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Using Leverage to Drive Better Outcomes for People

In March 2021, Shift held the first peer-learning session of its Financial Institutions Practitioners Circle, focusing on the topic of leverage. This resource captures the key takeaways of the session. 

The traditional approach of many banks and Export Credit Agencies (together “FIs”) has been to assess risk from a credit risk perspective and to make a binary decision about whether or not they will enter into commercial relationship with a client. As such, too often those decisions have been made on the basis of risk appetite rather than considering the more complex task of risk management, engagement with the client and the application of firm sustainability expectations. More committed FIs are shifting towards an approach that emphasizes managing risks to affected stakeholders rather than a sole focus on managing potential reputational risks. In addition to setting human rights-related expectations of clients upfront, FIs now need to focus, for higher risk sections of the portfolio, on scrutinizing the appropriateness of the expectations against intended outcomes, reviewing client adherence to them and evaluating their impact.  

When FIs take this approach, we see greater alignment with the UN Guiding Principles’ focus on improving outcomes for people. Moreover it facilitates a move away from so-called “cut and run” approaches whereby the bank makes another binary decision to cut ties with clients amid reputational concerns without first attempting to use leverage. Due Diligence is a wheel after all: it doesn’t start and end at assessment. The bank has a responsibility to get to action: to use its influence (leverage) to seek to improve outcomes for adversely affected people, including, at a minimum, engagement with clients around risks. This also helps the bank to get to the “yes, and” approach to navigating higher-risk transactions, whereby the bank can more confidently take on clients or transactions that pose heightened social risk, if it is prepared to invest the resources necessary for leverage and it has a credible road map for where the client needs to get to in terms of maturity of approach and/or concrete Key Performance Indicators (KPIs). It goes without saying that an element of pragmatism needs to be brought to bear when looking to achieve this at a portfolio level. The prioritization of resources and focus at the assessment phase is particularly important for financial institutions given their challenge of scale. 

The FI’s responsibility to respect human rights includes the need to understand where it has leverage – in the multiple different forms of leverage available – and where it needs to build it; it means using this leverage to seek to prevent and address harm in order to justify continued engagement. Leading FIs are increasingly exploring and institutionalizing this process.

Here are our 6 key takeaways from our discussion about how to consider leverage for financial institutions from the perspective of the UNGPs, with practical steps that might help turn these insights into action. 

The “S” in ESG: Best Practices and Way Forward?

On July 1, 2021, Shift, Frank Bold and the Thomson Reuters Foundation hosted a discussion to explore what’s needed for companies to better measure and report on their social risks and impact. A transcription of Professor Ruggie’s keynote remarks is available here.

THE S IN ESG: BEST PRACTICES AND WAY FORWARD?

The event featured introductory remarks by Professor John Ruggie. Participants also included: Irit Tamir (Oxfam), Lauren Compere (Boston Common Asset Management), Julie Vallat (L’Oréal), Filip Gregor (Frank Bold), Tom Dodd (EU Commission), Giulia Corinaldi (TRF) and Caroline Rees. (Shift).

Using Worker Voice Tools to Assess Relationships Between Workers and their Managers

This note focuses on one dimension of how technology-enabled worker voice tools can be used: to gather qualitative data about the nature of relationships between managers and workers or communities at factories, farms, mines and plantations. This is achieved by asking workers and community members relationship-based questions.

Use this method to:

  • Quantify and make sense of often subtle, sometimes unexplored, worker dynamics that might impede or enable the achievement of positive human rights outcomes.
  • Identify manager or supervisor behaviors that may be undermining responsible workplace programs.
  • Explore relationships between workers’ experiences in the workplace and traditional business performance metrics, such as productivity, absenteeism and turnover.

Sensemaker: Combining Stories, Numbers and Data Analytics to Uncover Hidden Dimensions of Relationships

SenseMaker is a method to collect qualitative information from stakeholders in the form of stories or micro narratives about their experiences and then, after interpretation and quantification, to identify visual patterns across the narratives of large and diverse populations.

This note focuses on the use of SenseMaker to generate data about intangible dynamics –such as trust, agency and power – within relationships between companies and the workers, communities and consumers they impact.

Use this method to:

  • Gain detailed local insights from the set of individual experiences that people share about their contexts.
  • Visualize patterns and identify common themes across the narratives of large and diverse populations.
  • Use insight from the stories and the data they generate to inform efforts that address problems and challenges.

Using Experiments to Assess Behavior Change Interventions

The ongoing relationships that a company, its suppliers or other business partners have with potentially affected stakeholders are a product, in good part, of the way those business actors behave in their interactions. This is why many companies invest time and resources in promoting – for example via training, guidance, incentives or even workplace signage – specific behaviors of company management or employees.

Experiments – specifically the application of Randomized Control Trials (RCTs) – that integrate stakeholder voice can determine whether and to what extent such behavior change interventions and programs lead to intended outcomes.

Use this method to:

  • Analyze and observe if desired behaviors are being practiced and if they can be attributed to a company’s intervention.
  • Focus resources on interventions that work and abandon initiatives that do not deliver improvements from the status quo.

Measuring Quality of Relationships: Using ICMM’s “Understanding Company-Community Relations” Toolkit

Securing and maintaining a social license to operate is central to the strategies of many companies for which the long-term success of their operations depends on a positive relationship with host communities. While the need for good relationships between companies and their host communities is widely recognized, there is very little clarity on how to assess if a company is achieving this goal. The International Council on Mining and Metals (ICMM), has developed the Understanding Company-Community Relations Toolkit as a structured approach to measuring the quality of relationships between mining companies and their host communities, with the ultimate goal of using the information to improve them.

Use this tool to:

  • Monitor how relationships with host communities evolve over time based on the voices of community members themselves.
  • Distinguish and measure different aspects of relationships and identify those aspects that need improvement.
  • Explore external factors that shape company-community relationships.

Cultivating Voice in Relationships: Using Regular Micro-surveys at Scale to turn Stakeholder Experience and Perceptions into Actionable Data

This note profiles Constituent Voice (CV): a way to engage and learn from large numbers of people about how company, government and funders’ programs and activities impact them. CV, developed by Keystone Accountability uses a small number of simple questions (micro-surveys) asked at scale and over time in order to generate real-time insight that helps companies and their stakeholders to quickly and easily identify, foster and monitor improvements.

Use this resource to learn about a methodology that can help you:

  • Engage and learn from large numbers of people about how they experience their relationship with a company.
  • Compare data within and across different geographies and sites.
  • Foster rapid learning and action with reduced time spent on data collection and analysis.