Search Results

Blog | Thursday April 15, 2021

Six Things Business Should Know About the EU Taxonomy

Preview

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

4. The EU Taxonomy will affect businesses beyond Europe.

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

5. The EU Taxonomy is not only about environment.

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

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

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

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

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

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

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

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

Blog | Thursday April 8, 2021

Keeping Workers in the Loop

Preview

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

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

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

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

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

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

Together, we seek answers to the following questions:

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

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

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

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

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

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

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

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

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

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

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

Join Us

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

Blog | Wednesday March 31, 2021

Maritime Anti-Corruption Network Embarks on a New Journey

Preview

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

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

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

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

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

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

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

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

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

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

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

Blog | Tuesday March 30, 2021

Inside BSR: Q&A with Sethypong Sok

Preview

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Blog | Wednesday March 24, 2021

What Businesses Operating in Vietnam Can Do about Climate Risk

Preview

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

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

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

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

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

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

How Businesses in Vietnam Can Prepare for Climate Risks

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

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

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

How Climate Scenarios Help Business Prepare for the Future

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

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

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

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

Building Climate Resilience

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

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

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

Blog | Wednesday March 24, 2021

Transforming Business for Resilience

Preview

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Reports | Tuesday March 23, 2021

Resilient Business Strategies: Decisive Action for a Transformed World

Preview

A World Transformed

After the tumultuous events that erupted last year and continue to reshape our world, we need no reminder that we are living in an era of profound turbulence and historic change. 

The deep and interconnected changes remaking our world demand bold action. Simply aiming to integrate elements of sustainability into a business’ core strategy is no longer sufficient.

For business, the call to action could not be clearer: resilient business strategies are more urgent than ever today and are the key to achieving value for all stakeholders in the long term. They will lead to nimbler and more innovative companies.  

But it is not just about a process that drives company and stakeholder value. Resilient business strategies are an essential pathway to achieving a just world and an economy that delivers truly inclusive and sustainable prosperity.

Blog | Friday March 19, 2021

Forced Labor and Human Trafficking: Four Regulatory and Legislative Trends Business Should Watch

Preview

Governments are increasingly scrutinizing human trafficking and forced labor abuses in private sector operations. In addition to the moral imperative to address these abuses, businesses should be on alert given the significant disruptions in supply chains that government regulation may cause, resulting in potential economic, legal, and/or reputational harm. Apparel, food and beverage, technology, and financial services companies in particular should closely monitor and prepare for global regulatory developments.  

1. Companies should expect more active involvement from civil society organizations in the U.S. Customs and Border Protection’s Withhold Release Order process.

The Situation

The U.S. Customs and Border Protection (CBP) has utilized Withhold Release Orders (WRO) to suspend the importation of goods at a U.S. port of entry when the agency has reasonable evidence of the use of forced labor in the manufacturing or production of a good entering the U.S. supply chain. The onus is then on the importer to demonstrate to the U.S. government that the good was not made with forced labor. In the last two years, the CBP has ramped up its use of this enforcement tool, issuing 13 WROs across multiple industries in 2020 alone.

While the CBP has welcomed the public to submit information on merchandise that could be considered for a WRO, there has been limited visibility on submissions until now. In February 2021, anti-trafficking organization Liberty Shared submitted two petitions to the CBP concerning the use of forced labor in the supply chains of the apparel industry in Leicester, UK and of Boohoo, PLC. 

What Business Can Do

Companies which have identified forced labor as a supply chain risk should be conducting ongoing human rights due diligence to identify, assess, and mitigate potential or actual risks of forced labor, engage in meaningful dialogue with rightsholders, and ensure their grievance mechanisms are working.

2. Companies should prepare for increased regulation and withholding of products sourced or manufactured in Xinjiang, China.

The Situation

Reports have described the mass internment and surveillance of over a million ethnic Muslim minorities in Xinjiang, China. News sources detail how Uyghurs and other minorities are being forced to work in factories that produce raw materials and goods which are shipped throughout China and around the world. Reports have also documented the capital provided to Chinese technology companies by financial institutions and private equity firms to support the mass surveillance of Muslim minorities. Industries implicated in these reports include food and beverage buyers, pharmaceutical companies, apparel brands, and technology and renewable energy companies.

In response to these findings, the U.S., Canada, and UK have all published advisories for companies doing business in or with links to Xinjiang. The U.S. has also passed a Uyghur Human Rights Policy Act, issued sanctions, and banned the entry of goods allegedly produced by forced labor in Xinjiang. The EU is considering implementing sanctions as well.   

What Business Can Do

Companies should map business activities and business relationships with suppliers, customers, and end users of products in China and conduct due diligence on business relationships to ensure that they are not working with entities that are involved in aiding human rights abuses. With business challenges related to Xinjiang unlikely to disappear in the short term, companies should work with third parties such as NGOs, industry associations, and business associations to better understand the human rights situation, and they should also craft and pilot traceability measures in collaboration with peers. See guidance from the CBP on best practices here.   

3. Companies should begin planning for more stringent modern slavery disclosure requirements

The Situation

In response to calls from business leaders, civil society, and legislators to strengthen the UK Modern Slavery Act, the UK government in September 2020 announced proposals that would require businesses to report against each of the six reporting areas and would make approval and sign-off requirements more stringent. In September 2020, the New South Wales government signaled its intent to enact a Modern Slavery Act (NSW MSA), which would include a provision to require more entities across Australia to submit a modern slavery statement by lowering the national reporting threshold from AU$100 million to AU$50 million. In addition, the NSW government indicated its position to levy financial penalties for breaches of the Act. A modern slavery disclosure bill was also introduced to Canada’s Senate in October 2020. While sharing similarities with Australia, California, and the UK’s disclosure legislation, Canada’s bill could be the first to allow personal liability for directors and officers for non-compliance.  

What Business Can Do

Businesses subjected to the UK Modern Slavery Act should be prepared to report against the proposed requirements. Companies that are not captured under an existing legislative scheme should at minimum understand where human trafficking risks may be present in their supply chain and proactively take prevention measures. As more governments enact modern slavery acts, more robust legislation on supply chain due diligence is on the horizon.  

4. Companies should be aware of heightened scrutiny of illicit financial flows linked to human trafficking.

The Situation

There have been some signals suggesting that companies with weak compliance systems to capture proceeds associated with human trafficking may be the subject of future attention by government authorities.

For example, in July 2020, Deutsche Bank was fined US$150 million by the New York State Department of Financial Services for failing to maintain an effective and compliant anti-money laundering program related to client Jeffrey Epstein, his sex trafficking enterprise, and correspondent banks. In September 2020, Australia’s financial intelligence agency, AUSTRAC, reached a AU$1.3 billion settlement agreement with Westpac Banking Corporation for facilitating transactions that enabled child exploitation in the Philippines.

What Business Can Do

Financial institutions should integrate indicators of human trafficking into their compliance systems to capture financial flows that may be connected to human trafficking. In addition to facing fines, financial institutions face potential criminal liability through the U.S. Trafficking Victims Protection Act and UK Criminal Finances Bill. Financial institutions should assess their links to human trafficking and forced labor holistically through their lending portfolios, core business operations, platform, and business relationships. Guidance from the FAST initiative and FinCEN on identifying and reporting human trafficking may be a good start.

To learn more about the Global Business Coalition Against Human Trafficking (GBCAT) and BSR’s work with business to address forced labor and other forms of modern slavery risks in global supply chains, please reach out to our team.

Blog | Thursday March 11, 2021

Leading with Equity: How Companies Can Promote Social Justice through DEI

Preview

I have a very simple professional philosophy: No one voice should be louder than the other. No one hand should control every action. No one perspective encompasses everyone’s reality. No one body should take up all the space. We all add value, and we all belong. I am excited to bring this philosophy to BSR as Director of Diversity, Equity, and Inclusion (DEI) and to further our mission to build a more just world.

In my nearly 20-year career, I have had the honor and privilege of working with people from a wide array of backgrounds and experiences—ranging from the deepest of grassroots to the highest levels of government—across a wide spectrum of social justice issues as a funder, advocate, and strategist. Most recently, I have worked with companies to help reimagine their DEI strategies to center equity, a key component of social justice.

Companies are powerful stakeholders that have the ability to help shape a more inclusive world in which all people have fair access to opportunities and the ability to participate in activities to better their lives.

I believe that companies are in a unique position to drive broad impacts that extend well beyond their HR and supply chain operations. In fact, companies are powerful stakeholders that have the ability to help shape a more inclusive world in which all people have fair access to opportunities and the ability to participate in activities to better their lives. To achieve this, companies should keep the following four things in mind:

1. It’s not about outputs. It’s about impact.

To start, we need a radical shift in mindset and vision for how business can be levers for positive social change. This includes stretching beyond a focus on traditional KPIs and diversity metrics, which are normally shorter-term quantitative measures, and instead going deeper by looking at quality or effect of these efforts over a stretch of time. 

I like to think of it as the big ‘so what?’ question. This means that businesses should be more intentional about how they are setting DEI targets and see them not as mere transactions but as  opportunities to create meaningful transformation, both within the business and at the community level.

2. Companies are not independent actors. They are community stakeholders.

Setting and achieving big, bold, transformative DEI goals is not an insular endeavor; it creates ripple effects outside of a company’s day-to-day operations. The business sector must be willing to see itself as a co-conspirator in the pursuit of social justice and inclusion alongside other anchor institutions such as government, NGOs, and academia.

More importantly, companies need robust community engagement strategies that proactively seek to engage and build relationships with—not just include—the oft-forgotten voices of marginalized frontline communities. Such communities often lack power and influence but are rich with insight, ideas, and data steeped in lived experience. Their direct participation can provide businesses with information about issues relevant to their quality of life, help to identify and remove barriers to opportunity and accessing resources, and establish an added layer of external accountability.

BSR’s approach to helping businesses advance their understanding of DEI is one that will also inform how we engage with our member companies and partner agencies.

3. Aim to learn rather than to lead.

Becoming an equitable and inclusive business is an iterative process that requires a commitment to learning and a willingness to grapple with the uncertain. Unlike many other business operations, DEI is about shifting behaviors, which is an adaptive challenge where there are no one-size-fits-all approaches. Company leadership should dedicate time and resources to develop and refine a shared vision for action with stakeholders at all levels, test strategies to determine what works best given their unique set of circumstances, and understand that there are no quick fixes—changing a company’s culture takes time and requires constant experimentation.

Additionally, because it is about systems change, DEI is an area that requires collaboration over competition. Business leaders have an opportunity to establish a community of practice in which they can engage in peer-to-peer learning, have a safe environment for sharing challenges, and most importantly examine ways in which DEI can drive innovation for the sector.

4. DEI is not an add-on function. It’s a lens through which business operates.

Lastly, DEI is more than a set of aligned strategies within a company’s HR, supply chain, and corporate philanthropy departments. It is a philosophy that permeates throughout a company’s business operations and is a way to actualize its stated values.

A strong DEI plan enables a company to apply a critical lens to its policies, practices, and programs and to identify how it can be more inclusive and create opportunities for those who are systematically marginalized. It also means reimagining the power of business to drive systemic change and meet the needs of society’s most vulnerable.

The BSR approach

I am a strong adherent of modeling the behavior that we wish to see from others. BSR’s approach to helping businesses advance their understanding of DEI is one that will also inform how we engage with our member companies and partner agencies.

We see ourselves as part of a larger ecosystem of actors seeking to create a world in which everyone—regardless of identity or background—is afforded the opportunity to equal participation in all aspects of life, has fair access to resources, and can be assured that systems are operating in ways that improve the quality of life for all, and not a select few.

BSR believes that to achieve this, we must prioritize the needs and voices of those who have been and continue to be subject to marginalization and exclusion. Anchored by this belief, our DEI offerings will take on an “equity-first” approach that embodies all the above-mentioned precepts.

I will admit that this vision for BSR’s DEI work is ambitious and will at time feel fraught with discomfort and chaos. But DEI is a tool for disruption, and it is in the commotion that magic emerges. I look forward to pushing us beyond our comfort zones and tapping into that most radical part of our collective imagination—the part that sees a ‘just world’ as more than a mere aspiration, but as a reality that BSR is shaping.

Blog | Tuesday March 9, 2021

The Human Rights Impacts of Workplace Monitoring Technology

Preview

The monitoring of employees by employers is not a new phenomenon, but it seems to be entering a distinctly new phase.

Today, it is increasingly common practice for large companies to implement employee monitoring, whether to increase productivity in warehouse distribution roles, maintain quality control in manufacturing, or bill accurately at consulting firms.

The COVID-19 pandemic has seen the sudden move of many millions of workers around the world to home-working—and this has accelerated the use of tools designed to monitor workers in new and even more invasive ways that respond to the unique conditions of a pandemic. Techniques such as screen capture, measuring keystrokes, webcam photos, and web monitoring are being used to “prove” employees at home are meeting employer expectations.

All workers face these risks with the rise in use of technology in the workplace. However, workers in low-income jobs, with insecure employment status, or irregular schedules are particularly vulnerable, and women and people of color make up a disproportionate share of these types of jobs.

Despite this widespread use of workplace monitoring already taking place, there is no internationally recognized framework governing how these tools can be deployed in a rights-respecting way. While the International Labour Organization (ILO) published a non-binding code of practice to provide guidance on the protection of workers’ personal data in 1997, there is no ILO convention or recommendation covering workplace data protection, privacy, and non-discrimination issues in a modern setting.

Employers need to consider several human rights impacts that may arise from workplace monitoring tools when implementing such technologies in the workplace:

• Erosion of privacy: There are legitimate reasons why employers need to understand what their staff are doing—such as legal obligations to ensure that sensitive data isn’t stolen or leaked. However, many emerging tools are far more intrusive and risk collecting, storing, and processing personal information that is not work related (such as movement) and use methods where employees may not be aware that monitoring is taking place (such as remote activation). The right to privacy should only be interfered with in ways that are lawful and non-arbitrary, meaning that any compromise has a legitimate purpose and is both necessary and proportionate for that purpose.
• Non-discrimination: New digital tools could accentuate existing workplace discrimination and increase risk for workers from vulnerable groups or marginalized populations. For example, monitoring how many times employees leave their desk during the workday could be paired with automated performance review processes and result in poor reviews, employees being passed over for promotions, or even termination. This disadvantages people who need to leave their desks for prayer or physical disabilities, among other things. The use of "affective technology"— purporting to identify individuals’ emotions by providing insights on an individual’s facial expressions or body language during hiring or performance reviews—present significant risks of discrimination based on gender, race, ethnicity, or other physical characteristics.

The right to privacy should only be interfered with in ways that are lawful and non-arbitrary, meaning that any compromise has a legitimate purpose and is both necessary and proportionate for that purpose.

• Informed consent: Informed consent is an essential concept in the digital sphere and is defined by both participation (i.e. the ability to participate in decisions) and empowerment (i.e. the ability to understand both risks and rights when consenting).
• Power imbalance: The severe economic downturn accompanying COVID-19 will alter the balance of power between employees and employers as unemployment rates rise—workers are much less likely to raise concerns about potentially intrusive surveillance being deployed or choose not to use it while they are concerned about the safety of their jobs.
• Human dignity and agency: The increasing use of digital tools to collect data and inform decisions raises novel issues around human dignity, autonomy, control, self-worth, and well-being, such as whether employees should reasonably expect to have their movements tracked as a metric to gauge productivity or whether insights into employee motivation, energy, and workplace satisfaction derived from psychological or sentiment analysis are a reasonable expectation of employment.
• Freedom of association: There are implications for the morale and motivation of a workforce that is being monitored as it is likely they will conclude that their employers don’t trust them. Some tools can also be used to effectively control what employees discuss, e.g. online content moderation tools that prohibit employees from using words such as “unionize” in online work chats. 

COVID-19 has turbocharged the trend of increased monitoring of employees at work. And post-COVID "back to work" planning has included monitoring of employees’ health, which is some of the most personal data employees have.

More work needs to be done to understand the impact of this kind of monitoring in different types of workplaces to lay the groundwork for the development of an international standard. BSR plans to lead this process, which must be centered on workers themselves: engaging with workers and the groups that represent them is essential. Our goal is to develop actionable guidance on how companies can implement workplace monitoring in a transparent and limited way that protects the rights of individuals and that this is developed through multi-stakeholder dialogue and engagement. We invite companies, donors, and industry and worker groups to join us in this process.