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Blog | Monday October 12, 2020

Meeting the Moment for Climate Action: Q&A with Maria Mendiluce, CEO, We Mean Business Coalition

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BSR is pleased to welcome Maria Mendiluce, CEO of the We Mean Business coalition, as a plenary speaker for BSR Conference 2020, where we will virtually gather the sustainable business community around the theme: Meet the Moment. Build the Future.

Meeting the moment doesn’t solely apply to the events of 2020, momentous as they may be. It also means taking action on the ongoing—and worsening—climate crisis. In May 2020, with the COVID-19 pandemic and economic downturn in full swing, Maria was appointed CEO of the We Mean Business coalition. A proud founding partner of the coalition, BSR welcomes Maria to the position and looks forward to our continued collaboration to catalyze business leadership, climate action, and policy ambition to accelerate the transition to a zero-carbon economy.

We were able to connect with Maria ahead of BSR Conference 2020 to learn more about what she thinks is needed from business to meet the current moment and build a more equitable and sustainable future.

 

In 2020, we’re facing the COVID-19 crisis, mass unemployment, and the growing movement to end systemic racism alongside devastating climate impacts across the globe. How do the events of this year underscore the need for business to take meaningful climate action? In your opinion, what is the role of business to meet the moment? 

The world is continuing to grapple with the effects of the COVID-19 pandemic, economic downturn, systemic racial inequality, and more, but the impacts of climate change cannot be ignored. Most weeks bring fresh headlines of wildfires, such as in California and Australia, droughts, and rapidly melting ice caps. They’re all stark reminders that inclusive climate action and a transition to a net-zero economy that does not leave marginalized communities behind cannot wait for calmer times.

While the pandemic has revealed our fragility, it has not diminished the recognized need for bold climate action, and governments, citizens, and the corporate world are increasingly driven to harness this poignant moment of change in a way that benefits us all.

Climate action is a driver of innovation, economic growth, competitiveness, resilience, and job creation. The latest research shows that green stimulus measures are better at boosting jobs and GDP growth than business as usual or traditional government stimulus measures. There is a clear incentive to drive bold climate action as a way to recover better and create good jobs.

However, we must ensure that we deliver a just transition that does not exacerbate social inequalities. This includes building a more resilient labor market that redeploys, retrains, and upskills those working in high carbon industries for the new green economy.

In this time of global disruption, ambitious climate action by both business and government is more urgent than ever before. Climate action equals greater resilience and, for forward-looking businesses, this is quickly moving beyond their sustainability teams to be a core part of business strategy. This is why it’s so timely that, as a coalition, we have launched the Climate Leadership Now guide. The time is now for business leaders to significantly raise the bar; we need to reboot economies, solve the climate crisis, and bring benefits to societies globally, while leaving no one behind. 

At BSR Conference 2020, we will be discussing ways in which business can contribute to the creation of a more just and sustainable future. As business begins to create post-COVID-19 strategies, how important is it to include climate action in these future plans? How can they show Climate Leadership Now?

Encouragingly, the COVID-19 pandemic has not diminished the recognized need for bold climate action and actually has strengthened resolve among citizens, companies, governments, and investors to drive real progress. Consequently, the need to develop a robust leadership position on climate action is more urgent than ever and should be central to any company’s strategic vision.

We are truly at a pivotal turning point in history, and companies can harness this moment to join the Race to Zero and set a course out of the crisis through climate leadership.

This means aligning corporate ambition with the best available climate science, setting targets to reach net-zero emissions by 2050, at the latest, with strong interim targets to get there through the Science Based Targets initiative (SBTi).

Companies must identify and implement action to reduce carbon emissions across operations and supply chains to enable them to deliver on their ambition.

Then it means speaking up to secure wider change through advocacy.

In September, the We Mean Business coalition launched Climate Leadership Now, our new guide outlining how companies can progress their climate strategy toward a climate leadership position fit for this decisive decade. We urge all companies to engage with these three A's: ambition; action; and advocacy. Now is the time to join the Race to Zero and show leadership in the global effort to tackle the climate crisis.

Business and governments need to work together to accelerate climate action. Ambitious company action emboldens governments to set stronger policies, which in turn enable the scale-up of business actions. 

One of the pillars in the Climate Leadership Now guide is Advocacy, highlighting the crucial role and voice that business has in helping developing policy frameworks to spur a zero carbon economy. How can business use its influence to ensure that governments build back better and include climate action in their economic recovery plans? 

Business and governments need to work together to accelerate climate action. Ambitious company action emboldens governments to set stronger policies, which in turn enable the scale-up of business actions. We need companies to make the case in support of bold climate policy.

In a recent video interview with We Mean Business, Jakob Askou Bøss, senior vice president at Ørsted, said, “It’s quite clear that governments cannot do it alone, and companies cannot do it alone. We need to work together. Governments need to set ambitious targets for carbon reduction and renewable energy deployment and create the visibility needed for companies to deploy the vast amount of capital and drive the innovation that is needed to further mature and scale renewable energy and to further bring down costs."

This December will mark the five-year anniversary of the adoption of the Paris Agreement. To meet the goals of limiting warming to well below 2°C, governments need to increase their national pledges. In your point of view, what is the role of business in helping to meet the Paris Agreement goals?

Corporate climate ambition and action help mitigate and avoid risks, like business interruption, supply chain collapse, and market destruction, whilst bringing opportunities like cost savings, new markets, new finance, new customers, and new products. Business leaders can see the benefits and are seizing them.

Just this month, PayPal, Walmart, Ford, and Facebook are among companies to have increased their level of climate commitment, announcing bold strategies to accelerate the zero-carbon transition. To date, nearly 300 companies have joined the Business Ambition for 1.5ºC campaign, led by SBTi, We Mean Business, and the UN Global Compact, including those in hard-to-abate sectors such as the world’s largest cement maker, LafargeHolcim.

During the past few weeks, we have seen the kind of corporate leadership the world needs. We need more businesses to follow suit, because this must become the new business norm.

Blog | Wednesday October 7, 2020

Investors Are Committing to Action on Diversity. Now What?

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Amid a wave of societal commitments to action on diversity, equity, and inclusion (DEI) and racial justice, investors are stepping up commitments and vowing to intensify engagement with companies on DEI.  Despite some progress made to reflect a country’s demographics in the corporate office, in the U.S. and around the world, we are now amid a racial reckoning that calls on all of us to reflect on the real progress made and what needs to advance for real change.

So, what does that mean for companies, and how should they prepare to meet the moment?

The business case for diversity in the workplace is crystal clear. The most recent evidence includes a McKinsey report finding that companies with greater gender diversity are 25 percent more likely to experience above-average profitability compared to their counterparts. In the alternatives space, the average earnings growth of portfolio companies with two or more diverse board members has been nearly 12 percent per year greater than the average of companies that lack diversity, according to private equity firm The Carlyle Group.  

Investors Want Transparency from Companies on the Diversity of Their Workforces

Investors, passive and active alike, are more than ever urging companies to go further and to do so transparently as DEI is integrated into investment decisions and corporate engagement activities. There is a clear and unambiguous ask from investors for U.S.-based companies to disclose annual data on the composition of their workforce disaggregated by race and ethnicity, gender, job category, and, as of recently, pay equity, using the U.S. Equal Employment Opportunity Commission’s (EEOC) EEO-1 form. These reports tell a story of the makeup of a company’s workforce over time.

Currently, only a fraction of companies, or 4 percent of companies of the Russell 1000, release the full data they are required to collect each year and disclose through an EEO-1 report. A more recent survey by Bloomberg revealed that in the S&P 100, as many as 25 companies have released their EEO-1 report, many for the first time, and others plan to do so in 2021. First-mover companies that publish their EEO-1 report are likely to be better off for it by holding themselves accountable to the progress they have committed to make and in doing so proactively rather than reactively.

There is a clear and unambiguous ask from investors for U.S.-based companies to disclose annual data on the composition of their workforce disaggregated by race and ethnicity, gender, job category, and pay equity.

Investors also request disclosure beyond the EEO-1 report, including turnover by region, and critically, what the company strategy on DEI is across the enterprise, including its governance. As pressure continues to build around diversity of board and executive leadership, proxy advisor Institutional Shareholder Services (ISS) has directed letters to U.S. companies asking for self-identified race and ethnicity data at the director and senior executive level. Likewise, the Workplace Equity Disclosure Statement—with investor backing of US$1.88 trillion in combined assets under management (AUM)—calls on companies to release meaningful data on policies, practices, and outcomes related to workforce composition, promotion, recruitment, and retention rates, as well as pay practices.

Investment managers are also increasingly requesting privately-held companies to provide data on race, ethnicity, and gender, particularly at the executive and board levels. In addition, some private equity firms are setting targets to improve DEI in their portfolio companies over a three- to five-year timeline. 

Investors Want Companies to Take More Action on DEI

There is clear investor support for broader actions on diversity. Large institutional investors have articulated their expectations on diversity, from disclosure to strategy and implementation, through letters to the board chairs of the public companies in their portfolios, while active investors have filed several proposals on these topics. Investors and advocacy groups making a broader case for a diverse workplace will expect to see evidence of how companies are recruiting, retaining, and promoting diverse talent across corporate functions, including recruitment of board members.

Investor coalitions like the Racial Justice Investing Coalition seek to engage with, amplify, and include Black voices in investor spaces and company engagements, taking direction and guidance from their lived experience. The Thirty Percent Coalition, known as the Coalition for U.S. Board Diversity and representing over US$6 trillion in combined AUM nationally and internationally, has articulated the resolve of institutional investors to continue to press for more board diversity across gender, race, and ethnicity.

Investors and advocacy groups making a broader case for a diverse workplace will expect to see evidence of how companies are recruiting, retaining, and promoting diverse talent across corporate functions, including recruitment of board members.

As investor action on DEI escalates, we may see more investors and stakeholders taking litigious steps to demand action. For instance, earlier in 2020, shareholder derivative lawsuits were filed with the boards of three large technology companies for failing to deliver on diversity in their boards and executive ranks. Complaints have been filed with other companies for breaching their fiduciary duty by making false assertions about their diversity commitments.  

Investors may also:

• Ask for disclosure on additional categories of diversity, including LGBTIQ+
• Scrutinize how companies’ products and services can impact DEI, whether they are conducting relevant human rights impact assessments, and how they make DEI part of product design and roll out
• As a result of the point above, diversity as an element of broader human rights company engagements could also take shape

Investors Will Take Action during Proxy Season

Investors want a clear strategy on the role that diversity plays at the management level and on the boards of companies. Outcomes from the past few proxy seasons have demonstrated that these are issues companies will likely hear about in the 2021 proxy season.

Investor requests for additional quantitative and qualitative information, such as the role that diversity plays in the firm’s broader human capital management practices and long-term strategy, will increase. Companies that delay or do not engage with their investors could expect to receive shareholder proposals asking for key metrics such as median gender and racial pay equity and diversity data. Blackrock, State Street, and Vanguard, among others, are going further in seeking to understand company performance across a variety of diversity-related issues. While institutional investors typically do not file shareholder proposals, they will exert their influence through proxy voting.

The impact of the use of mandatory arbitration on companies’ employees and workplace culture in employment policies is becoming a key indicator of policy actions to drive equity and inclusion. Investors and advocates see the use of arbitration as being a facilitator of the prevalence of harassment and discrimination in the workplace and on employees’ ability to seek redress for claims of discrimination.

It is imperative that companies respond to these investor interests by developing clear DEI strategies, integrating them into their core business, developing cross-functional communications between sustainability teams, human resources, investor relations, and the C-suite and board of directors, and, not least, engaging their investors.

How Companies Can Respond to Investors’ DEI Interests

Across the capital structure, we see companies making efforts to reduce the gender and race divide. BSR believes it is imperative that companies respond to these investor interests by developing clear DEI strategies, integrating them into their core business, developing cross-functional communications between sustainability teams, human resources, investor relations, and the C-suite and board of directors, and, not least, engaging their investors.

It is time for a deliberate, thoughtful, and humble reset of the role that the corporate world will play in creating diverse, equitable, and inclusive workplaces. The theme for BSR Conference 2020 is an active sentence: Meet the Moment, Build the Future. If you’re interested in learning more on this topic, please join our conference session, How Can Investors Better Address Diversity, Equity, and Inclusion? and contribute with your thoughts, questions, and ideas to advance DEI in your organization. To learn more about BSR’s work on DEI, please don’t hesitate to reach out to our team.

Blog | Tuesday October 6, 2020

Is Your Company Ready for the Future of Reporting?

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The field of sustainability reporting is entering a significant phase of transformation that has the potential to set direction for disclosure over the next decade and more.

The significance of this moment gets to the heart of why we believe companies should report in the first place: reporting is not an end itself, but rather a way to inspire transformation and performance improvement at companies, and a means by which investors, civil society organizations, and governments can make better decisions and judgments about how to create a sustainable and more equitable future.

The list of developments giving us cause for optimism is long and the trajectory of travel on multiple fronts is encouraging. BSR member companies have a great opportunity to shape outcomes by engaging with governments and multi-stakeholder standard setters that are working to improve, align, and harmonize global reporting standards and their governance processes.

We’ve listed some of the key developments at the end of this blog, including those from the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), the Task Force on Climate-Related Financial Disclosures (TCFD), the International Integrated Reporting Council (IIRC), the International Financial Reporting Standards (IFRS) Foundation, and Accountancy Europe. We are especially pleased to see the emphasis on alignment and harmonization in CDP, CDSB, GRI, IIRC and SASB Statement of Intent to Work Together Towards Comprehensive Corporate Reporting, and regulatory action coming from the proposed changes to the Non-Financial Reporting Directive (NFRD) in Europe.

BSR’s objective is to strengthen sustainability reporting by promoting alignment, harmonization, and integration into business, and we are engaging with many of these entities with this intent in mind.

We believe that the sustainability reporting ecosystem and the use of sustainability reporting frameworks and standards by companies should achieve three complementary outcomes:

1. Business transformation and performance improvement at companies, by enabling investment in resilient business strategies that improve company performance.
2. Better outcomes for sustainability, by focusing board and management attention on how the company can help achieve Sustainable Development Goals, accomplish the Paris Agreement targets, and fulfill international human rights standards.
3. Decision-making that accelerates progress towards an equitable and sustainable economy, by eliciting information from companies needed by investors, customers, civil society organizations, and governments to make informed decisions that support a rapid transition to sustainability.

However, as three decades of sustainability reporting has clearly illustrated, these three goals can only be achieved if reporting frameworks and standards are practical for companies to implement.

With these impacts and outcomes in mind, we have developed a perspective—arising from nearly three decades of BSR insight into what works and what doesn’t—to guide our engagement in dialogue about the future of reporting. This perspective is summarized in the following chart, which combines common elements of reporting frameworks and standards, such as reporting principles and metrics, with the practical solutions that we think are needed to achieve our three desired outcomes.

We believe that the future of reporting should be based on the following interrelated and interdependent components:

• Reporting principles: Principles are fundamental to effective reporting by helping ensure that the right information is reported and is of sufficient quality. In combination, the IIRC and GRI provide well-established reporting principles that can form the basis of a more aligned and harmonized approach.
• Resilient business strategies: Companies should describe how they establish resilient business strategies that create long term value for all stakeholders. The TCFD’s core elements of governance, strategy, and risk management—and especially scenario planning and futures thinking—provide an excellent model for an approach that links reporting with business strategy. This structure can replace other conceptual frameworks for describing company management approaches.
• Comparable disclosures and metrics: Ideally, companies would be able to utilize a long list of potentially material sustainability disclosures that, though arising from different standards-setting organizations, are aligned, consistent, interoperable, and of similar quality. Taken in combination, these disclosures and metrics would meet the information needs of a wide range of report users and enable enhanced company performance and tracking.
• “Core” reporting: Five years ago, Accountancy Europe shared the concept of “core and more” as a model for smarter corporate reporting. Inspired by this model, which is conceptually very similar to BSR’s own “reporting triangle approach;” we believe that companies can publish succinct “core reports” that meet the needs of (a) investors, via annual reports and (b) a broader range of stakeholders, via sustainability reports, with clear connectivity between the two. Further, while annual reports have a consistent structure—we all know our way around a Form 10-K—the goal of creating a more equitable and sustainable economy would benefit from a similarly consistent structure in sustainability reporting.
• “More” reporting: Companies can publish more detailed reports that are targeted at specific audiences; examples include disclosures covering tax payments, country- or site-level impacts, product-level impacts, diversity and inclusion, human rights, climate change, lobbying, privacy, and freedom of expression. We believe that issue-specific reporting is an especially exciting area for innovation, as captured by Uber’s recent safety report and transparency reporting on law enforcement relationships.

These elements can be brought together with an integrated, joined-up, and interoperable approach to standard setting by the various reporting framework and standards organizations, a direction they all appear to be moving in.

This thinking brings together proposals we and others have developed and shared previously. Most notably, our perspective is very similar to the Statement of Intent to Work Together Towards Comprehensive Corporate Reporting recently published by CDP, CDSB, GRI, IIRC and SASB, a very encouraging initiative that we are pleased to support.

Indeed, it is this convergence of thinking—and the very practical nature of it—that gives us the most cause for optimism that a better future for reporting is well within our collective grasp.

Business urgently needs to embrace resilient business strategies, supported by a system of company reporting that is fit for that purpose; we are optimistic that a tipping point leading in that direction is finally here.

Blog | Monday October 5, 2020

The Future of Human Rights Due Diligence: Legislation and Regulation for a Level Playing Field

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Authors' Note: This blog is the first of a three-part series. In this blog, we will focus on the current landscape of mandatory human rights due diligence (HRDD) and disclosure requirements and the push toward a more universal approach. The second blog will discuss the elements that BSR has found important for effective HRDD, and our third blog will focus on further unpacking the various options being proposed in the European Union’s mandatory Human Rights Due Diligence Legislation (henceforth referred to as EU mHRDD proposal).

Between a global pandemic, accelerating impacts of climate change, and the erosion of democracy worldwide, the year 2020, like the several years preceding it, has caused many of us significant stress and anguish about the state of the world.

One positive development in the human rights landscape is the push for mandatory human rights due diligence. In particular, the recent EU mHRDD proposal is noteworthy as it is the first attempt to mandate HRDD at the regional level, putting in motion an evolution originally envisioned as part of the state duty to protect under the UN Guiding Principles on Business and Human Rights (UNGPs), which are currently only a voluntary set of principles. By establishing mandatory requirements at regional or international levels, we anticipate improvements and clarity in methodologies and approaches, greater visibility on the human rights impacts of the operations of companies around the world, and a push toward greater cooperation and collaboration among private sector actors to address these impacts and provide remedy.

The EU mHRDD proposal, anticipated to take effect in early 2021, is expected to be cross-sectoral and will require EU operating companies to identify, prevent, and mitigate adverse human rights and environmental impacts of a company’s own operations and value chain, even if the impact takes place outside Europe. Already, multinational corporations have welcomed these potential improvements and, as such, are lending their voice and influence to promote such measures. In addition, civil society organizations have also expressed their support, recognizing the most important potential outcome of all, greater respect for and protection of human rights around the world.

Current Landscape

Over the last decade, we have seen a flood of mandatory due diligence and reporting regulatory requirements from all corners of the world. These can be lumped into a few broad categories:

• Issue-specific legislation, including the U.S. and EU Conflict Minerals Rules, the UK and Australia Modern Slavery Act, and the Dutch Child Labor Due Diligence Act
• Mandatory disclosure requirements without significant implementation mechanisms, like those listed above but also including the California Transparency in Supply Chains Act and the EU Non-Financial Reporting Directive (EU NFRD)
• National-level mandatory due diligence and reporting requirements that cover all human rights, such as the French Duty of Vigilance Law, the proposed Swiss Responsible Business Initiative, and the proposed German Supply Chain Due Diligence Act

The evolution away from issue-specific or disclosure-only regulations, more popular in the first half of the 2010s, to general mandatory human rights due diligence requirements is a welcome one. While laws such as the Modern Slavery Acts and Conflict Minerals Rules were positive in raising awareness among the business community on an international scale, their focus on reporting and disclosure over due diligence and specific issues over the broad spectrum of human rights means that the impact for rightsholders may not be as significant as intended.

Conversely, the move toward broader mandatory human rights due diligence requirements, such as the EU proposal, are more likely to bring the intended outcomes: a leveled playing field, greater legal certainty and harmonization, increased respect for human rights where companies operate, remedy for the impacted rightsholders, and non-negotiable standards to increase leverage with third parties. If such requirements are consolidated at a regional or international scale and hopefully supplant issue-specific disclosure requirements, companies can dedicate more time toward developing a holistic, comprehensive human rights due diligence approach—ultimately leading to improved remedy and outcomes for rightsholders.

Mandatory HRDD: A Positive Development

While there are many open questions about what the specific requirements will be in the final version of the EU mHRDD proposal, in general we believe that a regional or international mandatory HRDD approach is a significant improvement over the current landscape for the following reasons.

1. Drives prevention of human rights impacts. By holding companies to a standard duty of care with regard to how risks are identified and subsequently mitigated or remediated, we can anticipate meeting the original goals of the UNGPs in a much more impactful way—mitigation and remediation of human rights impacts on rightsholders and vulnerable populations across corporate value chains.
2. Creates a level playing field and drives legal harmonization. While the scope of applicability of the EU mHRDD proposal is yet to be determined, a regional or international legal requirement will provide legal certainty, harmonization, and clear and consistent expectations for the private sector, moving away from a hodge-podge of issue-specific disclosure or diligence requirements.
3. Creates a clear legal duty. Though the details of what liability looks like are yet to be finalized, we can anticipate that with time, a consistent duty of care will be established in terms of how HRDDs must be carried out and what corporate obligations are in terms of providing remedy.
4. Encourages a holistic approach. Human rights violations do not happen in a vacuum—there are systemic issues that result in such impacts, and thus a systemic approach to addressing them is needed. By requiring all companies to undertake HRDD across their full value chain and working collaboratively to address those risks, we move closer to a systemic approach to human rights management.

Many of the details of the EU mHRDD proposal are yet to be finalized: open questions remain around the required scope of the HRDD program, including what entities will be in scope, what the expectations are for providing remedy and redress for victims, and what liability and penalties will mean.

Still, we believe that the proposed legislation will remove many of the lasting hurdles that prevent impactful corporate HRDD programs today. In the rest of the blog series, we will explore what constitutes good HRDD practices from an impact perspective and discuss the various permutations of the EU mHRDD proposals.

Blog | Thursday October 1, 2020

Introducing The Fast Forward: BSR’s Emerging Issues Update

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The world is changing in rapid, complex, and unpredictable ways. This makes it more challenging than ever for businesses to create strategies that are fit for the future. At the same time, what were once seen as primarily sustainability issues—such as the climate crisis and the struggle for racial justice—are increasingly transforming the corporate agenda. There has never been a greater need for business to anticipate and prepare for disruptive emerging issues—and sustainability offers a crucial north star to navigate the turbulence ahead.

Introducing The Fast Forward

To address this situation, BSR’s Sustainable Futures Lab is launching The Fast Forward, a new quarterly publication exploring emerging issues at the nexus of business and sustainability. It will focus on nascent trends that are likely to disrupt the operating context of the future and that will require a robust and forward-looking sustainability strategy to navigate. Some of these may be niche developments that we believe are likely to become mainstream; others may represent the acceleration or intensification of existing trends in ways that materially change their impacts on business.

The inaugural edition of The Fast Forward was written during the height of the COVID-19 crisis and, like everything else in the world today, has been strongly shaped by that experience. The pandemic, and our response to it, is a truly transformative historical event. Equally important has been the movement for racial justice exemplified by Black Lives Matter, which has made more visible the urgent need to address ongoing structural inequality.

The confluence of these global historical developments shaped the selection of the seven issues we decided to cover in this inaugural edition of The Fast Forward. As we identified the issues and delved into their business and sustainability implications, two overarching themes became apparent:

• Technological disruption is accelerating on several key fronts. The COVID-19 crisis is turbocharging investment in automation; driving employers, educational institutions, and others to abruptly embrace a shift to the virtual; and creating the conditions where more and more people may feel compelled to trade their personal data for participation in social and economic life.
• The COVID-19 crisis is exacerbating longstanding disparities and systemic inequities. Women; Black, Indigenous, and People of Color (BIPOC) communities; youth; and migrants are bearing the brunt of many of the changes wrought by the pandemic. Women’s role in the economy is being threatened by the COVID-19 crisis; young people are being challenged as jobs for new college graduates evaporate, school is disrupted, and developmentally critical socialization among children is curtailed; and the combination of COVID-related travel restrictions, climate impacts, and growing nationalism are creating new hurdles for migrants. And each of these challenges is intensified for members of BIPOC communities.

The Business Response

These emerging issues are global in scope and will impact every area of business—from new opportunities to improve operations to challenges in far-flung supply chains. Above all, these changes will require business to intensify its focus on people. Although the impacts of these wide-ranging changes are manifold, these emerging issues will require a particularly strong business response in three key areas.

An Expanded Focus on Human Rights

The COVID-19 crisis is exacerbating long-standing disparities and systemic inequities. Women; Black, Indigenous, and People of Color (BIPOC) communities; youth; and migrants are bearing the brunt of many of the changes wrought by the pandemic. A comprehensive diversity, equity, and inclusion strategy grounded in the UN Guiding Principles on Human Rights will be needed to adequately address the needs of employees, customers, local communities, and other stakeholders. As health data become increasingly important, businesses will also need a human rights approach to worker data protection that is grounded in principles of privacy, non-discrimination, and human dignity.

Advocacy and Collaboration for a New Social Contract

Several of these emerging developments will create challenges that are beyond the capacity of business to solve alone. Rapid and widespread automation will require changes to the labor force and social safety nets that go beyond reskilling efforts at individual companies. A systemic approach—one that engages business, government, and civil society—will be needed. Given the scale of the challenge, experiments with expanded unemployment insurance, portable benefits, and universal basic income may be needed. As pressures intensify on migrants, business will also need an approach to immigration policy that is firmly grounded in international human rights principles.

Agility, Flexibility, and Foresight

Finally, these changes will require business to be even more agile, flexible, and attuned to the future. Several of these changes will manifest in radically different ways in different regions of the world. Business should anticipate that laws around data privacy and migration, for example, will become increasingly divergent in the U.S., Europe, and China. Other changes will accentuate the differing needs among diverse stakeholder groups, such as women, BIPOC, and rising generations. Finally, the speed with which the COVID-19 crisis unfolded should leave no doubt: massive disruption can happen on a very short time scale. As volatility continues to intensify, strategic foresight techniques such as scenario planning will be more important than ever to enable business to anticipate and prepare for these sorts of changes.

We hope that the The Fast Forward will prove to be a valuable resource to business for anticipating emerging issues, meeting the moment, and building the future. To better understand how these issues will specifically impact your business or industry, the Sustainable Futures Lab can facilitate a trends and emerging issues assessment that will generate new insights for how to prepare for these issues and create more resilient business strategies. Please don’t hesitate to reach out to learn more about the work of the Futures Lab and how futures thinking can help you prepare for what comes next.

Blog | Tuesday September 29, 2020

Three Futures of Company Climate Action

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When BSR carries out climate scenario analysis, we construct three or four plausible futures that capture the disruption relevant to a company’s business. We then work with the company to make its strategy more resilient, e.g. by hedging against risks in more than one scenario, by guarding against disastrous tail risks, or by investing in unexpected business opportunities. Climate scenario analysis then reveals how climate action by the company can build resilience to potential disruption.   

This year’s Climate Week NYC has advanced a shift from climate commitments to climate action, which we must accelerate to keep the Paris Agreement goals within reach. What will company climate action look like in this Decisive Decade? Here are three plausible futures for companies considering their own climate and environmental strategy. 

1. To Net Zero and Below 

Two years ago, the IPCC’s Special Report on 1.5°C made it clear that to reach the Paris Agreement’s stretch target, we will need to reach global net zero emissions by 2050. The north star of net zero is followed by countries—witness the EU’s move towards climate neutrality by 2050, and China’s surprise pledge last week to reach carbon neutrality by 2060. If achieved, China’s pledge alone could reduce warming by 0.2-0.3°C.  

Companies too have followed this north star. Last week, Walmart targeted zero emissions across global operations by 2040. In June, Unilever targeted net zero emissions from all of its products by 2039. In January, Microsoft targeted becoming carbon negative by 2030 and removing all of its historical emissions by 2050. 

These targets and others like them reveal the main questions companies must answer about their future climate action. Will the company act on its own operations or also across its value chain? (Value chain action is usually more impactful.) What hierarchy of emissions reduction interventions will the company undertake to progress towards its target? (One which maximizes the company’s credibility and environmental integrity.) What will be the role of offsets—whether of avoided emissions or which sequester carbon from the atmosphere? (Hopefully secondary to action in the company’s own value chain.) The Science-Based Targets initiative (SBTi) last week published a paper on the conceptual foundations for net zero targets, attempting to bring some standardization to the debate.  

2. Science-Based Everything 

Indeed, the success of the SBTi over the past five years, with nearly a thousand companies committed to emissions reduction targets, points to a second plausible future. If science can ground a company’s climate target, can it ground all of a company’s environmental targets? Can we have a science-based corporate environmental strategy? 

This is the premise of the initial guidance published by the Science-Based Targets Network last week. The SBTN proposes a framework which can apply to all environmental targets, even if the science underlying them is very different. Companies will need to work through the challenges related to their particular environmental targets, much as Mars did using Science-Based Problem Solving. 

The implications for climate action in this future are clear—that it will increasingly align to objective science rather than subjective demands from stakeholders or peer behavior and that companies will attempt to lever an environmental system, rather than satisfy a group of people. 

3. Business Transformation By All 

Transform to Net Zero, which BSR helped to launch over the summer, points to a third plausible future of climate action. To build net zero value chains, companies will need to integrate climate goals into their corporate strategy and deploy corporate functions well beyond sustainability and operations. All businesses will need to transform. 

Net zero value chain targets imply that procurement teams will prefer that resilient, low carbon suppliers support them to decarbonize. Enterprise risk management and business continuity processes will integrate climate risks. Finance departments will ring-fence capital and establish new criteria for its deployment. Public affairs staff will add climate-favorable policies to its list of priority asks. Research and innovation departments will need to develop lower carbon or more resilient designs. Marketing campaigns will foster public support. Human resources will improve recruitment and retention through connection to climate purpose. And company leadership will set out a strategy and management structure befitting this effort. 

In this third future, businesses will transform into organizations directed against climate change and find climate action to be one of their main sources of business advantage. 

Which of these three plausible futures will become reality? When we carry out climate scenario analysis, we know that none of our scenarios depicts the actual future and that the future will be a combination of all of them. So it is with company climate action. Our task ahead is to build net zero value chains by transforming our businesses and deliver what science demands. What can your company do to take the next step? 

Blog | Monday September 28, 2020

Building Momentum for Positive Change in the Palm Derivatives Sector

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The COVID-19 pandemic, its economic impacts—particularly on the supply chain—have led to huge global disruption over the past year, affecting the way we live, work, and socialize. Even amid all the upheaval, one thing that has not faltered, however, is global demand for the products that rely on palm derivatives. Though many people are not aware, it is in the soap that we wash our hands with, the cleaning solutions that keep us safe and healthy, and the cosmetic and home products that bring joy to quarantine. Palm derivatives continue to be an essential component in many facets in our lives.

The social and environmental challenges of palm production are well known. However, the complexities of the derivatives supply chain obscure visibility of practices at source. Companies seeking to accelerate compliance with deforestation-free and responsible supply chain principles are faced with resource-intensive supply mapping exercises, often in duplication with other downstream players and prohibitive for smaller companies. Transparency to source is therefore limited, and the significant collective influence of the palm derivatives sector is yet to be fully utilized.

It has been just over ten months since Action for Sustainable Derivatives (ASD), a sector-wide collaboration for users of palm and palm kernel oil derivatives in the beauty, personal and health care, and oleochemical industries, was launched to galvanize a collective voice of influence for responsible palm production and to operationalize collective tools for change. Our vision is to achieve and promote palm derivatives sourcing that is free from deforestation, respects human rights, and supports local livelihoods.

ASD is proud to share our first Annual Update on Progress, demonstrating the rapid progress that has been made even in the context of global upheaval. Since its inception, ASD has facilitated the sharing of information, data, and solutions to accelerate transformation of the palm derivatives sector among its members. Moreover, ASD also acts as an operational platform for transparency, risk prioritization, and on-the-ground impact.

The resulting proof points speak to our founding collaborative and impact-oriented approach:

• Conducted individual member company and collective group supply chain mapping for 18 member companies, covering 450,000 tons of palm-based materials and over 700 ingredient types
• Mapped derivatives supply chain to mills of origin for 81 percent of palm volumes
• Leveraged existing environmental and social risk data to prioritize production hotspots and supply chain players in the collective supply chain, which allows for engagement to improve production practices and secure supply of responsible palm derivatives to uphold No Deforestation, No Peat, No Exploitation commitments of downstream users
• Developed an impact-oriented strategy to focus collective resources in support of responsible production practices and relevant conservation, restoration, and livelihood initiatives

We are confident that our collective transparency model holds huge potential to drive alignment and efficiencies in the palm derivatives sector. By bringing a collective derivatives voice to the issues, ASD aims to maximize opportunities for impact by co-building and co-implementing solutions with wider stakeholders and initiatives in the sustainable palm space.

Ultimately, our goals rely on comprehensive sector-level participation and industry collaboration to scale impact. ASD invites new companies to join and interested stakeholders to engage and work together in continuing to drive positive change in this sector.

Reports | Monday September 28, 2020

Action for Sustainable Derivatives | Annual Update on Progress 2020

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It has been just over ten months since Action for Sustainable Derivatives (ASD), a sector-wide collaboration for users of palm and palm kernel oil derivatives in the beauty, personal and health care, and oleochemical industries, was launched to galvanize a collective voice of influence for responsible palm production and to operationalize collective tools for change. Our vision is to achieve and promote palm derivatives sourcing that is free from deforestation, respects human rights, and supports local livelihoods.

ASD is proud to share its first Annual Update on Progress, demonstrating the rapid progress that has been made even in the context of global upheaval. Since its inception, ASD has facilitated the sharing of information, data, and solutions to accelerate transformation of the palm derivatives sector among its members. Moreover, ASD also acts as an operational platform for transparency, risk prioritization, and on-the-ground impact.

The resulting proof points speak to our founding collaborative and impact-oriented approach. In just ten months, ASD has:

• Conducted individual member company and collective group supply chain mapping for 18 member companies, covering 450,000 tons of palm-based materials and over 700 ingredient types
• Mapped derivatives supply chain to mills of origin for 81 percent of palm volumes and to refineries and crushers for 90 percent
• Leveraged existing environmental and social risk data to prioritize production hotspots and supply chain players in the collective supply chain, which allows for engagement to improve production practices and secure supply of responsible palm derivatives to uphold No Deforestation, No Peat, No Exploitation commitments of downstream users
• Developed an impact-oriented strategy to focus collective resources in support of responsible production practices and relevant conservation, restoration, and livelihood initiatives

Blog | Friday September 25, 2020

Missing Climate Week, Seeing Climate Refugees

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For the first time in many years, I am missing Climate Week and the UN General Assembly (UNGA) this year, and not only because COVID-19 prevents me and most of the Sustainable Development Goals (SDG) community from traveling to New York. This year, I also missed it for family reasons: our younger son began university, in person, even amidst the pandemic.

Universities in the United States have been seriously disrupted by COVID-19, and there are many fears about whether even limited opening makes sense from a public health perspective.

But for our family, there’s more, since our son entered university in the state of Oregon in the immediate aftermath of the devastating wildfires that destroyed homes and livelihoods for so many. My “climate week” this year was all too real.

Upon arriving at our hotel in Eugene, Oregon, we encountered not old friends and colleagues from countless climate conferences, but a Red Cross table checking in dozens of fire evacuees whose homes had been destroyed and who required temporary housing in hotels.

Transportation was disrupted not by the motorcades of heads of state shutting down midtown Manhattan, but the sight of entire neighborhoods burned to the ground alongside the interstate on the way from California and poor visibility from the smoke that plagues the West Coast of the U.S. weeks after the fires began.

Instead of earnest—and undeniably important—conversations about poverty reduction and achievement of the SDGs in conference rooms, our hotel hallways and common spaces were filled with evacuees—climate refugees—carrying their belongings. It was impossible to ignore the fact that many of the people in our hotel were economically disadvantaged before the fires and face extreme precarity thanks to these fires.

It was also striking that many of the displaced did not honor the statewide mandate to wear masks inside. This troubling experience seemed likely to be a real world manifestation of the “mask denialism” that plagues portions of the United States. This is yet another illustration of the all-too-familiar debates over red-state versus blue-state culture in the U.S. that have similarly undermined climate action in the world’s largest economy.

I suspect that my 2020 Climate Week, far from New York, far from an endless stream of dialogues, dinners, and impromptu meetings, will linger in my consciousness far longer than any other.

Climate Week remains an indispensable time of year. Indeed, amidst all the terrible news of 2020, the flurry of new announcements tied to Climate Week from leading businesses, investors, and coalitions is one of the best reasons I can think of to maintain a degree of optimism at a time of so much hate, suffering, and uncertainty.

And while I miss being with friends and colleagues working furiously for a net zero economy that truly sustains all people, I suspect that my 2020 Climate Week, far from New York, far from an endless stream of dialogues, dinners, and impromptu meetings, will linger in my consciousness far longer than any other.

I hope that next year, we will be able to gather safely in the ways we have grown accustomed to doing. And whether Climate Week 2021 is virtual or in person, I intend to hold dear the encounters I had with the climate refugees I witnessed in the lobbies and hallways of Eugene, Oregon this week. We do our work for them. Even more, we do our work to make sure that their tragic reality does not become our collective fate. And with no offense to everyone fighting hard to achieve decisive climate action, a single encounter with a family that has lost their home means more, and inspires more, than a thousand Zoom chats.

Blog | Thursday September 24, 2020

Scaling the Impact of Digital Financial Services: The Opportunity and Imperative during COVID-19

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“Being paid into an account is much safer. During Corona, if I were paid in cash, I would have had to go to the factory in person and disinfect the money as my colleagues did when they received their salaries in the envelope.” Ibrahim, Garment Worker, Egypt

For Ibrahim, as for many low-income workers in global supply chains, the COVID-19 pandemic has brought the physicality of cash into sharp focus. Even where factories have remained open, for those who receive wages in cash, payday has become arduous and dangerous. Where operations are suspended, though, receiving cash wages becomes an impossibility, putting workers at increased risk of being plunged into economic crisis. 

The pandemic has revealed and accentuated the limitations of cash payments: they are time-consuming, insecure, and disempowering for workers. As lockdowns have brought much of the world to a standstill, governments and the private sector alike have turned to digital financial services to make rapid payments at scale. For example, the government of Bangladesh’s COVID-19 support package for the garment sector was available only for employers paying digital wages; this led to over 800 garment factories rapidly digitizing their payroll, and in April 2020, 1.9 million garment workers received the government support package payments into their accounts—with more than half estimated to be paid digitally for the first time.

In global supply chains, this rapid shift to digital payments has, in the short term, enabled critical support to reach the most vulnerable populations: low-income workers who rely on regular wages or government payments to feed and support their families. More broadly, however, the shift has highlighted the longer-term potential of digital wages to drive financial inclusion and resilience, bringing low-income workers into the formal financial system and thereby increasing their ability to save, plan, and respond to crises. As Nupar, a Bangladeshi garment worker, revealed: “I keep track of all my expenses and have savings even from my small salary. Every month I save 1,000-1,500 taka in my mobile wallet and 5,100 in my savings group. Because of this, I didn’t need to borrow any money [during the COVID-19 lockdown].”

There is therefore a major opportunity, right now, to accelerate the transition to digital and generate positive impact at scale. Since 2018, BSR’s HERproject and the Mastercard Center for Inclusive Growth have partnered to leverage the HERfinance Digital Wages program to scale up wage digitization for ready-made garment factories and workers in Bangladesh, Egypt, and Cambodia. Together, we are calling on business globally and governments to unite in developing and implementing more cash digitization programs. Through their supply chains in countries like India and Bangladesh, global brands and buyers have unique access to millions of workers and can, in partnership with relevant governments and stakeholders, make digital wages a global reality.  Governments can digitize their social protection payments and support individuals to access and use these much-needed disbursements. 

However, while such a shift has enormous potential, it is critical that efforts are carefully designed and managed. The Mastercard Center for Inclusive Growth and HERproject are therefore pleased to share a new report, Digitizing for Inclusion: Insights from Wage Digitization in the Garment Sector. This report draws on the extensive experience of HERfinance Digital Wages programs across multiple countries, highlighting key lessons that can help global brands, governments, financial service providers, and other stakeholders ensure that the transition to digital payments is inclusive, effective, and beneficial to all.  

The report shares insights that private sector, governmental, and development organizations should consider before beginning any payment digitization programs. These include the following:

• Without training, digital wages may offer little to no benefit. While digital wages programs may succeed in providing workers with accounts and transitioning factories away from cash payments, this may be a token gesture with little impact if workers are not trained and encouraged to use digital financial services. In 2017, for instance, when the garment industry in India digitized wages, there was limited training provided to workers. Three years later, research found that male and female workers are still withdrawing 100 percent of their wages on payday. By contrast, through the HERfinance Digital Wages programs in Bangladesh, workers have been trained on using their mobile money accounts to send remittances to families, save money in their accounts (which helps them to better weather future shocks), and make payments for products in areas around the factory. As a result, they became active mobile money users: women were conducting approximately eight transactions per month and men 13 transactions.
• If gender is considered from the start, digital payments can enable women’s economic empowerment. In Bangladesh, for example, women are often forced to hand over some or all of their wages to husbands or male family members. Paying women digitally does not necessarily alleviate this problem and may, in some cases, make it worse. The HERfinance Digital Wages programs have therefore devoted significant time to discussing the advantages of joint financial decision-making with both men and women, leading to female participants reporting increased control over their wages. If the specific barriers women face are accounted for and incorporated into training programs, there is an increased likelihood that gender norms can be shifted, paving the way for greater women’s empowerment.

As these lessons show, transitioning to digital payments is not just a matter of flicking a switch. It requires knowledge, expertise, and thoughtful planning and implementation. HERproject and the Mastercard Center for Inclusive Growth are therefore delighted to make the learnings from HERfinance Digital Wages programs publicly available; we encourage global brands and governments to read and share these learnings as the first step to activating their potential to scale digital payments and change lives for the better.

Originally appeared on HERproject.