The Special Rapporteur on the human rights to water and sanitation will focus his 2020 report on “privatization and the human rights to water and sanitation.” See concept note and progress of public consultations here.
• Shift, Pacific Institute and UN Global Compact (2015) Guidance for Companies on Respecting the Human Rights to Water and Sanitation: Bringing a Human Rights Lens to Corporate Water Stewardship.

Private Prisons/ Detention Centers:

• Human Rights Advocates submission on Article 9 of the International Covenant on Civil and Political Rights discusses the effect of the profit motive on conditions in private prisons as a part of its “focus on what governments are required to do to avoid having detention becoming arbitrary when a person’s liberty is turned over to a private entity.”
• Human Rights Watch (2017) Code Red: The Fatal Consequences of Dangerously Substandard Medical Care in Immigration Detention a report analyzing 15 deaths in immigration detention custody in the US, concluding that “healthcare and oversight failures … present in so many of them” point to “larger, systemic deficits in immigration detention facility health care” in both publicly and privately run facilities.

Residential Care Facilities:

• Human Rights Watch (2018) “They Want Docile”: How Nursing Homes in the United States Overmedicate People with Dementia.”

Research in the mining sector shows that often there is a tension between “technical time” – the time needed for the construction or completion of a project – and “social time” – the time needed to address community concerns related to the project.

Oftentimes, even when companies see the importance of consulting affected communities; their approaches are not effective.

• A survey of construction project managers shows that while they believe engagement with the local community improves relationships, they see it as a burdensome, arduous, time consuming and costly process.
• A Chatham House report with perspectives from the extractives sector shows that even though setbacks from break-downs in community relations are costly, community engagement often fails because it is seen as a “distraction,” as a box-ticking exercise, or because community relations officers are marginalized or only involved when things go wrong.
• Oxfam’s research shows that while more companies are making commitments to free, prior, informe consent (FPIC), implementation is still weak and gaps remain between policy commitments and practices.

Even companies or financial institutions that have policy commitments to community engagement can sometimes have business models that depend on project timelines which do not allow for sufficient time for consultation with affected stakeholders.This can lead to the following risks to people:

Business models that substantially depend on project timelines which do not allow for sufficient time for consultation with affected stakeholders can lead to the following risks to companies:

• Reputational Damage: Public backlash has forced cities that intended to host mega-sporting events to withdraw from the process (Boston) or scale-down their amibitions (Tokyo).
• Financial Risks: The shutdown of the US Dakota Access pipeline is estimated to cost $643 million in 2020 and $1.4 billion in 2021. Representatives from the extractives sector reported that delayed production in a major mining project due can cost $20 million per week.
• Operational Risks Linked to Social Unrest: From the riots related to the Rio 2016 summer Olympics to the deaths of demonstrators protesting the Conga Mine in Peru, social unrest can create operational risks for the company as well as security risks for company staff and local communities.
• Legal Risks: Companies operating in contexts where the local government does not follow international standards on Free, Prior, Informed Consent (FPIC) risk facing legal action locally or internationally. For instance, civil society organizations in Guatemala challenged the government before the Inter-American Commission on Human Rights (IACHR) for failing to consult local communities in line with International Labour Organization (ILO) Convention 169 regarding the authorization of the Marlin Mine.

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

Addressing impacts on people associated with this red flag can contribute to ensuring responsible, inclusive and participatory and representative decision-making at all levels (Target 16.7 of SDG 16: promoting peaceful and inclusive societies). The results of consultation with groups affected by projects can enable companies to better understand and mitigate risks to people, which can contribute to the following SDGs:

• Do we understand the local context and the potential ways in which our project can impact on people?
• Do we have a mechanism to sensitize our staff about local issues and the local context?
• Do we know which stakeholders we need to consult and how to structure the consultations to make them meaningful and accessible?
• Do our project plans allow sufficient time for the consultation to take place?
• Do we actively support the role of community relations managers to carry out the consultations?
• Are we prepared to act on the advice of community relations managers? Are we prepared to review the project plan based on insights from the consultations?
• Do we measure the cost of conflict with local communities?

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

• Risks to people arise when the business models of retailers or logistics companies do not appropriately factor in the human cost of delivery. Labor cost is the most significant cost within the “last mile” (the movement of goods from a transportation hub to the final delivery destination), and is the process step on which logistics providers often focus to gain competitive advantage (McKinsey & Company 2016).
• In many cases, consumers do not wish to pay for delivery, but at the same time assume that retailers are aware of, and factor in, the human cost of delivery; retailers are often in fact unaware, and pass this cost on to the logistics providers. In turn, logistics providers – incentivized to compete on price and speed of delivery – frequently pass the human cost of delivery onto workers.
• Pressure on Wages and Conditions: Where retailers and logistics companies compete on delivery costs, “final mile” workers, as well as workers in warehouses, have faced below living wages, charges for missing work and denial of holiday and sick pay (Right to enjoy just and favorable conditions of work). The gig economy has been embraced by the logistics sector; human rights impacts can arise where the gig economy intersects with vulnerable workers, and particularly where companies classify workers as self-employed to avoid employer responsibilities and costs and/ or are denied the right to bargain collectively (Right to enjoy just and favorable conditions of work, including equal remuneration for work of equal value; Right to an adequate standard of living (through decent remuneration); Right to join trade unions and the right to strike).
• Risk of Injuries and to Health: Drivers and cycle couriers can face increased risk of crashes due to pressures to deliver more goods, faster, with resulting risks to their health and lives. The effect is exacerbated where retailers engaging independent delivery drivers decline financial responsibility associated with crashes, despite exercising control over factors such as destinations, deadlines and routes. In 2018 the Guardian reported that a UK driver missed three medical specialist appointments to avoid GBP150 daily penalties for missing work, and later collapsed at the wheel and died. (Right to life; Right to health; Right to an adequate standard of living).
• Pressure on Family Life: As retailers offer more and faster delivery options, including late night delivery, workers can see a reduction in time spent with family, and often do not see wage conditions reflecting this reality. (Right to family life).
• Vulnerable Workers: Migrant workers can be particularly vulnerable in the logistics sector, especially when working for subcontractors who enter the retail value chain to meet seasonal demands (Right to enjoy favorable conditions of work). Impacts are exacerbated where migrant workers pay fees to recruitment agencies that place them in situations of unsustainable debt, tying them to a particular agency or job. (Right not to be subjected to forced labor).
• Job Impacts from Automation: New technologies and increased automation impacting business models in the delivery sector can lead to large scale displacement of workers. Risk of human rights impacts can arise where this is not executed with planning or support for upskilling or redeployment of workers. (See Red Flag 21 for further information on large scale or rapid automation).

• Business Continuity Risks: Same-day and instant delivery is likely to form 15% of the market by 2020 (McKinsey & Company 2016). As the percentage of retail companies’ revenue derived from online sales increases, retailers who have not resolved risks in their business model associated with this red flag face considerable disruption if this leads to work stoppages amongst logistics workers or consumer boycotts. Investing in capacity building by and with logistics providers with respect to worker rights makes business sense.
• Reputational Risks: As logistics workers face overwork and poor pay and conditions to meet cost and speed requirements, risks of impacts that create reputational and ethical challenges for both retailers and logistics companies increase. Investigative articles examining the conditions of logistics workers, naming both logistics companies and retailers, have been increasing in the UK, Germany and other markets. For example, in Germany it was reported that migrant workers from Eastern Europe who were recruited by agencies to deliver parcels for or in the supply chain of large retailers during the Christmas rush, were receiving below minimum wage and not enjoying decent conditions of work.
• Operational Risks: The value chain may become more complex and higher risk from an operational perspective as logistics providers outsource to sub-contractors to meet unreasonable requirements of price or speed.
• Legal Risks: In some cases, logistics companies relying on contract labor are being determined by the courts to in fact have an employment relationship with logistics workers: in June 2018, an employment tribunal in the UK found 65 Hermes Parcelnet couriers to be workers, and not self-employed contractors. Reasons included the fact that workers had limited scope to negotiate their pay and terms of contract.

*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:

• What processes do we have in place for identifying the presence and extent of risks to the human rights of workers delivering our products resulting from the demands placed on them? Do we set expectations for logistics providers with regards to working conditions?
• Do we engage with logistics providers on the issue of working conditions for workers delivering our products and seek genuine feedback on whether and how delivery terms and expectations may create unreasonable pressures?
• Do we reward logistics providers for measures that ensure the protection of workers’ rights, or do we, in practice, consider only speed and price?
• Do we engage at the industry level to put in place common measures that avoid retailers competing on delivery terms that place pressure on the human rights of logistics workers?

Logistics Providers:

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

Case Example(s):