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Blog | Friday August 30, 2024

Don’t Take the Off-Ramp: Four Tips for Business Leaders to Advance Social Justice Amidst DEI Blowback

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Businesses face heightened scrutiny and increased expectations when considering how to respond to social issues. Racial justice and LGBTIQ+ inclusion are part of social justice, both of which are being scapegoated by a small organized group seeking to dictate how companies conduct their business. Currently, companies are wrestling with how to navigate a fraught landscape when it comes to their Diversity, Equity, and Inclusion (DEI) programs in name and in practice.

There was a boom in corporate activity in the US on DEI in response to the global protests of the murder of George Floyd in 2020. By the end of that year, US DEI job postings increased by 55 percent, the US was projected to be the largest market for DEI, and by May 2021, companies had earmarked close to US$200 billion toward racial equity, according to the McKinsey Institute for Black Economic Mobility, with DEI roles and budgets being cut from company agendas and Chief Diversity Officers leaving their roles citing obstruction and exhaustion.

Meanwhile, legal scrutiny of diversity initiatives, including the recent US Supreme Court ruling on the use of affirmative action in higher education, had a chilling effect on corporate willingness to champion progress. However, companies that are more mature in their DEI approaches and recognize the bottom-line impact are doubling down on their investment to ensure that they are future-fit for the next generation of talent and sophisticated stakeholders who expect and demand authentic and consistent corporate commitment to social justice.

Additionally, new attacks on LGBTIQ+ rights in the states, particularly around transgender care and equality, have gone mostly unchecked despite national gains when it comes to the rights of same-sex couples to marry. 

So, how should business leaders respond in this challenging environment? Here are four tips that can help: 

1) Be Prepared and Consider the Source of the Blowback 

It’s important to recognize that DEI blowback may not actually come from a company’s stakeholders such as current or prospective workers and consumers, but from organized, vocal opposition groups. Understanding the source of the opposition allows businesses to prepare and respond effectively, while remaining true to their values. Due to a rise in bots social media chatter is becoming less of a bellwether for public perception or stakeholder sentiment

Companies may be tempted to take an off-ramp to end or diminish DEI programs as well as participation in meaningful external benchmarks, such as HRC’s Corporate Equality Index, because of detractors who perceive the business as an opportune target for political purposes. It’s easy to get caught up in the moment when the social media pressure and emails to executives’ inboxes seem to demand a reaction—don’t take the bait. As Axios reported recently, the internal policy reversals by companies saw 77 percent more media mentions and roughly 40 percent more social media interactions than the initial attacks targeting the company. 

However, this does call upon companies to go beyond short-term thinking, which can be hard when the politics of the moment makes everything seem divisive and urgent. 

2) Ensure Your DEI Program is on Firm Ground 

Recently, some companies have been retreating from DEI initiatives with external pressure playing a role. This isn’t just a step backward for workplaces—it’s a retreat from the normalization of practices that actually remove barriers and impediments in society for everyone. It's essential for existing DEI programs to evolve and that stakeholders—including employees, consumers, investors, and communities—understand how these initiatives can benefit everyone. Recent data underscore this reality. More than six in 10 Americans view DEI positively, with even stronger resonance among younger generations of workers and consumers. 

3) Frame DEI in a Broader Context 

DEI is not an isolated function effort—it is an integral part of a broader business commitment to social justice and other equity-driven imperatives. This perspective is not a trend; it’s the new normal. DEI is a part of social justice, which encompasses climate justice and democracy to economic inclusion, racial and gender equity, caregiving, worker rights, LGBTQI+ inclusion, and beyond. Acting on social justice principles, regardless of how they’re labeled, is crucial for responsible business leadership. The racial wealth gap, how women often face outsized caregiving demands, and other unmet structural deficits facing stakeholders—especially workers—call upon business to exert influence in meaningful ways through public policy, regulation, and beyond.

4) Get Business Associations Off the Sidelines 

Your company likely belongs to multiple business advocacy groups, including the US Chamber of Commerce, Business Roundtable, and industry-specific associations, that talk publicly about the value of DEI to their members. There is strength in numbers when it comes to consistent messaging with the business press on where these attacks are coming from, why DEI makes business sense, and acknowledging there’s been a gap between commitments and implementation. Just because it’s a work in progress doesn’t mean DEI should become the scapegoat for activists seeking to turn back the clock on an inclusive society that includes and rewards contributions from all workers.

How BSR Can Support You 

BSR’s Center for Business and Social Justice’s free, downloadable The Social Justice Guide for Business to offer actionable insights for companies to navigate these complex expectations and avoid the pitfalls of short-term thinking. Section III offers a tool that spotlights barriers companies face as they build their social engagement strategies. The tool includes high-impact, actionable recommendations for overcoming those barriers and supporting a more equitable society while minimizing risks to business. 

BSR’s Equity, Inclusion, and Justice team also offers consulting services for companies, providing assessments and strategies from experts working at the nexus of business and next-generation approaches to social impact.

Blog | Wednesday August 28, 2024

Responsible Innovation in the Automotive Industry

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For the past couple of decades, the automotive industry has been under considerable pressure to uncover and address adverse human rights impacts in their business and value chains. Recent regulations, such as the EU Corporate Sustainability Due Diligence Directive (CSDDDD) have introduced comprehensive human rights due diligence requirements for companies across their value chains, directly impacting many automotive companies with substantial market presence in Europe.

As these regulations come into effect, are you confident that your company fully understands the human rights risks within its value chain? Are you prepared to meet these new requirements?

The Corporate Human Rights Benchmark 2022 report, identifies the sector as the poorest performer in human rights, with civil society organizations revealing significant human rights violations within the automotive supply chain. Understanding these human rights concerns and adverse impacts are not just a regulatory necessity, but also a strategic imperative for safeguarding reputation, ensuring operational integrity, preventing litigation risks, and avoiding supply chain and production delays.

To help automotive companies understand adverse human rights impacts across their value chain, BSR has released a primer on the top 10 human rights issues impacting the sector.

Based on BSR’s engagement with the transport and logistics sector, and over 30 years of experience across human rights, the primer highlights the issues that automotive companies will likely need to manage in order to prepare to comply with emerging regulations, meet customer expectations, and avoid costly delays, fees, or litigation due to human rights incidents.

In addition to the primer, we outline below three key trends across the automotive sector value chain and their potential human rights impacts.

Human Rights Issues in Sourcing Raw Materials for Electric Vehicle Batteries

Amidst a slowdown in consumer adoption of electric vehicles, the sector continues to invest in advancing new Electric Vehicle battery (EV battery) technologies. Currently, competition has intensified with the entry of new players from China and India, aiming to carve out market share by offering cost-effective EVs.

The human rights and environmental concerns associated with mining the associated raw materials such as cobalt, lithium, manganese, graphite, and nickel is now well documented.

For instance, nickel mining in Indonesia and the Philippines has been linked to deforestation, water contamination, and adverse health impacts on local communities; cobalt mining in the Democratic Republic of Congo (DRC) has been marred by allegations of forced evictions and child labor; and there is continued concern about forced labor practices in Xinjiang, China, particularly in the processing of cobalt and the mining of key materials such as aluminum and graphite.

Beyond the risks associated with sourcing raw materials for EV batteries, emerging human rights challenges are arising in the maintenance and repair of EVs. Changes in technology and safety standards necessitate ongoing reskilling and retraining of technicians in production sites and repair workshops to mitigate potential job losses and ensure occupational health and safety standards are upheld.

Responsible Use of AI is Key to Mitigate Human Rights Risks

This year, we also see several businesses are gearing up to introduce advanced levels of automated self-driving technology.

Autonomous driving and other driving assistance technologies can pose various human rights challenges. Errors in AI-driven driver assistance technologies may compromise safety and security in the event of accidents. These technologies may also exhibit performance disparities for underrepresented groups in the dataset.

The implementation of higher levels of automated self-driving technology often involves the collection and utilization of larger volumes of sophisticated data to train algorithms and support decision-making processes. This also raises privacy concerns if automakers fail to clearly explain the types of data being collected, processed, and used, making it difficult to obtain proper user consent.

The Shift from Ownership to Subscription Models

There is a noticeable trend emerging within the transportation sector, particularly in car rental markets, towards offering Car-as-a-Service (CaaS) via an on-demand subscription model. This shift is fueled by in- vehicle connectivity and data on vehicle usage, facilitating easy and flexible real-time servicing. However, from a human rights perspective, compared to the traditional sale and ownership model, this trend may pose higher risks for CaaS providers. As the CaaS model allow a higher level of oversight and control over the vehicle’s location and data, as well as granting a higher leverage in selecting customers/users due to recurring contractual relationships.

Periodically, there are reports in the news about vehicles being intentionally misused for harmful purposes, such as facilitating armed operations or criminal activities like human trafficking. With the subscription model, the auto-providers track the geographical location and usage of the vehicles. This would lead to greater expectations and responsibilities to prevent and detect illicit use of vehicles, or usage in conflict prone and higher risk locations known for activities such as deforestation, illegal mining activities, or human trafficking hotspots.

This may also increase the probability of law enforcement agencies requesting real-time data from CaaS providers to support combating crimes. The increased ability for law enforcement to access vehicle position information could facilitate real-time tracing and surveillance of targeted individuals, such as dissidents or human rights defenders—and exacerbate further human rights risks.

BSR’s human rights team advises business from across sectors on human rights due diligence, assessment, and management of risks. Please get in touch to discuss how our team can help yours navigate these emerging trends and manage the key human rights risks in the sector.

Primers | Wednesday August 28, 2024

Top 10 Human Rights Priorities for the Automotive Sector

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Human rights are inherent to all people, regardless of nationality, sex, national or ethnic origin, color, religion, language, or any other status. They are globally agreed upon standards of achievement for all people, covering a wide range of independent yet interconnected civil, political, economic, social, cultural, and environmental rights that serve as a “code of conduct” for all human beings.

All companies can impact human rights either positively or negatively through their action or inactions. The key document speaking to these impacts is the UN Guiding Principles on Business and Human Rights (UNGPs), the authoritative global standard on business and human rights. Though technically “soft law,” the UNGPs have been incorporated into the OECD Guidelines for Multinational Enterprises, ISO 26000, IFC Performance Standards, GRI, UN Sustainable Development Goals, and many other frameworks. They have also been endorsed by business and industry organizations representing thousands of companies, civil society organizations, NGOs, and member states of the United Nations. 

As part of the corporate responsibility to respect human rights, the UNGPs require companies to actively identify and manage the negative human rights impacts they may cause or contribute to, or to which they are linked through their business relationships.

This primer identifies the 10 most relevant, urgent, and probable human rights impacts for businesses operating in the automotive sector. It is intended as a starting point and should be supplemented by robust internal human rights due diligence processes. The information here is gathered from BSR’s direct engagement with industrials sector companies, as well as our 30 years of experience helping companies in all sectors manage their human rights risks. 

The automotive sector comprises a wide range of businesses and activities across its value chain, from sourcing raw materials and parts to manufacturing auto parts, such as tires, step bumpers, and chasses, to assembling a fully functioning vehicle and transporting finished vehicles to distributors, dealers, and, eventually, into the hands of end-users such as transport companies, truck drivers, or individual commercial and household drivers.

As the automotive industry embraces the green transition, incorporating electric vehicles (EVs) and sustainable materials and other green solutions, new human rights risks will emerge and evolve. These include, for example, sourcing new types of raw materials for EV batteries, shifting skill requirements for technicians in production sites and repair workshops, and increased occupational health and safety risks associated with EV battery handling. It's crucial for automotive companies to proactively address these risks together with their suppliers and business partners throughout the green and digital transformation, as this evolution reshapes the ecosystem, the industry’s human rights risk profile, and the future of automotives. 

While each company has distinctive human rights risks based on their different value chain footprints and business models, this primer highlights common risks across the automotive sector to help companies in the automotive value chain identify, prevent, and mitigate adverse impacts on people in the course of doing business. As a sector that is both global and local and employs tens of millions of workers around the world, it also offers opportunities to advance the realization of human rights. 

Blog | Tuesday August 6, 2024

Investing for Impact: A Leadership Framework for Private Equity Investors

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In today’s landscape, businesses are increasingly recognizing the connections between social justice, climate impacts, and financial returns, which has driven a shift towards impact investing. 

This shift is not just a trend but a significant movement reshaping the industry. The impact investing market reached US$495.82 billion in 2023, up from US$420.91 billion in 2022, reflecting a 17.8 percent compound annual growth rate. The Global Impact Investing Network (GIIN) reported that the market size amounted to US$1.164 trillion in assets under management in 2022. Private equity is at the forefront of this growth, with nearly half of all capital allocated to impact investments coming from private equity and private debt. Major players like KKR and TPG are making substantial commitments, with KKR raising nearly US$2 billion for its second impact fund and TPG closing its Rise Climate Fund at US$7.3 billion.

PE investors can provide critical capital, expertise and exert management influence across the sectors they invest in, initiating steps to drive positive impact. In addition, the holding period of investments, which is an average of about five years for PE firms, is crucial for creating significant value. During this time, asset managers can utilize their expertise to amplify environmental and social impacts. Effective impact leadership within private equity is characterized by proactive engagement, strategic vision, and the ability to drive substantial value through environmental and social initiatives.

Some of the leadership practices in impact investing are: 

• Attributing and Contributing to Sustainable Development Goals (SDG) outcomes: Ensuring interventions contributing to the SDGs and attributing positive outcomes to their specific actions during the holding period provide building blocks toward impact accountability.
• Prioritizing Material Sustainability Issues: Integrating environmental, social, and governance into investment strategies, not only mitigates risks but also identifies opportunities for positive impact. 
• Implementing Impact Measurement Frameworks: Developing impact measurement frameworks with clear impact goals, procedures for regularly tracking progress, and adjusting as needed to achieve desired outcomes. 
• Ensuring Effective Governance: Setting the scene for long-term success by improving board structures and diversity, increasing accountability, and ensuring strategic oversight, which are key for long-term success. 
• Embedding Operational Improvements: Implementing efficiency measures, process optimizations, and leveraging technology to enhance a twin financial and impact performance—enhancing efficiency and reducing costs. 

Impact investors can use a variety of innovative methods to develop impact value creation levers.

Building on these leadership practices, PE investors employ a variety of methods and innovations to drive impact. Investor contributions could be both financial and non-financial, encompassing a range of strategies to create value. According to a report by Tideline Impact Capital Managers, impact value creation levers include:

• Impact Positioning: Strengthening market presence by positioning the brand as impact focused (e.g., by redefining the organization’s vision). 
• Workforce Initiatives: Engaging employees to improve job culture and workforce (e.g., through employee engagement surveys). 
• Impact Incentives: Aligning management incentives with impact goals (e.g., through compensation structures that are linked to impact performance). 
• Impact Risk Management: Managing impact risks to avoid unintended consequences (e.g., by assessing physical and transition climate risk impact on the business). 

Innovative approaches to investor contributions have emerged, particularly in areas like climate risks, technology, and geographic expansion.

Notable Examples of Impact Value Creation Levers 

• Market Building: LeapFrog supported Redcliffe Labs in expanding its healthcare diagnostics services in India through strategic acquisition, resulting in substantial revenue growth and a broader impact reach.
• Product/Service Development: Rethink Capital Partners helped AllHere, an EdTech business, enhance its core product with an AI chatbot during the pandemic. This pivot allowed the business to maintain demand for its services and significantly increase its reach and revenue.
• Impact Risk Management: Nuveen assisted Annapuma, a microfinance business, in integrating physical climate risk data into its operations developing an alert system for customers during climate disasters, and reducing loan default risks.

Only a minority of investors monitor the results of their contribution, missing the opportunity to fully capture the true impact of their investment.

The initiatives below help investors document and validate their contributions, ensuring they are meaningful and impactful. 

Innovative Tools for Tracking Impact

• Impact Frontiers' Investor Contribution 2.0: This tool helps investors better track and monitor their contributions with metric taxonomies and engagement tracking templates. British International Investment (BIL) participated in a pilot project for this initiative, enhancing its ability to track and report on impact contributions.
• MedAccess' Bespoke Counterfactual Framework: MedAccess developed a unique framework to assess and validate expected investor contributions to impact, particularly in the health sector. This framework helps determine where financial contributions will have the greatest impact.

There is the constant challenge of measuring these outcomes, with the need to move from simply measuring outputs to meaningful measurement indicators as to the depth of impact experienced by end-beneficiaries. Looking forward, massive opportunities exist for impact managers to innovate in this area, moving away from easy-to-measure indicators, to building meaningful indicators from the ground up. 

BSR supports its private equity members in adopting effective leadership, and taking innovative approaches backed by rigorous tracking to drive progress toward a just and sustainable world.

For more information or support, please contact us.

Audio | Thursday August 1, 2024

Navigating U.S. Election Uncertainty: A Call to Action for Sustainable Business

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In the United States, electoral uncertainty, threats to democracy, and the potential for instability and chaos are notably apparent as the country faces an enormously consequential election this fall. What are the risks for sustainable business, and what proactive steps can business leaders take to mitigate them? BSR President and CEO Aron Cramer chats with David Stearns about five topics central to the just and sustainable business agenda that will be affected by the outcomes of the election, followed by strategies for advancing sustainability objectives using BSR’s Act, Enable, Influence approach.

Blog | Thursday August 1, 2024

Measuring Biodiversity: Is e-DNA Part of Your Data Collection Kit?

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Pressure for companies to understand, measure, reduce, and ultimately reverse their biodiversity impacts is mounting. Global agreements (Global Biodiversity Framework), voluntary frameworks (Taskforce on Nature-related Disclosures and the Science Based Targets for Nature) and regulations (Corporate Sustainably Reporting Directive) all point toward rising expectations and underscore the need for increased business attention. 

However, biodiversity is multifaceted, and natural systems are interconnected—there is no single metric like a GHG equivalent to encompass all aspects of biodiversity. BSR recommends measuring data related to 5 different impacts which include land use change, climate change, overexploitation of resources, pollution, and invasive species, and considering the state of biodiversity to prioritize action. Given the complexity of measuring business impacts on nature and the growing impetus to do so, it's no surprise that several new approaches are emerging that enable better data collection for biodiversity state metrics. One such approach is bioacoustics (covered in a previous blog on decoding nature’s soundscapes), another is environmental DNA (e-DNA). 

 What is e-DNA?

All species leave traces of their presence in an environment. These traces are known as e-DNA, and can tell us which species—plants, fungi, or animals—were in an environment. e-DNA can be collected in water, soil, air, and even the seabed. e-DNA Technology is used to analyze e-DNA and identify the species present within a sample. After sample collection, DNA sequences are extracted and analyzed against large meta-databases of genetic information previously collected from hundreds of species to identify each trace in the sample.

Advances in biological sequencing technology have reduced both the cost and the time needed to process data, enabling venture-backed start-ups like DNAir—which pulls air samples for e-DNA analysis—to attract funding and refine solutions. DNAir’s CEO & Founder, Fabian Roger, notes, “While e-DNA is complementary with traditional ecological survey methods, it can uncover hidden diversity by detecting more species than through conventional methods- including often undetected species such as invertebrates or micro-organisms such as bacteria.”

How can e-DNA meet business needs?

e-DNA offers a non-invasive, rapid, and relatively low-cost method for safely identifying the presence of species—including rare, threatened, and invasive ones. It can be useful across multiple project applications and phases, including: 

Before and during facility construction: e-DNA technology can help identify biodiversity presence and absence, providing a better understanding of the spatial distribution of species and species groups, including high-risk threatened species that should be assessed in further detail. e-DNA can also detect invasive or pest species at an early stage, potentially preventing or limiting costs associated with managing invasions. 

Evaluating Project Impacts: e-DNA can help track the effectiveness of mitigation and restoration actions by providing a more accurate measure of priority species loss or gain: “Kering is piloting e-DNA as part of its Regenerative Fund for Nature, to explore a more systematic and harmonized way to measure the biodiversity impact of its projects – and particularly species richness. It is an innovative way to increase transparency on a project's impact on biodiversity in a user-friendly yet scientific approach We hope to contribute to increasing local data on biodiversity and we believe EDNA shows great potential for becoming a standard tool for biodiversity monitoring in regenerative agriculture, conservation and restoration projects globally.”

Limitations and risks of e-DNA 

Like all emerging solutions, e-DNA has limitations that must be managed: 

• Availability of Comparison Data: One of the main challenges with e-DNA today is the robustness and completeness of available datasets for species comparison. Simply put, if DNA sequences for a species are not available in the database used to cross-check samples, those species cannot be identified. The size and quality of databases are improving every day as more and more cooperative genetic databanks, such as Genbank, come online.
• Sequence Interpretation: Accurate sample analysis requires interpretation in context of the nuances of the environment in which the sample was collected. e-DNA degrades rapidly in freshwater and ocean samples, but can persist for decades in soil—and both scenarios pose challenges for pinpointing when a species was present. Identifying a fish species from a freshwater sample could mean that a fish was present at the sample location OR upstream. e-DNA also doesn’t tell us how big the species was, their developmental stage (e.g., larva, adult), or health—e-DNA detects both living and dead organisms.
• Data Privacy & Responsibility: While we’ve focused on the environmental benefits of e-DNA, there are also human impacts to consider. The first is who owns e-DNA and genetic data - an issue made more concerning when we consider that human DNA is also present in many of these environments. Human traces of e-DNA can reveal genetic and ethnic makeup of populations as well as medical conditions in nearby populations raising issues of privacy, consent, and potentially discrimination. While e-DNA can be used to support Indigenous rights and protect culturally significant sites by providing scientific support, the collection of e-DNA must consider indigenous rights, consent, and data sovereignty. 

The Future of e-DNA 

Uncertainty remains, but e-DNA clearly has much to offer on the path to a nature-positive economy. Companies can already consider it as part of their data collection toolkit while also exploring opportunities to support continued improvements in e-DNA and other emerging solutions to biodiversity challenges. As solutions “buyers,” companies play a critical role in ensuring emerging technologies are developed and deployed in ways that prevent harm, protect vulnerable populations, and scale and disseminate best practices—for people and ecosystems alike.

If your team is interested in better understanding the regulatory landscape, exploring peer positioning, or defining nature goals and strategy, please reach out to BSR’s Nature team.  

Blog | Tuesday July 23, 2024

CEO Outlook: How is Business Advancing Sustainability Priorities in 2024?

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At the start of this year, I presented seven pivotal questions that would shape sustainable business in 2024.

1. What impact could the 2024 global elections have on just and sustainable business, and what can companies do about it? 
2. Will the COP28 agreement mark a real transition? 
3. Are DEI commitments flagging? 
4. Can we ensure that emerging technology is developed responsibly and sustainably? 
5. Will new regulations turn sustainability into a compliance exercise? 
6. How is the role of the Chief Sustainability Officer (CSO) changing? 
7. How will business juggle so much interlocking change? 

As we reach the midpoint of the year, I’ve reflected on how these questions interconnect, based on insights and observations from our discussions with companies and other influential actors around the world. 

Companies are focusing more intently on what they know they can deliver with respect to existing goals. 

After a flurry of new commitments in the first part of the 2020s, appetite for ambitious new goals is sharply limited right now. Indeed, high-profile companies in multiple sectors are not only focused on the delivery of existing goals but also on extending the time frame for implementing climate change pledges and other sustainability objectives. This reflects the messy realities of balancing ambition with a hard-headed assessment of delivery challenges. The ongoing tension between ambition and pragmatism can be seen amidst the current battle over the direction of the Science Based Targets Initiative. 

The focus on new regulations is tamping down ambition, which is reshaping the role of the Chief Sustainability Officer–at least for now. 

There is little doubt that new regulatory requirements are having a major impact on company ambition. Preparation and readiness for the new requirements of the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and others, have soaked up a substantial amount of time and attention, as well as budget.

The question on the table is whether this is a one-time transition as companies build systems and competencies, or whether the shift—with a newfound emphasis on verification of quantifiable information and new accountability systems—is here to stay. Will the ESG Controller or the CSO steer sustainability? Will the necessary investments in compliance crowd out the need to have sufficient innovation and ambition?

Compliance orientation is transitory but will also have positive and lasting effects. The CSDDD for example, requires companies to assess and address negative impacts on both people and the environment and helps level the playing field for sustainability leaders. However, it is essential that leaders avoid adopting a compliance-only mindset; that innovation and ambition remain strong; that resources are not overwhelmingly dedicated to reporting, and that businesses transform to meet emerging sustainability challenges. 

Political turbulence is influencing ambition and delivery. 

2024 is the year of elections globally and so far the results have been as unsettled as expected. In the last two months we have seen a surge of the far right in France, followed a week later by a shocking comeback by the left; a landslide changing of the guard in the UK; the election of Mexico’s first female president; a surge of right-leaning parties in the European Parliament; the end of the ANC’s 30-year majority in South Africa, as well as the BJP’s majority in India. The events of the last three weeks in the US have shaken the political system as the upcoming election looms large this fall.

The lack of clear direction and questions about the political system’s stability and resilience create uncertainties that could impede long-term thinking and business planning, including those related to sustainability. Currently, companies do not see sufficient policy stability or certainty on core sustainability issues, and are acutely aware of the public anger and anxiety that is manifesting itself at the ballot box. The rise of nationalism and right-wing populism has targeted business action on diversity, sustainable investing and climate directly, especially in the United States. So far, businesses have chosen to stay quiet about election processes; whether that proves to be a good strategy is not yet clear. 

The underlying realities that underpin the importance of just and sustainable business are stronger than ever, even if company actions appear more muted right now. 

Amidst all this turbulence, the underlying facts facing business and the world remain powerful motivators for action. Climate science change impacts, diversifying and growing populations, economic uncertainty, and the case for investing in a sustainable future remain indifferent to election outcomes. Instead, questions over how much time has to be given to regulatory compliance, or dependencies in delivering on goals, such as the availability of clean energy to enable Scope 3 emissions reductions still stand. A rising generation shows no signs of reducing its demands to see a more fair and sustainable economy.

Almost 20 years after Al Gore’s seminal movie, there are more—and more powerful—inconvenient truths than ever before. Business leaders ignore or diminish them to our peril. No company ever complied its way to innovation. No company can stand by passively as political movements that erode democracy undermine the rule of law that business depends on to operate and thrive. And no company can ignore the need to develop a diverse and talented workforce and a climate-resilient business strategy. 

The questions we posed at the start of the year remain very open. The multiple crosswinds affecting companies’ commitments to just and sustainable business are real. The compelling reasons why these commitments are so important, however, will outlast whatever twists and turns businesses face each year. Sustainable business has always been about looking to the future; that is even more true at a time when the present is turbulent. 

The challenges are real. Nonetheless, a retreat into a compliance-focused mindset; undue caution in the face of uncertainties, and what seems to some as capitulation to political opposition serves no one. We believe that it is high time to renew a focus on ambition, delivery, and innovation. Standing still means falling behind, at a time when real progress is so badly needed. 

If you’d like further information on BSR’s approach to advancing sustainability amid election-related uncertainty and to discuss what’s right for your organization, please don’t hesitate to reach out to us. 

Insights+ | Tuesday July 16, 2024

Navigating US Election Uncertainty: A Call to Action for Sustainable Business

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Blog | Tuesday July 9, 2024

How Financial Institutions Can Manage Reduction of US Reproductive and LGBTQI+ Rights

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Two years since the US Supreme Court overturned Roe v Wade, more than 20 states have banned some or all abortion care. States have also restricted LGBTQI+ rights with 571 anti-LGBTQI+ equality bills introduced in state legislatures in 2023 and 77 signed into law. At least 23 states now limit or ban access to gender-affirming care.

Healthcare providers and others who help patients access care now face criminal penalties. In some states such as Texas, children may even be taken from parents who support their gender expression. Meanwhile, organizations providing financial support for reproductive care and businesses that are inclusive of LGBTQI+ communities are increasingly targeted by policymakers. 

This fractured landscape poses human rights dilemmas for consumer banks, fintech platforms, and credit card issuers seeking to comply with the law while operating responsibly. For instance, in states where abortion is illegal, health insurance no longer covers abortion care, so individuals use personal credit cards, debit cards, cash, and payment platforms such as Apple Pay, Venmo, and PayPal to cover abortion-related expenses, including medication, telehealth visits, and out-patient care.

The greater the distance individuals must travel to access abortions, the higher the financial burden. Meanwhile, gender-affirming care may require ongoing medical visits, medication, and other interventions which extends the financial paper trail over time. As a result, prosecutors may work in collaboration with law enforcement to gather financial information such as purchasing history or transaction data to prosecute individuals and healthcare providers. 

This legal context is destabilizing for business and exposes Financial Institutions (FIs) to financially-material risks. Yet “staying out of it” is not an option—by a margin of two to one, consumers and workers want to live and work in states where reproductive and LGBTQI+ rights are guaranteed. Shareholders are calling on companies, including FIs, to safeguard sensitive customer and user data that may be used to prosecute abortion cases, and regulators are requiring global companies operating in the EU to assess, address, and report on the negative human rights impacts connected with their activities.

Navigating this terrain is complex and the fear of public backlash has led to a chilling effect among many FIs who are increasingly reluctant to speak out publicly. At the same time, little guidance exists to help them manage their approach to legal compliance in ways that respect abortion and LGBTQI+ rights to the greatest extent possible, in line with the United Nations Guiding Principles on Business and Human Rights (UNGPs). The UNGPs clarify that “where domestic laws fall short of internationally recognized human rights, companies should uphold the higher standard. And where laws conflict with those standards, they should seek ways to honor human rights principles within the boundaries of the law.”

There are also no industry or multi-stakeholder initiatives aimed at supporting FIs in navigating government action that undermines human rights. In the technology industry, the Global Network Initiative is a multi-stakeholder collaboration focused on helping tech companies navigate law enforcement data requests that undermine the rights to privacy and freedom of expression.

To address the growing risks to reproductive and LGBTQI+ rights, BSR has published the report, Navigating the Rollbacks in Protection of Reproductive and LGBTQI+ Rights in the United States: A Guide for Financial Institutions, which seeks to equip FIs to assess the implications of legislative developments for how they operate and impact people, weigh competing stakeholder claims, and uphold human dignity. The report summarizes how financial institutions may be involved with human rights impacts and the associated material risks, and provides recommendations on companies’ data practices, handling of law enforcement data requests, de-risking activities, lobbying efforts, and discriminatory or inequitable provision of financial services and healthcare coverage.

Adopting a principles-based approach to navigating this context provides FIs with a roadmap for operating in an increasingly unwieldy patchwork of state laws and regulations in ways that align with human rights principles and create long-term value. 

For further information on the guidance report, or to discuss any of the issues raised further, please reach out to the Human Rights team. 

Blog | Wednesday July 3, 2024

Climate Scenario Analysis: It’s about More than CSRD Compliance

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According to leading climate scientists, 2023 was not just the warmest year in recorded human history—it was the warmest by far. While this increasingly unstable and warmer climate demands business action to decrease emissions, regulations are also requiring companies to begin identifying and addressing the risks and opportunities that climate change, as well as climate policies, poses to business. 

For the past few years, BSR has helped companies meet these expectations by identifying their unique climate risks and opportunities through a best practice known as scenario analysis. This is a well-established methodology that has been embraced by the Task Force on Climate-Related Financial Disclosures (TCFD) to explore divergent climate futures and ultimately develop resilient business strategies that are better prepared for multiple potential realities. 

The Latest Updates to BSR’s Approach to Climate Scenarios 

In 2023, BSR updated its three climate scenarios to align with the latest narratives and datasets published by the Network for Greening the Financial System (NGFS). The NGFS models are notable for their coverage of both physical (e.g., extreme weather) and transition risks (e.g., climate policies, carbon pricing) in a single, integrated dataset.

The latest updates incorporate new policy pledges and targets from countries around the world, updated projections for emerging technologies (e.g., solar, wind, carbon capture and storage), as well as brand-new projections for financial losses from floods and tropical cyclones. 

In addition to including the most current data from NGFS, BSR has made two major changes to its approach to climate scenario analysis: 

Financial quantification of climate impacts to help companies develop a more tangible understanding of their climate risk with estimated impacts to financial performance and cash flow. BSR’s financial quantification methods include the option to estimate the overall risk of misalignment with a net-zero transition and a more bespoke option to quantify the physical risk to your business’s specific locations of interest using geospatial analysis. 

Sector-specific scenarios provide a thorough analysis of how the three scenarios will impact each sector, including insights on which regions are likely to experience the greatest physical risks, which business-relevant opportunities are likely to arise, and which sector trends are likely to be impacted. These ready-made insights provide a better starting point to identify insights specific to your company’s unique situation. For this latest update, the scenarios include coverage of the following six sectors: 

• Consumer Products 
• Energy 
• Financial Services 
• Food, Beverage, and Agriculture 
• Industrials 
• Technology 

Why Conduct Climate Scenario Analysis: It’s About More than TCFD Alignment 

Regulations and standards across the globe are steadily adopting the TCFD framework for climate disclosures, including its recommendation to conduct climate scenario analysis. This includes the EU’s CSRD, California’s recently published climate disclosure bill (SB-261), and numerous other country-level regulations that are aligned with the IFRS Sustainability Disclosure Standards. Beyond complying with regulations and meeting investor expectations, climate scenario analysis can also help companies to: 

• Enable long-term planning to inform strategy setting and financial planning that more robustly capture climate considerations across a wide range of plausible futures
• Improve the management of critical climate risks by integrating them into existing enterprise risk management processes
• Enhance strategic conversations by challenging business-as-usual assumptions and considering novel, disruptive developments 
• Promote collaboration among internal stakeholders through shared discussion of key drivers reshaping the external operating environment 
• Improve strategic agility by establishing indicators that should be monitored and rehearsing responses to disruption in advance 

If you’re interested in conducting a climate-scenario analysis with BSR, please contact us. In the upcoming months, the climate team will continue to develop these scenarios, including the latest models and data from the Network for Greening the Financial System (NGFS), a new fourth scenario that depicts a world with both high transition and physical risks, and guidance on incorporating nature considerations into scenario analysis.