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Blog | Wednesday November 3, 2021

The VRF and IFRS Foundation Join Forces: A New Day for ESG Reporting and Disclosure

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While it may lack of some of the drama of the net zero and deforestation pledges that have come already at COP26, today’s announcement by the International Financial Reporting Standards Foundation (IFRS) that it intends to consolidate the Value Reporting Foundation (VRF) and the Climate Disclosure Standards Board (CDSB) may well prove to be one of the most important developments in Glasgow.

For purposes of transparency: I serve on the Board of the Value Reporting Foundation, and prior to that, on the Board of the International Integrated Reporting Council. The steadfast focus from these organizations to prioritizing outcomes over institutional interests has been fantastic to see: their leaders deserve immense credit for that vision.

Since ESG reporting and disclosure began more than 20 years ago with the launch of the Global Reporting Initiative (GRI), all participants in the reporting “system” have quite justifiably decried the confusion, duplication, and inconsistencies in reporting standards and frameworks.

Some of this duplication is to be expected. We have been witnesses to and participants in the creation of a new form of measuring value and providing transparency. The significance of this is massive, important, and complicated. 

Times have changed. Fragmentation serves no one’s interests. As ESG gains momentum and urgency, the era of “letting a thousand flowers bloom” is no longer fit for purpose. It is time to embed sustainability considerations in the basic functioning of the capital markets. That will only happen with universal disclosures that enable consistency.

The work of the nascent International Sustainability Standards Board (ISSB), which will be significantly strengthened by the consolidation announced today, will advance with the objective of achieving comparable, consistent, and reliable disclosures on climate and other sustainability issues.

Much remains to be done and demonstrated. It will be essential that a fast-evolving landscape be embraced in the new ISSB to ensure that reporting reflects society’s expectations. This is particularly true when it comes to the “S” in ESG, which is sometimes harder to quantify: equity is not as easy to measure as carbon emissions. The new ISSB would be wise to take heed of the “double materiality” model that embraces not only things that are financially material today, but also those matters that are material to society, and which often become financially material tomorrow.  And other key actors—including the GRI, the Task Force on Climate-Related Financial Disclosures (TCFD), the World Economic Forum’s International Business Council, and others—can and should be part of the shaping and implementation of the ISSB.

The news today from Glasgow may well mark a real turning point in how markets operate. A harmonized, universal system will align incentives, promote wider uptake, and enable comparability.  Consolidation should also do three other critical things:

• Unleash more business focus on creating long-term value for all stakeholders.  
• Allocate capital by investors to companies who embrace a long-term approach.
• Enable the public, and policymakers, to understand which companies are truly delivering in pursuit of a just and sustainable world.

We all celebrate the new commitments coming from COP26. We also know that commitments alone won’t get the job done. The alignment announced today may well provide the foundation on which ambition can be turned into action.

Reports | Tuesday November 2, 2021

Business in Conflict-Affected and High-Risk Contexts

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Overview

Businesses in conflict-affected and high-risk contexts (“high-risk contexts” in this brief) face heightened risks of involvement in serious human rights violations. This can lead to severe harm—including loss of life, liberty, and livelihoods—to community members, employees, suppliers, contractors, and customers, as well as reputational damage, operational interruptions, legal liability, and financial penalties for the business.

To prevent and mitigate human rights risks in high-risk contexts, companies should conduct “heightened” human rights due diligence. Heightened human rights due diligence goes beyond what is required by the UN Guiding Principles on Business and Human Rights (UNGPs) by accounting for context and the business’s impact on that context. It requires ongoing stakeholder engagement, forward-looking trend analysis, proactive mitigation measures, and localized decision-making.

One of the central concepts we're advancing here is that business does not operate in a vacuum—they are parachuting in to a preexisting context with preexisting power dynamics and tensions, and by virtue of entering that context, they are changing it. Businesses may think that they are "neutral" because they don't take a position on the political situation in that country, but because they bring financial resources and interacting with people, economic systems, and the environment, they are having an impact (either positive or negative) on that context.

Defining High-Risk Contexts

High-risk contexts include situations of armed conflict and mass violence as well as areas with weak governance or rule of law; extensive corruption or criminality; significant social, political, or economic instability; historical conflicts linked to ethnic, religious, or other identities; closure of civic space; and a record of previous violations of international human rights and humanitarian law.¹

No one factor drives the conflict and instability seen in these contexts. Rather, a complex interplay of social, political, environmental, and economic factors fosters an environment where violence, oppression, poverty, human rights abuses, and state failure are more likely to occur. These factors include social divisions; governance grievances like political exclusion, weak state accountability, corruption, and inadequate service provision; economic grievances like limited economic opportunity and economic inequality between groups; and environmental factors, including climatic shocks and stresses as well as natural resource scarcity and degradation.²

Blog | Wednesday October 27, 2021

Transform to Net Zero: Five Key Steps to Setting Net Zero Goals

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While more than 3,000 businesses have joined the UNFCCC Race to Zero campaign and pledged to reach net-zero greenhouse gas (GHG) emissions by 2050, many companies face challenges in putting this guidance into practice. 

Wipro is a founding member of Transform to Net Zero, a cross-sector industry initiative to accelerate the transition to an inclusive net-zero global economy. Our 2025 goal is for 1,000 Fortune Global companies to adopt targets backed up by transformation plans to achieve net-zero emissions no later than 2050.

To advance robust net-zero goal setting, Transform to Net Zero’s new Transformation Guide will share how three Transform to Net Zero members—Danone, Wipro, and Environmental Defense Fund (EDF)—approached a net-zero goal-setting process that translates into meaningful business transformation.

Below are five steps of how your organization can navigate the net-zero goal-setting process and commit to meaningful emission reduction targets.  

Step 1: Understand Your Emissions

Every company’s decarbonization journey begins with a comprehensive value chain GHG baseline and footprint assessment. Knowing your footprint allows you to set net-zero targets, but it is often easier said than done, especially with regards to Scope 3 emissions, which are often the lion’s share of a company’s emissions. 

Scope 1 and 2 emissions are relatively straightforward to account for because they are derived directly from company operations and therefore within the direct control of a company to remediate. Scope 3 requires accounting for your entire value chain, much of which is outside your control either upstream or downstream, which make Scope 3 emissions a tough nut to crack.  

Measuring Scope 1, 2 and 3 emissions are nevertheless a crucial first step in developing an accurate net-zero roadmap that demonstrates credibility to investors, customers, civil society, and other stakeholders. Amidst increased scrutiny of corporate net-zero targets, it is imperative that this accounting of your carbon footprint is reliable and transparent. 

Step 2: Set an Ambitious Net-Zero Goal with Clear Interim Milestones

Every company needs a north star commitment when it comes to emissions. For instance, Wipro has committed to net-zero GHG emissions by 2040, with a 55 percent reduction in GHG emissions by 2030. But making a commitment is not enough. Publishing a detailed plan explaining how you will get there is a major component as well. In an era where credibility is paramount, you must show your work. That means sharing key details regarding each phase of your GHG mitigations, including direct emissions (company facilities and vehicles), indirect emissions (purchased electricity, good and services), and yes, your value chain too (waste, transportation, business travel, employee commuting, and all downstream lifecycle activities related to your products and services). Creating and publishing a detailed roadmap accounting for every facet of your emissions with interim milestones will enable you to track and share your progress toward net zero with key internal and external stakeholders.  

Step 3: Engage with Leaders to Create and Sustain Organizational Buy-In 

Decarbonization doesn’t happen instantaneously. It’s a long process that requires the buy-in and support of many people over a period of many years. In the beginning, your leadership must be onboard because decarbonization requires major operational changes through your organization. Wipro has been working on decarbonizing its value chain for more than 15 years. Initially, the focus was on socializing with leadership the idea of developing a strong climate change program and obtaining consensus on commitments to the necessary investments and resources.  Over time, this process matured into a common shared understanding throughout the company of the need to constantly improve our net-zero and sustainability work. 

Step 4: Collaborate with Suppliers and Employees on Meeting the Scope 3 Challenge

Achieving net zero is not possible without tackling Scope 3 emissions, which by definition are not under the company’s direct operational control. For many companies, measuring and ultimately eliminating Scope 3 emissions offer the greatest potential GHG reductions, so it’s an incredibly worthwhile, albeit difficult, task. For example, 75 percent of Wipro’s emissions in FY21 are from Scope 3 sources, with business travel, employee commute, and purchased goods/services comprising a significant proportion. 

To help reduce your Scope 3 emissions, consider adopting some of the following strategies:  

• Work with local transport authorities to improve access to public transport for employees 
• Increase carpooling by employees 
• Develop robust processes to promote remote working and collaboration
• Reduce business travel, in particular air travel
• Increase the lifecycles of your products and their end-of-life treatments
• Reduce the waste generated by your organization as much as possible 

In addition, work with suppliers directly through industry associations to decarbonize purchased goods, such as IT hardware, telecom, and other business services. Your suppliers must be a key part of your reduction strategy because they most likely contribute most of your value chain’s emissions. 

Step 5:  Partner with Customers

The GHG emissions of the IT services sector tend to be relatively lower than more carbon-intensive industry sectors. For B2B businesses, while reducing your own value chain emissions to net zero is a significant contribution, you can also play an equally important role in helping customers reduce their own GHG footprint with the help of the right technology solutions and expertise. Organizations around the world are all facing the net-zero imperative, and your organization’s experience planning and executing a net-zero commitment is valuable and important. Share it with your customers. While many of the world’s largest companies have net-zero commitments, even more do not. It is essential that more and more organizations join the drive to net zero, and by sharing your story with your customers, you make their own journey that much more palatable. 

We will be sharing more in Transform to Net Zero’s Transformation Guide on Net Zero Goal Setting being published on November 8, 2021. 

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Blog | Tuesday October 26, 2021

COP26 and the Real Economy: Climate Change Solutions at and beyond Glasgow

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As many of us prepare to descend on Glasgow for the once-delayed, badly needed COP26, the world is facing serious questions. While it may be hyperbolic to say that these next two weeks represent the “last chance” to avert climate disaster, the urgency of action is blindingly clear, as the UN’s declaration of a Code Red for humanity makes clear.

At the core of this COP, and indeed all our collective efforts to maintain a stable climate that sustains humanity, is this dilemma: actions and commitments continue to increase, but the trajectory of the planet’s warming is headed in the wrong direction. 

Breaking this dynamic is objective number one in Glasgow and is very much worth navigating the welter of COVID-19 precautions adding a layer of complication on top of what is a highly complex event to begin with.

Here are four things we want to see emerge by the time this COP ends on November 14.

Raise Ambition

First and foremost, it is essential that we continue to expand ambition: An explosion of net-zero commitments has been made since Paris, an idea that remained at the fringes in 2015. More than 3000 companies have now committed to net zero before mid-century, including one-fifth of the world’s largest companies. More than 130 governments—representing 61 percent of global emissions, 68 percent of global GDP, and 52 percent of the global population—have made comparable commitments. The Race to Zero is one of the centerpieces of voluntary action in Glasgow, which is assembling commitments in several hard-to-abate sectors. What’s more, there are nearly 2,000 companies that have expressed support for science-based targets. Many governments are coming to COP with strengthened nationally determined contributions (NDCs). Investors are making commitments through Climate Action 100+, adoption and use of the TCFD framework, and other means.  The ambition loop must continue—and expand.

Translate Ambition to Action

All this is crucial, to be sure. But it is far from sufficient. The science tells us that we are not yet turning the corner. It is well past time to translate ambition into action. Doing this means setting not only 2050 targets, but also 2025 objectives, which are measured and reported transparently. As one article put it,  a 2050 pledge is “six CEOs from now,” meaning that long-term commitments may not lead to necessary changes. Ensuring that commitments deliver tangible, meaningful results requires not only changing business models, products and services, and incentives, but also an urgent call for strong policy solutions. This continues to lag, not least on the part of many companies and trade associations in the US recently, with insufficient support (albeit with some exceptions) for the climate provisions of President Biden’s Build Back Better legislation.

Finance the Transition

It is also essential that governments keep their Paris promises on climate finance. Some governments—Germany, for example—have done exactly that. But far too many have failed to do so. This is a matter not only of justice, but also of generating the widespread support required for transformative global action. The need could not be clearer. We have learned the painful lessons of the financial costs—let alone the devastating human costs—of the global pandemic. In the wake of COVID’s destruction, it is therefore sobering to see The Lancet, one of the world’s foremost medical journals, call climate change “the defining narrative for human health.” The fact is that the human costs of climate change come along with financial costs, which also makes clear that climate finance is an investment that will pay off. Business has unique credibility in making the economic case for such investments; it should use its voice to make sure governments make good on their pledges—at long last.

Bring Climate Justice to the Fore

My strongest hope for COP26, however, is that it will be a turning point towards a more just and inclusive world as we go through the energy transition. Climate justice has too often been relegated to the sidelines at COPs—and beyond. We have seen such changes before. At Paris in 2015, very few companies or political entities had committed to net zero; today, it is rapidly becoming commonplace.  Can the same dynamic be embraced on climate justice? Of the 3000+ companies setting net zero aspirations, how many have included commitments to climate justice? BSR’s estimation is that the numbers are closer to 1 percent than even 10 percent, let alone 100 percent.  As the treatment of climate finance shows, there is insufficient public investment in investing in inclusive climate solutions. In a world that is brutalized by extreme weather with increasing frequency, it is indefensible not to make climate justice a priority.

The Challenge Ahead

The world is facing a serious test at a time when international cooperation and democratic institutions are under significant pressure. There is also great cynicism about whether the many commitments made by business and government are more than empty words. It has never been the case that any COP could turn the world in the right direction. Many of the exciting partnerships, investments, and innovations that we need happen far from the COP “Blue Zone” where the negotiators trade text. 

The world outside COP relies on commitments inside COP, but the work to make good on those commitments happens in “the real economy” the rest of the year.  With ongoing ambition, resolute pursuit of that ambition, the right level of investment, and a focus on climate justice, we can turn this into a catalyst that shifts the economy in the right direction.

Reports | Thursday October 21, 2021

Within Reach: How Digital Wages That Work for Women Can Support Bangladesh’s Economic Future

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Wage digitization of low-income populations has the potential to be a win-win opportunity that can deliver both social and economic progress, helping countries meet the UN’s Sustainable Development Goals. For garment workers, it can mean transparency over pay, the chance to open a financial account, and greater economic empowerment. For the wider economy, it can mean improving efficiency for factories, a new market segment for financial service providers (FSPs), and citizens saving and remitting more money. This report sets out three possible future scenarios of how things might evolve for women workers. This exercise aims to assist policymakers developing Bangladesh’s digital road map—highlighting where the risks and opportunities are.

Blog | Friday October 8, 2021

The Stars Are Aligning

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When I first entered the field of just and sustainable business in the mid-1990s, it was based on a vague notion that big business should “do the right thing” by addressing social and environmental concerns. We had few normative goals, and we certainly had no standards to which we could hold business accountable.

This void was filled over the following quarter century.

The Sustainable Development Goals (SDGs), the Paris Agreement, and continued evolution in international human rights instruments provided a clear destination—“the what” of just and sustainable business.

New global norms, such as the UN Guiding Principles on Business and Human Rights (UNGPs), the OECD Guidelines for Multinational Enterprises, and the plethora of multi-stakeholder initiative codes and principles provided clear guidance for the role of business in reaching the destination—“the how” of just and sustainable business.

New global standards, such as the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), and Science-Based Targets (SBTs) all improved our methods for holding companies accountable—“the show and tell” of just and sustainable business.

And then suddenly, amid a global pandemic, the concept of “Environmental, Social, and Governance” (ESG) criteria came to dominate the discourse.

However, this quarter century of entrepreneurship also sowed the seeds of confusion. Questions such as “what is material,” “material to whom,” and “which standard shall we use” became mainstream. Our jobs in the just and sustainable business field became easier because we had norms and standards to work from. However, our jobs also became more difficult, because confusion, complexity, and inconsistency became a strike against them all.

But the stars are now aligning. We are entering the next era of just and sustainable business with a much clearer pathway, and we should take a moment as a field to reflect on this milestone. BSR has written extensively elsewhere about the details of standards alignment; here, our intention is to sketch out the framework around which the field seems to be coalescing.

• Double materiality: As the EU Corporate Sustainability Reporting Directive makes clear, business is accountable in two ways—to investors, for the creation of enterprise value, and to society at large, for impacts on people and the environment. We need, and now have, standards (e.g., SASB, GRI) for both.
• Dynamic materiality: The two dimensions of materiality are distinct and exist entirely on their own merits, but they are also connected—impacts on people and the environment interact with the creation of enterprise value creation and may become more material to business over time. The two dimensions of materiality are dynamic, and the trick is figuring out how and where they interact and how that should inform business action.
• Performance and reporting: The refrain that reporting alone is insufficient has always rankled because those creating reporting standards never claimed that disclosure alone would solve all ills. Today, we have a collective appreciation of the synergy between performance and reporting, as reflected in the deliberate integration of impacts and outcomes (such as the SDGs and SBTs) and normative process standards (such as the UNGPs) into disclosure standards (such as GRI and TCFD). While more progress is undoubtedly needed on measuring impacts and outcomes, performance and reporting are becoming more connected than ever before.
• The company and the system: Twenty-five years ago, it seemed obvious that by transforming big business, good things would happen in society; however, too often the just and sustainable business field lacked a complete grasp of how business interacted with the broader political, financial, social, environmental, and economic systems. Today, the field better appreciates that institutions, structures, and organizations are impacted by deep-rooted racial, gender, and political discrimination and that climate action is a collective endeavor. Systems need to be reformed if we are to sustain performance over the long term, and companies should understand their connection to the wider context if meaningful and positive change is to be achieved.
• The company and the government: I recall a heated debate, around fifteen years ago, about whether “corporate responsibility” should be defined as all the voluntary actions companies took beyond regulatory requirements. This felt unnecessarily constraining to me and not why I entered the field. Today, there is a stronger consensus that government regulation of business is critical to the achievement of social justice and sustainability goals, that business should challenge governments when they violate human rights, and that a company’s government affairs, social justice, and sustainability commitments must be aligned.

When asked about the state of just and sustainable business, I like to use a framing that our President and CEO Aron Cramer introduced a few years back, that “everything’s changed, and nothing’s changed”—in other words, that by one set of benchmarks, the business community has come a long way, but by another set of metrics, impacts of climate change are becoming all the more real and urgent, democracies are in decline, and economies are becoming less equitable.

We’ve created the infrastructure, but we still need to prove we can deploy it in ways that truly address the climate crisis, place equity at the center of our social, economic, and environmental systems, and ensure the universal fulfillment of human rights. These urgent priorities must dominate the next era of just and sustainable business.

It has taken a quarter of a century for the role of business to become as clearly defined as it is today. It had better have been worth it, because we now only have a decade left to finish the job.

I would like to thank Paloma Muñoz Quick for feedback and dialogue on this blog.

Blog | Wednesday October 6, 2021

Inside BSR: Q&A with Paloma Muñoz Quick

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Inside BSR is our monthly series featuring BSR team members from around the world. This month, we connected with Paloma Muñoz Quick, an Associate Director in our NYC office.

Paloma chatted with us about how her life in Chile and Brazil fostered her interest in tackling systemic injustice, her work on investor action on human rights, and how working at BSR supports her commitment to protecting human rights.

 

Tell us a bit about your background. Where are you from, where are you based, and how have you been since COVID/work from home/etc.? 

I am half American and half Chilean, and I spent my formative teenage years living in Brazil. I’m now based in Brooklyn, where I worked from home throughout the pandemic.

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

Born under the dictatorship of Augusto Pinochet and living in both Chile and Brazil—two countries affected by significant socioeconomic inequality—I was drawn to human rights and tackling systemic injustice from an early age. I eventually did a Master’s in International Affairs and Human Rights and landed my first job at the Danish Institute for Human Rights. I’ve now been working on business and human rights for over a decade, initially advising companies on human rights country risk, then building the capacity of civil society around the world to advocate for business respect for human rights, and later advising governments on adopting robust public policy to safeguard human rights from business activities.

Eventually, I realized financial actors—institutional investors in particular—were largely absent from the human rights and business conversation. As the source of capital for business, their involvement is critical for making progress. That’s when I decided to move to the Interfaith Center for Corporate Responsibility (ICCR) and launch the Investor Alliance for Human Rights, whose investor membership now represents over US$5 trillion in assets under management. I later worked for the UN Working Group on Business and Human Rights to develop a global report taking stock of investor action on human rights and a series of recommendations to help scale investor engagement in this area.

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

All this experience brought me to BSR, where I’ve been leading our work at the intersection of finance, investment, and human rights for the past four months. In this role, I am excited about developing insights on the interlinkages between environment, social, and governance (ESG) investing and the business and human rights framework, as well as practical tools to help further bridge action on human rights and ESG. I am also excited about supporting private equity and venture capital firms in their human rights journey.

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

No surprise here—I’m passionate about human rights. Governments came together to agree upon a standard of achievement for all people, covering a wide range of civil, political, economic, social, cultural, and environmental rights. The standards are clear, and so is the roadmap for business to uphold these standards—namely, the UN Guiding Principles on Business and Human Rights. Yet too often, we see business actors and data providers reinventing the wheel, defining the “S” of ESG in their own way, often missing the wide range of human rights impacts connected to business activities and the business processes needed to address these. My work at BSR enables me to work on this from various angles, including by directly advising financial actors and developing thought leadership.

2020 was undoubtedly a difficult year. What were the things that brought you joy amid lockdowns/quarantines? What are you most looking forward to for the rest of 2021 and looking into 2022?

My dog brought me joy! Together we walked our way around parts of Brooklyn I’d never ventured into. I even discovered a new neighborhood that I moved into halfway through the pandemic. What I look forward to is traveling—anywhere! But especially to Chile to see my family.

Blog | Thursday September 30, 2021

Accelerating Action on SDG 5 across the Jewelry Industry

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Women drive 90 percent of demand for jewelry industry products and are present across the entire value chain. However, women’s roles and opportunities in the jewelry supply chain are conditioned by gender inequalities and discrimination. 

Furthermore, the COVID-19 pandemic has slowed and, in some cases, reversed progress toward gender equality across industries. Many of the hardest hit industries, including retail, are dominated by women. Jewelry retail in particular is one of the hardest-hit consumer goods categories, with sales dropping as much as four-fifths in certain regions in the early stages of the pandemic, and the impacts have cascaded throughout the industry and its supply chain, worsening many of the structural inequalities and challenges women already face.  

In 2020, UN Women launched a ground-breaking campaign: “Generation Equality: Realizing women’s rights for an equal future,” marking the 25th anniversary of the Beijing Declaration and Platform for Action and bringing together multiple generations of women’s rights activists. This culminated in July 2021 in Paris, where business, governments, and civil society committed to an ambitious global acceleration plan to achieve gender equality by 2030. This momentum and the resulting "she-cession" of the global pandemic increased the urgency for business to advance gender equality. Forty companies made individual and collaborative commitments to push for gender equality across their value chains.

“We acknowledge issues on gender equality are complex and deeply rooted, but strongly believe business can play a critical role in changing attitudes, building responsible practices throughout the supply chain, and creating inclusive and safe work environments for everyone.”

Iris Van der Veken, Executive Director of the Responsible Jewellery Council (RJC)

As part of Generation Equality, BSR, in partnership with RJC, engaged with a wide range of industry stakeholders across the globe through workshops, regional roundtable discussions, and surveys. The resulting report, “Gender Equality Report: The time is now to accelerate SDG 5, achieve gender equality, and empower all women and girls,” sheds light on the current state of corporate efforts to advance gender equality in the jewelry industry. The report presents four major insights:

1. Enabling small and medium-sized enterprises (SMEs) to advance toward gender equality is a key opportunity for the entire industry.

Gender equality efforts begin with high-level leadership commitments and transformational business policies that can set the pace for integrating gender equality across business value chains and teams. However, one of the biggest barriers toward achieving these commitments and policies across the industry is organizational size. SMEs often lack internal capacity, expertise, and/or resources to develop formal policies, and gender equality is not prioritized as clearly as in larger organizations that face more expectation to act and commit to external initiatives. As many as 35 percent of RJC members are SMEs who have not developed external commitments or vision statements, and 21 percent of RJC members have shared that they have limited formal policies. However, many SMEs have made internal commitments, have adopted informal policies, or promote inclusivity in other ways, such as company charters.  

2. Social norms on gender and structural factors in companies are impacting access to talent.

In the jewelry industry, accessing and hiring diverse talent, particularly women, is challenging.  This issue is even more acute in particular regions, in the mining industry, and for roles in logistics or STEM-based functions. However, some companies have begun to address these barriers to gender diversity.  So, while many companies still focus on "hiring the best person for the job," which may hamper efforts to increase gender diversity, the survey revealed that 24 percent of RJC member companies are reviewing their job positions and requirements to remove potential biases. In addition, many other opportunities exist to implement hiring, development, and retention plans. Practices, such as unconscious bias trainings for hiring teams, hiring and promotion target-setting, and creating focused development and learning opportunities for underrepresented groups, are still limited across members, meaning there is significant scope for improvement. 

3. Globally, the conversation on diversity in the industry is centred on gender equality.

However, in certain regions, the approach is shifting to broader diversity and inclusion dimensions, such as focusing on racial justice and ethnic diversity in North America and disability and age in Europe. Because different dimensions of identity can create layers of discrimination for an individual, not all women have experienced the same level of progress toward gender equality in recent years. Companies should consider taking an intersectional approach to gender equality and understand how different dimensions of identity intersect with one another. However, a shared challenge across many companies in the industry is where or how to start, as these issues are highly culturally sensitive and the regional context is critical to understanding the challenges and opportunities. 

4. Organizations have an opportunity to amplify their impact and drive change in the industry by looking at their entire value chain.

Businesses can enable more diversity in their value chains by taking a range of actions, including actively sourcing from entities that are led and/or owned by women or other underrepresented groups, focusing on worker well-being throughout their supply chains, and using their marketing practices to challenge stereotypes. However, value-chain initiatives in the industry are still largely limited. Only 2 percent of surveyed companies have commitments to procure from women-owned or minority-owned businesses. Lack of market access for smaller and/or women-owned businesses continues to be a significant barrier to value-chain diversity.

Where to from here?

Our dialogues and other engagements make it clear that industry-wide collaboration will be essential to tackling the systemic challenges to achieving gender equality. BSR and RJC are committed to supporting and stirring this industry-wide collaboration and furthering this dialogue with industry stakeholders to promote progress within individual organizations as well as the broader industry. 

We also encourage jewelry industry organizations to explore the RJC report for more insights on how to move the gender equality agenda forward, including case studies and best practices from industry leaders. And as always, we welcome the opportunity to work with companies and other stakeholders, either directly or as part of an industry collaboration. Click here to learn more about the value of RJC membership, its code of practice, and how to get involved.

Blog | Thursday September 23, 2021

Human Rights Are Not Just an “ESG Factor”

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The notion that investors should use environmental, social, and governance (ESG) considerations to inform their decision-making is having a moment. This is undoubtedly a good thing for those who believe that just and sustainable business has an essential role to play in the creation of a more equitable future. However, there is a risk of fundamental concepts getting lost in the process. One of these concepts is the responsibility of business—including institutional investors—to respect human rights.

The profile received by ESG today may seem sudden, but is happening for good reason: The physical impacts of climate change are becoming more apparent with each season, the global pandemic has forced a renewed examination of human capital across company value chains, and the decline of democracy and trend towards political polarization has significantly increased legal, operational, and reputational risks for companies everywhere. In this context, it is not hard to convince investors of the material significance of ESG to enterprise value creation.

However, this lens—of viewing ESG considerations solely as a series of factors that impact enterprise value creation and financial returns—may jeopardize the very outcomes we are seeking to achieve. 

Put simply, respect for human rights is not just an ESG factor, but a global standard of expected conduct for all companies, including institutional investors. Human rights are not a subset of discreet social topics to be addressed, but a globally agreed upon standard of achievement for all people, covering a wide range of interdependent civil, political, economic, social, cultural, and environmental rights.

...enterprise value creation should only happen when business can meet its responsibility to respect human rights.

In the business context, this is manifested in a responsibility to adopt a human rights policy, embed respect for human rights throughout the business, and undertake human rights due diligence—in other words, a fundamental methodology and mindset, not simply an issue to address. And crucially, taking action to address human rights risks should not be contingent on their relevance to enterprise value creation; enterprise value creation should only happen when business can meet its responsibility to respect human rights.

However, too often the opposite is the case. When investors position risks and opportunities for the business as the core metric for evaluating ESG performance, companies will respond by focusing too much on what shareholders have to say, and not enough on the voices of those whose rights are impacted. And by aggregating ratings across E, S, and G factors, companies may be labeled as strong ESG performers by investors due to their high ranking on financially material environmental criteria, despite contributing to human rights harms on social criteria. 

This is a problem. Many investors misinterpret fiduciary duties as limiting their ability to act on anything that does not demonstrably increase the financial standing of beneficiaries or customers in the short-term. While severe risks to people often converge with risks to business, measuring the returns of paying a living wage (for example) may not be apparent in the short-term. 

Public debates on the merits of ESG too often ignore the growth of business and human rights, such as the incorporation of the UN Guiding Principles on Business and Human Rights (UNGPs) into the OECD Guidelines on Multinational Enterprises and the subsequent creation of responsible business conduct guidance for institutional investors by the OCED. Emphasizing this shortcoming, a recent United Nations report found that “knowledge of human rights, including how human rights are defined, how they are relevant across ESG factors, and what meaningful human rights due diligence looks like remain limited in the investor community.” 

We believe that the business and human rights framework tackles many weaknesses in today’s ESG landscape, and important organizations are moving in this direction too. The EU has taken on a leadership role in re-defining responsible business and ESG investing by codifying the human rights expectations of business actors—for example, the Sustainable Finance Disclosure Regulation requires investors to disclose the adverse impacts of ESG-branded investments on people and planet regardless of financial materiality, while the proposed EU “social taxonomy” is also grounded on human rights standards and frameworks.

The notion of “double materiality,” which features prominently in proposals for a new EU Corporate Sustainability Reporting Directive, is especially promising. Building upon two decades of standards development, double materiality makes clear that business is accountable in two different ways—to investors, for the creation of enterprise value, and to society at large, for impacts on people and the environment. We need standards for both.

The two dimensions of double materiality are connected because impacts on people and the environment increasingly interact with the creation of enterprise value creation. This has become known as “dynamic materiality,” and wise companies will seek to convey to investors how they address this relationship. However, the two dimensions of double materiality—to investors, for the creation of enterprise value, and to society, for impacts on people and the environment—are distinct and exist entirely on their own merits.

Ten years ago, the unanimous endorsement of the UNGPs by the UN Human Rights Council brought new clarity to the notion that all companies, including investors, have a responsibility to respect human rights, regardless of its significance to financial returns. By all means, let’s seize the moment of increased investor interest in ESG to advance more responsible forms of business; but let’s not forget the conceptual foundations that make for truly just and sustainable business, and make sure that the ESG movement meets its own responsibility to respect human rights.

Reports | Tuesday September 21, 2021

Climate Change: Building Resilience While Protecting Human Rights

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Overview

Human rights and climate change are inextricably linked. The impacts of rising global temperatures—natural disasters, the proliferation of vector-borne diseases, climate migration, famine, and drought—negatively impact many human rights, such as rights to shelter, natural resources, mobility, health, employment, and livelihoods.

Whether caused by physical climate impacts (e.g., extreme weather events, flooding, heat stress, the spread of disease) or climate solutions themselves (e.g., communities excluded or left behind as companies install new infrastructure as part of their transition to a net-zero economy), climate change has disproportionate impacts on poor and marginalized communities, and it exacerbates the underlying systemic inequities that these communities already face.

As climate change magnifies inequalities and vulnerabilities, protection of human rights becomes even more urgent: where human rights protections are weak, individuals and communities are less able to adapt and build resilience to climate impacts.

Why This Matters for Business

The UN Guiding Principles on Business and Human Rights (UNGPs) serve as the primary internationally accepted framework for standards and practice regarding human rights and business. According to the UNGPs, companies have a responsibility to respect human rights, which requires that companies (a) avoid causing or contributing to adverse human rights impacts through their own activities and address such impacts when they occur and (b) seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products, or services by their business relationships, even if they have not contributed to those impacts.

In the context of climate change, this means that companies have:

1. A responsibility to address human rights impacts related to their physical climate impacts;
2. A responsibility to address human rights impacts related to their transition to a low-carbon economy; and
3. An opportunity to promote the realization, fulfillment, and enjoyment of rights in a resilient world.

The table below illustrates how physical climate impacts, transition risks, and transition opportunities should be considered in the context of a company’s climate and human rights strategy.