Blog | Wednesday July 6, 2022

Activating Directors on Sustainability: Six Questions for Your Board

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Directors of companies headquartered in the EU will likely soon face a pivotal shift in their duties regarding sustainability with the upcoming EU Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD). Under the CSRD, companies will have to disclose how sustainability matters are managed at the board level and how sustainability is integrated into directors’ incentive schemes, while the CSDDD sets out ambitious new guidance on the personal duties of directors specifically.

The first blog in the three-part series detailed key recommendations for companies to prepare for the Corporate Sustainability Due Diligence Directive. Here, we draw on our learnings from engaging with boards of BSR member companies and have identified six key questions for boards to determine their readiness to govern evolving expectations. We would also like to highlight the recent recommendations at the World Economic Forum related to human rights and the role of boards as an additional source.

A Holistic Approach across ESG

Governments, investors, and other stakeholders are increasing calls for boards to provide oversight on sustainability and environmental, social and governance (ESG) topics. Examples include the SEC’s draft rule on climate disclosure requirements, which would require board and management-related risk oversight and governance. The International Sustainability Standards Board (ISSB) has also released exposure drafts on sustainability and climate-related financial disclosures.

The EU Commission’s proposed CSDDD is far-reaching in terms of responsibilities, with a comprehensive approach beyond climate, spreading across a broad range of ESG subjects. The CSDDD sets out two provisions on directors’ duties for EU-based companies:

• Directors’ duty of care: When fulfilling their duty to act in the best interest of the company, directors should take into account the consequences of their decisions for sustainability matters, including human rights, climate change, and other environmental considerations, in the short, medium, and long term.
• Directors’ oversight responsibility: Directors are responsible for overseeing a due diligence policy and processes, with due input from relevant stakeholders, including rightsholders impacted by the company’s business activity.

One of the groundbreaking elements of the CSDDD is its potential link between the company’s sustainability strategy and the variable remuneration of directors. As stated by the European Commission,

Where companies' directors enjoy variable remuneration, they will be incentivized to contribute to combating climate change by reference to the corporate plan.

Six Key Questions for Boards

Over the past 30 years, BSR has worked with companies and boards to integrate sustainability into business strategies and operations.  

Based both on that experience and an understanding of the likely impact of these impending changes, it is essential that boards go beyond “check-the-box” compliance to provide effective oversight and governance.

1. Composition: Does the board have access to relevant knowledge and training on human rights and wider sustainability questions?

There is increasing awareness on the part of business of the need to fill the gap in sustainability expertise and skills at board and management levels, including human rights due diligence. Companies can address this gap through dedicated training for all directors to ensure that due diligence becomes integrated into the companies’ processes and by securing external expert guidance. Boards can also review their skillset when considering sustainability risks, including how ESG and human rights topics relate to other company material issues.

2. Oversight: How does the board examine and oversee ESG issues? Is there a dedicated committee or is sustainability integrated across all board committees? 

The entire board must have the right level of understanding of human rights impacts and position these within the company’s wider ESG strategy. Relevant ESG topics can be integrated into respective committees (via nomination, audit, etc.) so they are addressed alongside other board considerations. This may also include a dedicated ESG committee.

3. Company impacts: Does the company have the appropriate approach in place to understand potential adverse human rights impacts on affected stakeholders?

Based on evolving norms in materiality and the CSDDD, companies should understand not just material issues to the business, but also salient human rights impacts. Potential adverse human rights impacts may vary widely, from supply chain labor to the use of algorithms in marketing campaigns to discriminatory effects of services. Such impacts may not be covered under narrower, “traditional” views of the financial materiality of ESG.

4. Stakeholder insight: Is the company conducting stakeholder engagement as a means of understanding relevant perspectives, risks and opportunities?

This could include two main components: Boards can first ensure company management has all necessary processes to create a meaningful and ongoing dialogue with affected stakeholders. In some cases, boards may themselves engage with and/or access regular insights from key stakeholders, including employees, trade unions, and affected community organizations, on salient issues covering sustainability strategy and ongoing relevant emerging issues. One mechanism through which this can be done is the establishment of a stakeholder advisory council, with which Board members may engage, along with management.

5. Emerging risks and strategic implications: Does the board have an approach—such as scenario planning—in place to identify emerging ESG and human rights risks and opportunities?  

Boards look at strategic, capital, talent, and other commitments that will affect a company for years or even decades to come—yet few have a method for considering the profound impacts that social, environmental, and other sustainability-related trends may have on these plans.

Futures thinking employing scenario analysis enables companies to identify emerging risks, opportunities, and their potential implications for the company. While perhaps not standard practice for boards today, directors and leadership teams can use these tools to ensure that their business has allocated the right resources, against multiple “what if” scenarios to ensure they are truly resilient in the face of tomorrow’s disruptions. Whether that’s linked to geopolitical risks such as the invasion of Ukraine, acute physical climate risks, or policy and legal risks on human rights, boards have a duty to long-term governance, versus reactive shifts.

6. Accountability: Is executive remuneration aligned with the company’s sustainability objectives?

Any flexible components of Board and executive remuneration should be linked to the achievement of measurable sustainability targets (time-bound and science-based in the case of environmental targets) set in the company’s strategy and certainly to outcomes beyond share price.

The dynamic business and social context all companies face means that Directors will be most effective when they consider a diversifying set of perspectives and considerations. New EU regulations, whether the CSRD or in this case the CSDDD, mean that heightened and more sophisticated attention to ESG is not only smart practice, but required, to ensure that their Boards’ can be effective stewards of company strategy and performance to deliver long-term value. We invite companies to collaborate with BSR in enhancing board leadership on an evolving and expanding set of questions.

Blog | Friday July 1, 2022

President and CEO Aron Cramer Responds to West Virginia v. EPA

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BSR believes that today’s US Supreme Court hearing in West Virginia v. EPA is a deeply mistaken decision that wrongly undermines the US federal government’s ability to take decisive action to combat dangerous climate change.

As we continue to assess the specifics of the ruling, many things are clear. First and foremost, the science speaks in a way that is more authoritative than the Court, and it is clear that climate action is becoming more and more urgent by the day. Restricting the ability of the EPA, the main environmental regulator in the US, means that the United States will not be able to take steps necessary to shift to a clean energy economy.  Signs of further restrictions on other science-based steps to address environmental and other questions are also very troubling.  

The damage done by this decision emanates beyond the immediate impacts on the EPA’s regulatory authority. It will undermine American climate diplomacy, at a time when the world’s largest economies must band together to take action on a global basis. Reversal of climate action also creates a public health challenge, one that falls most heavily on women, people of color, and communities with fewer economic resources.  It also suggests that the Court, as it showed  in its recent decision to overrule and invalidate Roe v. Wade, and weaken states’ authority to enact gun safety legislation, is not only damaging to the rights of Americans, but also out of step with public opinion in ways that weaken its legitimacy.

Today’s decision reinforces the need for ambitious climate action on the part of business, states and cities, civil society, and all of us as citizens. We are pleased that so many companies from across the US supported an amicus brief supporting the EPA’s authority.  Even more, thousands of companies have committed to net zero climate strategies, and are investing in new business models, technologies, and transition plans to help lead the way to a clean energy future.

We are convinced that the future depends on this transition. While it is heartening to see action from state and local officials, investors, civil society, and businesses, it is extremely distressing that the Supreme Court has embraced a backwards looking ideological approach that will only create greater cost and economic uncertainty, worse public health outcomes, and even more political division. We will continue to work with our more than 300+ member companies and many partners to achieve a truly just and sustainable world.

Blog | Thursday June 30, 2022

The Norwegian Transparency Act: Key Insights for Business

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Majestic fjords, Nobel Peace prizes, and cheese slicers are not the only special features of Norway—there is also an important culture of trust and transparency among peers. So much so that everyone’s income and taxes are made public for everyone to see. It is therefore not surprising that one of the most ambitious national laws on human rights due diligence to date, which takes effect on July 1, 2022, is called Åpenhetsloven—literally, the Transparency Act.

While the business and human rights field has been buzzing with talk of the EU Proposal for a Directive on Corporate Sustainability Due Diligence (CSDD), the imminent entry into force of the Norwegian Transparency Act follows a broader trend by national legislatures across Europe—including in France and Germany—to turn human rights due diligence into law.

Following France’s trailblazing Corporate Duty of Vigilance Law in 2017, the German Supply Chain Due Diligence Act is set to come into force in early 2023. At a regional level, the EU Corporate Sustainability Due Diligence (CSDD) Draft Directive will introduce due diligence obligations on thousands of large companies based and operating in Europe—albeit not before 2025-28.

As the Norwegian Transparency Act becomes the newest human rights due diligence law to enter into force, what does it mean for business with operations in Norway? How should they best prepare?

Below are key insights and recommendations based on work we conducted with our members on assessing their preparedness for the Transparency Act.

• Scope

  The size and volume threshold for in-scope companies is substantially lower than for other human rights due diligence laws across Europe. Large companies are defined as companies that meet at least two out of the three following criteria:

  (1) at least 50 full time employees during the fiscal year (or equivalent man hours)

  (2) An annual turnover of at least NOK 70 million (EUR€6.9 million or US$7.94 million)

  (3) A balance sheet of at least 35 million NOK (EUR€3.5 million, or US$3.97 million)  

   The Act requires companies to promote respect for human rights and decent working conditions (including the provision of a living wage) across their operations and supply chains. It covers companies in Norway and foreign companies that sell products and services in Norway.

• The Right to Request Information

  The right to request information is a unique aspect of the Norwegian Transparency Act and a first in the broader armory of human rights due diligence instruments (there is no such right in the German or French due diligence laws nor in the EU CSDD proposals). The requirement enables any individual to request information from a company on how it addresses actual and potential human rights impacts.

  In practice, it means that any member of the public, including investors, NGOs, and trade unions, can ask for information about a company’s due diligence efforts. How this right will play out in practice—including the level of information that companies need to provide—remains to be seen.

• Due Diligence in Line with the OECD Guidelines

  The Act does not deviate substantially from internationally recognized standards in terms of due diligence requirements, although it is more demanding in terms of supply chain coverage. This means all companies should conduct due diligence, in a manner proportionate to their type, size, sector, and operational context, and follow a risk-based approach.

• Human Rights Reporting Requirements

  The Act also establishes a human rights reporting obligation for companies. A company must publish an annual human rights statement by June 30 that is publicly available on the company’s website. It requires sign-off by all Board members.

• Oversight and Enforcement

  The Norwegian Consumer Authority will be the public enforcement authority responsible for overseeing the Act’s implementation. It is responsible for publishing appropriate guidance and enforcement in the case of non-compliance by businesses, including by issuing orders and fines (amount is unspecified). So far, there has been limited guidance from the Consumer Authority on key elements of the Act.

Recommendations for Business

Based on its work on the Norway Transparency Act and UNGPs and OECD Guidelines, BSR has three recommendations for in-scope companies:

1. Conduct Due Diligence in Line with Internationally Recognized Standards

The Norway Transparency Act is one of several emerging mandatory due diligence obligations to come into effect across Europe. To future-proof their work, companies can build a human rights due diligence approach that is consistent with the standards set out in the OECD Guidelines and the UNGPs.

2. Prepare for the Right to Request Information

The Right to Request Information is a novel feature in the human rights due diligence legislative landscape and requires the development of a clear process for responding to requests.

• Define a process and procedure for responding to requests: Determine appropriate tool, function(s), and process for receiving, assessing, and addressing human rights request and criteria for instances when request may be refused. Mobilize stakeholders and resources internally to ensure they are prepared to respond to requests for information on how they address potential and actual human rights impacts. Key functions for examples would be Sustainability, Compliance, and Public Affairs.
• Enhance visibility over human rights due diligence efforts: Map human rights due diligence efforts and relevant stakeholders across the company to enable a prompt and comprehensive response within the timeframe. Anticipate through stakeholder engagement what issues could be of interest to the public and prepare internal reports accordingly.
• Build capacity on human rights due diligence across the company: Engage with all relevant functions (e.g., Legal, Compliance, Procurement, Public Affairs and Communications) to help them understand the philosophy of the Act and the benefits of a more proactive and detailed transparency about the company’s human rights due diligence efforts.

3. Monitor Implementation and Engage with Regulatory Bodies

Lack of certainty remains around the scope of several of the Act’s key elements, including the Right to Request Information, the inclusion of living wage in the definition of decent working conditions, and requirements for downstream due diligence. The Norwegian Consumer Authority has indicated that producing clear guidance will be a key focus when the law enters into force and that it encourages businesses to come forward with any questions.

Human Rights and Sustainability functions can also work with colleagues in their regulatory teams to engage with the Norwegian Consumer Agency to keep abreast of the latest developments.

The construction of a risk-based human rights due diligence approach and transparency with external stakeholders on human rights efforts are foundational elements of the Norway Transparency Act. We encourage companies and members to follow the requirements above, not only to respond to the Act but to start building a robust architecture for human rights due diligence obligations to come across Europe. And who knows, full transparency may soon become the norm way beyond the beautiful Norwegian fjords.

Blog | Wednesday June 29, 2022

The Housing Crisis: Key Priorities for Investor Action

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We are in the midst of a startling global housing crisis, with 100 million people homeless due to a lack of adequate and affordable housing. In the United States (US) alone, 23 million people—including children, seniors, people with disabilities, and veterans—live in households that pay more than half of their income on rent and utilities in 2019.

Population growth, wage stagnation, a lack of public investment and government oversight, and decades of local opposition to the building of new affordable housing have all played a role in the housing crisis. Yet one factor has come into focus: the role of institutional investors.

In the first 3 months of 2021, 1 in 7 US homes were purchased by institutional investors—including private equity firms, pension funds, and publicly listed companies. In Europe, the rate at which institutional investors are buying up housing is also accelerating, driving up housing prices. Financialized landlords often rent out or sell these units to new buyers at inflated rates—causing individuals to divert funds from other basic needs like food or clothing to avoid eviction.

Earlier this month, The Shift Directives: From Financialized to Human Rights-Based Housing were launched in the EU Parliament, which call on governments to regulate financial institutions in the housing market. Regulatory and public policy pressure is also growing, and organized political and social movements against financialized housing are emerging. Meanwhile, widespread media coverage is zoning in on investors’ role in the housing crisis.

As investors increasingly consider environmental, social, and governance (ESG) principles that are aligned with UN Responsible Investment Principles (PRI), Limited Partners’ (LPs) expectations, and emerging due diligence and disclosure regulations, there is no better place to start than with housing. The Universal Declaration of Human Rights sets out adequate and affordable housing as a fundamental human right.

Unanimously endorsed by governments in the UN Human Rights Council, the UN Guiding Principles on Business and Human Rights (UNGPs) clarify that all companies, including institutional investors, should take action to respect human rights. The UNGPs provide a process-based due diligence framework that helps investors identify and address human rights risks, recognizing that where risks to people are greatest, material risks to business often follow.

The most effective efforts will be founded upon a human rights-centered approach to housing that considers how the purchase, maintenance, and sale of real estate assets impact people—including renters, homeowners, and community members at large. Here are key actions for investors to consider:

1. Make A Public Commitment

Commit to upholding adequate housing as a core policy commitment that is integrated into investment-level policies and subsequently integrated into ESG screenings, including human rights risk assessments, real estate asset allocations, and stewardship. Ensure third-party operators also commit to these principles. 

2. Assess Risks and Impacts by Engaging Stakeholders

Listen to the people most impacted by housing shortages and rising costs, including tenant associations, renters and homeowners, NGOs, and local officials. Come to the table not to defend your investment portfolio, but to learn about systemic risks to adequate housing, the role your investments may play, and workable solutions grounded in people’s lived realities.  

3. Establish Fair Housing Practices, including: 

• Fair Rent Levels—Set rents commensurate with income levels (e.g., no more than 30 percent of wage levels), and the costs associated with housing should be at such a level that other basic needs are not compromised.
• Tenant Protections—Establish tenant protections including missed payment grace periods, rental freezes for warranted cases (e.g., sickness, temporary joblessness), and the removal of ‘hidden’ fees, such as administration fees and payment convenience fees.
• Pathway to Ownership—Create a path for renters to become homeowners, including via rent-counting, fair and transparent rent-to-own models, financing options for tenants, and waiving of early termination fees. 
• Accountability and Access to Remedy—Ensure tenants can easily identify who owns and manages their home, can raise grievances and receive remedy in a timely and efficient way, and have an active say in housing decisions affecting their lives. Hold third-party operators accountable for their human rights performance. 

4. Align Policy Advocacy

Support pro-housing affordability policies and be transparent via external and internal communication where policy dollars are being spent related to housing issues. 

5. Track and Disclose Performance

Track and disclose, on a consistent basis, efforts to ensure adequate housing, as well as efforts of third-party operators. Such disclosure should be accessible and decision-useful for affected communities and LPs. Specific metrics for disclosure should include rent levels (compared to median wages), grievances/complaints received, and tenant engagement activities.

The housing crisis is not the fault of institutional investors alone and can only be solved through systemwide approaches. However, with their unique financial leverage, investors have both a responsibility and an opportunity to play a key role in the solution.

We look forward to further engagement on the solutions proposed, and we invite all institutional investors who are interested in responsible and human rights-respecting investment to contact us to learn more.

Blog | Friday June 24, 2022

Key Ways for Business to Respond to the Fall of Roe v. Wade

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The sweep of the ruling on abortion is staggering and destabilizing for business in America.

Abortion is now illegal in at least 13 states, and more will certainly follow. New restrictions in other states would make the procedure even more difficult to actually obtain, even in many places where it might technically remain legal. Chaos lies ahead, as some states race to the bottom with criminal abortion bans, forcing people to travel across multiple state lines and, for those without means to travel, carry their pregnancies to term—dictating their health, lives, and futures. Today’s decision will ignite a public health emergency.

This Supreme Court ruling will unleash months of intense pressure on business to mitigate harm and meet rising worker, consumer, and investor expectations. More importantly, women in some parts of the country, particularly the South, will have to travel hundreds of miles to reach an abortion provider. This ruling disproportionately impacts lower-income women and women of color given existing structural inequities. In addition, women who don’t have access to abortion care are three times more likely to leave the workforce.

One in four working women will have an abortion at some point; this could be an unplanned pregnancy, a planned pregnancy where something goes tragically wrong or as part of fertility treatments. Americans broadly support the Supreme Court upholding Roe v Wade. A recent Washington Post-ABC poll finds 75 percent agree that such decisions should be left to the woman and her doctor. 

Recent research by Morning Consult also underscores this broad support by a 2:1 margin: employed adults, across all demographics, would prefer to live in a state where abortion is legal and accessible.

There is a business case that connects how access to comprehensive reproductive healthcare impacts a company’s bottom line and the corporate workforce. One study found existing abortion restrictions already cause $105 billion in economic losses annually. We can expect additional impacts to the ability of business to attract, retain and support their workforce in a labor market that is already quite challenging. We also anticipate increased expectations for companies to respond to employee and consumer demands to take a public stand on this topic. 

Top talent wants reproductive healthcare–including abortion access, to be part of corporate gender equity efforts. Roughly 7 in 10 respondents say access to reproductive healthcare should be an issue companies address when it comes to gender equity in the workplace. Further, companies in more restrictive states may be at a competitive disadvantage. The same Morning Consult research showed that adults want to understand the social policies in a state before deciding to move there, with 71% agreeing social policies should be considered in a decision to move.

There also is a tie-in with the childcare crisis: companies are already struggling to attract and retain workers due to a lack of affordable childcare and the COVID-19 pandemic; taking away women’s ability to decide when they can have children will only exacerbate this situation. An investment in accessible reproductive healthcare allows women to fully engage and advance in the workplace. 

Furthermore, 7 in 10 consumers believe it is important for companies to take a stand on social issues, 86% of which want them to take a stand on reproductive health. This puts reproductive health in line with the demand for action on other social issues, such as gender equity (92%), racial justice (94%) and voting rights (92%).

While the situation continues to unfold rapidly, there are six key points for business to consider. Some point to immediate actions, and some relate to longer-term impact. 

Mitigate Harm

Companies can ensure equitable and inclusive benefits are available to support the spectrum of workers’ reproductive health needs. A self-audit can identify, and redress obstacles faced by employees who need to obtain abortion and other reproductive healthcare. The Society for Human Resource Managers recently provided a recommendation for employers along these lines. Beyond covering travel costs, companies can address gaps in their paid sick leave programs and provide support for time-sensitive care in a confidential way. Companies can also consider practices to support pregnant workers who travel to states where abortion is illegal and may need to access care in emergency situations. For workers who may not be eligible for benefits and therefore lack access to programs or policies that would support them in accessing abortion care, companies should increase or enhance programs centering the needs of non-benefits-eligible workers who need timely access, while protecting privacy. 

Business also can create a supportive culture around reproductive health benefits by sharing clear information about coverage and finding ways to reduce stigma around comprehensive reproductive health in conversations about benefits. A previous BSR blog offers more in-depth advice on how companies can be prepared for workforce impact.

Companies can also highlight relevant and accurate information on healthcare services that continue to provide abortion access. Comprehensive directories such as I need an A, Abortion Finder, and the National Abortion Federation Hotline provide visitors with trusted individual, private, and non-profit clinics. Plan C also offers updated information on at-home abortion and medicine access based on location. The Pro Repro Playbook offers employers—especially small and medium sized businesses and non-profits—with strategies to protect the reproductive health of their workers who can become pregnant.

Engage in Relevant Public Policy at the State and Federal Level 

Many large companies are members of business associations that could play a significant role when it comes to supporting federal policy priorities to protect abortion access. At the federal level, the Women’s Health Protection Act would codify Roe yet remains stalled. At the state level, where a historic number of abortion restrictions have already been passed, companies still have the opportunity to weigh in with elected officials. Companies have an opportunity and a powerful platform to make their voices heard with policy makers, local business associations, and other influential organizations about the workforce impact and economic costs of harmful abortion restrictions.  

Align Political Contributions with Workforce Values, Equity, and ESG Commitments

It’s time for companies to align—once and for all—their public positions, their operational / workforce policies, and their political influence. They have to all be pointing in the same direction. In a world where Roe v Wade was settled law, companies could avoid taking a public position. We now expect that this issue will be legislated in every state, which means company’s public and internal commitments to women’s empowerment may directly contradict with how they spend their lobbying dollars; and that contradiction will be untenable. 65% of American adults agree that companies should cut back on political donations to elected officials who are working to limit access to abortion, according to the Morning Consult research.  

Protect Voting Rights

The Court’s diminishing of the Voting Rights Act’s preclearance powers means lawmakers can impose burdens on voting to narrow the electorate. It will be crucial for companies to use their voice and influence to address both restrictive social policies and efforts to limit voting, so that avenues for countering extreme social policies through normal democratic channels are protected. Morning Consult data indicates that 67% of adults agree with companies speaking out against efforts to limit access to voting for eligible voters.

Speak Out

While most Americans support access to abortion, ending gun violence, and protections for LGBTIQ+ people, among other issues, public policy solutions are stalled. Business has been increasingly expected to take a public position—to show how support for these issues is important to the business community, to their workers, to their customers, and to the communities in which they operate.

This involves not only public statements of support, but aligned action such as decisions to reconsider locations of events, meetings, and future operations given a state's reputation, and climate on social issues. Recent prominent examples include Salesforce’s actions in protest of Indiana’s proposed anti-LGBTIQ+ religious freedom bill, Major League Baseball pulling the All-Star game out of Atlanta to protest Georgia’s restrictive new voting law. 

Support Relief Efforts

Business can provide financial, logistical, and other support that can mitigate the current and anticipated harm incurred by workers navigating new burdens to access care. Support abortion funds directly and support advocacy organizations through awareness raising and other efforts unique to your business and expertise. Coalitions such as the Brigid Alliance and Midwest Access Coalition help with travel coordination and costs.

Grant Access to Remote Work

Companies can consider how overturning Roe informs their stance on remote work policies. For businesses with operations in states with trigger laws or that have old laws on the books, employees who would otherwise be expected to work in the office can leverage remote work policies to be based in states where their healthcare access is protected. However, for workers where remote work is not possible, additional support as mentioned above (i.e., travel, paid sick leave) needs to be made accessible.

At BSR, we are committed to working with member companies of all industries to promote women’s empowerment as well as diversity, equity, and inclusion—in the workplace and beyond. Without access to reproductive healthcare, women’s economic empowerment can only go so far. Business can meet this moment to address the workforce and economic impact and demonstrate commitments to equity and social justice. 

Additional Resources: 

Navigating the SCOTUS Rulings: Recommendations for Business Advancing Social Equity and Justice | Upcoming Events | BSR

SCOTUS Overrules Roe v. Wade: Part I: Potentially Wide-Ranging Impact on Companies Navigating Employee Benefits, Privacy Protections, and Law Enforcement Demands | Jenner.com

Employers: Checklist for a Post-Roe Workplace | Workforce Bulletin

Blog | Wednesday June 22, 2022

Inside BSR: Q&A with Olivia Li

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Tell us a bit about your background. Where are you from, and where are you based? What is your favorite hobby?

I was born and raised in Shanghai, China and currently work as manager in Sustainability Management at BSR.

In my spare time, I enjoy dancing—jazz and hip hop—as well as jogging and swimming. I’m also a fan of Chinese contemporary arts. I visit art galleries on a regular basis and would love to introduce these talented artists to the world.

How did you first get involved in sustainable business? How long have you been at BSR? What is your current role, and what does that entail?

My career has been driven by a passion for advancing diversity and inclusion, and a practical approach to social entrepreneurship. 

I was exposed to real-life social issues in my undergraduate years, and directly interacted with the first generation of social entrepreneurs and CSR (Corporate Social Responsibility) practitioners through my work at student associations and volunteer groups. With their support, I organized on-campus events to spread knowledge on social inclusion and combat discrimination against people living with HIV and AIDS.

In subsequent years, I visited slums in Nairobi and Delhi, where I witnessed real-life challenges facing c women and children in poverty. I worked at a well-established NGO in Toronto that benefited from one of the best social support systems in the world. I connected with a community of colleagues, friends and mentors who were passionate about bringing positive impact through different professions and methods.

My experiences abroad inspired me to come back to China and work in sustainable business, with the aim of mobilizing corporate resources to help build a more sustainable and equitable world.

I joined BSR’s Beijing office as an intern, and then moved to the newly established Shanghai office as a coordinator. Since then, I have done extensive work in supporting companies to implement their sustainability strategies, plans and programs, including in-depth research on the most cutting-edge sustainability issues affecting China and Asia.

What are some interesting projects that you get to work on as part of your role at BSR? What do you enjoy about them?

A project that I am proud of—and that I currently manage—involves working with a technology company to design a socially inclusive project using wireless technology. The mobile application offers audio and visual support as well as volunteer accompanying services to assist blind and visually impaired people to overcome their daily challenges.

Before launching the service to users, the project team conducted various pilots to ensure that the mobile application could smoothly link the blind user and our partner volunteer organizations.

Xiao Wang was our first pilot user of this service. He needed to travel from Yantai, Shandong alone to Beijing for his summer internship at a blind massage center. Our mobile application helped him find a volunteer to pick him up at a Beijing Railway Station and accompany him to his home in the suburbs.

One year later, Xiao Wang informed me that he had left his massage job, and was about to take the National Bar Exam to practice law. He would very possibly be the first blind law practitioner of his province. He is continually giving back to his local community to support the disabled, and mentioned that our work has been a source of inspiration.

I was deeply inspired by his inner strength, kindness and resilience. There have been challenging times throughout my career; either responding to a complex client requests, or living as an entrepreneur to create and execute innovative solutions. Xiao Wang’s story reminds me of my original goals, which has helped to reinforce my passion and resilience toward my work.

What issues are you passionate about and why? How does your work at BSR reflect that?

I have a natural passion for writing. I write in the Wechat Blog platform in Chinese to share my knowledge on sustainability consumption and green lifestyles. At BSR, I have co-written the China blog series to unpack the sustainability and business impacts of China’s 14th Five Year Plan toward the western sustainability community.

At BSR, I am a member of the Diversity, Equity and Inclusion (DEI) taskforce, a voluntary group that assesses organization culture, policies and procedures related to DEI, and provides recommendations.

I also actively engage in diversity and inclusion related projects at work, including leading the mobile App project that supports blind people in China, conducting women’s empowerment research in Asia-Pacific, implementing women’s economic empowerment programs in Vietnam, and executing women’s health programs in the global supply chain.

What were the things that brought you joy amid the uncertainty and challenges of the past two years? What are you looking forward to in 2022?

The past 2-3 months were extremely difficult for us in Shanghai due to the city lockdown, especially in early April, when delivery and logistics were cut off and we had issues with accessing food and other essential products.

I appreciated the companionship of colleagues and friends at the Shanghai office, who helped turn the frustrating moments into trivia and jokes, as well as the support and positive messages from colleagues and clients across the globe. 

The constant reminder of the impact of my ongoing and past projects is a great source of energy for me and helps me navigate through difficult moments knowing that I am giving back to my community.

Blog | Thursday June 16, 2022

Turning Ambition into Action: Principles That Guide BSR’s Work

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Our Mission and Core Principles

Sustainability is now embraced as a core part of business. It is widely understood both inside and outside the private sector that truly resilient business strategies, and human and societal progress, depend on sustainable business action.

As we celebrate BSR’s 30th anniversary we are heartened to see the rush of business and investor interest in advancing action on ESG, and energized by the increased attention from citizens, consumers, employees, and governments.

We are also pleased by a growing recognition that meaningful action requires greater clarity about what ESG means in practice and how credible it is. If we are to meet the promise and expectations of our moment, it is more important than ever to deliver the goods. A just and sustainable world isn’t a marketing campaign or prestige project or a fad or a get-rich-quick scheme.  It’s not about incremental change slapped with an ESG label. It’s about the difficult and imperative task of ensuring that all people can thrive on a healthy planet.

We remain as sharply focused on our mission–to work with business to build a just and sustainable world–as ever. Our mission animates our work as an organization and our passion as individuals, and we are dedicated to it in all that we do. We do this with a seriousness of purpose, and an understanding that lofty ambition that is not translated into action is not what the world needs.  

BSR has always believed in engagement, and our Principles are true to that spirit. We know that many organizations express their commitment through negative screens, requiring commitments on certain topics, or scoring performance. While we respect such models, we deliberately have chosen a different path: emphasizing how we work to achieve impact. For BSR, we believe that this positive view of what we are trying to achieve is preferable to an approach focused on exclusion.

We believe that our mission must be put into action in our work with business and other partners, with a unique perspective based on three Core Principles:

• We focus on impact in everything we do​
• ​We make connections between issues, and between business and the wider world/stakeholders ​
• ​We provide honest advice and insight that translates ambition into credible action​

BSR’s Project Principles

To ensure that we live up to these Core Principles, we have developed guidance for BSR teams on how to apply the Core Principles in our work with companies, in the insights we deliver, and in the recommendations that we make.  We have therefore established 16 Project Principles, which we share in their entirety here. The Project Principles are organized into three groups:

Achieving Impact

The first four Project Principles lay out how we focus on impact. They highlight the importance of building real business solutions that offer the biggest opportunities for meaningful change (thereby avoiding incrementalism). They guide us to look holistically at the ways a company might act to create change, not just on its own but also by working with value chain partners, markets, policymakers, and systems.

Understanding Business and Social Context

The next five Project Principles are based on our recommendations for a company’s particular business imperatives and opportunities, as well as relevant societal and sustainability context. We aim to ensure that companies consider not only business value, but also a full understanding of their impacts on diverse stakeholders and rightsholders, and how they can promote equity and social justice.

Taking Credible Action

The remaining seven Project Principles emphasize the need to focus on credible action.  We always seek to articulate the business value of sustainability, but we also don’t delude ourselves that everything can be a “win-win”—many cases involve difficult choices that demand leaders make tradeoffs, and take decisions based on ethics and values. However, we don’t have all the answers, so we listen to our member companies, connect them with other experts, engage with credible and ambitious standards, and support collaborative efforts and public policy solutions. Finally, we encourage transparency and accountability so that companies and their stakeholders can learn and monitor progress.

Putting the Principles into Action

After 30 years of advocating and advancing just and sustainable business, we celebrate its mainstreaming. We also believe that the essential meaning of this approach to business, and its role in society, risks getting interpreted, marketed, and implemented in ways that dilute its power and impact.  

If we do our jobs right, then many companies may think, “BSR gets our business and is an invaluable strategic partner; we value the way BSR points us to what’s needed, not just what’s comfortable.” In turn, many in civil society may think, “BSR pushes for the right impact, even though sometimes they are too focused on the private sector.”

We know that our focus on credibility, impact, and business action may make some potential partners reluctant to work with us, and we understand that. But for those willing to ask the right questions, and seek bold, meaningful answers, we look forward to partnering with you for real impact, business value, and a resilient global economy based on progress, equity and sustainability.

We invite you to join us, and explore the Principles that guide our work.

Blog | Wednesday June 15, 2022

How Business Can Advance Climate Justice

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Climate change affects each of us differently, and its impact will be exacerbated for communities that already face underlying socioeconomic inequalities or injustices. For the private sector, climate injustice can be experienced across the value chain—from suppliers to employees and consumers. To advance climate justice, it is essential that the voices of those who are the most impacted are put at the forefront. 

Below are several ways in which climate change can disproportionately and unjustly impact communities and where private-sector-solutions can be focused:

Building Resilience to Physical Climate Impacts

Individuals and communities are less able to prepare, respond, and recover from extreme weather events and the spread of disease if they lack access to financing, insurance, or healthcare, or if their rights are not protected. Consequently, women, people of color, Indigenous peoples, people with disabilities, children, and the elderly in under-resourced communities are often less able to adapt to climate impacts. 

Business can ensure that all communities across the value chain are prepared, protected, and able to rebound, defined as building resilience. Conducting climate risk assessments is useful in identifying and understanding how climate change is affecting not only operations but also communities across the value chain. Companies can also use this as an opportunity to identify ways to increase access to their products and services—for example, medicines and technologies—to help build resilience equitably.

Ensuring a Just Energy Transition

Transitioning to a net-zero economy risks leaving behind workers and communities traditionally dependent on fossil fuel industries for jobs and livelihoods, including women who are underrepresented in the green jobs movement. Planning, dialogue, and engagement with workers and stakeholders is essential for a just transition—which aims to ensure social and economic opportunities of climate action are maximized and that fundamental labor principles and rights are upheld. 

Several energy, utilities, and other related companies—that are deeply committed to achieving net-zero emissions in a manner that mitigates the potential adverse impacts on workers and communities—are coming together along with other stakeholders to collectively develop practical guidance on how companies can plan for, operationalize, and integrate just transition principles into their sustainability strategies and practices. 

Upholding Human Rights in the Transition to Net Zero

In the transition to a net-zero economy, the development and procurement of decarbonization technology and renewable energy requires the mining of metals and minerals—for example, solar panels and ion batteries for electric vehicles. The extraction of many of these materials, as well as some of the practices used by companies, are associated with armed conflict, land and water grabs, violation of the rights of Indigenous peoples, the denial of workers’ rights to decent work and a living wage, and other human rights abuses.

As we transition our economies to reduce the impact of climate change, we can ensure business practices are just and uphold human rights. Business, therefore, has a responsibility to ensure that climate and net-zero strategies consider the social impacts of these transitions. An integrated climate change and human rights impact assessment can serve as a critical step in preventing and mitigating harm to people due to business activity.

Ensuring Equitable Access to Clean Energy

As we transition to a greener economy, we want to ensure all communities have access to clean energy technologies and solutions. For example, as companies set ambitious net-zero targets across their value chains, suppliers will need access to renewables to act on climate change and meet buyers’ expectations.

Not all markets have access to clean technologies or renewables in the electrical grid. Under-resourced communities are more likely to experience energy insecurity and lack access to affordable, efficient, secure, and reliable clean energy. Identifying where there are gaps in access across the value chain is an important first step to assessing what proactive actions companies can take—such as policy advocacy, financing, and coalition building—to counter inequities in access to clean energy. Adjustments to sourcing and procurement strategies and policies are also essential.

While many companies are just starting to explore issues connected to climate justice, others are taking different approaches to integrate a social lens into their climate action. Most recently, a cross-sector collaborative initiative, “Transform to Net Zero”, launched a transformation guide in which three companies shared their values and initial approaches to climate justice engagement. 

Any transition to a more climate-resilient society will require deliberate engagement with a diverse array of stakeholders and affected communities, understanding the complexities and intersectionality of challenges and opportunities, as well as local capabilities, knowledge, and identified solutions.

Essentially, the communities that are least responsible for climate change, and least able to adapt and recover from its impacts, are the most affected. Business can acknowledge its role in contributing to climate change, and seek to counter past harm by supporting communities in building resilience as well as transitioning to net zero in a just and equitable manner. As such, climate justice goes beyond value chain resilience to acknowledge and leverage privilege, address injustices in society related to climate change impacts, and help under-resourced and underserved communities deal with climate change and climate-related transitions.

As companies increasingly commit to net-zero targets and invest in climate action, it is essential to emphasize the needs of the people and communities that are disproportionately affected in their ecosystems. Climate justice must be central to any corporate climate commitment or action plan, and listening, co-creating solutions, and elevating the voices of those most affected are paramount in advancing climate justice.

Blog | Thursday June 9, 2022

Beyond Audits: Six Ways to Manage Human Rights Risks in Supply Chains

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According to the UN Guiding Principles on Business and Human Rights (UNGPs), companies are responsible for conducting human rights due diligence to manage the most salient human rights risks across their operations and supply chains. To assess workplace conditions like forced labor, child labor, low wages, discrimination, and harassment, for example, companies have historically relied on social audits from their Tier 1 suppliers. However, since the Tazreen Garment Factory and Rana Plaza tragedies in Bangladesh, social audits are increasingly scrutinized. Companies are now expected to go “beyond” auditing by adopting more robust approaches to address human rights violations in their supply chain.

Often treated as a “pass/fail” compliance exercise, traditional social audits aim to capture information within a limited timeframe and involve little effort to understand systemic issues or plans for ongoing supplier engagement. “Beyond audit” approaches, on the other hand, seek to engage suppliers through training and capacity building, integrating worker voices, strengthening management and governance systems, and driving greater transparency.

While many recognize the need for a systemic shift away from audits, there is no easy alternative. Below are six points for companies to consider when addressing human rights risks through a holistic approach: 

1. Investment in Governance Structure

Audits are typically managed by third parties, whereas “beyond” audits call for companies to invest in internal governance models to oversee human rights due diligence. An effective “beyond” audit governance structure involves coordination with the procurement team and the implementation of a Supplier Code of Conduct, which requires suppliers to execute their own human rights-related policies. It is essential to develop a strategy that is based on the company’s specific industry context and operations. One example of this is hiring regionally placed, in-market employees, who have a better understanding of local contexts, to oversee supplier relationships.

2. Collaborative Stakeholder Engagement

Partnering with suppliers to understand their challenges, identify solutions, and develop shared commitments has a longer-lasting impact than standalone audits. Forums and stakeholder engagement tools, such as mobile technologies that allow anonymous feedback from workers, can connect buyer companies, suppliers, workers, communities, and governments to increase visibility into supply chains. On-the-ground, direct engagement with suppliers through on-site visits helps companies identify risks and develop culturally and context-relevant programs in collaboration with suppliers. For example, companies can facilitate greater communication between supplier sites and proximal communities to help to foster trust and ongoing engagement.

3. Inclusion and Enforcement of Standards

Aligning human rights policies with international standards, integrating them into supply chain management, and holding suppliers accountable is critical. International human rights standards, such as freedom from slavery or servitude, the right to effective remedy, and the right to freedom of opinion and expression, should be fully embedded into procurement processes. Adherence to these standards should be incorporated into the evaluation of supplier performance and purchasing decisions. Concurrently, buying teams should be trained in responsible buying practices to mitigate the risks often caused from unrealistic deadlines and squeezed prices. Companies should determine the appropriate strategy for termination or remediation of suppliers based on their supplier base. For example, some companies may avoid terminating contracts when violations occur because of limited access to more suppliers, while others may focus instead on remediation and improvement programs.

4. Capacity Building and Incentives

Companies are increasingly investing in capacity building and supplier incentives. These initiatives facilitate knowledge exchange, provide access to tools, and empower suppliers to take ownership of systemic issues and challenges. 

Leading companies also recognize that the most effective remediation strategy includes in-person trainings and hands-on support to strengthen management systems. This approach, unfortunately, has not been possible of late due to the COVID-19 pandemic, driving companies to turn to online engagement and multilingual e-learning programs. The uptake of online trainings has been a hurdle, which is why targeted trainings and incentives, such as preferred contracting terms, are essential. 

5. Supplier Portals and Grievance Mechanisms

Supplier portals are online platforms that serve as a one-stop shop for suppliers to access codes of conduct, supplier documentation, grievance mechanisms, capacity building tools and trainings. Requiring business partners to register their supply sites on such a platform can improve adherence to human rights principles and streamline monitoring. 

These portals have also been where grievance mechanisms are offered to suppliers and their employees. Ensuring that workers in the supply chain have access to a confidential and anonymous grievance mechanism is essential to a “beyond” audit approach. However, many companies have shared that their grievance mechanisms are ineffective and not widely used. New models are being developed to address this gap, including on-site and supplier-led grievance mechanisms, as well as whistleblower technologies. 

6. Change Management and Methodology

New technologies are emerging to replace and augment traditional auditing mechanisms. These technologies can increase information flow to consumers, investors, and other stakeholders by employing tools to map supply chains, assess risks, trace products, and act as grievance mechanisms. Some examples include near field communication (NFC) devices, which enable peer-to-peer communication through secure forms of data exchange. Another is blockchain, which operates as a shared ledger to record transactions and track assets in a business network with a decentralized database. Testing these solutions in-house before expanding across the supply chain is best practice. These tools are promising, yet technology cannot address the root of human rights risks without change management at the leadership, buyer, and supplier levels.  

Managing human rights across supply chains continues to be an ongoing challenge for companies across all industries. While social audits are one way to gain insights into working conditions in supply chains; there is mounting evidence of their limitations. To ensure that social audits are effective and meaningful, companies must go beyond the traditional audit approach by embracing these best practices to achieve positive outcomes for workers and communities.

Blog | Wednesday June 8, 2022

How the SEC Can Mandate Climate-Related Disclosures and Drive Corporate Action

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The SEC's proposed rule on the Enhancement and Standardization of Climate-Related Disclosures for Investors is part of a global movement to improve and harmonize climate-related financial disclosures, which support informed investment decisions and incent ambitious action.

The European Union (EU) and other jurisdictions outside the United States (US) are mandating climate disclosure. Over 2600 companies have already committed to similar disclosures, and the world's largest asset managers are demanding them. By codifying a climate-related disclosure rule, the SEC joins a broad network of institutions formalizing the production and publication of the information investors need to make decisions.

This leadership from the world’s largest economy is significant and can help prevent a fractured disclosure landscape for US companies since many will be required to comply with climate reporting mandates in other jurisdictions.

BSR welcomes the proposed rule as a necessary (but not sufficient) feature of regulatory efforts to ensure urgent action by companies and investors to address the climate crisis.

In support of the SEC’s current efforts to react to market demand for comprehensive climate-related financial disclosures, BSR responded to the latest public consultation on climate-related disclosure and encouraged the Commission to publish a final rule that includes the following:

1. Disclosure requirements that are fundamental for effective climate-related decision-making

The final rule should be just as comprehensive as the proposed draft and require disclosure of key climate-related information in financial filings, including companies’ scope 1, 2, and 3 emissions, assurance for scope 1 and 2 emissions, and governance metrics, particularly those that show board-level involvement.

2. Balances prescriptiveness and flexibility that provides clear guidance to report preparers

Greater clarity in a final rule on elements that are currently open to interpretation—and relevant resources that may aid disclosure—will enable companies to comply more easily.

3. Provides additional accommodations for preparers

BSR supports accommodations for preparers included in the proposed rule. The Commission can also consider additional methods of flexibility, such as allowing an extended period of acceptable estimates for scope 3 emissions and clarifying expectations related to re-baselining of goals and targets in line with globally accepted methodologies.

4. Supports ambitious voluntary commitments

Certain provisions of the proposed rule may disincentivize new climate action and target-setting by requiring disclosure only if the company has a plan or target in place. Accordingly, the SEC should consider adopting a “comply or explain” approach for conditional disclosures (e.g., scope 3 emissions, climate-related goals, targets and transition plans, and the use of climate scenario analysis) where companies would either disclose their approach or explain why they do not have one.

We also emphasize the importance of providing companies with a strong liability shield or “safe harbor” for certain disclosures (e.g., climate scenarios analysis) where uncertainty is inherent in the information being reported and where the absence of these protections may have a chilling effect on disclosure.

5. Is harmonized with relevant global reporting standards and requirements from other jurisdictions

BSR supports the important step that the SEC has taken in building its proposed rule upon broadly accepted reporting frameworks. Accordingly, the SEC should allow the use of alternative reporting provisions that are harmonized with criteria developed by the International Sustainability Standards Board (ISSB) to ease the reporting burden on companies that will also be required to report against these provisions in other jurisdictions.

BSR strongly supports the SEC’s decision to require climate-related financial disclosure, acknowledges the merit behind the Commission’s efforts to create a comprehensive yet accommodating proposed rule, and encourages the SEC to issue a final rule that continues to drive alignment in the reporting landscape, leads to improved climate-related risk management and governance, and incentivizes credible climate action.

BSR will continue to engage on this issue, and in ESG reporting more broadly, through our Future of Reporting collaborative initiative. We encourage companies to get involved in the consultation process by showing support for the proposed rule and the SEC’s efforts to harmonize the reporting landscape and highlighting ways the Commission can strengthen the rule for the benefit of all stakeholders.