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Blog | Friday March 22, 2019

To Advance Gender Equality, We Need to Tackle Climate Change

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Tackling climate change requires tackling gender inequality. On International Women’s Day, an article in Business Green quoted L’Oréal’s Chief Sustainability Officer Alexandra Palt as saying, “I do not think we will see any advances in gender equality if we do not succeed in mitigating the consequences of climate change on women's lives.”  

As the effects of climate change continue to exacerbate poverty, inequality and other social issues, the solutions we put forth must include social focus. This includes empowering women to be leaders. Even if slowly, we’re moving in the right direction. The international community has begun to mainstream gender-friendly decision-making through policies and solutions: in 2015, through the development of the SDGs, both climate change and women’s empowerment were prioritized as goals, and in 2017, the UN climate change negotiations put forth the Gender Action Plan to promote gender equality throughout climate change policy.  

As these gender and climate solutions trickle down through global, national and subnational solutions, what does this mean for business?  

First, as we’ve seen in multiple climate-fueled extreme events, climate risk can affect every aspect of a business from operations and supply chains to the communities crucial in providing raw materials or labor. Following severe flooding in Thailand in 2011, reported insured losses were estimated as high as US$20 billion, and more than 14,500 companies reliant on Thai suppliers suffered business disruptions.  
 

Second, the opportunity for empowering women to lead on climate solutions can unlock multiple business benefits, including driving productivity and innovation, especially within sectors with large women workforces; protecting raw materials; increasing financial stability and returns; and strengthening the resilience of local communities because women are well connected in their communities. The broader business benefits of investing in women are already clear: BSR’s HERproject, for instance, found that following the implementation of workplace programs promoting women’s health in 37 factories across six countries, turnover of the workforce decreased by 4.5 percent. When women are empowered not just in the workplace but as changemakers and leaders for their communities, the benefits multiply and the return on investment grows. And companies are already seizing this opportunity: Through the Women4Climate initiative with C40, L’Oreal aims to provide climate change leadership opportunities for women in their own company and influence others to do the same.  

Business has a role to play here not only because it’s the right thing to do, but because it makes pure business sense.

Although acting at the intersection of climate change and social issues, including women’s empowerment, are new topics for business, over the last few years we’ve seen companies step up to tackle the challenge, recognizing how it’s a win-win-win for business, society, and women.  

Mondelez International, recognizing that increasing resilience of farmers and communities is necessary to maintain sourcing of one of their crucial commodities, has developed The Cocoa Life Program. The program increases women’s access to farm inputs and land ownership, supports young women by ensuring participation in youth-oriented programming, and helps women improve their livelihoods through access to finance, entrepreneurial skills, and more. 

Business has a role to play here not only because it’s the right thing to do, but because it makes pure business sense. By addressing these barriers through the provision of basic human rights, access to education, finance and decision-making, and the removal of discriminatory laws, it enhances the resilience of women so that they can be better positioned and able to lead.  

More specifically, companies can:  

• ACT to put women at the center of all internal climate change approaches and solutions. In particular, they can provide women in their operations access to relevant trainings, inputs, financing, and technologies.  
• ENABLE women throughout the value chain and broader community to effectively respond to climate-related events by linking them with local networks and partners, which can serve as mutual support mechanisms to strengthen climate change solutions.  
• INFLUENCE underlying inequalities such as the lack of decision-making power or access to financial resources that exacerbate the disproportionate negative impacts for women in the context of a changing climate. 

While undoubtedly women are disproportionately affected by climate change due to the various social, economic, political, cultural and economic barriers they face, women are far from the vulnerable victims as often depicted. Given the opportunity, women can be great leaders that will help to catapult society forward while tackling the greatest crisis we’ve ever faced.  

While there are few examples of corporate solutions that aim to put women at the center of their climate change solutions, many are beginning to see the opportunity of expanding their women’s empowerment and climate change programs to intersect. The business case for opportunity is clear to put women at the center of climate solutions.  
 

To learn more about business can act at the intersection of climate change and women’s empowerment, read BSR’s report, Climate and Women: The Business Case for Action. As an official partner of the Women Deliver Conference, which will take place from June 3-6 in Vancouver, Canada, BSR will also co-host three sessions on women and climate, exploring how to finance a “just” transition to a low-carbon economy and why empowering women and girls is key to addressing climate change. For more information, please contact us.  

Blog | Friday March 15, 2019

Three Ways for Companies to Promote Women’s Leadership across the Supply Chain

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More than 90 guests joined BSR's HERproject, The Estée Lauder Companies, Inc., Nordstrom, UGG, and Williams-Sonoma, Inc. for a special event on women’s leadership on the eve of International Women’s Day last Thursday, March 7, 2019. In two engaging panels, leaders from business, politics, development, and media explored the challenges and opportunities for empowering women to progress as leaders.  

For companies, three clear opportunities emerged.  

Companies Can Act to Demonstrate They Value Women’s Leadership 

All brand speakers emphasized the importance of walking the talk at the corporate level. From Pottery Barn, whose CEO is a woman and whose overseas leadership is 67 percent women, to The Estée Lauder Companies, Inc., which this year enacted a 20-week parental leave policy for men and women in the United States, panelists emphasized the need for companies to live their values and demonstrate a belief in women as leaders.  

This also extends to how leaders promote and nurture women within their organizations. Andrea O’Donnell, President, Fashion Lifestyle, Deckers Brands (UGG), pointed out that “our responsibility is to allow women to find their voice and their confidence, and be active mentors and cheerleaders for them”—a sentiment shared by Nancy Mahon, Senior Vice President, Global Corporate Citizenship and Sustainability at The Estée Lauder Companies, Inc., who highlighted the need for women to “throw the ladder back down.”  
 

Systems Need to Be Changed to Enable Women to Succeed 

While individual leaders and companies have significant roles to play, panelists also highlighted the many barriers that might stand in the way of women becoming leaders—or prevent them from fulfilling their potential once in leadership positions. Citing her own experiences of pregnancy and childbirth, Penny Abeywardena, Commissioner for International Affairs at the New York City Mayor’s Office, commented on the inadequacy of existing structures: “Women make up more than half of the American workforce, but the policies that dictate our experience in the workforce are from 50 years ago.”  

For Maria May, Program Officer at The Bill & Melinda Gates Foundation, these challenges affect how women progress into leadership: “The balancing that women have to do, and how silently they do it a lot of the time, leads women to evaluate opportunities differently and require different kinds of support.” And Jenny Hollander, Deputy Editor at marieclaire.com, highlighted the complacency that may develop as women achieve leadership roles: “People assume that the problem goes away when you put women and minorities into positions where they should be. I think you also need to make sure you are giving them the tools to succeed, because otherwise you are dooming them to fail.”  

For companies, it is therefore critical to maintain a focus on the specific challenges that women may face once in leadership positions, such as time poverty, lack of voice, and social norms that hinder career progress.  

Companies Can Influence Peers and Partners for Greater Impact 

Beyond the corporate office and across the supply chain, barriers to women’s leadership are greater still. Latha Ramakrishnan, an expert on women’s empowerment programs in India, highlighted the situation of many low-income women workers in India: “A woman faces limited access to the outside world and to education, and she has a limited voice. A girl has always to be under the shadow of a male person: her parents, then her husband, then her son.” This discrimination has knock-on effects, with girls and women less likely to acquire critical skills, more likely to accept low positions in business, and less likely to believe in their own abilities.  

Panelists, however, felt that change was possible through partnerships. Abeywardena highlighted how “the private sector has a beautiful opportunity to partner with governments to help develop and shape policies” and asked: “What does it look like if we work as a collective to move it for the entire community?” Mandy Seidel, Vice President, Global Sourcing at Pottery Barn, explained that through partnerships with suppliers and local experts within HERproject, Pottery Barn has created a happier and more stable workforce: “One of our largest manufacturers has run HERproject. They wrote to me and said that because of the investment we have made and that they have made in the workforce, they saw 100 percent worker retention rate after Chinese New Year, versus 80 percent in previous years.”  

Despite the ongoing challenges, panelists were optimistic about the future of leadership for and by women. Through individual and collective action, companies have the chance not just to promote women as leaders but to become leaders on women’s empowerment—and there has never been a better time to do so. As Hollander put it, “there is huge opportunity in this space where everything is changing so dramatically.” 

If you would like to find out more about how your company can empower women across your supply chain, please contact our team of experts.  
 

Blog | Thursday March 14, 2019

Access to Modern Family Planning Products: Time to Address Social Stigma

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In Kenya, HERproject has been working with global brands to increase use of family planning. Our program employs supply-side strategy, which involves facilitating healthcare linkages from the workplace to external service providers to improve healthcare access for low-income women and men, as well as demand-side strategy, which involves reducing the barriers to access and participation. Our experiences support the widespread view that addressing both demand-side and supply-side barriers concurrently is critical to improving access to modern family planning products for women workers in global supply chains.

According to the most recent Step-Up Kenya report released by the Population Council, UK Aid, and the African Population Health and Resource Center (APHRC), over 40 percent of pregnancies in Kenya are unintended—either mistimed or unwanted. The average Kenyan woman has a fertility rate of 4.6 children; meanwhile, the Kenyan National Bureau of Statistics estimates that if women were to achieve their ideal family size, the rate would drop to 3.4 children per woman. Unplanned pregnancies stem largely from an unmet need for contraceptives: one in four married women in Kenya want to stop or delay childbearing but are not using a family planning product. And control over sexual and reproductive health and rights is a prerequisite for women to reach their full potential.

Access to healthcare is about more than geographic availability: it's about ensuring that necessary health products and services are available, accessible, affordable, and acceptable to people.

Family planning initiatives that focus on ensuring access to modern family planning, reducing the distance required to access these products, and educating women and girls on the benefits of family planning can have (and have had) positive impacts. However, addressing social norms that both women and men hold, as well as enhancing men’s awareness and support for their partner’s health, are essential to improving access and use of family planning products.

Access to healthcare is about more than geographic availability: it’s about ensuring that necessary health products and services are available, accessible, affordable, and acceptable to people. In the context of family planning, this means that modern family planning products such as male or female condoms, intra-uterine devices (IUD), or injectables should be in stock, within geographic reach, at a price that people can afford, and socially and culturally acceptable.  

In four agricultural workplaces in Kenya, HERproject asked low-income women workers about their access to modern family planning products. On the supply side of the equation, of the women workers surveyed:

• 97 percent of women reported that family planning products and services were available, with 82 percent reporting that modern family planning products were within walking distance.
• 96 percent of women reported that family planning products were affordable.
• 76 percent of women reported using family planning products.

Yet of those not using modern family planning products, nearly 20 percent said that they would want to use it. So what is holding them back?

Social norms and attitudes that reinforce inequality can act as a barrier to women accessing family planning products. 

We found that the “acceptability” dimension of access is key to understanding women workers’ demand for family planning products. Our data suggest that family planning remains a taboo topic for many Kenyan women. Take the women who are not currently using family planning products. As noted above, 20 percent explicitly said they would want to use it, and 10 percent said they would not want to. Yet nearly 70 percent declined to answer the question, which may well indicate pressure and fear surrounding women’s use of family planning products.

In addition, HERproject seeks to understand the extent to which women have decision-making power and control over use of health products and services. Lack of this decision-making power is likely a barrier for women to use family planning products, even when they wish to delay childbearing.  

In the same four workplaces, we presented workers and managers with the statement: “I think family planning decisions should be made by the man.” Twenty-two percent of women and 19 percent of men—around one in five people surveyed—agreed with this statement.

Together, these data suggest that social norms and attitudes that reinforce inequality can act as a barrier to women accessing family planning products.

HERproject works to improve access and use of modern family planning by addressing stigmas that women and men hold about family planning products during workplace training. We empower women workers to address family planning questions with their partners. We also include male workers in awareness-raising sessions to reinforce the role men can play in promoting the health of their partners and the benefits of this approach for the whole family.

This is an important area that demands comprehensive planning and local expertise to address sensitive topics. We believe that applying a gender lens to access to healthcare and family planning products requires more attention from practitioners, healthcare providers, and employers alike. We invite companies with supply chains in Kenya, as well as healthcare companies, to contact our team to learn more.  

Blog | Thursday March 7, 2019

Three Changes for Women and Business Coming in 2019

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We celebrate International Women’s Day this year, as ever, with the launch of a wealth of new initiatives and commitments from companies, governments, and civil society organizations. And yet, the pace of change is still too slow: The most recent World Economic Forum Global Gender Gap report found that it will take another 200 years to achieve parity in the workforce. This serves as a stark reminder to all of us to continue to push ourselves to do more.

At BSR, this past year was focused on deepening and expanding our work, including efforts in new industries, the development of influential guidance on gender and supply chain management, and the launch of a refreshed HERproject strategy. As we look ahead, we are closely tracking three events in 2019 that have the potential to alter how business influences women’s empowerment.

Understanding What the Future of Work Means for Women

The debates rage on as to what the impact of automation and new technologies, dubbed the “Future of Work,” will have on entire industries, overall employment, and current social policies. Amidst this, BSR will partner with Women Deliver to explore these challenges through a gender lens. At the Women Deliver Global Conference, the world’s largest global conference on the health, rights, and well-being of girls, BSR will host a private sector pre-conference, How Business Can Build a Future of Work That Works for Women. The event will bring together companies and experts to explore whether the “Future of Work” will erase gains in employment and work quality women have made and/or potentially contribute toward improvements in women’s workforce participation based on new skills and increased flexibility that can benefit women workers.

The Women Deliver Global Conference, which convenes only once every three years, will gather nearly 7,000 participants in Vancouver June 3-6, providing an ideal opportunity to connect global businesses committed to gender equality with grassroots women leaders and organizations from over 177 different countries. In addition to the private sector pre-conference, the BSR team will be on the ground highlighting HERproject’s work on the advancement of female workers in global supply chains, Business Action for Women’s work in providing a platform for collaboration and knowledge-sharing, and the need to address the disproportionate impact of climate change on women.

Applying a Gender Lens to Human Rights

There is a growing realization that women often experience business-related human rights abuses in a distinct and disproportionate way in various situations such as discrimination in hiring and pay, challenges with labor rights due to the nature of women’s roles in global supply chains, and increased instances of harassment and violence. In response to this, a new set of recommendations and findings related to these and other challenges will be presented to the UN Human Rights Council this June.

BSR’s Human Rights and Women’s Empowerment teams are partnering to create a series of tools and resources to assist companies in better integrating gender into their human rights due diligence.

The project is being led by the UN Working Group on Business and Human Rights and seeks to effectively apply a “gender lens” to the UN Guiding Principles on Business and Human Rights (UNGPs). The work emerged following the recognition that the business and human rights field has not fully captured the differentiated impacts of “business-related human rights abuses on women” and the additional challenges women face when trying to access effective remedies. The goal is to provide guidance to both governments and businesses on “how to adopt a gender lens in implementing the UNGPs,” including by making the case for the importance of doing so, developing guidance, and bringing together experts to collaborate on solutions. BSR’s Human Rights and Women’s Empowerment teams are partnering to create a series of tools and resources to assist companies in better integrating gender into their human rights due diligence.

Eliminating Gender-Based Violence

As part of their due diligence, companies will need to examine their impacts and policies on workplace harassment and violence more closely. The public momentum behind #MeToo will be brought directly to companies as they will be required to consider their support and response to not only the new gender lens of the UNGP’s recommendations, but a new binding International Labor Organization (ILO) Convention on violence and harassment at work as well. Given the global operating context in which 59 countries still do not have laws protecting against sexual harassment at work, a new ILO Convention can provide the necessary internationally-accepted standard to prevent and respond to harassment and violence at work. BSR will be exploring the forthcoming convention, opportunities for companies to support it, and more in a webinar on April 17.

Accelerating the pace of change in workplace gender equality efforts will require the types of multi-stakeholder efforts represented in each of the initiatives listed above. Civil society organizations help to identify systemic realities facing women, international standards help to define what good looks like, and business can implement and scale solutions to reach wide numbers of women. This year, BSR will be paying close attention to the three issues listed above as we continue to pursue a future in which women achieve equity and empowerment in all settings, including the workplace.

If you’d like to take part in empowering women in the workplace with BSR, please contact us to learn more.

Blog | Wednesday March 6, 2019

#ThisIsALeader: Raising the Profile of Women Making a Difference

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When you think of inspirational women leaders in business, who comes to mind? Is it Mary Barra, Chairman and CEO of General Motors—the first female CEO of a major global automaker? Or maybe Indra Nooyi, who served for 13 years as CEO of PepsiCo, one of the largest food and beverage businesses in the world? 

With women at the helm of such large enterprises, it’s hard to believe that there had not been a woman CEO of a Fortune 500 company until 1972—when Nooyi was 17. No doubt she and Barra faced formidable obstacles in their journeys to leadership, including discrimination against women in education, in business, and across societal expectations. In spite of this, they rose to prominence and success, blazing a trail for others to follow, and we are right to celebrate what they have achieved.   

However, the celebration of women leaders should not be limited to the C-suite. Out of the spotlight and away from the media attention, women throughout global supply chains are quietly taking on leadership roles and driving change for their colleagues, families, and communities. To highlight these lesser-known leaders on International Women’s Day, we have partnered with four committed partners of BSR’s HERproject—The Estée Lauder Companies, Inc., Nordstrom, UGG®, and Williams-Sonoma, Inc.—to raise the profile of and increase support for women leaders right across the supply chain, from corporate offices to the factory floor.  

Out of the spotlight and away from the media attention, women throughout global supply chains are quietly taking on leadership roles and driving change for their colleagues, families, and communities. 

Our #ThisIsALeader campaign celebrates workers from factories in China, India, Vietnam, and other countries where HERproject is active. Through HERproject, these women have become peer educators: sharing knowledge and skills on health, financial inclusion, and gender equality with their colleagues. And as leaders in their respective communities, these peer educators advocate on behalf of their colleagues, provide them with support, and show what is possible even in societies where women often face overwhelming challenges. 

Take Sapna, a HERproject Peer Educator in Agra, India: 

I was the sole breadwinner of my family for a long time and I was responsible for the overall well-being of everyone at home. For reasons we never discovered, one of my brothers fell ill and suffered a paralytic stroke. He was bedridden for months. My mother was also unwell and eventually passed away after a heart attack. That happened just after my engagement. 

Because of this series of sad events, culminating in my mother’s death, the groom’s family decided that I was a bad omen and called off our engagement. These were really bitter and tough experiences for me. But they only strengthened my determination to succeed in life.  

I didn’t know what the HERfinance program was, but when I heard about it, I was curious, and I thought that I wouldn’t lose anything by attending it. So, I took part in the trainings at the factory and they helped me to regain the confidence I had lost. I realized that, along with education, financial planning is critical for our generation. The trainings made me decide to spend wisely and save so that my future is secure. 

My brother has now recovered from his illness. He recently started a new job and is looking forward to a bright future. For myself, I’m pursuing higher education again and I’m hoping to graduate.  

That’s just one of the amazing stories we hear through HERproject. Like Sapna, women leaders within brands are driving commitment to women’s empowerment. They are connected across geographies by the belief that they can help others and improve the lives of people around them—especially fellow women.  

In addition to our #ThisIsALeader social media campaign, we are hosting an evening event on Thursday, March 7, to celebrate women’s leadership. Senior leaders from The Estée Lauder Companies, Inc., UGG®, and Williams-Sonoma, Inc. will join nonprofit leaders, public officials, and members of the media for a discussion on what is needed to ensure that women around the world can fulfil their potential as leaders. If you would like to join us, please register your interest here.  

We invite you to join the conversation on social media by sharing a photo of an unsung woman leader with the sentence “#ThisIsALeader because…”.

Beyond celebrating women across the global supply chain, we want to catalyze support so that they can go further as leaders: spreading knowledge, belief, and confidence, and unlocking the potential of women around them. Because we believe that when business and partners work to unlock this potential, the impact will be unprecedented.  

Ahead of International Women’s Day, we call on businesses to commit to empowering women leaders right across your supply chain. And we invite you to join the conversation on social media by sharing a photo of an unsung woman leader with the sentence “#ThisIsALeader because…”. Together, we can raise the profile of the women who are making a difference and step up our support for them as they drive positive change.  

Blog | Tuesday March 5, 2019

How Private Equity Can Address TCFD and Climate Change

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In the face of mounting global climate action and inquiries from institutional investors, private equity firms should anticipate that addressing climate change will move from being an emerging interest to a fundamental expectation—just as it has for environmental, social, and governance (ESG) issues. 

We are in the midst of a new era of climate action. The UN Principles for Responsible Investment (PRI) recently announced that reporting based on the Task Force for Climate-related Financial Disclosures (TCFD) will become mandatory for PRI signatories. The proposal for a Green New Deal is expanding the boundaries of the US political conversation. More companies are making commitments to science-based targets for emissions reductions, and in December, investors managing $32 trillion in assets called on governments to accelerate climate action. 

The upshot for private equity firms is this: It is imperative to better understand, manage, and disclose climate risks and opportunities in your investments. While some call for firms to conduct carbon footprinting for their entire portfolios, others in the industry have expressed concerns that such an undertaking would be resource-intensive and of unclear value. Firms should consider how climate trends affect their investments, not just in terms of flood risk or energy costs, but in terms of the technologies they use, the products they source, and the labor forces they employ. 

So the question arises: What courses of action will help private equity firms address climate risks and opportunities in an actionable, meaningful way? BSR suggests two types of approach. 

TCFD Maturity in Climate Management 

Private equity firms should be in the business of building better managed, more valuable companies.  That same objective applies in responding to climate change: Private equity firms should engage with portfolio companies to ensure that all parties can effectively understand and manage climate risks and opportunities. Further, firms should be able to demonstrate such an understanding to investors and stakeholders in relation to the TCFD framework. Firms can do this by applying similar approaches as have been used to address other ESG topics, such as responsible sourcing.   

Major steps to improve TCFD maturity in climate management would include: 

1. Assessing portfolio companies’ exposure to climate risks and opportunities using simple, open-source tools to evaluate physical and transition risk (e.g. the Climate Policy Tracker for Business, developed by BSR) 
2. Evaluating companies’ climate maturity using the TCFD framework  
3. Mapping climate exposure vs. maturity for the portfolio to identify the most significant sources of climate risk, the highest priority companies, and the most common gaps in practice 
4. Using the results to inform firm-level reporting and to enable portfolio companies to report their own information 
5. Providing guidance, resources, and tools to improve practices for high-priority companies and topics (e.g. sample policies, data sources, and position descriptions) 

By using such an approach, private equity firms can avoid more academic exercises and use the TCFD framework to support practical actions, meaningful reporting, and improved business outcomes.   

Strategic Foresight and TCFD Climate Scenario Analysis 

Given the uncertainty surrounding the cascading impacts of climate change, as well as society’s collective response to the issue, the TCFD has recommended that all firms undertake “climate scenarios analysis” to assess their exposure to a range of climate-related risks and opportunities and enhance their strategic resilience. To derive the true benefit of this methodology, climate scenario analysis should not treat global temperature increase (e.g. 2 degrees vs. 4 degrees) in isolation or as a one-dimensional quantitative calculation.  

Unlike forecasts or predictions, scenarios describe multiple plausible futures that may confront a business. Scenario analysis offers a multidimensional perspective that examines how inter-related social, technological, economic, environmental, political, and business factors can drive highly divergent outcomes, with profoundly different impacts on investments. These additional dimensions of information transform scenario analysis from a dry accounting task to a robust, generative activity with major strategic implications, as was illustrated in BSR’s Doing Business in 2030 report. 

Scenario planning is a prudent undertaking for current portfolio companies. By assessing companies against relevant scenarios, a firm can better understand the potential impacts of climate change and other related factors; optimize company governance, strategy, risk management, and measurement; protect against future risk and pursue future opportunities; and report on findings to key stakeholders. 

Strategic foresight may be even more exciting for assessing future investment opportunities. By exploring multiple plausible futures, scenarios can help companies and investors move beyond present-day thinking, envision disruptive new possibilities, and be proactive in seizing emerging opportunities. Furthermore, unlike large players within industry, private equity investors have the advantage of being able to act quickly to integrate lessons into their investing decisions without major damage to their incumbent interests.  

As climate impacts become increasingly material and the pace of change in climate action and expectations increases, it is critical for private equity firms to begin acting now. Through pragmatic, strategic approaches, there are valuable opportunities for firms to ask the big questions on climate change and begin taking action, both to support the long-term success of their investments and the economic, social, and environmental imperatives for climate action. 

Blog | Monday March 4, 2019

How Private Equity Firms Can Develop Responsible Investing Policies

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Over the past 10 years, the private equity sector has seen responsible investment approaches move from exception to expectation. Recently, PRI reported that over 60% of its private equity firm signatories surveyed have implemented responsible investment strategies, an increase of 25% from 2015—and over a third are linking responsible investment objectives to key performance indicators of their investment staff. It’s clear that the formalized integration of environmental, social, and governance (ESG) considerations is becoming the norm. 

As a result, General Partners (GPs) that do not yet have these formalized approaches to responsible investment are moving quickly to develop the policies, management systems, reporting tools, and follow-up initiatives to meet evolving stakeholder expectations. For all firms, a meaningful policy is fundamental to responsible investment and ESG integration.

Furthermore, while there has been some useful guidance for asset owners, there is limited current guidance for GPs about what should go into a responsible investment policy.  Many firms end up using generic language, leading to policies that are not well-tailored to the individual firm’s investment profile, creating a disconnect between the firm’s investment strategy and ultimate ESG objectives, leading to less effective and less efficient approaches.

That’s why we have developed a white paper that outlines guidance on a straightforward approach, relevant principles, and practical tips to use in developing a responsible investment policy.

Why Firms Need a Responsible Investing Policy

A responsible investment policy is a firm's commitment to incorporate ESG factors into investment decisions to better manage risk and generate sustainable, long-term returns. The policy serves as the cornerstone of a firm's responsible investment efforts in the following ways:

• Establishes a “North Star” by providing direction to employees and other external stakeholders in understanding the firm’s core investment beliefs
• Communicates commitments to Limited Partners in a clear, consolidated, effective statement
• Aligns expectations and builds trust with broader stakeholders including investors, investment professionals, regulators, portfolio company employees and local communities where portfolio companies operate
• Establishes the framework for a consistent approach to implementation by clearly describing the scope, governance structure, actions, and reporting to support the integration.

Who Develops the Responsible Investing Policy

Typically, an executive or member of senior management will lead the process of drafting the policy, securing buy-in, and assigning resources needed for its implementation. This person ought to work in tandem with a cross-functional working group of committee to help steer the policy through the different steps of policy development. In all cases, it is essential for investment and portfolio teams to play a role in policy development and sign-off in order to develop a policy that can be successfully operationalized.

What a Responsible Investment Policy Includes

There is no one-size-fits-all approach to responsible investment—the investment strategy of the fund will be key to determine the responsible investment approach, and the policy ought to be tailored to the investment profile and beliefs of the fund.  BSR recommends that policies indicate that the firm will focus on “material” ESG issues. At the same time, several foundational elements are considered best practice to include in the policy. Our paper delves further both into definitions of materiality as well as the elements of a responsible investment policy listed below.

• Title and approval date
• Purpose and priorities
• Scope
• Governance structure
• Implementation approach
• Reporting
• Regular revisions of the policy
• External collaboration

How To Implement a Responsible Investment Policy

Once the policy is finalized, the real work starts. The firm ought to act to implement and uphold the policy, including developing an implementing plan, effective governance structures, regular teach-ins for investment professionals, and taking action to enhance portfolio performance. The policy should not sit on a shelf—it should be the impetus for action and results.

We hope our paper will provide GPs a blueprint to write policies that align with their unique investment principles and strategies.  If you’d like to reach out to us with feedback or start a conversation about developing your own policy, please contact us at web@bsr.org.

Reports | Monday March 4, 2019

ESG in Private Equity: How To Write a Responsible Investment Policy

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Over the past 10 years, the private equity sector has seen responsible investment approaches move from exception to expectation. Formalized integration of environmental, social, and governance (ESG) considerations is becoming the norm.

A diverse group of stakeholders—from investors to portfolio companies to employees—increasingly expect that General Partners (GPs) at private equity firms to demonstrate that they invest responsibly and incorporate ESG factors into their investment decisions. Furthermore, as ESG factors increasingly affect the business value of portfolio companies, GPs are recognizing the benefits of taking a more structured approach to ESG integration.

As a result, GPs that do not yet have formalized approaches to responsible investment are moving quickly to develop the policies, management systems, reporting tools, and follow-up initiatives to meet evolving stakeholder expectations. GPs already pursuing formalized approaches ought to update their efforts on an ongoing basis to match evolving practices. For all firms, a meaningful policy is fundamental to responsible investment and ESG integration.

This paper will outline a straightforward approach, principles, and tips to use in developing a responsible investment policy. We aim to provide firms with general guidance to facilitate the development of strong policies that address common policy considerations while at the same time tailoring the language to suit its unique circumstances and material ESG considerations. In doing so, we hope that we will enable the adoption of more effective responsible investment approaches and ESG management practices at firms and their portfolio companies, and to encourage capital deployment towards a more sustainable future.

Blog | Monday February 25, 2019

A New Transparency Challenge for Business and Human Rights

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What’s the harm in sharing company data with the government? Three recent news stories demonstrate the significant human rights risks that arise when companies share data with law enforcement agencies: Motel 6 was fined over US$7 million for sharing guest lists with U.S. immigration authorities. Bloomberg News reported that 7-Eleven Inc. had shared information with U.S. immigration that led to raids in over 100 of the company’s franchises. And in China, the Associated Press revealed that more than 200 automotive manufacturers, including Tesla, Volkswagen, BMW, Daimler, Ford, General Motors, Nissan, and Mitsubishi, are sharing location information and other important data to government-backed monitoring centers.

There are many good reasons why companies share data with law enforcement agencies. This can include transport and logistics companies addressing human trafficking and smuggling, travel and tourism companies seeking to prevent child sexual abuse, and financial services companies tackling money laundering and the illegal funding of terrorist organizations. There are also many ways in which companies are called upon to assist with criminal investigations or with matters of public safety and national security.

However, these scenarios come with two common challenges: The first is providing appropriate assistance to law enforcement efforts that have the protection of human rights as a core purpose, while at the same time protecting the privacy rights of customers and users. Second, companies must work out how to constrain assistance to law enforcement efforts that may not have the protection of human rights as a core purpose, as can be the case in governments that don’t respect the rule of law, or that regularly violate the human rights of their citizens.

This leads me to my central theme: the public currently lacks sufficient insight into how companies are navigating these two challenges, the strategies companies and governments can deploy to enhance human rights protections, and the transparency necessary to scrutinize whether these human rights protections are being implemented.

The public currently lacks sufficient insight into ... the strategies companies and governments can deploy to enhance human rights protections and the transparency necessary to scrutinize whether these human rights protections are being implemented.

Encouragingly, the technology industry has developed practices that indicate a path forward. In 2010, Google published the world’s first law enforcement relationship report (which the company called a “transparency report”) listing the number of requests the company received from governments to restrict content or hand over user data. The report explained how relevant legal processes worked and described when and how Google chose to challenge these requests to protect their users’ rights to freedom of expression and privacy. Since then, more than 70 internet and telecommunications companies have started publishing regular law enforcement relationship reports.

While much remains to be done to ensure that data are managed appropriately, this transparency has brought three essential benefits:

• Awareness: The reports have substantially raised awareness about the complex data sharing relationships between governments and companies, resulting in higher quality public policy proposals on key human rights issues.
• Advocacy: The reports have enabled civil society organizations and human rights defenders to advocate for improved privacy protections. More strikingly, companies have used the reports to expose privacy violations committed by governments and advocate for greater human rights protections on behalf of their users.
• Accountability: The reports have provided a place for companies to explain the processes and procedures in place to respect and protect the human rights of their users, allowing them to be held accountable for their approach by civil society organizations and users. The reports have also enabled civil society organizations around the world to better understand the nature and volume of data requests made by their home governments, advocate for improved rule of law and data protections, and hold governments to account.

However, as the three cases of Motel 6, 7-Eleven Inc., and automakers in China illustrate, technology companies are not the only ones receiving requests for data and assistance from law enforcement agencies. These requests extend to companies in the transport and logistics, travel and tourism, retail, healthcare, financial services, and other sectors as well.

Indeed, with the emergence of the internet of things, facial recognition, and artificial intelligence, the amount of data collected, processed, and shared by non-technology companies is exploding. And there is no doubt that law enforcement agencies will increasingly demand access to this information. In a world of increasingly ubiquitous data, it is essential that all companies incorporate data sharing considerations into their human rights due diligence and strategies.

There is an urgent need to enhance disclosure practices across all industries that receive requests for data and assistance from law enforcement agencies.

For this reason, I believe there is an urgent need to enhance disclosure practices across all industries that receive requests for data and assistance from law enforcement agencies. By establishing the norm that all companies, regardless of sector, issue thorough, transparent, and informative law enforcement relationship reports, we increase the likelihood that personal data will be better managed by the private sector and that civil society, business, and governments are more able to hold each other accountable.

Blog | Tuesday February 19, 2019

The Future of Sustainability Reporting

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Sustainability reporting and environment, social, and governance (ESG) disclosures are on the rise around the globe—we’ve seen increased regulation in Asia, it has become expected practice in Europe, and investors in the U.S. are increasingly using this information to inform their decision-making.

2018 saw some of the first communications in line with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, the codification of the Sustainability Accounting Standards Board (SASB) Standards, and a new draft standard from the Global Reporting Initiative (GRI) on tax and payments to governments. The field—and what is expected of companies—is evolving at an accelerating pace.

The most essential development that we need to see in the coming years, however, will be the alignment and harmonization of reporting standards to enable more efficient reporting processes that result in more user-friendly, comparable reports on the most important sustainability topics. For this reason, we strongly support the continued work of the Corporate Reporting Dialogue.

As one interviewee for our recent report, Redefining Sustainable Business: Management for a Rapidly Changing World, told us, “It is like the wild west out there in terms of what is reported. We would really like to see the reporting standards organizations get together and streamline.”

Over the past year, BSR has been working with over 20 companies to explore and influence this field through our Future of Reporting collaborative initiative. This group of companies seeks to shape the future of reporting by sharing reporting best practices, exploring ways to improve the decision-usefulness of reports, and informing the work of various reporting organizations. (While this post is informed by that work, the opinions expressed here are those of BSR.)

These are the five innovations that we would like to see improve reporting and disclosure in 2019.

1. Reporting practitioners play an essential role in shaping the future of reporting, including through the work of the Corporate Reporting Dialogue. We heard loud and clear in our conversations with companies that they want to play a role in shaping the future of reporting; practitioners are, after all, the ones who hold the pen when reports are written. Because they are most closely involved in the use of reports to improve performance, they have fundamental insights into how harmonized reporting standards can improve company performance. Standardization across various frameworks should be a central aspect of this work, as this will both help companies disclose the most decision-useful information for their stakeholders and increase efficiency.
2. We look forward to continued effort from companies and investors to meaningfully quantify and report on impact, including related to the SDGs. This applies to both the impact of the company on sustainability and the impact of sustainability on the performance and direction of the company. Companies should move from mentioning the SDGs and mapping their existing programs to them to prioritizing those SDGs most relevant to their business and measuring their contributions and impacts. Ideally, this measurement should also inform company strategy—it creates an opportunity to link disclosure with performance. Investors are increasingly using this information both in individual decisions and the creation of new funds.
3. We hope to see increasing efforts to apply the TCFD recommendations, including to undertake and report on scenario analysis. Implementing the recommendations may be challenging for many companies, but companies looking do so don’t necessarily need to implement them all immediately—they can start with those that are most closely aligned with their existing reporting. Those elements that pertain to organizational change are likely to be the most difficult for companies to implement, but this creates an opportunity for them to make progress over time. Companies can also use their sustainability reports and CDP disclosures as a testing ground for information that may ultimately reside in mainstream financial disclosures.
4. More involvement and oversight of ESG disclosures at the board level will help raise the profile of sustainability efforts as a contributor to long-term value for companies and society. Increasingly, forward-looking companies are appointing directors with specific sustainability-related expertise, and boards and board committees are including aspects of sustainability into their charters to govern ESG issues at the highest levels. Board oversight of sustainability strategy and performance overall is increasingly common; a recent study of the S&P 500, State of Integrated and Sustainability Reporting 2018, found that 212 companies (42 percent) have a formal board committee overseeing sustainability.
5. We hope to see more sustainability information included in mainstream financial disclosures (including the Form 10-K), yet we also hope to see more detailed issue-specific sustainability reporting targeted at specific audiences. The Future of Reporting group had energetic discussions across these aspects. Companies should not try to include all disclosures in one report, but issue different reports focused on the differentiated needs of different target audiences.

If you’d like to be a part of the conversation about the next generation of sustainability reporting, please contact us to learn more about how you can participate in the Future of Reporting group in 2019.