Archives: Resources

Red Flag 5. Algorithmic decision-making that can result in discrimination

RED FLAG # 5

Algorithmic decision-making to profile, and make predictions about, people in ways that can result in discrimination or other human rights harms.

For Example
  • Banks, insurance firms and mortgage companies using automated decision-making that results in individuals being declined credit based on their age or race
  • Recruitment companies using algorithmic systems to help employers make decisions about candidates in ways that result in certain groups such as women and ethnic minorities being disproportionality removed from recruitment processes
  • Companies offering algorithmic solutions to law enforcement or the criminal justice system that disproportionately predict that young black men will commit crimes and undermine the right to equal treatment before the law
  • Social media companies selling profiling and targeting services that enable political campaigners to spread misinformation about opponents or election dates in ways that undermine the ability of individuals to participate in political processes without interference
Higher-Risk Sectors
  • Companies that offer or make use of targeted advertising such as social media, search, websites, blogs, as well as advertisers and their media agencies
  • Consumer finance and credit
  • Health insurance and healthcare
  • Retailers when targeting customers with product promotions
  • Recruitment industry including online portals and software providers
  • IT and technology companies selling algorithmic solutions to government agencies including healthcare and the criminal justice system
  • Political consulting firms
  • Data brokers selling data analytics as a service
Questions for Leaders
  • Do we have evidence that algorithmic profiling delivers notably greater benefits than more traditional tools for decision-making? Have we done an expert review of whether it may lead to us excluding certain groups?
  • Do we have in place the necessary technical know-how and oversight to:
    • Design, build and deploy algorithmic tools in ways that minimize discriminatory and other risks?
    • Responsibly evaluate, procure and use algorithmic tools?
  • If challenged, are we prepared to explain the decisions we make using these tools? Can we evidence that we are not negatively impacting people’s right to non-discrimination, privacy and other rights?

How to use this resource. Group 33 Created with Sketch. ( Click on the “+” sign to expand each section. You can use the side menu to return to the full list of red flags, download this Red Flag as a PDF or share this resource. )

Understanding Risks and Opportunities

Risks to People

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.

Impacts on Civil and Political Rights including the right to equality before the law, freedom from arbitrary arrest, freedom of assembly, the right to information, political participation. For example:

  • Predictive Policing: In 2019, human rights organizations, journalist and academics reported that police departments in the United States and the United Kingdom were piloting private sector tools to predict crime as a means to allocate resources with discriminating effects based on race, sexuality and age.
  • Predicting Recidivism Rates in Criminal Justice: In 2016, A commercial tool developed by U.S company Northpointe to predict the likelihood of a criminal re-offending, was assessed by Pro Publica. Findings included that among other things “black defendants were far more likely than white defendants to be incorrectly judged to be at a higher risk of recidivism, while white defendants were more likely than black defendants to be incorrectly flagged as low risk.”
  • Facial Recognition: The proposition of facial recognition tools is to enable users to identify individuals by comparing their facial characteristics against a database of images. Users – such as law enforcement agencies, airports, border control and private security companies – can then act on matches where an individual has committed an offence or that they deem to be a threat. Concerns about these tools include: the risk of false positives and unfair detention (especially where they have proven to be less accurate on non-white and non-male faces), and chilling effects on freedom of assembly.
  • Political Campaigning and Disinformation: Social media companies that generate revenue by selling targeted advertising to political campaigners have come under intense scrutiny from civil society organizations making the case that this has threatened democratic processes. Of particular concern have been examples in which voters have been targeted by foreign parties with disinformation about voting dates and processes with the aim of suppressing some voters from going to the polls. Equally concerning, and spotlighted by the infamous Cambridge Analytica scandal, are when political lobby or consulting firms sell micro-targeting strategies using disinformation as a service to political incumbents or opposition parties.

Impacts on the Right to Effective Remedy: Whether algorithmic profiling and predictions amount to State violations, or a business abuse of human rights, the nature of the tools described above can undermine the right to an effective remedy for violations of human rights, which is a fundamental principle of international human rights law. In her 2020 report, the UN Special Rapporteur on contemporary forms of racism, racial discrimination and xenophobia explains that, “In many cases, the data, codes and systems responsible for discriminatory and related outcomes are complex and shielded from scrutiny, including by contract and intellectual property laws. In some contexts, not even computer programmers may themselves be able to explain the way that their algorithmic systems function. This “black box” effect makes it difficult for affected groups to overcome steep evidentiary burdens of proof typically required to prove discrimination through legal proceedings, assuming that court processes are even available in the first place.”

Privacy Impacts: Where business models depend on algorithmic profiling and predictions about individuals, this can create or compound risks to the right to privacy. For example:

Risks to the Business
  • Rapidly Evolving Regulatory Risks: The development, sale and use of algorithmic profiling and decision-making tools is gaining increased attention from regulators. In the United States there have been proposals for a federal Algorithmic Accountability Act and local law makers have already passed (New York City in 2017) or are debating laws (for example, Washington State). The most notable developments have taken place in the European Union.
    • The EU’s General Data Protection Regulation addresses
      the right of individuals not to be data subject to a decision based solely on automated processing, including profiling, where that decision has legal or other effects concerning him or her or similarly significantly affects them. In one example, a Swedish financial services company was ordered to correct its credit risk algorithm which was illegally using age as a parameter to determine credit. The EU Competition Commissioner has announced plans to further regulate this practice.”
  • Existing Legal Risk: Where algorithms are being designed and used to make traditional decisions in novel ways concerning employment, advertising and credit, existing laws apply. For example:
    • The use of AI in hiring in the United States may lead to companies failing to comply with existing laws such as the Employee Polygraph Protection Act or Genetic Information Non Discrimination Act.
    • The American Civil Liberties Union brought a series of cases against Facebook and the U.S Department of Housing also filed charges alleging that its algorithm violated US Equal Employment Opportunities laws and the US Fair Housing Act. Facebook settled in both cases, and has changed their policies and systems.
    • In the UK, law firms and academic institutions have warned that financial institutions that make use of algorithms can risk non-compliance with consumer lending laws.
  • Reputational Risk, Including with Employees: The sharp increase in civil society scrutiny of algorithmic tools means that companies developing or using such tools may experience reduced trust from consumers, employees and citizens. In 2019, 250 Facebook staff members published a letter criticizing the company’s refusal to fact-check political ads and tied the issue to ad targeting.
  • Lost Investment Pre-Launch: Where companies using algorithms are found to discriminate or are deemed to be making decisions in ways that lack a social license, this can result in companies having to choose not to take these products to market. In 2018, one company had to halt the launch of a product designed to vet people for domestic services using “advanced artificial intelligence” to analyze their personalities based on social media posts, after they faced a public backlash.
What the UN Guiding principles say

*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.

Possible Contributions to the SDGs

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.

SDG10: Reduce Inequality within and Among Countries.

SDG3: Healthy Lives and Well-Being for all, including by tackling disruptions to progress such as from the COVID-19 global pandemic.

SDG 5.B: Promote Empowerment of Women Through Technology

SDG11: Make cities and human settlements inclusive, safe, resilient

The UN Secretary-General’s Roadmap for Digital Cooperation is an important resource to guide “all stakeholders to play a role in advancing a safer, more equitable digital world” even as technological solutions are used to achieve the SDGs.

Taking Action

Due Diligence Lines of Inquiry

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

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.

  • Principles, Governance and Oversight: A number of companies in the technology industry and beyond have committed to some form of AI fairness principles as well as having ethics officers and cross-functional committees that look at these issues. One example is Microsoft’s AI, Ethics and Effects of Engineering and Research (AETHER) Committee, which operates alongside the company’s Office of Responsible AI (ORA). Microsoft states that its governance arrangements are designed to set “company-wide rules for enacting responsible AI, as well as defining roles and responsibilities for teams involved in this effort” and that “senior leadership relies on Aether to make recommendations on responsible AI issues, technologies, processes, and best practices.”
  • Tech Tools to Detect Bias: Some technology companies – including IBM, Microsoft, Google’s What-If tool and Facebook’s Fairness Flow – have developed products aimed at detecting bias in algorithmic decision-making. Such efforts can be a way to root-out bias from companies’ own profiling and predictive models as well as a way for “big tech” to mitigate the risk that third parties develop, design and deploy discriminatory algorithms using these companies’ platforms or computing power. With a similar purpose, Aequitas is an “an open source bias audit toolkit developed at the University of Chicago, [that] can be used to audit the predictions of machine learning based risk assessment tools to understand different types of biases, and make informed decisions about developing and deploying such systems.”
  • Debiasing Discrimination in Lending: Start-up Zest AI has created a feature that “uses a technique called adversarial debiasing to correct discrimination in lending models… One model predicts a borrower’s ability to pay, while the second predicts protected information, such as the race or gender of the borrower. The dueling models learn from each other through dozens of adjustments until the discrimination predictor is stumped — the race or gender variable bears no meaningful relationship to the applicant’s credit score.”
  • Data-sheets for Data Sets: Experts at Microsoft Research have proposed the idea of labelling of data sets that train algorithms similar to a nutrition labelling on foods. The intent would be to mitigate against discriminatory outcomes that occur when biased data sets are used to train algorithmic models. The idea is that this will “allow users to understand the strengths and limitations of the data that they’re using and guard against issues such as bias and overfitting.”
  • Changes to Targeted Advertising Policies: As far back as 2015, Facebook and Google banned payday loan companies from advertising on their platforms. Since 2019, Twitter, Google and Facebook have made changes to the policies and systems that allow customers to target adverts. Different changes pertain to different categories of advert including for housing and job opportunities. Of particular interest from a human rights perspective were the changes that Twitter and Google made to policies concerning political advertising made in the run-up to the 2020 US presidential election. Twitter banned political ads outright in October 2019. Google limits targeting advertising in certain broad categories such as sex, gender and postcode (as against micro-targeting). The exact impact of these moves, including from a human rights perspective, is still being explored.
  • LinkedIn Fairness Tool Kit: Linked-In has developed LiFT an open-source project that detects, measures, and mitigates biases in training data sets and algorithms. The company has been using the tool itself to “compute the fairness metrics of training datasets on its platforms, such as the Job Search model.”
  • Ideal’s Reduce-Bias Guidance and tool to Reduce Bias: The recruitment services firm Ideal published a Workplace Diversity Through Recruitment: A Step-By-Step Guide and has a tool that customers can use to test and monitor for adverse impacts in its candidate grading system. Customers who collect demographic data during the course of their hiring process, can ask Ideal to instruct its algorithms to both ignore those demographics and test for and remove adverse impacts based on, among other things, compliance with the US Department of Labor’s affirmative action program, Canada’s equity programs for designated groups, and the European Union’s hiring discrimination laws.
Other tools and resources

Red Flag 4. Privatized access to public goods with risks to quality of services

RED FLAG # 4

Offering privatized access to public goods, such as water, health and security, where profit-maximization affects access or quality of service.

For Example
  • Offering private water or sanitation services where profit-maximization affects access or quality of service
  • Offering nursing home services and engaging in cost cutting activities at the expense of quality of service
  • Providing private prisons or detention centres and reducing qualified staff or cutting maintenance or essential programs to achieve cost savings
Higher-Risk Sectors
  • Water and sanitation services
  • Private care industry, e.g. nursing homes, children’s homes, assisted living facilities
  • Private prison industry
Questions for leaders
  • How does the company identify and respond to any tensions between its responsibility to ensure access and quality, on the one hand, and the need to deliver financial results on the other? What policies guide decision making?
  • How does the company ensure that its lobbying positions (for example, on regulation relating to access or quality) do not have a potential impact on human rights?
  • What systems does the company have in place to ensure that early warnings with regard to issues of access or quality of service make their way to senior decision makers?
  • How does the company ensure access to remedy for people denied adequate access or quality of service?

How to use this resource. Group 33 Created with Sketch. ( Click on the “+” sign to expand each section. You can use the side menu to return to the full list of red flags, download this Red Flag as a PDF or share this resource. )

Understanding Risks and Opportunities

Risks to People
  • 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).
Risks to the Business
  • 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.
What the UN Guiding Principles Say

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

The UNGPs address privatization directly in Principle 5 and its commentary, noting that “States do not relinquish their international human rights law obligations when they privatize the delivery of services that may impact upon the enjoyment of human rights”. As such in the context of privatization, both the state duty to protect, and the corporate responsibility to respect, human rights are directly relevant to these types of impact.

If they fail to meet basic standards for enjoyment of rights, companies offering services upon which dependent populations rely to realize their rights, are at risk of causing a human rights impact.

The following situations are examples of situations that may give rise to an argument of contributing to impacts:

  • A private company reduces services to a level that creates an environment in which violence flourishes (e.g. in a private prison);
  • Aggressive pricing by the company is a factor in rendering the final price of a good or service too high for vulnerable populations to access it.
Possible Contributions to the SDGs

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

SDG 6: Clean Water and Sanitation, in particular Target 6.1: By 2030, achieve universal and equitable access to safe and affordable drinking water for all, and Target 6.2: By 2030, achieve access to adequate and equitable sanitation and hygiene for all and end open defecation, paying special attention to the needs of women and girls and those in vulnerable situations.

SDG 11: Sustainable Cities and Communities, in particular Target 11.1: By 2030, ensure access for all to adequate, safe and affordable housing and basic services and upgrade slums.

SDG 16: Peace, justice and strong institutions, in particular Target 16.6: Develop effective, accountable and transparent institutions at all levels.

SDG 17: (Partnerships for the Goals) envisages partnerships between the public and private sector to be a vital part of the achievement of the SDGs. In particular, Targets 17.16 and 17.17: Public-private partnerships to be entered into in furtherance of the SDGs, and are relevant in this context to efforts to bring key services such as water and sanitation to under-served populations. However it has been noted that there is a “need to reconcile the call for increased partnerships by the SDGs, [with] the understanding that the definition of service provision should be guided by the maximization of benefits to the achievement of human rights.” (See Special Rapporteur on human rights to water and sanitation here).

Taking Action

Due Diligence Lines of Inquiry
  • 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

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

  • In Senegal, private company Senegalaise des Eaux (SDE), a subsidiary of Saur International, has been the private partner in a public-private partnership for water management since 1996. Water supply and sanitation in Senegal is characterized by a relatively high level of access compared to the average of Sub-Saharan Africa. The company extended the service to reach low- income settlements, with social tariffs available to ensure affordability, and offers detailed customer surveys and a complaints system (see C. de Albuquerque).
  • Other mitigation examples have involved action on the part of the state to maintain or reclaim control over aspects of the service provision that intersects with respect for stakeholders’ rights. For example, following accusations of abuse of detainees, the BBC reported that the UK Home Office had concluded that contracts were “no longer fit for purpose, given the lack of scope to impose financial penalties and enforce improvements in conditions and treatment” and that it had plans to include in new contracts “performance measures covering staff recruitment, induction, training, mentoring and culture” and “a contractual role for the Home Office to monitor the appropriateness of the use of force against detainees and the care of staff and detainees following an incident.”
Other Tools and Resources

Private Water and Sanitation Services:

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:

Red Flag 3. Project timelines that undermine consultation with communities

RED FLAG # 3

Construction or commencement of projects with timelines that do not allow sufficient time for consultation with groups affected by the projects.

For Example
  • Extractives projects being planned and costed such that there is not adequate time for local communities to be consulted about potential negative impacts, nor for mitigations to be put in place.
  • Infrastructure projects that are authorized and completed before local communities are able to express concerns or seek mitigation for negative impacts such as loss of access to land or loss of transport links.
  • Mega-events (sporting, exhibitions, fairs) that have tight timelines from project award to delivery of the event.
Higher-Risk Sectors
  • Extractives – particularly mining and on-shore oil/gas
  • Construction – particularly large infrastructure projects Agriculture – particularly large scale operations such as rubber
  • Energy utilities – particulary those that involve infrastructure such as hydroelectric dams
  • Sporting bodies and sporting associations – particularly in the organization of mega-sporting events
  • The financing of projects in the above categories by banks and development finance institutions
Questions for Leaders
  • To what extent are our project timelines able to accommodate engagement with groups impacted by the project?
  • How do we know we know we are identifying and engaging with the appropriate stakeholders?
  • Do we have sufficient understanding and internal capacity to engage with groups affected by the project?

How to use this resource. Group 33 Created with Sketch. ( Click on the “+” sign to expand each section. You can use the side menu to return to the full list of red flags, download this Red Flag as a PDF or share this resource. )

Understanding Risks and Opportunities

Risks to People

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:

  • Loss of Livelihood and Negative Health Impacts: In Mexico, Indigenous communities near a newly built dam in Sonora were not consulted or informed when the dam started to be filled. As the dam was filled, the communities reported they had not yet been relocated, that the dam had flooded areas where they used to access medicinal vegetation and that the project had cut road links to other communities. In Myanmar, opposition to the Myitsone dam on the Irrawaddy river forced the government in 2011 to put the project on hold. The 3.6 billion USD dam was to be financed by China. The dam itself would displace thousands of people and affect fishermen and communities downstream. The reservoir was expected to flood an area the size of Singapore. Local communities reported losing their farmland, which was the source of their income. In addition, the dam would affect cultural rights, as the Myitsone area is believed to be the birthplace of the Kachin people. In recent years, fears that the project may be revived have sparked new protests.
  • Forced Displacement: In Brazil, residents of Vila Autódromo resisted displacement to clear land for construction of the Olympic Park in Rio de Janeiro for the 2016 Rio Olympics. Although the majority of the residents had been offered compensation, others preferred not to leave their homes and felt the government’s plans to go ahead with construction amounted to forced eviction. More generally, research shows that in the 20 years to 2007, approximately 2 million people in different countries were displaced by the Olympic Games. Non-sporting mega-events have also led to forced evictions and displacement: for example, 18,000 households were displaced in Shanghai, China, in preparation for the World Expo 2010.
  • Access to Water: In the US, the Standing Rock Sioux and other American Indian tribes raised concerns that the Dakota Access Pipeline could damage their water supply and cultural heritage. In 2020, a court ordered a temporary shutdown of the pipeline, finding that the environmental impact assessment had been inadequate. In Peru, local opposition to Newmont’s Conga mine forced the company in 2016 to remove the 4.8 bilion USD project from its pipeline. The project had been approved by the national government despite 78% of people in the province of Cajamarca were opposed to it. Local communities challenged the environmental impact of the project: it would cause the loss of four mountain lakes and damage five river basins on which the lives of local comminuties depend. This would not only impact the health and livelihoods of local communities, but also the culture and tradition of campesino communities (traditional farming communities).
  • Environmental Damage: The lack of consultation in the construction of a tourist train in Yucatán, Mexico raised concerns that the new towns that will be created along the line will put pressure on biodiversity and nature reserves which are managed by local communities.
  • Loss of Cultural Heritage: In Australia, the Wangan and Jagalingou community challenged the provision by Siemens of rail signaling to the Adani coalmine, stating that they had not provided approval for the project and the mine would cause environmental damage and limit their access to ancestral ceremonial grounds. In Cambodia, communities from Ratanakiri province filed complaints with the Compliance Advisory Ombudsman (CAO) of the International Finance Corporation (IFC) related to the IFC’s investment in Vietnamese rubber company Hoang Anh Gia Lai (HAGL). Besides IFC, other financial institutions that invested in HAGL included Deutsche Bank, Credit Suisse and Dragon Capital Group. Local communites complained that HAGL’s use of its rubber land concessions had resulted in loss of forest and grazing land, destruction of burial grounds, and lack of access to resin trees and non-timber forest products necessariy to sustain livelihoods. Moreover, communites reported that no effort was made by HAGL to obtained their free, prior informed consent, involve affected communities in the decision-making process, or provide adequate information to them. The CAO facilitated a dispute resolution process, which resulted in HAGL agreeing to a number of remedial measures. However, the company later unilaterally witdrew from the process. As of 2020, the case is still ongoing.
  • Violation of Indigenous Peoples Rights: It is important to highlight Indigenous peoples as a vulnerable group among affected stakeholders. Failure to obtain FPIC can undermine Indigenous peoples’ right to self-determination. It can also undermine their access to other Indigenous peoples’ rights such as life, liberty, security, culture, language, spirituality, education, information, employment, etc. In some contexts, Indigenous leaders play the role of human rights defenders; they are therefore at risk of persecution from state or non-state actors. In Guatemala, UN human rights experts including the Special Rapporteur on the Rights of Indigenous Peoples, raised concerns about the imprisonment of an Indigenous leader for campaigning against a hydroelectric project. The Oxec hydroelectric dam project had started without the consent of the affected communities.

Guatemala’s Supreme Court suspended the project and then the Constitutional Court recognized the right to free, prior, informed consent of the q’eechí’ peoples. However, in 2018, Indigenous leader Bernardo Caal Xól was sentenced to seven years and four months’ imprisonment on charges brought by representatives of the hydroelectric company.

Risks to the Business

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.
What the UN Guiding Principles say

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

  • Companies can cause adverse human rights impacts when they fail to carry out meaningful consultation with affected stakeholders and their actions negatively affect human rights. A failure to allow time for the conduct of Free, Prior and Informed Consultation (FPIC) with affected Indigenous communities, or to ensure that FPIC with these communities has been conducted by others, is itself a breach of Indigenous people’s human rights. More generally, a company may cause human rights impacts when it sets timescales which preclude consultation with affected communities as part of a risk assessment and mitigation process, and the company’s actions then have negative impacts on communities such as forced displacement, depriving communities of access to water, food or livelihoods or preventing them of entering cultural sites.
  • Organizations (including companies, mega-event organizers and financial institutions) can contribute to adverse human rights impacts when their business models create demand for speed in the delivery of projects by third parties, and the demand for speed prevents third parties from carrying out meaningful consultation with local communities, resulting in adverse human rights impacts.
Possible Contributions to the SDGs

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:

SDG 1: End poverty in all its forms everywhere.
Adequate consultation can help ensure that people – particularly vulnerable communities – have equal rights to economic resources, including ownership and control over land.

SDG 2: Zero hunger.
Adequate consultation can help agricultural productivity and incomes of small-scale farmers, in particular women and Indigenous communities, including through secure and equal access to land and productive resources.

SDG 3: Good health and wellbeing.
Adequate consultation can help protect stakeholders’ health by preventing negative impacts such as pollution of soil, air or water sources, or impacts from poor working conditions such as fatigue, stress and accidents.

SDG 6: Clean water and sanitation.
Adequate consultation can help prevent pollution of water sources.

Taking Action

Due Diligence Lines of Inquiry
  • 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

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

  • Encouraging active citizenship by building the capacity of civil society to unlock productive dialogue between the company and local communities. For example, Oxfam’s NORAD project in Ghana, Tanzania and Mozambique to improve petroleum governance.
  • Dialogue tables co-owned by companies, local communities and stakeholders (civil society) as spaces for respectful, patient engagement and joint problem-solving. The dialogue tables can be facilitated by neutral third parties, which can help companies and communities build trust in the process. For instance, Anglo American participated in dialogue tables in the Quellaveco project in Peru. This enabled the company to make commitments to the local community on water management, environmental protection and social investment.
  • Monitoring agencies set up between representatives of Indigenous peoples, local government and businesses to enable joint decision-making and monitoring compliance with the terms of the agreement between the company and local communities. The Snap Lake Environmental Monitoring Agency was set up by DeBeers, the Government of the Northwest Territories of Canada and a number of aboriginal groups. Its board was comprised of representatives of Indigenous groups, and the agency functioned as a “watchdog” to monitor environmental compliance by DeBeers.
  • Tailored approaches that respond to community concerns and go beyond compliance can help companies and communities build trust. In New Zealand, Newmont Waihi Gold (NWG) wanted to expand their gold mining beneath homes of the local community. The company realized that a primary concern of the community related to property damage. In response, NWG set up a number of platforms that went beyond the legal requirements to provide transparency and enable the community a role in decision-making. These included an independent ombudsman for property matters, a policy to guide how the company would respond to matters of property damage, and a community forum with members of the community, the company and local government.
  • Empowered community liaison officers who, in addition to being approachable and personable towards the local community, can take decisive action when concerns are raised. For instance, at Newmont Waihi Gold (NWG) in New Zealand, the community liaison officer had the power to stop operations when the community raised certain issues, even if the pit was operating within consent limits.
Other Tools and Resources

General:

Sector Specific Examples:

 

Red Flag 2. High-speed that places pressure on warehouse workers and logistics workers in “the last mile”

RED FLAG # 2

Offering high-speed delivery such that it places pressure on warehouse workers and logistics workers in the “last mile”.

For Example
  • Retailers offering free or low-priced express delivery to consumers in ways that place unreasonable time or wage pressure on logistics workers
  • Logistics providers that rely on low wages and precarious labor
Higher-Risk Sectors
  • Online retailers
  • Logistics Providers
Questions for Leaders
  • How does the company understand what the true costs of delivery are once decent working conditions are factored in, and where those costs are reflected in the company’s pricing model?
  • (Retailers) Does the company know whether it incentivizes consumers to ask for extremely short delivery times, without informing them of the potential decent work implications?
  • (Retailers) How does the company know whether its model leads in practice to logistics providers placing unreasonable time or wage pressures on individual workers?

How to use this resource. Group 33 Created with Sketch. ( Click on the “+” sign to expand each section. You can use the side menu to return to the full list of red flags, download this Red Flag as a PDF or share this resource. )  

Understanding Risks and Opportunities

Risks to People
  • 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).
Risks to the Business
  • 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.
What the UN guiding principles say

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

Retailers:

  • Where a retailer’s own business model facilitates or incentivizes logistics providers to impact the human rights of warehouse and/or logistics workers, it is considered to contribute to the impacts. Where the retailer takes serious steps to avoid facilitating or incentivizing these outcomes, but impacts nevertheless occur in connection with delivery of the company’s products, the retailer may be considered not to have contributed, but to be directly linked to the impact.

Logistics Providers:

  • Where logistics providers pay workers below a living wage and deny decent working conditions they cause human rights impacts.
  • Where impacts occur at the level of a logistics subcontractor, the logistics provider will at a minimum be directly linked to the impacts; it will contribute to impacts if its business model or practices incentivized or facilitated them.
Possible Contribution to the SDGs

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

SDG 8: Decent Work and Economic Growth, in particular: Target 8.8 on protecting, “labor rights and promot[ing] safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment”; and Target 8.7 on eradication of forced labor.

Taking Action

Due Diligence Lines of Inquiry

Retailers:

  • 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:

  • How do we assess the true cost of delivery, once decent working conditions are factored in, and how can we integrate this into prices?
  • Do we seek genuine feedback from our workers about their experience providing our services, through channels they can trust?
  • Do we have in place policies and processes to provide decent working conditions? How do we embed these and track our progress?
  • Do we have a channel in place to discuss with retailers the human costs of delivery, and retailer pressures that impact workers/working conditions? Can we create one either individually or in concert with industry peers?
Mitigation Examples

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

Logistics Providers :

  • Engagement Beyond Employees: Following the death of a driver, DPD conducted a strategic operational review, including a consultation with UK drivers, obtained independent, external advice and rolled out a driver code in 2018. DPD UK introduced new self-employed worker contracts aimed at providing “all drivers the flexibility to move between different employment statuses including employed, Owner Driver Workers and Owner Driver Franchisees.” (See further DPD CSR Report 2018, p. 19).
  • Royal Mail: Engages the government in relation to better labor standards across the industry.
  • Ombudsperson System: Hermes Parcelnet has adopted a Code of Conduct and developed a Social Compliance Model to underpin the embedding of its Code. As part of this, the company created a Panel to hear courier complaints and appointed a Business and Human Rights Ombudsperson who provides a) recommendations to the Panel on remedy for human rights-related complaints and b) suggestions to the audit committee for strengthening the company’s policies and processes.

Retailers:

here is limited information on good practices at the retailer- level with respect to this red flag, particularly with respect to addressing the effect of retailers’ own practices.

  • UK Logistics Initiative: A small group of retailers joined together to address working conditions at their final mile delivery logistics partners. This has involved using collective leverage to open up a conversation between logistics providers and a credible independent third party and a workshop with retailers to discuss the findings of those conversations, to develop a common understanding of the risks to people and to take action individually and where appropriate collectively. This is an informal group, convened by Shift in partnership with the British Retail Consortium.
  • Capacity Building: Marks and Spencer conducts risk assessments and audits of logistics providers. The company also brought logistics providers (amongst other suppliers) to its Modern Slavery and Human Rights Conference, offering capacity building with respect to modern slavery, including a toolkit for suppliers, and a reminder of M&S expectations (See M&S 2017 Human Rights Report, p.21).
Alternative Models

Logistics Providers: In a groundbreaking step for the gig economy, logistics provider Hermes Parcelnet engaged in a recognition deal with GMB Union pursuant to 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).

Other Tools and Resources

Case Example(s):

  • 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.
  • 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.
  • Shift partnered with the Behavioral Science Group at Warwick Business School to see if behavioral science could suggest some ways to “nudge” consumers towards longer delivery windows that could reduce pressures on couriers. See, Adding Human Rights to the Shopping Cart (2020).

Más Allá del Orgullo: los Derechos de las Personas LGBTI y la Responsabilidad Corporativa de Respetar

En cada región del mundo las personas lesbianas, gays, bisexuales, transgénero e intersexuales (LGBTI) se enfrentan a algún grado de violencia, persecución o discriminación:

Desde lo que se dice en torno a una mesa familiar hasta quién llega a participar en una competencia deportiva. Desde qué persona puede hacer uso de un baño hasta cuál es sentenciada en un tribunal, o quién es víctima de esterilización forzada o sometida a procedimientos médicos nocivos. Y desde quién consigue un apartamento, una oferta de trabajo o un ascenso hasta qué persona es encarcelada, azotada o sentenciada a muerte. Los contextos de dicha violencia y discriminación son tan variados como las personas en el acrónimo LGBTI, y plantean una amplia gama de riesgos de derechos humanos para las empresas.

Las empresas tienen la responsabilidad – según los Principios Rectores sobre Empresas y Derechos Humanos de las Naciones Unidas (UNGPs, por sus siglas en inglés) – de comprender y abordar la manera en que sus acciones, decisiones, omisiones y relaciones comerciales pueden generar impactos negativos en las personas. En el caso de las personas LGBTI, eso significa considerar cómo podrían estar aumentando el riesgo que ya enfrentan por su orientación sexual, identidad o expresión de género, o características sexuales (SOGIESC, por sus siglas en inglés).

Usa este recurso para:

  • Aprender cómo las actividades y las relaciones de las empresas pueden exacerbar los riesgos enfrentados por las personas LGBTI.
  • Entender por qué los riesgos pueden variar dependiendo del contexto geográfico y cultural, y qué significa eso para las empresas de nivel global.
  • Explorar cómo las empresas pueden entender las vulnerabilidades particulares que experimentan las personas LGBTI para así identificar mejor los riesgos y priorizar la acción.
  • Revisar qué están haciendo las empresas para atender los riesgos a los derechos de las personas LGBTI, y en dónde están los vacíos en las prácticas actuales.
  • Considerar formas significativas en las que las empresas pueden interactuar con las partes LGBTI interesadas y utilizar su influencia con sus pares, socios, proveedores, gobiernos y otros.

Audio | Getting Contractual Provisions on Human Rights, Right

CLICK PLAY BELOW TO LISTEN TO THIS EPISODE

As the mandatory due diligence debate heats up in Europe and we look ahead to more countries turning the responsibility to respect into a corporate duty, companies will increasingly need to focus on setting clear expectations of their business partners. Putting the right provisions into contracts is going to become even more important.

In this conversation, Shift’s Rachel Davis and John F. Sherman III discuss a recent project of a Working Group of the Business Law Section of the American Bar Association (ABA) that is trying to get ahead of the trend of new legislation and put companies on the right path in how they approach the role of contractual requirements.

You may also read more about the Model Clauses in a viewpoint by John Sherman, here.

This episode’s speakers

RACHEL DAVIS

Rachel Davis is one of Shift’s co-founders and has led work at Shift over the last decade on standard-setting, human rights and sports, financial institutions, conflict and international law.

As Vice President, Rachel shapes our strategy and oversees a range of our collaborations with companies, governments, investors, civil society and other partners. Rachel leads Shift’s work to influence STANDARD-SETTERS of all kinds to integrate the UN Guiding Principles into the rules that govern business, including engaging with governments and the European Union on mandatory human rights due diligence. Learn more

JOHN F SHERMAN III

As Shift’s General Counsel and Senior Advisor, John F. Sherman III focuses on the role of corporate lawyers in the implementation of the Guiding Principles in their role as wise legal counselors.

John is an internationally recognized thought leader on this subject. He chairs the business and human rights working group of the International Bar Association. He writes frequently in professional and academic journals and is a sought-after speaker at legal conferences and workshops, advocating for lawyers’ role in ensuring companies do business with respect for human rights. John is a founder of the IBA CSR Committee and was its co-chair from 2008 to 2010. Learn more

Red Flag 1. Lowest cost goods or services in ways that put pressure on labor rights

RED FLAG # 1

The business’s commercial success substantially depends upon offering lowest cost goods or services such that it becomes economically challenging for the company or suppliers to respect labor rights.

FOR EXAMPLE
  • Selling apparel and other consumer goods premised on cheapest prices for customers, such that increases in production costs are absorbed through the wages of already low-paid workers 
  • Locating (and relocating) production to countries with lowest wages 
HIGHER-RISK SECTORS
  • Commerce sector, in particular “value brand” retail companies, including apparel retail
  • Textiles, clothing, leather and footwear sector
  • Food and drink sector
Questions for Leaders
  • Do low costs in the company’s sourcing locations flow in part from a lack of investment in basic protections for workers? How does the company mitigate attendant risks to people?
  • How does the company know if its buying practices influence suppliers’ ability to meet their expectations on human rights? Does the company seek out feedback from suppliers in this regard, and act on it?

How to use this resource. Group 33 Created with Sketch. ( Click on the “+” sign to expand each section. You can use the side menu to return to the full list of red flags, download this Red Flag as a PDF or share this resource. )  

Understanding Risks and Opportunities

Risks to People
  • Where the business model is premised on securing cheapest prices for customers (as opposed to other differentiating factors such as quality/service), retail prices often remain constant or reduce, even when costs of production, raw materials or demands for high-speed delivery increase. In such cases the company may use its purchasing power to place heavy price pressure on suppliers working on narrow margins, such that costs are passed onto the most vulnerable people in supply chains – such as factory workers, including migrant workers, women workers, producers and small-holder farmers – affecting their livelihoods and those of their families. (Right to fair/living wage; Right to adequate standard of living).
  • Suppliers under excessive price pressure may be incentivized to demand excessive overtime from workers, not pay wages or overtime, or not provide safe working conditions. Risks are exacerbated when the company provides little or no commitment to long-term sourcing, disincentivizing investment in improving working conditions. (Right to just and favorable conditions of work; Right to Health).
  • Risks are greatest where the company locates (and relocates) production to countries where minimum or industry wages leave workers in poverty and workers lack adequate protections in law or in practice. (Right to an adequate standard of living; Right to fair/living wage). (See further Red Flag 23).
Risk to the Business
  • Reputational Risks: Companies operating in a hyper flexible sourcing context (i.e. where sourcing can move quickly and easily between multiple locations) may benefit from lowest prices, but face reputational risks linked to the ease of exploitation of low-skilled, low-paid workers in such sourcing geographies with minimal protections for them. The short-term and remote nature of many supplier relationships can a) reduce buyers’ leverage to do anything about abusive behaviors in their supply chain when they are highlighted by civil society, consumers or their own audits and b) constrain the ability of buying companies to divest from such sourcing geographies where these issues are or become systemic. Moreover, tragedies affecting workers in the supply chains of global brands that benefit from low cost production implicate entire industries: in the wake of the Rana Plaza collapse, articles referred to the “complicity” of the entire industry in conditions leading to the tragedy.
  • Operational Risks: Companies may find themselves unable to guarantee traceability as suppliers under extreme price pressure may sub-contract production, leading to a longer, less transparent and less controllable supply chain.
  • Financial Risk and Business Opportunity Risk: Data showing slowdowns in frequency of purchase of lowest price apparel goods, for example, and increases in the number of consumers willing to pay more for ethically sourced or sustainable goods, has led some business leaders to predict a backlash from consumers, “in the same way as plastics and deforestation linked to palm oil.” Failure to address this may have financial implications including in the form of missed opportunities to adapt.
  • Regulatory Risk: Operating on a price leadership model can be associated with regulatory risk. Regulation has been tabled in some jurisdictions to reduce waste associated with low cost goods (e.g. in the UK, taxes on garments to fund recycling and repairing in the fashion industry have been proposed, and a government report proposed a ban on sending to landfill clothes that can be reused or recycled).
What the UN Guiding Principles Say

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

The UNGPs note that companies should “strive for coherence between their responsibility to respect human rights and policies and procedures that govern their wider business activities and relationships [including] …. procurement practices.” (Principle 16, Commentary)

Where the incentives for impacts are embedded in the buying company’s purchasing practices, it may systematically rewards buyers for placing extreme pressure on suppliers, and punish those that invest in protections for workers in ways that raise their costs (and therefore prices to the buying company). In such circumstances, the company may be considered to contribute to impacts on supply chain workers. Similarly, where the company executes a strategy to benefit from wages below a living wage, including, in some cases, by lobbying against minimum wage increases, it may contribute to the impacts experienced by workers. (See further Red Flag 23).

Possible contributions to the Sustainable Development Goals (SDGs)

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

SDG 10: Reducing inequalities within and between countries This goal becomes relevant as profit margins and returns are concentrated at the buyer/investor level, with less and less value making it into the pockets of the poorest in the supply chain.

SDG 8: Decent Work and Economic Growth, in particular Target 8.8 on protecting “labor rights and promot[ing] safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment.”

SDG 1: End Poverty in All its Forms Everywhere, in particular Targets 1.1 and 1.2 on eradicating extreme poverty and reducing by half the number of people living in poverty (according to national definitions).

Taking Action

Due Diligence Lines of Inquiry
  • Do our contracting/tendering processes unduly incentivize cost cutting or disincentivize supplier investment in rights-related improvements (e.g. annual bidding for contracts; procurement decisions based on lowest-cost alone). How do we ensure that lowest price bids reflect greater efficiencies rather than externalization of costs onto supply chain workers? Have we considered the seven key buyer purchasing practices that Better Buying has identified that affect a supplier’s ability to provide a safe work environment?
  • How do we incentivize and reward our buyers and how do they perceive the factors on which they are judged to succeed? Do we consider factors other than lowest price (eg relationship and capacity building; adherence to sustainability codes etc.)?
  • Do buyers have sufficient knowledge, incentives and support to assess how and when their decisions will place human rights at risk, and to know from whom to seek assistance when they do?
  • How do we know whether our buyers follow our processes, rules or guidelines in practice when engaging or contracting with suppliers?
  • Do we engage with our suppliers in ways that help us understand how far they can go to meet our demands while still respecting the rights of their workers? Do we work with suppliers in countries of production to increase worker protections?
  • Do we take a short term, transactional approach to supply chains or do we develop supply chain partnerships?
  • How are we engaging with our industry peers to uphold human rights in our shared supply chains, recognizing this is a pre-competitive issue? Are we engaging in multi-stakeholder initiatives that are actively working to improve wages and livelihoods in the supply chain?
Mitigation Examples

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

  • Increasing leverage through collaboration: ACT is a coalition of 22 global apparel brands and IndustriAll Global Union working to achieve living wages for workers through collective bargaining at industry level. ACT brands have signed a Memorandum of Understanding with IndustriAll Global Union, which commits them – amongst other things – to ensure that their purchasing practices facilitate the payment of a living wage. Where successful, coalitions such as this can set a “rights respecting baseline” in the industry such that human rights factors, such as wages and conditions, become “pre-competitive” elements. The ACT labor costing protocol provides guidance to brands for implementing the Purchasing Practices commitment they make to cover wages and wage growth in brand purchasing prices.
  • Length and quality of supplier relationships: In 2013 H&M created and rolled out a Fair Living Wage Strategy with strategic suppliers, centered on workplace dialogue and industrial relations, wage setting, industry collaborations and government engagement in countries of manufacture. The methodology aims to support the creation of holistic pay structures that enable and sustain fair living wages, by taking into account an individual worker’s skills, experience, performance and responsibility. In Bangladesh and Cambodia, H&M offers “exclusivity agreements” to a selection of suppliers, whereby the company commits to purchase the entire output of clothing factories whilst the supplier undertakes measures to improve working conditions.
  • Understanding and addressing pressures on farmers and suppliers: The Farmer Income Lab, launched by Mars, with Dalberg and Wageningen universities and Oxfam USA, is a collaborative effort to identify ways to increase smallholder farmers’ incomes – beginning with Mars’ supply chains in developing countries – and to understand how to create positive outcomes for farmers at scale.
  • Contributing to a regulatory environment that enables respect for rights: In 2014, eight apparel brands wrote to the Cambodian deputy prime minister and the chairman of the local Garment Manufacturers Association to say they were “ready to factor higher wages” into their pricing.
Alternative Models

In the US, the Fair Food Program, established by The Coalition of Immokalee Workers (CIW) in 2011, brings together the CIW, farmworkers on participating farms, farmers and retail food companies. Among the many facets of the program is a “penny per pound” premium that is paid by participating buyers on top of the regular price paid for tomatoes or other covered products. The premium is then passed through by farmers as a bonus on worker’s paychecks, which are monitored by the Fair Food Standards Council, the program’s independent monitoring body. See further from Shift here.

Alternative models can focus on differentiating through quality and/or ethical and transparent sourcing. Various “slow” movements (“slow food,” “slow fashion”) etc. offer products in which the value proposition incorporates fair, transparent and sustainable sourcing and manufacturing, with a focus on durability and quality.

  • The ETI highlights examples in the apparel industry, including:
  • Nudie Jeans (higher priced but ethically sourced and more durable jeans).
  • People Tree (apparel produced using organic cotton, sustainable materials and traditional skills that support rural communities).
  • “Crowd farming” (consumers receive food directly from source and sponsor the cultivation of raw materials).
Other tools and resources

Case example

  • Rana Plaza Factory Fire (IHRB).

Human Rights & Labor Principles: A Business Imperative

This High-Level dialogue was hosted by the UN Global Compact in the context of the 10th anniversary of the UN Guiding Principles on Business and Human Rights. It was moderated by Shift’s Vice President, Rachel Davis. Panelists include the author of the UN Guiding Principles, John Ruggie; UN High Commissioner for Human Rights Michelle Bachelet; the Secretary-General of IOE, Roberto Suarez Santos; and the Chair of the UN Working Group on Business and Human Rights, Dante Pesce.