CHRB the Corporate Human Rights Benchmark 2017 findings with a focus on apparel

CHRB the Corporate Human Rights Benchmark 2017 findings with a focus on apparel

TextileFuture presents today the touchy subject of corporate Human Rights through a benchmark report that has also findings on a focus on clothing. We include also the agriculture with an eye on cotton

IntroductionReport Cover

“A deceptively simple question – which company performs best in human rights terms – has been impossible to answer objectively. Today, we take an important step towards answering the question as we rank just under 100 companies from three industries on the implementation of the UN Guiding Principles on Business and Human Rights and other internationally recognised human rights and industry standards.

Steve Waygood of CHRBThe Corporate Human Rights Benchmark (CHRB) is about more than setting benchmarks. It’s about ranking companies. It’s about making this data public and free. It is also about “enlightened self-interest”.

Observing the highest standards of human rights is fundamental, we believe, to the credibility, effectiveness and sustainability of business – now and in the future. If business does not observe the highest standards of human rights then society is at risk. And if society does not observe human rights then business is at risk. With recent political events we have vividly witnessed the backlash against systems people feel do not work for them. So the CHRB is also about economic development and making markets work for everyone.” These are some of the introductory words of Steve Waygood, Chief Responsible Investment Officer, Aviva Investors Chair, Corporate Human Rights Benchmark.

The CHRB’s Pilot Methodology is the result of extensive multi-stakeholder consultation around the world over two years, involving representatives from over 400 companies, governments, civil society organisations, investors, academics and legal experts. The Pilot Methodology and Addendum are detailed and therefore not repeated here, but can be accessed at http://www.corporatebenchmark.org. However, below are some key points of information readers will require to understand the 2017 results.

A note about measuring corporate human rights performance

As CHRB we want to emphasise that the results will always be a proxy for good human rights management, and not an absolute measure of performance. This is because there are no fundamental units of measurement for human rights. Human rights assessments are therefore necessarily more subjective than objective.

The Benchmark also captures only a snap shot in time. We therefore want to encourage companies, investors, civil society and governments to look at the broad performance bands that companies are ranked within rather than their precise score because, as with all measurements, and particularly one as new as the CHRB which is in its pilot phase, there is a reasonably wide margin of error possible in interpretation.

For example, a score of 0 on an individual indicator does not necessarily mean that bad practices are present or there is no company action on the issue. Rather, it means that CHRB has been unable to identify in public company documentation all of the elements required for a positive score.

CHRB also want to encourage a greater analytical focus on how scores improve over time rather than upon how a company compares to other companies in the same industry today. The spirit of the exercise is to promote continual improvement via an open assessment process and a common understanding of the importance of the UN Guiding Principles on Business and Human Rights. As noted on the CHRB website (www.corporatebench- mark.org), CHRB will be conducting an open consultation on this pilot phase and we encourage feedback on the pilot as part of this spirit of continual improvement.

Methodology

Abbreviations

 

    AG: Agricultural Products    

    AP: Apparel

    AG/AP: Companies falling in both the Agricultural Products and Apparel industries

    EX: Extractives

 

Key Messages

There are some clear leaders, but improvements can still be made.

Results cross industries

There are leading companies in each industry which are out ahead of the pack on human rights. But these leaders are both few in number – 3, 3, and 12 companies in the top three bands respectively – and do not yet achieve top marks across the board. The highest band any company has earned is in the 60-69 % range, with the bulk of leaders scoring between 40-49%.

Table results bands

With at least two companies from each industry in the top two bands, these leaders provide the examples of current best practice that other companies can quickly learn from and emulate.

The results skew significantly to the lower bands

The 2017 results are significantly skewed toward the lower bands. This reflects the relatively early stage that many companies are still at when implementing the UN Guiding Principles and other internationally recognised human rights and industry standards. Nearly six years on from the UN Guiding Principles’ endorsement, this is an important if uncomfortable finding. Subsequent years of Benchmark results will indicate whether this average improves, with the skew reducing and hopefully shifting to the right over time, with the upper range also increasing. Indeed, part of the point of the Benchmark is to play a role in promoting this improvement, and this is one way of measuring the CHRB’s success.

Company results

Lowest performing companies must improve urgently

The large majority of low performing companies (0-29%) are falling overwhelmingly behind, with all the dangers for human rights abuse of workers and communities that this implies. The leading companies in the Benchmark have recognised the moral imperative, business case, and commercial viability of taking action on human rights, and the critical mass of low performing companies must now look to the leaders’ example and make urgent improvements.

They need to act decisively, learn from leading practices, and emulate rapidly their existing standards. Many of the companies in the Benchmark have strong public brands, have a large market capitalisation, and in high risk industries for human rights. With increasing public scrutiny, any inaction runs a high reputation risk with investors, customers, and the talent that their future success depends on.

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Commitments must be followed through

Companies tend to perform more strongly on policy commitments, high-level governance arrangements, and the early stages of human rights due diligence. These results point to a growing willingness to commit to respect human rights, establish systems to embed that commitment in the company’s DNA, and begin to understand the risks the company poses to human rights.

Performance drops off however, even amongst leading companies, when it comes to acting on those risks, tracking responses, communicating effectiveness, remediating harms, and undertaking specific practices linked to preventing key industry risks.

It is clear that for any company to improve their corporate human rights performance moving forward, a concentrated focus must be put on implementation in practice and continually learning the valuable lessons the ongoing due diligence and remedy processes offer.

Engagement with those potentially affected is lacking

Engagement with potentially affected stakeholders – communities and workers especially – is a feature of several indicators across the Benchmark, but levels of corporate performance against each are low. For example: 56 % of companies do not score any points for their commitments to such engagement; 84 % do not score any points for having a framework for such engagement; and an alarming 91 % of companies do not score any points for involving users in the design or performance of their grievance mechanisms.

These key stakeholders have valuable insights into how company products, operations and services enhance or harm people in their operations and supply chains, and whether the company’s human rights policy and approach is working.

The 2017 results indicate that there are few companies that could safely feel they are performing strongly against this fundamental feature of meaningful corporate performance on human rights.

There is a gap between responding publicly to serious allegations and taking appropriate action

The responses to the serious allegations measurement theme is one of the unique features distinguishing the CHRB from many other benchmarks. The CHRB does not consider the veracity of the allegation itself but whether a company responds when such allegations are made, whether there are appropriate policies in place, and whether they have taken appropriate action.

The 2017 results indicate that the companies that faced serious allegations were those in the top and bottom bands of the Benchmark. In other words, the companies in the middle bands tended not to face allegations meeting CHRB’s threshold of severity for inclusion.

Of the allegations considered, the results show that companies are commonly responding to allegations publicly, and generally have appropriate policies in place covering the issue in question. Where performance falls away is in taking appropriate action, with 77 % of companies earning 0 points, no company earning the full 2 points, and just 23 % earning 1 point.

Factory 3 men and cloud

Call to action

Action Businesses

Companies assessed in this Benchmark, particularly those in the middle and lower bands, should see the clear case for implementing their corporate responsibility to respect human rights under the UN Guiding Principles. Companies should take the opportunity to study the CHRB Pilot Methodology and Addendum as well as their company score cards and assess where improvements can be made. The 2017 results indicate there are opportunities to improve across the full spectrum of policies and governance, embedding respect and human rights due diligence, ensuring effective remedy, performance, and transparency.

The leading companies’ approaches and emerging practices provide a crucial chance to learn from peers within and across industries, and improve preventative measures as well as effective remedies for victims.

Equally, tools such as the UN Guiding Principles Reporting Framework, Global Reporting Initiative, and other reporting guidelines indicate the minimum information stakeholders are expecting to see around company implementation.

Experience counts, as it takes time to put systems and practices in place. Those that are underway with these efforts deserve due credit for their efforts, whether as leaders, or falling in the middle bands but working on implementation behind the scenes. Those that have yet to start implementing their human rights responsibilities must begin, as further delay runs the high risk of often preventable abuses occurring.

Investors have an opportunity to support the step change that is needed to encourage companies to embed the UN Guiding Principles. Institutional investors are of course also businesses. They should therefore consider how they embed the UN Guiding Principles on Business and Human Rights within their own operations, including how they encourage companies to which they deploy capital to ensure they respect human rights. This is particularly the case for equity investors, where they have voting influence through the rights of share ownership.

Action investors

Investors can use CHRB’s company-specific results as part of their overall investment analysis and capital allocation decision-making, particularly where they consider human rights to be material to the sector and performance is lacking. Investor engagement should focus in particular on the policy, governance and management frameworks, as well as the need for commitments to be followed through. Investors are encouraged to use their voting and engagement influence to promote better practice, particularly amongst those in the bottom bands. This includes questioning company manage- ment on key human rights risks during one-to-one meet- ings, as well as taking voting action on director re-elec- tion, board pay, and particularly the vote on the Report and Accounts at company Annual General Meetings.

Action Gov

Governments play a critical role in protecting human rights alongside companies respecting them.

With these results, policy-makers and regulators now have a new means to help them focus on those companies and industries that have significant human rights risks and impacts, and those underperforming despite these risks and impacts.

Governments should recognise and reward those companies showing they are seeking to respect human rights and taking on the many challenges that this entails. Their example demonstrates what is possible. It also opens a space for governments to use a smart mix of regulation and incentives to enhance transparency and minimum standards of corporate behaviour and make the business case for respecting human rights.

Governments should identify their most powerful levers to protect human rights that emerge from the 2017 results and take action to strengthen due diligence, remedy, and practices around key industry risks.

This includes within National Action Plans on Business and Human Rights, public procurement policies and processes, due diligence processes of export credit agencies, and other such measures.

Action others

Others: The Benchmark is designed to empower civil society, workers, communities, customers, and the media with better public information to reward, encourage, and promote human rights advances by companies and make well-informed choices about which companies to engage with.

History shows that one of the biggest motivating factors in getting companies started is the risk to their reputation that comes with human rights issues being made high profile. Equally, it takes determination to keep improving, and the human rights advocates within companies gain substantial influence from the public reward that companies receive when they enhance their human rights-related policies and performance.

This constituency has played a powerful role over the years in moving the needle on corporate performance, and the CHRB is intended to further empower all actors with an objective way of focusing their efforts and interventions.

The gap between the leaders and laggards can be bridged. It will be particularly important for civil society, workers, communities, customers, and the media to engage those companies in the middle and lower bands to understand what more they could be doing when it comes to human rights.

Table Textile value chain

Apparel

Apparel A

Apparel B

Table 11 Apparel Band

Table 12

Performance

Apparel 3

Enabling factors 1

Enabling factors 2

TransparencyKey Industry Risks

Forced LabourForced Labour 1 A

Forced Labour Restriction Workers

Freedom of assoc. and collective bargaining

Health & Safety

Haelth & Safety 1A

Land, Water Sanitation

Women Rights and Working HoursWorking hours 1 A

Indigenous & Security

Types opf Allegations considered

Results and Emerging Practices

Apparel value chain 2

Agri 1

Agri 2

Agri Results Companies

Agri 4

Annex 1

Annex 2 Apparel

Annex 3 Apparel & Agri

This report summarises the 2017 results of the Corporate Human Rights Benchmark and the key findings they signal. Detailed results by industry, measurement theme, and company are available at  www.corporatebenchmark.org

 


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