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Blog | Wednesday April 28, 2021

China’s Climate Goals, The 14th Five-Year Plan, and the Impact on Sustainable Business

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Following a weeklong meeting in March, China’s 14th Five-Year Plan (FYP), which covers 2021-2025, was approved by the National People’s Congress at the Two Sessions in Beijing. The plan signals the direction of China’s economic, environmental, and social development in a critical period in which China will lay the foundation for its climate goal to peak carbon emission by 2030, reiterated by President Xi at the China-France-Germany virtual climate summit on April 16.

How will the 14th FYP steer the country’s development for the next five years, and what does it mean for business? In this blog post, we look at the environmental and climate considerations of the new FYP.

An Evolving Environmental Approach: From Pollution Control to Emissions Reduction

In the recently released plan, energy and climate targets take center stage. For the first time since 1986, China has omitted a numerical GDP target in its FYP, instead setting longer-term climate goals and introducing the idea of a CO₂ emissions cap. The FYP set an 18-percent reduction target for CO₂ intensity and a 13.5-percent reduction target for energy intensity from 2021 to 2025.

This marks a significant shift from pollution prevention to carbon emissions reduction.

In the 12th FYP, the Chinese government began dedicating significant funds and high-level attention to reducing energy consumption and greenhouse gas emissions, and it declared war on pollution in 2014. This continued into the 13th FYP, with specific sectoral targets and milestones to eliminate pollution.

In the 14th FYP, energy and climate stand out as a central-policy priority, building on the existing efforts and strategies focusing on ecological and environmental protection.

The 14th FYP Will Guide Sector-Specific and Regional Plans to Reduce Carbon Emissions

The international business community and climate experts have raised questions regarding China’s energy transition and specifically how it will reach its 2030 emission peak goal through actions set in the 14th FYP. These details, especially regarding timeline, road map, and the KPIs at the local and sectoral level, will be clarified in the 14th FYP’s forthcoming sector-specific and regional plans. These clarifications are important and worth watching for.

Still, we have information from key ministry and state-owned enterprises, which take the lead in setting direction for policy implementation. For example, the Ministry of Ecology and Environment (MEE) will set targets for nationwide greenhouse gas emission controls between late 2021 and early 2022. These targets will break down those outlined in the FYP at the sectoral and administrative level and will provide greater details concerning road maps and action plans for implementation, evaluation, and reporting.

Industry experts anticipate there will be more demand for both mandatory and voluntary carbon disclosure. In particular, as the national carbon emission trading market kicks off in 2021, there will be increased expectations for data on emissions reductions and company measures to control emissions.

Meanwhile, state-owned enterprises also vowed to peak carbon emission and reach carbon neutrality goals ahead of the country’s goal. The State Grid Corporation of China released a plan for peaking emissions and achieving carbon neutrality goals in March 2021. China Baowu, the world’s largest steel company, announced its aim to have CO₂ emission peak before 2023 and Sinopec, the world’s largest oil refiner, has set a target for carbon emissions to peak by 2025. 

Major cities, including Beijing and Shanghai, the industrial provinces of Guangdong and Jiangsu, and the island of Hainan, have all included emissions peaks in their proposed five-year plans, which will align with the overarching national blueprint guiding policy through 2025.

Business Operating in China Should Expect Changes to the Market to Align with Climate Goals

As sector-specific and regional FYPs start to take form, these policy changes will gradually be delegated down to businesses and society across sectors and regions.

The net-zero transition will have a significant impact on almost every part of the supply chain, particularly those still dependent on coal-fired power and which are not yet ready to transition to renewables. This could include sectors such as mining, steel, petrochemicals and chemicals, transportation, textiles as well as others. The impact will be concentrated in coal-reliant regions and provinces, affecting local economies, employment, tax revenue, and social benefits, and could push business and talent to regions where renewable energy is cheaper.

The financial market is responding quickly to the government plans. Carbon neutrality-themed shares in the Chinese stock markets have surged since early in the year. We also expect that the national carbon neutrality goal will activate the financial market and encourage more long-term value investors to focus on zero-carbon development and invest in zero-carbon assets, projects, and technologies.

Businesses operating in China should thus expect these changes to take into effect soon and prepare their own operations as well as their supply chains to meet both policy and market expectations for a net-zero transition.

What’s Next

BSR’s China team will continue to unpack business impacts of the national plan. Future blog posts will provide more details on industry impacts and how businesses should prepare through insights and dialogues with climate and energy experts and key opinion leaders from important stakeholders across sectors.

If you are interested in learning more about how BSR can help shape your China strategy, please reach out to connect with the team.

Blog | Tuesday April 27, 2021

Leaders Summit on Climate: Forward Progress to the Net Zero Economies We Need

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The Paris Agreement’s goals to keep global warming well below 2°C and pursue 1.5°C were never going to be reached all at once, but rather by countries strengthening their emissions reduction targets every five years. For the first time since Paris, the Leaders Summit on Climate kicked off a new round of stronger targets from major emitters, which will culminate at COP26 this November.

Signaling full U.S. engagement in the global effort to combat climate change, the Summit stepped toward the net zero economies we need.

Leading the way:

These updated pledges will meaningfully draw the global emissions curve downward but fall short of staying on track toward the Paris goals. We must look to the major emitters to do more ahead of COP26. And when the COP is done and dusted, we must look to governments to implement these targets as domestic policy, providing more certainty to guide business action.

These targets and others will galvanize the business transformation of BSR’s members and the wider business community. By innovating across business functions, companies will seize the economic opportunities of an inclusive net zero economy, leading to better jobs, shared prosperity, and Paris-aligned emission reductions during this Decisive Decade.

By working with leading collaborations such as Transform to Net Zero and the 1.5°C Supply Chain Leaders and with our members, BSR will spend the coming years bringing net zero implementation ever closer to reality.

The Summit also was also notable for the launch of two major private-sector initiatives: the Glasgow Financial Alliance for Net Zero, including a new Net-Zero Banking Alliance, and Lowering Emissions by Accelerating Forest finance (LEAF), a new public-private coalition with the aim of mobilizing more billions to protect tropical forests at jurisdictional scale.

The new national targets remind us that net zero pledges ring hollow unless, as the Transform to Net Zero Position Paper and Action Plan sets out, they are consistent with and supplement shorter-term science-based emissions reductions across value chains. And the LEAF coalition reminds us that the need to remove carbon from the atmosphere to achieve net zero targets cannot blind us to the need to invest in avoided emissions to keep the door to Paris open.

Leading businesses on climate are called in these different directions—to achieve science-based reductions across the value chain en route to net zero goals and to invest in solutions to systemic issues like tropical deforestation. After the Leaders Summit on Climate, we know they will be joined by governments eager to accomplish the same.

Blog | Wednesday April 21, 2021

Joining the UN Generation Equality Forum is Smart Business

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As the world grapples with the impacts of a global pandemic with women on the frontlines, the Generation Equality Forum (GEF) offers a once-in-a-generation opportunity for actors around the globe, including the private sector, to come together to build an ambitious agenda to empower women and girls. BSR, The B Team, and Women Win/Win-Win Strategies are working together to engage the private sector in making meaningful commitments to promote gender equality at the Forum. We connected with BSR member PayPal to hear more about its role as a GEF Action Coalition Lead and what motivated it to take part in the Forum. 

There’s been a lot of excitement for the Generation Equality Forum, for which PayPal is a private sector lead. Can you tell us more about the Forum and why companies should engage?

The Generation Equality Forum (GEF) is a civil society-centered, multi-stakeholder global gathering for gender equality. Part of the Forum includes the launch of six innovative and multi-stakeholder Action Coalitions. The Action Coalitions engage governments; women’s, feminist, and youth-led organizations; international organizations; and the private sector to catalyze collective action, drive increased public and private investment, and deliver concrete, game-changing results.

PayPal is proud to be a private sector leader in the Action Coalition on Economic Justice and Rights. We believe there’s a strong case for other companies to join us and engage with the GEF.

First, engaging with the GEF is an efficient way to send a strong message to your investors, board, customers, government stakeholders, and employees that your company is committed to ESG outcomes for a more just, equitable, and prosperous future.

Second, without the expensive membership fees of many global communities, your employees will have an opportunity to engage with a dynamic, multi-stakeholder set of actors jointly dedicated to turbo-charging practical change in the world on gender equality and the rights of women and girls. You can join others at global and regional events to amplify the Commitment Maker’s role and contribution in accelerating results on the SDGs.

Third, it is a unique learning exchange and collaboration opportunity across the Global North and Global South. You can learn about what works to advance change on gender equality and women's and girls’ rights. Once you develop the muscles of gender equity, you can cross-apply this acumen to other types of equity and diversity, whether it’s race, religion, sexual orientation, disability, or beyond.

And this is on top of the deep, evidence-based, and data-driven business case. Gender equality is a critical component when considering that closing the gender gap could increase global GDP by 35 percent.

Why has PayPal chosen to engage with GEF and the Economic Justice Action Coalition?

At PayPal, we believe that now is the time to reimagine money and democratize financial services. Every person has the right to participate fully in the global economy. We feel an obligation to empower people to exercise this right and improve financial health. As a leader in digital financial services, we believe in providing simple, affordable, secure, and reliable financial tools and digital payments. With this company mission, it was a no brainer for PayPal to apply to serve on the leadership group of the Action Coalition on Economic Justice and Rights.

I was barely six weeks into my new role when I pitched the opportunity to PayPal senior leadership. It was a Friday night, and before Monday morning, I received not only a green light, but also strong support from our senior leaders (including our President and CEO, Dan Schulman) to submit our letter of interest. We are honored to have been selected to serve on the leadership group of this Action Coalition and to be among a small group of private sector companies that are engaged in the overall Generation Equality Forum.

Advancing gender equality, specifically on the topic of Economic Justice and Rights, is not new to PayPal. We have pursued opportunities to improve outcomes across our stakeholders, including our employees, consumers, merchants, and supply chains. We have made progress in areas like gender pay equity and championing policies that promote workplace and economic equality for women. We are excited to explore the potential of leveraging our products, data, and platform for further impact.

The decision to get involved aligns with our values as an organization and allows us to bring focus and prioritization to the urgency of the gaps, especially as we all strive to overcome the setbacks of the COVID-19 pandemic.

Engaging with the Generation Equality Forum is an efficient way to send a strong message to your investors, board, customers, government stakeholders, and employees that your company is committed to ESG outcomes for a more just, equitable, and prosperous future.

What kind of recommendations are the Action Coalitions making?

Launched at the Mexico City Generation Equality Forum, the draft Action Coalitions Global Acceleration Plan includes recommended actions, and you can add your thoughts to influence the objectives of the Action Coalitions.   

To give you an example, one of the four subthemes of the Action Coalition on Economic Justice and Rights is on productive resources. Namely, the Economic Justice and Rights Action Coalition urges action to expand women’s access to and control over productive resources through increasing access to and control over land, gender-responsive financial products and services, and the number of firms owned by women by 2026. Under this action, we've identified three strategies to advance this ambitious goal:

• First, we must eliminate gender-discriminatory policies, adopt and implement laws and policies, and ensure strategies and investments are underway that realize women’s and girls’ access to and control over productive resources and assets.
• Second, we must support platforms representing women’s groups and scale infrastructure that measurably expands women´s access to and use of productive resources, including affordable capital, financial services, digital products, internet, energy, and equitable access to government services and benefits.
• And third, we must identify and challenge harmful social norms, stereotypes, and practices impeding women and girls from equitably controlling and benefiting from productive resources while fostering positive attitudes validating women’s empowerment and economic contributions.

I really want to emphasize the unique and far-reaching impact of the digital opportunity. Gender-intentional investments in digital payment and ID infrastructure are key to building forward, differently. We imagine more inclusive, resilient, and gender-intentional financial systems that enable women's financial inclusion and women's economic empowerment. Digital payments help women manage time poverty, give women agency, and provide more privacy and increased safety than cash.

Gender-intentional investments in digital payment and ID infrastructure are key to building forward, differently. We imagine more inclusive, resilient, and gender-intentional financial systems that enable women's financial inclusion and women's economic empowerment. Digital payments help women manage time poverty, give women agency, and provide more privacy and increased safety than cash.

These Action Coalition commitments sound inspiring. How are companies thinking about the commitments they can uniquely contribute to support the Generation Equality Forum outcomes?

In a panel hosted by The B Team, BSR, and Women Win/Win-Win Strategies to explore how companies can accelerate gender equality, Celine Bonnaire (Kering Foundation) and Michelle Milford Morse (UN Foundation, Girls and Women Strategy) joined me in a clarion call for the private sector to seize this moment.

The ask is to do something, and the opportunity to draft your corporate commitment is now. The private sector has so much to gain by participating, and we have an astounding level of capital, well beyond the financial commitments when we engage our employee base, our consumer base, and our collective might.

I would push us to think creatively about our different types of capital. For example, the private sector can leverage other types of capital beyond financial capital to help women businesses grow.

• Network capital—we can help women-owned businesses get to market
• Human capital—we can form partnerships to mobilize capacity building of skills specific to their business models and sectors
• Intellectual capital—we can enable technical assistance to support evidence-based and data-driven decision-making  
• Reputation capital—we can share the halo of our brands and voice

I would also leverage the Generation Equality Forum to be the action-forcing enabler to not only put gender equality on the list of company priorities, but also to raise it to the top of the list. Create urgency with fear of missing out on this global movement. Mobilize your employees and customers so the decision-makers say yes quickly to unleash funding, evolve policies and processes, sex-disaggregate the data, and mainstream gender transformational interventions.

There are multiple ways for interested companies to get involved in the Generation Equality Forum. This includes: becoming a Commitment Maker; participating in the Generation Equality Forum Public Conversation; and taking part in the Paris Generation Equality Forum (June 30-July 2).

Blog | Tuesday April 20, 2021

Science: A Human Right for Our Times

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Science is having a moment.

Despite extensive misinformation about COVID-19, vaccines have been developed at an extraordinary speed.

Despite continued skepticism about the science of climate change, new energy technologies are positioned to accelerate the transition away from fossil fuels.

And despite myths about health impacts, a fifth generation of mobile network technology (5G) will make possible new internet of things and machine-to-machine applications.

Each of these cases demonstrates how significant science is to the role of business in enabling the realization of human rights and how it will likely grow substantially over the decades to come.

There are two key forces shaping the growing importance of the right to science for business:

• The expanding role of the private sector in all types of scientific research, which includes artificial intelligence, agricultural research, food science, biotechnology, nanotechnology, energy, genetic engineering, and communications technology.
• The undeniable significance of science in addressing or contributing to global challenges such as climate change, public health, and access to information.

The right to science is found in Article 27 of the Universal Declaration of Human Rights, which sets out the right to “share in scientific advancement and its benefits,” and Article 15 of the International Covenant on Economic, Social, and Cultural Rights, which sets out the right “to enjoy the benefits of scientific progress and its applications.”

However, while these Articles are written for states rather than the private sector, we were struck by the lack of literature exploring the right to science and the role of companies.

Further, while the UN Guiding Principles on Business and Human Rights (UNGPs) clearly apply to all business activities, the focus of the business and human rights field to date has largely been on business operations and value chain relationships rather than on research and science. In this context, the publication last year of a new General Comment No. 25 on the Right to Science by the UN Committee on Economic, Social, and Cultural Rights was a significant development.

For this reason, and using General Comment No. 25 as a foundation, today we are publishing a new BSR primer on the right to science and the role of companies. The BSR primer sets out the following seven priorities for business:

1. Science should be deployed in the service of the universal enjoyment of human rights.
2. The right to science applies to everyone.
3. Human rights due diligence should be undertaken on research, including whether research should be undertaken in the first place.
4. Companies need diverse research teams and relationships.
5. Companies should provide the public with accessible information concerning the risks and benefits of science and technology so that informed decisions can be made.
6. Companies should deploy approaches based on informed consent.  
7. The right to science has limits, especially when it may be deployed or misused for nefarious purposes.

These seven priorities will become important as new dilemmas about science emerge over time. For example: 

• When is it right to abandon research priorities on account of potential future harms arising from use of the research, even if the same research has the potential to bring benefits too? If the research continues, what are the right mitigation measures to address potential future harms?
• How should responsibility for addressing adverse human rights impacts be distributed between the entity undertaking the research and the entity using it?
• What responsibility do scientists have to explore the human rights risks and benefits of their research?
• How much research should be published openly in the public domain when there is risk that the research may be abused to cause harm?
• What incentive structures will both respect the material interests of the author and spread the benefits of scientific research?

These are not easy questions, and we believe they will benefit from further exploration, debate, and dialogue using both the spirit and the letter of the UNGPs.

The right to science is a right for our times. We hope that our new primer becomes the basis of exploring in more depth how this right can be respected, protected, realized, fulfilled, and enjoyed.

Blog | Thursday April 15, 2021

Six Things Business Should Know About the EU Taxonomy

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The EU Taxonomy is set to be a foundational tool of the European Green Deal and will affect companies well beyond European borders. It is essential for foreign companies and markets that conduct business in the European Union (EU) to be aware of the implications of the Taxonomy.

The Taxonomy is a list of economic activities with performance criteria to assess the activities’ contribution toward six environmental objectives.¹ In other words, it describes what can be considered “green” and what can’t.

The Taxonomy will support the EU’s 2030 climate and energy targets as well as the objectives of the EU Green Deal, which offers a roadmap to guide the EU toward climate neutrality by 2050. The Taxonomy’s classification system is expected to shift investments toward a low-carbon, climate-resilient economy and avoid greenwashing.

The Taxonomy establishes a list of environmentally sustainable activities by defining screening criteria. It is neither a rating of “good” or “bad” companies nor a mandatory list of economic activities to invest in or to divest from. It does, however, aim to provide clear definitions of what is green to companies, investors, and policymakers.

Furthermore, the Taxonomy is likely to enable increased investment in activities deemed environmentally sustainable across a range of sectors, including but not limited to agriculture, buildings, ICT, manufacturing, transport, utilities, and finance. Activities in these sectors represent 93.5 percent of the EU’s greenhouse gas emissions.

Companies based in, doing business with, and with investors in the EU will need to pay attention to the Taxonomy and its impact on investments, particularly the following six points:

1. Investors will ask businesses how their activities align to the EU Taxonomy.

The EU Taxonomy is meant to be the bedrock of many financial mechanisms at the European level. European institutional investors and asset managers will have an obligation to disclose how their sustainable fund aligns to the EU Taxonomy. Thus, investors and financiers will be asking companies how aligned their business is to the Taxonomy, if they have not already done so.

Under the Non-financial Reporting Directive (NFRD), large public-interest companies with more than 500 employees are required to disclose non-financial information in annual reports, including sustainability-related policies such as environmental protection. The NFRD is being revised to include the EU Taxonomy.

It is likely that companies that fall under the NFRD will be required to disclose information on how and to what extent their activities are associated with environmental sustainability, aligning with the Taxonomy. Other uses will include the EU Green Bond Standard and Eco-Label for financial products.

2. Companies can get started by assessing whether their activities are Taxonomy-aligned.

To start, businesses can assess whether their activities are in alignment with the Taxonomy’s definitions and criteria. The Taxonomy proposes that economic activity should “substantially contribute” to at least one of the six environmental objectives as defined in the proposed regulation, “do no significant harm” to any of the other five environmental objectives as defined in the proposed regulation, and comply with “minimum safeguards.”² 

Using this Taxonomy, companies with European investors may assess which of their economic activities are considered environmentally sustainable, in accordance with the established criteria—for example, Acciona published an EU taxonomy report and leaflet.

Companies can then consider appropriate interventions to reduce potential regulatory and financial risk from activities that are not aligned with the Taxonomy as well as explore the opportunities associated with adjusting activities to gain Taxonomy alignment.

In Europe, businesses and investors are already engaged in conversations on Taxonomy-aligned activities. To prepare for and anticipate investor requests, European companies can seek to align their reporting with the soon-to-be-revised NFRD. Non-EU stakeholders that conduct business with European companies may wish to engage in conversation on potential expectations and implications of their own economic activities.

3. Other markets are starting to follow suit by establishing their own taxonomies.

While the EU Taxonomy might be considered the world’s first ever “green list certification system,” other markets, including Canada, Japan, Malaysia, Singapore, ASEAN at large, and the UK, among others, are in different stages of consultation and evaluation to establish their own taxonomies.³ 

Globally, there has been increasing demand for corporate ESG disclosure. Related to climate-specific disclosure, the Task Force on Climate-related Financial Disclosures (TCFD) has gained momentum in recent years, and investors are seeking data that is consistent and comparable. Definitions of “green” and the related screening criteria that taxonomies offer are considered useful tools to give financial institutions and investors clarity and certainty on the environmental sustainability of different types of investments. They can help to facilitate measurement and monitoring of sustainable financial flows.

The Central Banks and Supervisors’ Network for Greening the Financial System (NGFS) has also called on policymakers, relevant stakeholders, and experts to develop and adopt taxonomies that ensure ESG transparency on economic activities. Announced in October 2020, the International Platform on Sustainable Finance (IPSF) established a working group, co-led by the EU and China, to work toward a “common ground taxonomy” to identify the commonalities between different jurisdictional taxonomies and seek to support the scale up of cross-border green investments.

4. The EU Taxonomy will affect businesses beyond Europe.

As financial markets are global, the EU Taxonomy will have implications for businesses globally. If your business has European investors, they will likely be asking questions about your alignment with the EU Taxonomy. Furthermore, European companies operating globally will be likely to apply the EU Taxonomy lens to their global operations. While the Taxonomy is a European regulation, it will have implications for foreign markets that conduct business with Europe.

5. The EU Taxonomy is not only about environment.

To be aligned with the Taxonomy, businesses must also meet the minimum social safeguards of the OECD Guidelines on Multinational Enterprises and UN Guiding Principles on Business and Human Rights.

6. Mandatory reporting is slated to begin January 1, 2022.

The adoption of the Taxonomy Regulation has been delayed until April 2021. The European Commission is creating an IT tool to facilitate the use of the Taxonomy. It is expected that the tool will be available in the first half of 2021. Investors will need to report on the alignment of their ESG funds for climate mitigation and climate adaptation by January 1, 2022, covering the reporting period of 2021.

While the taxonomies for climate mitigation and climate adaptation have been developed, four more taxonomies will be published by the end of the year: sustainable use and protection of water and marine resources; transition to a circular economy, waste prevention and recycling; pollution prevention and control; and protection of biodiversity and ecosystems.

In sum, by establishing taxonomies, the public sector is striving to accelerate financing to support the transition to a low-carbon and resilient economy. BSR will continue to monitor the developments of national and international taxonomies and inform our members of the associated implications.  

¹ The six environmental objectives include climate change mitigation; climate change adaptation; sustainable use and protection of water and marine resources; transition to a circular economy, water prevention and recycling; pollution prevention and control; and protection of healthy ecosystems.

² The Technical Expert Group (TEG) on sustainable finance published a report in March 2020 with implementation guidance on how companies and financial institutions can use and disclose against the Taxonomy.

³ Canada’s financial institutions and investors have been assessing a voluntary transition-focused taxonomy. The UK plans to establish an advisory group to determine whether the EU Taxonomy’s metrics are right for the UK market. Singapore recently concluded a consultation period to review its proposed green taxonomy that will largely align with the EU Taxonomy. Malaysian financial institutions will start to apply a climate risk taxonomy this year. The Association of Southeast Asian Nations (ASEAN) seeks to establish a framework for green investments in the region to meet the goals of the Paris Agreement.  

Blog | Thursday April 8, 2021

Keeping Workers in the Loop

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We know that “rapid and far-reaching” transitions are needed across our global economy and societies to limit the worst impacts of the climate crisis. The fashion industry—which is linked to environmental degradation along the entire value chain—is no exception. Momentum is building to reshape the industry around the principles of a circular economy, to design out of waste and pollution, regenerate natural systems, and keep products and materials in use.

Shifts toward circularity are plentiful as many big fashion players embrace repair, reuse, and recycling practices. Simultaneously, consumer interest in new models of ownership continues to rise: despite COVID-19’s harsh impacts on the industry, the online resale platform ThredUp grew by 20 percent in 2020, and in India, Flyrobe’s rental platform has gained substantial ground in recent years.  

As the industry contemplates the rapid and far-reaching changes, it cannot ignore the human side of a transition this major.

Fashion is a people-powered business, serving billions of customers daily and employing millions of workers. Estimates suggest that from growing cotton to garment construction, one in eight workers globally participates along the industry value chain. If we include informal employment, those estimates may climb even higher. Many highly populated emerging economies, especially in Asia, rely upon the industry for economic and employment growth, where in many places it has boosted female labor market participation. 

All of this provokes a serious but overlooked question: how will circular fashion, at scale, impact job opportunities and quality? Keeping Workers in the Loop (KWIL) is a collaboration of industry leaders and stakeholders exploring this very question. Supported by Laudes Foundation and Sida, and in partnership with BSR’s Sustainable Futures Lab, CMS, and economists from the University of Lincoln, we are taking a futures approach to exploring the nexus of circular fashion and jobs in the decade ahead.

To truly understand circular fashion’s potential job impacts and to identify how this transition can be fair, just, and inclusive, we are collaborating with diverse and representative organizations across the global fashion system, including industry partners such as H&M Group, Shahi Exports, The Renewal Workshop, and VF Corporation.

Together, we seek answers to the following questions:

1. How many jobs may be gained, and lost? Where, and by which groups?

Our initial research envisages wide-ranging job impacts that may arise from this transition. In the next decade, scaling rental, resale, repair, and on-demand production, coupled with rising automation, will likely significantly reduce job opportunities for workers in production communities, an estimated 80 percent of whom are female.

Jobs in the Global North will be also impacted—increasing rental, resale, and e-commerce should increase roles in logistics, software, and quality assurance. Conversely, we could expect a decline in traditional retail jobs, a sector that employs 9.8 million people in the U.S., mostly women and people of color. 

COVID-19 has already highlighted the vulnerability of workers all along the global fashion supply chain to disruptions. Over the coming months, KWIL will use economic modeling to estimate the potential scale of job opportunity impacts linked to the anticipated growth of circular fashion.

2. What is the quality of more circular roles? Are workers being equipped with skills and training for the future of fashion?

Transforming the fashion industry in line with circularity principles will require major investment and a system redesign. At BSR, we see the momentum as a crucial opportunity to address the persistent and pervasive concerns around workers’ rights and wellbeing in the global fashion system.

Furthermore, we must ensure that newly created jobs are good and safe, though this won’t happen without intentional planning. For example, mainstreaming circular fashion will see significant growth of jobs in the collection, sorting, and recycling of garments—roles that are historically informal, dangerous, and offer low protection, particularly in the Global South. Mostly vulnerable populations rely on these jobs; in India, for example, the majority of waste-picking activities remain a job mainly done by lower castes. 

Through worker interviews in India—right along the value chain—and surveys of employees in roles that are changing due to circularity, we aim to surface the challenges and opportunities that the industry must integrate in its circular growth.

3. What actions to improve workers' rights and livelihoods could prove most impactful as the industry evolves?

KWIL aims to bring foresight to the strategies and policies under development in the circular fashion transition by exploring the job impacts of this shift alongside the critical uncertainties that participants have identified as shaping the future of the fashion industry: the disruption from automation and technology advances, the degree of effectiveness of environmental action, the strength and inclusiveness of labor policies, and shifting production and consumption geographies by 2030.

The circular transition is an opportunity to reimagine and rebuild the global fashion system—let’s make it one works for people and for nature.

Join Us

We are currently developing KWIL’s 2030 Future of Fashion scenarios, which we will publish in May. If you’re a fashion brand, textile manufacturer, or worker representative interested in getting involved to shape the scenarios or exploring their implications, please contact the team to join the conversation.

Blog | Wednesday March 31, 2021

Maritime Anti-Corruption Network Embarks on a New Journey

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When BSR talks about how business-driven collective action is necessary to achieve sustainable development goals, the Maritime Anti-Corruption Network (MACN) is often featured as an example of how collective actions can be structured and what they can achieve.

Founded in 2011 by a small group of committed maritime companies, MACN was set up as an industry-led initiative to fight corruption in the maritime value chain. When looking for a partner to help develop and grow the network, its founders turned to BSR, which agreed to support the development of MACN. Ten years on, the Network has demonstrated what is needed for a collective action campaign to really work in practice: for a dedicated group of professionals to agree on a pro-competitive approach to addressing a common issue that harms their companies and the communities that support them and then to work together over years to make change happen.  

As a result of collective action, MACN can demonstrate tangible outcomes globally, showing that it is possible to address systemic corruption by building strong alliances between the public and the private sector.

The success of MACN, both in terms of organizational expansion and operational effectiveness, has put the organization in a position where it can take on more ambitious initiatives. Today, BSR is proud to announce that MACN is prepared to take its next step: separating from BSR to become its own independent organization.

As a result of collective action, MACN can demonstrate tangible outcomes globally, showing that it is possible to address systemic corruption by building strong alliances between the public and the private sector.

We have been building towards this goal over several years, ensuring that MACN has a strong governance structure that enables its corporate participants to share oversight and responsibilities. MACN has grown over the years and now includes over 150 companies globally, over 50 percent of the maritime industry, and is recognized as one of the preeminent examples of collective action in the fight against corruption.

As an example, MACN’s work in Argentina is a prime example of how collaboration can lead to effective change. In partnership with local authorities, industry players, and business associations, MACN pursued a collective action which resulted in the successful adoption of a new regulatory framework for dry bulk shipping. MACN members experienced a 90-percent drop in corrupt demands in the ports included in MACN’s project.

By building a strong coalition of both international and national stakeholders, MACN and its partners put in place an inspections system in line with international standards, balancing the government’s responsibility to ensure the cleanliness of vessels exporting agricultural products with the conditions necessary for integrity in the context of foreign trade relations. MACN has played a key role in facilitating collaboration between the stakeholders, in translating new regulatory requirements into practices, and in promoting behavioral change among industry players and inspectors through training and practical guidelines. 

Partnering with donor organizations, including Danida and Siemens' Integrity Initiative, has also played a key role in increasing MACN’s impact through grant-funded in-country collective action initiatives focusing on tackling corruption in ports in Nigeria. This support has allowed MACN to deepen the engagement with government agencies in the ports and to launch new innovative solutions that empower the industry to resist and report corruption, such as the MACN Anti-Corruption HelpDesk in Nigeria. Functions like the HelpDesk greatly improve the long-term viability and effectiveness of collective action initiatives. They are a critical step in formalizing local efforts to reduce and eliminate corruption—especially if they are set up with government support.

As in any "leaving home" scenario, we are both sad and immensely proud that MACN has developed and grown to the extent where the transition into a stand-alone entity is possible. The future is exciting in terms of geographic expansion, operational leadership, official recognition, and donor support. BSR is very proud to have helped build something quite special here, and we encourage members of the wider maritime supply chain to join MACN.

MACN is registered as a not-for-profit member organization in Denmark and will be led by CEO Cecilia Müller Torbrand and governed by a board comprised of MACN members. Vivek Menon and Martin Benderson, who have also worked with MACN, will join the entity.

Blog | Tuesday March 30, 2021

Inside BSR: Q&A with Sethypong Sok

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March is always an exciting time, kicking off with International Women’s Day. Throughout the month, we celebrate BSR’s work to empower women, including HERproject, our collaborative initiative bringing together global brands, their suppliers, and local NGOs to deliver workplace-based programs to workers in global supply chains.

It made sense to us to feature Sethypong Sok, HERproject’s country representative in Cambodia, for this month’s Inside BSR interview. Sethypong works with global brands and factory management as well as multinational and local financial services providers to design and implement financial literacy programs for low-income factory workers, particularly women.

Read on to learn more about Sethypong, his work on HERproject, and his drive to lift fellow Cambodians out of poverty.

Tell us a bit about your background. Where are you from, where are you based, and how did you get into working on women’s empowerment and worker well-being?

I come from the Kingdom of Cambodia, or simply known as Cambodia, located in Southeast Asia. I was born in 1993, the same year when the United Nations Transitional Authority administered the first national elections for my country. In 2012, I graduated from high school with an outstanding degree. And despite the poverty trap my family encountered itself, I was persistent enough to pursue a bachelor's and master's degree at Pannasatra University of Cambodia with the faculty of Social Science and International Relations.

I meet and speak with people and workers who face countless hardships due to poverty. My feelings of powerlessness and pity actually strengthen my dedication to the goal of helping them have their voices heard and their rights fulfilled. By being part of driving HERproject in Cambodia, I feel I am a part of the solution.

I have more than seven years of experience working in non-profit organizations and in the development sector in various positions to serve local communities, vulnerable groups, or hard-to-reach populations, including children, women, survivors of labor and sexual exploitation, and low-income workers in Cambodia.

I started working in supply chains and worker well-being as a Trainer with Youth Employment Service Centre (YESC). At that time, I provided support services and training to factory managers, workers (particularly women workers), and young people aiming at enhancing employability, encouraging them to fulfill their potential, and increasing their economic opportunities.

Tell us about your work at HERproject. What is your current role and what does that entail? What are some interesting projects that you get to work on as part of your role?

I am currently serving as an in-country representative for BSR’s HERproject. I have been with HERproject for almost two years. I am responsible for managing HERproject program activities and leading other Women’s Empowerment projects in Cambodia. My main role is to liaison with the multinational financial services corporation, local financial services providers, brands, and factories management to design projects which aim at strengthening, implementing, and ethically enforcing internal procedures and policies in expanding the financial inclusion of low-income workers.

Currently, in Cambodia, we are piloting HERfinance Digital Wages. The project aims at ensuring the poor—particularly women—have the proper knowledge, skills, and attitudes toward financial services and enabling them to participate in the formal financial sector. I do enjoy working on this project because I am always excited to work on programs that aim to promote and enhance financial services in a timely manner through a sustainable financial system. This will help to bring these people—the unbanked—into formal financial services by supporting the development of an efficient and stable financial sector. At the same time, I also can gain extensive knowledge and skills on cooperating with social responsibility, union representatives, and financial service providers in global supply chains.

What issues are you passionate about and why? Does your work at HERproject reflect that?

My motivation to get involved and solve community problems started since I graduated from high school. I could not see myself being in another field not related to humanitarian work. I grew up in a country with a long history of the periodic humanitarian crisis, which undoubtedly affects the majority of the vulnerable population, particularly disrupting their welfare and education, security, the access to quality of public health service, and the shortage in skilled workers.

Another inspiration driving me to address the society complications was from my work experience, particularly from field work activities, where I meet and speak with people and workers who face countless hardships due to poverty. My feelings of powerlessness and pity actually strengthen my dedication to the goal of helping them have their voices heard and their rights fulfilled. By being part of driving HERproject in Cambodia, I feel I am a part of the solution.

2020 was undoubtedly a difficult year. What were the things that brought you joy amid lockdowns/quarantines? What are you most looking forward to when the pandemic is over?

Amid the challenges of 2020, I’m grateful that I can keep up with friends on social media platforms and connect with folks via videoconferencing, even if these aren’t really the same as seeing people in-person. I also enjoy this new normal that I never would have guessed how easy it is to do without so many modern conveniences.

I am looking forward to COVID-19 ending and not having to wear a mask and being able to give hugs to my friends and family again. I can’t wait to be able to high-five and shake hands with my friends, family, co-workers, and neighbors. I look forward to seeing all the smiling faces that have been hidden behind masks for years now.

Blog | Wednesday March 24, 2021

What Businesses Operating in Vietnam Can Do about Climate Risk

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All companies with business operations or supply chains in Vietnam need to know that the country is highly vulnerable to the impacts of climate change—and need to be aware of the ways they can build resilience.

Just last October, two mega-typhoons flooded communities, displaced families, and took lives in what is becoming an all too familiar pattern. In fact, Vietnam is one of the world's areas most affected by climate variability and extreme weather in the past two decades, according to The Global Climate Risk Index 2020.

The financial impacts from climate change are also severe in Vietnam. Infrastructure disruptions from climate change cost businesses in Vietnam an average of US$280 million each year.

Heavy rainfall can lead to flooding and landslides, shutting down roads and airports while damaging or destroying company facilities. Major storms like Typhoon Damrey in 2017 left an estimated US$1 billion in economic losses for Vietnam. In 2020, business interruptions from climate change affected thousands of local enterprises due to manpower shortages, scarce input material supplies, or damage to facilities. 

Climate projections indicate Vietnam will experience more intense extreme weather events in the future. By 2030, major cities such as Ho Chi Minh could experience an increased chance of extreme heatwaves, diminishing worker productivity in sectors from agriculture to construction to logistics.

Hanoi could experience heavier rainfall, straining urban wastewater systems and exposing coastal development to storm surges. The implications are wide-ranging, from increasing pest prevalence that limit crop yields to worsening the spread of vector-borne disease to deepening the economic hardship of at-risk communities.

How Businesses in Vietnam Can Prepare for Climate Risks

Fortunately, there are ways businesses in Vietnam can reduce their climate risk. To better prepare for the reality of climate change, businesses can build resilience: to anticipate, absorb, accommodate, and recover from relevant impacts. To do this, companies need to systematically explore where and how the business environment may change in the future. Scenario analysis is a commonly used process to explore different plausible futures. This tool allows companies to “stress-test” strategies and ensure adequate preparation for a range of potential outcomes.

For businesses in Vietnam, BSR has crafted three scenarios in English and in Vietnamese, describing plausible future business environments in 2030, that differ on climate severity and socioeconomic development. The physical impacts from climate change are inevitable and may vary in different scenarios. Layered on top of that, there will be interconnected impacts from a potential transition to a low-carbon economy as well as socioeconomic developments. These three scenarios uniquely explore different plausible futures:

• Inequitable Expansion: Vietnam and the global community have largely transitioned towards low-carbon economies, but societal development has lagged and seen greater urban inequity.
• Braving the Heat: Climate change is no longer debated globally, and the international community focuses on sustainable development. However, Vietnam sees comparatively limited progress.
• Acute Fragmentation: Intensifying climate change has worsened country relations, leading many states like Vietnam to emphasize energy security through extractive resource and protectionist policies.

How Climate Scenarios Help Business Prepare for the Future

These three scenarios are not predictions of the future in 2030. Rather, they are tools that can be used to explore critical uncertainties about the future, challenge assumptions, and identify blind spots related to disruptive change. They are meant for companies to use in internal workshop settings, where key participants from diverse business functions can actively discuss risks and opportunities that arise from climate change and prioritize core topics for appropriate action.

In this scenario analysis exercise, for example, workshop participants could imagine linkages between prolonged dry spells and food availability and the direct impact these may have, not just on the bottom line but also on employee well-being.

Or a business could explore the impact of supply chain disruptions due to submerged road networks and also consider blind spots from a resurgence of infectious diseases that thrives in warmer climates. After more than a year in the ‘black swan event’ that is COVID-19, companies cannot avoid discussions of preparing for shocks to the system.

From here, enterprises can decide how to leverage a range of risk interventions to address impacts from climate change and find new opportunities for business growth—from offering disaster risk reduction training to employees and enhancing employee health coverage, to investing in both green and gray infrastructure to climate-proof facilities, to offering new products or services that can help others build climate resilience.

Building Climate Resilience

It’s undeniable that climate change negatively impacts Vietnamese businesses. However, most companies are relatively optimistic about opportunities in the context of natural disaster risk and climate change, according to an Asia Foundation survey conducted in August 2020 of more than 10,000 enterprises across the country. They see opportunities for restructuring, overhauling production methods, and creating new markets for products and services. They are willing to invest in environmental compliance, good local labor quality, and vocational education for their workforce.

Actively enhancing climate resilience would meaningfully build off this energy and prepare businesses and the communities they operate in for addressing the complex challenges of climate change. To further help equip enterprises in Vietnam with business-relevant climate knowledge, BSR has also compiled a handbook of tools and resources in English and in Vietnamese. 

BSR conducted this project in collaboration with Winrock International’s Private Investment for Enhanced Resilience (PIER) project, which aims to increase the awareness and capability of the private sector in Vietnam to address the physical impacts of climate change across the value chain in the country.

Blog | Wednesday March 24, 2021

Transforming Business for Resilience

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We are living through extraordinary economic and social change where "transformation" has become our daily routine. And "resilience" is a term often used to signal the formula for the road ahead. And yet, what does this mean for businesses today?

I am absolutely thrilled to join BSR as Managing Director of Business Transformation. There has never been a more exciting or inspiring time to work for an organization dedicated to creating a just and sustainable world.

I come to BSR with over 20 years of experience working for multinational corporations in the tech sector, based mainly in Europe. I’ve grappled firsthand with the challenges of setting the right strategies to build and rebuild globally recognized brands following mergers and numerous acquisitions. And at a time when sustainability was seen "optional" for companies, I had the immense honor of working with European CEOs who saw the importance of creating leading sustainability frameworks as real business differentiators—ones that enabled transformational change across both the company and the communities where they were present.

What I have learned is that those successful and resilient businesses are the ones that are able to go beyond short-termism, to achieve long-term value for all stakeholders. They do not act in isolation. They work in active ways that are deliberately interconnected—through continuous proactive dialogue across the entire ecosystem, with leaders and experts alike. They challenge global assumptions, co-create new regional approaches, and bring along new stakeholders, while sharing the outcomes and future learnings with all: business, investors, public authorities, and civil society.

As I embark on my first months at BSR, here are three insights for how business can be more resilient:

1. Business transformation must be seen as a holistic company renewal effort across every activity.

At BSR, we call this "resilient business strategies." And for this resilience to happen, it must do three core things:

1. Anticipate material changes to the operating environment
2. Systematically develop and test strategic plans in the context of such changes
3. Allocate resources and create value in ways that enable success in multiple potential futures and collective action

Resilient business strategies are crucial not only for lasting business success, but also for a just and sustainable—and resilient—world, the importance of which we see more clearly than ever.

2. A resilient business strategy on its own is not enough.

Our world today is proving that resilient businesses can only thrive in resilient societies and economies. Neither can work without the other. And yet, societal resilience is being tested every single day—from environmental disruption to political dysfunction to income inequality to flaws in the social contract affecting economic and social mobility. For society and economies to thrive, they need an active partner in resilient businesses, ready to transform for the long term, and enabling systemic change. Both go hand in hand.

3. The deep and interconnected changes remaking our world demand collaborative action.

At BSR, we are inviting our members and all companies to partner with us to shape, test, and catalyze resilient business strategies that create long-term value in a rapidly transformed world. Shape by creating a shared understanding of what resilience means for both business and society, exploring both the building blocks for resilient business and what a 21^st-century social contract would look like; test resilience through futures scenarios; and catalyze action by bringing both business and societal leaders alike together in a dialogue for change through collaboration.

Resilient business strategies, founded on building blocks addressing elements such as governance, financial capital deployment, product and business model development, natural capital management, built environment, supply chains, people strategies, and public policy, can achieve strategic advantage in a way that anticipates long-term changes for business.

Through scenario planning, our Sustainable Futures Lab can help companies test resilience across our proposed building blocks while challenging leaders—from Boards to CEOs to the entire C-suite—to ask the right questions for long-term transformation.

Finally, we know resilient businesses are hard to achieve in fragile societies. This therefore calls for collective action, bringing representatives from business and society together in a dialogue of like-minded leaders to achieve systemic change. 

Mark Carney in his recent Financial Times article stated: “Building resilience means building buffers”—fiscal buffers, pandemic preparedness, digital connectivity for all to climate solutions. However, what draws us all to a common line is the deep conviction that we need to come together to enable a revolution of sustainable transformation: business, society, and the economy hand in hand.

When I joined BSR, I knew there was never a better moment to throw in my own hat to drive positive change for business with society, where ESG was at the core of a wider transformation in this Decisive Decade. And while I continue to learn each day of new challenges arising from our business members, I remain inspired by the active will across our membership and my colleagues at BSR to explore and co-create new solutions to create a just and sustainable world, through dialogue and constructive action.

It’s an extraordinary challenge—join us to drive resilient businesses today, hand in hand with society, to transform business and create a more just and sustainable world.