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Blog | Wednesday October 28, 2020

Building the Future Starts Now: Reflections from BSR Conference 2020

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Conviviality. This notion of bringing people together was highlighted at BSR Conference 2020 by plenary speaker Ann Mukherjee, chairman and CEO of Pernod Ricard North America. In this year of social distancing and remote work, there have been few opportunities to truly feel such a spirit of togetherness. And yet, this past week, the first ever virtual BSR Conference delivered this feeling—for me, for many others I spoke with, and hopefully, for all who tuned in.

While this year’s experience has been different from the in-person gatherings of the past, both the sense of community among the hundreds of participants that joined us and the sense of urgency to address the most pressing issues in sustainable business were as strong as ever. With the theme of Meet the Moment. Build the Future., our program aimed to help the sustainable business community see our changing world more clearly—with inspiration about how companies are managing the difficulties of 2020 and the ones still to come, with focus on the work needed to meet the moment and all its challenges, and with ambition to shape a more equitable and resilient future.   

Be Uncomfortable

“We have to get comfortable with being uncomfortable,” Anthony Romero, executive director of the American Civil Liberties Union (ACLU), told us in his plenary session. The theme of getting “uncomfortable” surfaced throughout the week, especially while discussing how business can address issues of racial and social injustice—which it must do to meet the moment of 2020. Both business and the field of sustainability must address the lack of and pressing need for increased diversity, equity, and inclusion (DEI). And being uncomfortable with these topics or unsure of what to do is no reason to turn away from the work.

The same can be said with the process of business transformation. For business to step up to its role in meeting the moment, sustainability and resilience needs to be integrated throughout the entire business. As Kering Chairman and CEO François-Henri Pinault said, “If you really want to put sustainability at the heart of your strategy, you have to rethink all processes and all ways you do business in your company.” No doubt rethinking all processes will be uncomfortable, but it is what’s necessary to create the future we want.

Put People First 

Our conference conversations ran across a wide range of topics, from environmental, social, and governance (ESG) investing to health data privacy to supply chains in Asia. Throughout the week, sessions repeatedly highlighted the S of ESG: putting people at the center of all sustainability work. As an example, climate justice “has brought to the center the people who are most impacted by climate change,” according to Darren Walker, president of the Ford Foundation—a shift from the previous focus on environmental impacts and risk. A similar shift has occurred in the discussion over supply chains, particularly in the face of the current moment. In a plenary panel on COVID-19 impacts on Asian supply chains, HERproject representative Smita Nimilita told us: “Without workers' voices at the table, without voices from the most vulnerable, it is impossible to build back better.” Investors, too, are taking into account how businesses treat their people and, in some instances, are also taking into account data on health and labor, where previously they relied more on environmental metrics.

“Without workers' voices at the table, without voices from the most vulnerable, it is impossible to build back better.”

-Smita Nimilita, HERproject representative

Use Your Influence

At BSR, we work with companies to explore the ways they can act, enable, and influence on particular issues. This past week, the “influence” part of the equation came to the fore in many discussions—from structural racism (NAACP’s Derrick Johnson told us: “Structural racism is about policy. The corporate voice to move policy in different directions is vital.”) to climate change (bp’s Bernard Looney noted, “If this world is going to get to net zero and well below 2 degrees, the world needs policies that incentivize that.”)  There was consensus that companies need to use their voice to support their values and the enabling environment that is critical for business to flourish. This included calls to protect democracy, to provide a social safety net, or to represent issues that matter to one’s employees and customers. As the world anticipates next week’s U.S. elections, one thing is clear: business should align its sustainability and ESG goals with its policy influence to make the structural changes needed to meet the moment.

Act with Urgency

No doubt, the sustainable business community has watched ESG become a topic of more and more importance over recent years. As Gillian Tett, founder of the Financial Times' newsletter Moral Money, explained, “ESG has moved from being activism to risk management,” building on ITUC General Secretary Sharan Burrow’s comments from earlier in the week that “a few years ago, you could ignore ESG because it was too small to worry about. Now, it’s too big to ignore.” Indeed, the topic of ESG has gotten too big to ignore—and instead, it is driving action. However, when the COVID-19 pandemic and its economic fallout first hit, we were unsure of how it would affect business’ sustainability commitments. Would the crisis sweep aside work on ESG issues? What has happened—as we heard from speaker after speaker at the conference—was the opposite. In fact, nearly 80 percent of participants in one session said they would be increasing their commitment to sustainability efforts in 2021—despite any economic headwinds.

In combination, the focus on ESG and the COVID-19 crisis have shown that we not only need action—we need it urgently. To strengthen sustainability strategies, to engage with stakeholders. To build resilience within companies and supply chains, to protect against future pandemics and shocks. The moment requires action now. We have run out of time for incremental improvements. We are in an unprecedented moment and to meet it, we must act with urgency.  

This week, we felt a special spirit of conviviality: the camaraderie of a global team advancing a single goal. Meet the moment. Build the future. This year’s conference theme laid out not just the topics we would cover this week, but our shared mission. Now, it’s time to get to work.

Blog | Tuesday October 27, 2020

Four Features of Effective Human Rights Due Diligence

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This blog is the second of a three-part series. In the first blog, we focused on the current landscape of mandatory human rights due diligence (HRDD), disclosure requirements, and the push towards a more universal approach. This blog will discuss the elements that BSR has found important for effective HRDD, and our third blog will focus on further unpacking the various options being proposed in the European Union’s mandatory Human Rights Due Diligence Legislation (EU mHRDD).

The EU’s proposed mandatory human rights due diligence legislation has the potential to reshape the way that companies manage their human rights risks—and to boost the impact of company efforts to prevent, mitigate, and remedy these risks. In line with the UN Guiding Principles on Business and Human Rights (UNGPs), the EU directive will require companies to carry out effective due diligence to identify, prevent, mitigate, and account for actual and potential human rights and environmental impacts in their own operations as well as in their upstream and downstream value chains. The European Commission is expected to submit a formal legislative proposal in early or mid-2021, with the legislation expected to come into force by early 2022.

As we anticipate the new regulations requiring due diligence, the question for companies then becomes: What does “effective due diligence” look like?

To be impactful—to achieve the desired outcomes of reduced human rights abuses and increased realization of human rights—effective due diligence requires more than a tick-box approach to process and procedure. Over the past 25 years, BSR has worked with companies to manage human rights risks, including more than 200 human rights impact assessments and implementation plans. Drawing on these learnings, we emphasize four features of effective human rights due diligence:

1. Effective human rights due diligence is forward looking. The forward-looking nature of human rights assessments is one of the most powerful tools companies have to ensure respect for human rights. By identifying potential impacts in advance, companies can put in place actions to prevent and mitigate harm. As stated in the UNGPs (Principle 18), human rights due diligence should be conducted prior to any new activity or relationship and prior to significant business decisions or changes in operation. Futures thinking and strategic foresight methods, such as trend analysis and scenario planning, enable companies to increase the range of potential adverse human rights impacts identified and surface new strategies to address those impacts. BSR’s new quarterly emerging issues brief, The Fast Forward, can help companies to track nascent disruptive trends.
    
2. Effective human rights due diligence is ongoing. Due diligence should not be a one-off event. Ongoing due diligence enables companies to track shifts in the operating environment—such as new laws or rising social tensions—that may change their human rights risk profile. The ability of a company to nimbly respond to such change depends not only on formal processes for updating risk assessments. It will also require regular stakeholder engagement (including dialogue with human rights defenders) as well as a culture of sharing and escalating internal concerns to the appropriate decision-makers inside the company. The most effective programs we have seen have integrated recurring due diligence checkpoints in their operations.
    
3. Effective human rights due diligence recognizes the company as part of a system. No matter where they are located or what industry they are in, companies operate in geographical contexts and product value chains that are shaped by preexisting dynamics. These dynamics can produce human rights abuses in which companies may become complicit, such as systemic racism in the U.S., gender-based violence in India, and confiscation of Indigenous lands across Latin America. While companies may cause or contribute to individual adverse human rights impacts, these harms occur in the context of the wider system. Companies should understand their role in shaping these systems and the ways their actions, combined with those of other companies, cumulatively impact people. Companies can effect change in these systems and increase their leverage, impact, and legitimacy by collaborating with other actors. This is particularly the case in fragile and conflict-affected contexts. In these cases, companies and other actors can assume a shared responsibility to address the multiple and intertwined causes of conflict and human rights violations in combination, increasing the likelihood of beneficial outcomes for everyone. Additionally, companies should understand how their internal ecosystem may affect the success of human rights programs: contradictory commercial targets, political advocacy, and business priorities may work against a company’s own human rights commitments.


4. Effective human rights due diligence is grounded in stakeholder engagement—especially with the most vulnerable. Rightsholders—the employees, customers, users, supply chain workers, and community members whose rights are impacted by company decisions, products, and operations—provide information that enables companies to understand their human rights risks. They do this by raising concerns about actual and potential impacts and by providing input about how best to address and remediate these impacts. Companies should make extra effort to engage with vulnerable groups to avoid aggravating structural oppression and disproportionately negative impacting people who are at heightened risk. Proactive consultation, formal grievance mechanisms, and ongoing dialogue with people who are impacted in different ways by the company’s business activity positions the company to design, implement, and track the effectiveness of their human rights due diligence programs.

Ultimately, human rights due diligence is about preventing, mitigating, and remedying harm to people impacted by business. To be meaningful, companies must look beyond process to real-world outcomes and ensure that their teams have the knowledge, the skills, and the relationships to shape these outcomes for the better. We believe that mandatory human rights due diligence requirements should be designed to support rather than hinder these four features of effective human rights due diligence.

Blog | Thursday October 22, 2020

Election 2020: A Test for American Democracy, and A Test for American Business

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American democracy is facing an immense test in 2020. This is also a test for American business.

Amidst a pandemic that renders some forms of in-person voting dangerous, a wide array of actors is exploiting both social and mainstream media to spread rumors, conspiracy theories, and outright lies concerning both the campaign and whether votes will be counted accurately. The FBI continues to make clear that there is a concerted effort from Russia, and to a lesser degree other countries, to sow chaos and interfere with both the electoral process and faith in the outcome. The U.S. Postal Service has undermined its ability—and commitment—to enable mail-in voting to proceed on a timely basis. And in a time when the persistence of systemic racism demands action, steps have been taken in many states to suppress access to voting, particularly for people of color who have faced serious restrictions throughout American history.

And, shockingly, for the first time in American history, the incumbent President is consistently undermining public trust in the electoral process. By hinting loudly that the courts rather than the American people will decide the election; making dishonest, unfounded claims of voter fraud; and most importantly, refusing to abide by the results of the election; this President is proving his commitment to his own power rather than protecting citizens’ right to vote.

No business can afford to stand by while this happens. No boardroom can say this is a matter for elected officials, journalists, and political analysts.

American business has thrived over the past 75 years in no small part because of the relative stability and predictability of the American political system. CEOs know well from their operations around the world that business is hindered by the political instability that all too often has roiled countries around the world. Business leaders invest in political risk analysis for good reason. Until now, the U.S. has not been viewed the same way as other countries roiled by coups, general strikes, and corrupt courts.

Process matters to business. Rule of law matters to business.

No company operating in America will want to face a society—and a workforce—that is torn asunder by even more profound polarization and the prospect of growing civil unrest in the wake of an election that is illegitimate or seen as illegitimate.

With all this in mind, the time is now for American business to align on the side of American democracy. As Ronald Reagan said in 1964 (in a very different context), this is “a time for choosing.”

In addition to the steps that many companies have already taken to enable voting and to promote free and fair elections, there are five additional things that business should do to sustain a healthy democracy.

1. Take preventive action: In advance of Election Day, companies can convey to elected officials how essential it is that democratic processes be protected. This may be most effective for companies and CEOs who have good lines of contact with GOP Senators. They should understand that the business community is watching and will not support officials to support or enable election interference.
2. Work through trade associations: Companies can leverage their voice and find strength in numbers by working through trade associations. If trade associations stand only for the narrow self-interest of their members, their purpose is highly questionable. Very specifically, this is a test for the Business Roundtable’s 2019 statement of purpose. There is no better way to demonstrate that it has real meaning than by using it as the basis for pro-democracy views.
3. CEO coalitions of the willing: Like-minded CEOs could band together to be prepared to speak up should things go off the rails. This is what happened in advance of the withdrawal of the U.S. from the Paris Agreement. CEOs can convey their views to the White House and make clear that election interference is not only wrong but bad for business.
4. Communicating with employees: We have seen multiple examples of employee activism in recent years. In the event of a contested election or interference with vote counting or the right to vote, companies will need to be ready to speak with their employees, who will want to know where their companies and their CEOs stand on American democracy. While companies need to respect diverse political views in their workforces, support for democracy is a basic principle that should not be presented as partisan.
5. Partnering with NGOs: Aligning with pro-democracy organizations for advice and support is also valuable, whether the ACLU or younger organizations such as NationSwell and Business for America. Business partners with NGOs around the world for similar purposes: why not in the United States also?

And in all these cases, business should also take care to address the fact that voter suppression all too often restricts access to the ballot for Black Americans and other people of color. The workforces of Fortune 500 companies are more representative of America than the U.S. Congress. In a year when many companies and business leaders are straining to demonstrate their commitment to their BIPOC colleagues and customers, calling for an end to voter suppression laws and regulations is a great step.

The test we face is a binary choice. It is not, however, a choice between Democrats versus Republicans. It is true democracy versus a degraded system that will undermine American society and American business. History will cast a keen eye on what happens over the next few weeks.

BSR’s founding Chairman, Arnold Hiatt, who served as the CEO of Stride-Rite Shoes for many years, said this at the Ronald Reagan Presidential Library in 2002: 

Business is the most powerful force in our society—particularly if it is willing to accept moral, civic, and financial leadership. Business has the tools, the energy, and the will to fill the growing leadership vacuum in government.

This leadership is badly needed in 2020. Will business pass the test?

Blog | Tuesday October 20, 2020

BSR Conference 2020: Coming Together to Meet the Moment and Build the Future

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It’s hard to find the words to describe the current moment. COVID-19. One million deaths. Economic shutdown. Racial injustice. Unemployment. Remote work and school. Extreme hurricanes and historic wildfire events. Political polarization and election fraud allegations in the U.S.

In 2020, we are navigating not one major challenge, but the convergence of public health, economic, political, societal, and existential crises.

So, how do we begin to think about meeting this moment? One thing that is true for all the crises I just described is this: No one solution, no single individual or company, no country on its own can overcome the challenges we face.

Now, more than ever, we need to come together.

Since 1993, the BSR Conference has convened sustainability professionals to connect, share, and learn together; to collaborate and inspire one another; and to create community. This year, however different the circumstances, will be no different.

As 2020 nears its end and we look to move beyond the current moment, we have the opportunity to build a more just, more resilient, and more sustainable future. 

This week, we will gather virtually with sustainability leaders around the globe to explore this year’s theme: Meet the Moment. Build the Future. While we won’t be meeting in person, the BSR Conference experience will provide the same unique value it always has:

• Inspiring and thought-provoking speakers
• Interactive sessions on the most pressing issues facing sustainable business
• Opportunities to network with peers and colleagues from different regions and industries

We’re excited to connect with the change makers that we’re proud to call our community. If you haven’t yet registered, there is still time to sign up and join us. Your Conference pass gives you a front-row seat to our whole program for the week—and access to the recording for an entire year.

As 2020 nears its end and we look to move beyond the current moment, we have the opportunity to build a more just, more resilient, and more sustainable future. Building that future will not be easy. It will take cooperation and collaboration—from business, investors, government, and civil society—and a range of tools and strategies to combat everything from climate change to systemic racism to future pandemics.

But that future is one we must continue to pursue: Sustainable, responsible business is the primary source of strategic advantage and the best route to a just and sustainable world. Through our collective work, as our President and CEO Aron Cramer recently said, we can build the kind of economy, the kinds of businesses, and the kinds of societies that we all want and need.

Only together can we meet the moment and build that better future. We look forward to taking the first step this week.

Blog | Monday October 19, 2020

Meeting the Moment with a Sustainability Strategy Refresh

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This week, BSR convenes the global sustainability community at BSR Conference 2020. Throughout the week, sustainability leaders will join us to share, learn, collaborate, and connect around the theme Meet the Moment. Build the Future. And there is no more important time than now to assess our changed world and how business sustainability strategies can meet the challenges ahead.

As a result of the global pandemic, every company is dealing with changes in the global markets, be it upswings, downswings, or other shifts. And whether you are a global leader with sustainability already integrated through your operations or still working to figure out sustainability and its meaning for your company, all businesses are experiencing changes to their operating environments. This means that—for nearly every company—your existing business strategy and sustainability strategy need to be refreshed for the new COVID-19-affected world. Indeed, governments, consumers, investors, and employees are all grappling with how to continue in this changing environment—and as a consequence businesses’ strategy, insights, and answers matter all the more.

Business sustainability investments now will matter most as the world emerges from the COVID-19 crisis and the after-effects become clear—from increasing stressed income inequality and consumer behavior and expectations changes to direct corporate impact, including reputation and talent retention. At the same time, the challenges on the horizon, temporarily obscured by COVID-19—climate change, environmental degradation, pollution, and social inclusion—will loom all the more large. 

Investments in sustainability need to translate across your entire business as it emerges from the post-COVID-19 world. How will finance, banking, and investor engagement be affected as the pools of available capital, and their expectations, change? How should you approach responsibility, product, and traceability as new consumer expectations or legal requirements emerge? How does your strategy factor emissions and climate resilience as your industry, your competitors, and your value chain increasingly focus on climate impacts and 1.5°C targets? How will your brand and marketing convey your vision, values, and roadmap to your industry, consumers, and current and future employees?

The world post-COVID-19 won’t merely be a return to the world pre-COVID-19: expectations of work are changing; job creation and income inequality are of ever-growing concern; and workers at the base of globally supply chains, particularly women and those most at risk, are being hurt. 

Here are five steps to make this refresh happen.

1. Update your materiality. In short, understand not only which issues are changing in importance, but why they are changing. Be sure to understand the views of your investors, your regulators, your leadership, your stakeholders. Understanding what is changing, and particularly why, helps set the stage for step two.
2. Refresh your strategy and purpose. If your company has already gone through a robust strategy process, this refresh is ensuring your corporate focuses continue to align with the external environment. If your company has not yet done this, well, it is really time to get to work.
3. Plan for alternate futures. COVID-19 has certainly illustrated the need to anticipate and plan for a variety of future scenarios. What will be the impact of climate change on your business operations? What if we see another COVID-19-like incident?  How are social expectations changing for business in your key markets? What trade tensions may impact business and supply chains in the future? Understanding scenarios allows you to build them into your business planning processes.
4. Build resilience in your value chains. Understanding current changes and potential alternate futures allows you to understand resilience and build into your value chain. Whether it is in terms of strategic sourcing options, globalization of plant, equipment, and talent, or identification of future market needs—all can be understood, planned for, and invested in.
5. Engage your employees. Invest in the knowledge, understanding, and engagement of your employees as they help your company navigate the increasingly complex and diverse impacts of COVID-19 and its consequences.

The economic impacts of the COVID-19 crisis will remain for years to come. If there is one thing we can be sure of now that the pandemic has been rampaging around the world for nearly a year, it is that the world post-COVID-19 won’t merely be a return to the world pre-COVID-19: expectations of work are changing; job creation and income inequality are of ever-growing concern; and workers at the base of globally supply chains, particularly women and those most at risk, are being hurt. As a consequence, markets, politics, and expectations of consumers, employees, and businesses—all continue to change.

At BSR, we continue to work through these issues with our members. From stakeholder engagement materiality processes, strategy integration, and futures scenarios to value chain resilience and employee engagement, we look forward to connecting with you, our members, partners, and network to build a more resilient, equitable, and sustainable future. 

Blog | Thursday October 15, 2020

Meeting the Moment for Healthcare: Q&A with Phil Thomson, President, Global Affairs, GSK

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Undeniably, 2020 has been defined by the global spread of COVID-19 and its devastating impacts. The global pandemic, which has taken over a million lives, has shone a spotlight on the healthcare industry.

In this unprecedented moment, BSR is pleased to welcome Phil Thomson, President, Global Affairs at GSK, as a plenary speaker for BSR Conference 2020. Phil has more than two decades of experience at the firm, having joined Glaxo Wellcome as a commercial trainee in 1996. A member of the Corporate Executive team, his responsibilities include the Group’s strategic approach to reputation, corporate responsibility, global health, government affairs, and external policy. 

We were able to connect with Phil ahead of BSR Conference 2020 to hear his thoughts on what business, in particular the healthcare industry, should do not only to meet the current moment, but also to build a more equitable and sustainable future.

The pandemic has shone a light on the important role of healthcare companies in society. In your opinion, what is the role of GSK to meet the moment?

Like much of the Life Sciences industry, we are heavily involved in developing solutions to COVID-19. Innovation is how we get through the COVID-19 crisis, and the Life Sciences industry is innovating at unprecedented speed to develop new products, technologies, data sharing platforms, and financing mechanisms in the search for effective testing, therapeutics, and vaccines.

Equally important is that these solutions are affordable and available to people around the world. In GSK’s case, we are reinvesting profits made from our vaccine adjuvant, making it available through collaborations with other companies and through donations to support the world’s poorest countries.

COVID-19 has exposed various types of inequality. How can healthcare companies learn from this and help to build a more just and sustainable future?

In healthcare, access to treatment remains a profound issue. I think it’s critical that we strengthen the multilateral system that supports health, making it stronger in vigilance and more capable to make interventions.

The pharmaceutical sector can help with this. Firstly, through innovation and secondly by taking a global approach, to allow access to it. Innovation without access isn’t true innovation in my view. I think we can be optimistic about this. Within the industry, we are seeing unprecedented collaboration, urgency, and innovation to fight COVID-19, with a generation of CEOs who really understand industry’s role in wider society. I am very hopeful that the learnings from this will extend beyond the pandemic, to help build a more just and sustainable future.

In healthcare, access to treatment remains a profound issue. I think it's critical that we strengthen the multilateral system that supports health, making it stronger in vigilance and more capable to make interventions.

We look forward to you joining us at BSR Conference 2020 where we will engage the sustainability community on the theme Meet the Moment. Build the Future. As business prepares to build the post-COVID-19 future, what are some of the most important lessons from 2020?

For me, one of the key lessons is that, as a global community, we need to be much bolder in future pandemic preparedness and in efforts to improve health resilience. Experience tells us that tackling major public health challenges requires scale interventions and long-term investment. The economic costs of COVID-19 now far outweigh any residual concern about preemptive investment.

Alongside that, collaboration between the private and public sectors is the only way we will succeed in tackling systemic risks, like climate change and health resilience. And we need collaborations that embrace technology and innovation. A good example of this is a new global pandemic preparedness initiative called The Trinity Challenge, of which GSK is a founding member. The coalition is made up of companies, public institutions, academia, and global health experts, all united by the common belief that we can use data and advanced analytics to develop insights and actions to better identify, respond, and recover from health emergencies.

Blog | Monday October 12, 2020

Meeting the Moment for Climate Action: Q&A with Maria Mendiluce, CEO, We Mean Business Coalition

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BSR is pleased to welcome Maria Mendiluce, CEO of the We Mean Business coalition, as a plenary speaker for BSR Conference 2020, where we will virtually gather the sustainable business community around the theme: Meet the Moment. Build the Future.

Meeting the moment doesn’t solely apply to the events of 2020, momentous as they may be. It also means taking action on the ongoing—and worsening—climate crisis. In May 2020, with the COVID-19 pandemic and economic downturn in full swing, Maria was appointed CEO of the We Mean Business coalition. A proud founding partner of the coalition, BSR welcomes Maria to the position and looks forward to our continued collaboration to catalyze business leadership, climate action, and policy ambition to accelerate the transition to a zero-carbon economy.

We were able to connect with Maria ahead of BSR Conference 2020 to learn more about what she thinks is needed from business to meet the current moment and build a more equitable and sustainable future.

 

In 2020, we’re facing the COVID-19 crisis, mass unemployment, and the growing movement to end systemic racism alongside devastating climate impacts across the globe. How do the events of this year underscore the need for business to take meaningful climate action? In your opinion, what is the role of business to meet the moment? 

The world is continuing to grapple with the effects of the COVID-19 pandemic, economic downturn, systemic racial inequality, and more, but the impacts of climate change cannot be ignored. Most weeks bring fresh headlines of wildfires, such as in California and Australia, droughts, and rapidly melting ice caps. They’re all stark reminders that inclusive climate action and a transition to a net-zero economy that does not leave marginalized communities behind cannot wait for calmer times.

While the pandemic has revealed our fragility, it has not diminished the recognized need for bold climate action, and governments, citizens, and the corporate world are increasingly driven to harness this poignant moment of change in a way that benefits us all.

Climate action is a driver of innovation, economic growth, competitiveness, resilience, and job creation. The latest research shows that green stimulus measures are better at boosting jobs and GDP growth than business as usual or traditional government stimulus measures. There is a clear incentive to drive bold climate action as a way to recover better and create good jobs.

However, we must ensure that we deliver a just transition that does not exacerbate social inequalities. This includes building a more resilient labor market that redeploys, retrains, and upskills those working in high carbon industries for the new green economy.

In this time of global disruption, ambitious climate action by both business and government is more urgent than ever before. Climate action equals greater resilience and, for forward-looking businesses, this is quickly moving beyond their sustainability teams to be a core part of business strategy. This is why it’s so timely that, as a coalition, we have launched the Climate Leadership Now guide. The time is now for business leaders to significantly raise the bar; we need to reboot economies, solve the climate crisis, and bring benefits to societies globally, while leaving no one behind. 

At BSR Conference 2020, we will be discussing ways in which business can contribute to the creation of a more just and sustainable future. As business begins to create post-COVID-19 strategies, how important is it to include climate action in these future plans? How can they show Climate Leadership Now?

Encouragingly, the COVID-19 pandemic has not diminished the recognized need for bold climate action and actually has strengthened resolve among citizens, companies, governments, and investors to drive real progress. Consequently, the need to develop a robust leadership position on climate action is more urgent than ever and should be central to any company’s strategic vision.

We are truly at a pivotal turning point in history, and companies can harness this moment to join the Race to Zero and set a course out of the crisis through climate leadership.

This means aligning corporate ambition with the best available climate science, setting targets to reach net-zero emissions by 2050, at the latest, with strong interim targets to get there through the Science Based Targets initiative (SBTi).

Companies must identify and implement action to reduce carbon emissions across operations and supply chains to enable them to deliver on their ambition.

Then it means speaking up to secure wider change through advocacy.

In September, the We Mean Business coalition launched Climate Leadership Now, our new guide outlining how companies can progress their climate strategy toward a climate leadership position fit for this decisive decade. We urge all companies to engage with these three A's: ambition; action; and advocacy. Now is the time to join the Race to Zero and show leadership in the global effort to tackle the climate crisis.

Business and governments need to work together to accelerate climate action. Ambitious company action emboldens governments to set stronger policies, which in turn enable the scale-up of business actions. 

One of the pillars in the Climate Leadership Now guide is Advocacy, highlighting the crucial role and voice that business has in helping developing policy frameworks to spur a zero carbon economy. How can business use its influence to ensure that governments build back better and include climate action in their economic recovery plans? 

Business and governments need to work together to accelerate climate action. Ambitious company action emboldens governments to set stronger policies, which in turn enable the scale-up of business actions. We need companies to make the case in support of bold climate policy.

In a recent video interview with We Mean Business, Jakob Askou Bøss, senior vice president at Ørsted, said, “It’s quite clear that governments cannot do it alone, and companies cannot do it alone. We need to work together. Governments need to set ambitious targets for carbon reduction and renewable energy deployment and create the visibility needed for companies to deploy the vast amount of capital and drive the innovation that is needed to further mature and scale renewable energy and to further bring down costs."

This December will mark the five-year anniversary of the adoption of the Paris Agreement. To meet the goals of limiting warming to well below 2°C, governments need to increase their national pledges. In your point of view, what is the role of business in helping to meet the Paris Agreement goals?

Corporate climate ambition and action help mitigate and avoid risks, like business interruption, supply chain collapse, and market destruction, whilst bringing opportunities like cost savings, new markets, new finance, new customers, and new products. Business leaders can see the benefits and are seizing them.

Just this month, PayPal, Walmart, Ford, and Facebook are among companies to have increased their level of climate commitment, announcing bold strategies to accelerate the zero-carbon transition. To date, nearly 300 companies have joined the Business Ambition for 1.5ºC campaign, led by SBTi, We Mean Business, and the UN Global Compact, including those in hard-to-abate sectors such as the world’s largest cement maker, LafargeHolcim.

During the past few weeks, we have seen the kind of corporate leadership the world needs. We need more businesses to follow suit, because this must become the new business norm.

Blog | Wednesday October 7, 2020

Investors Are Committing to Action on Diversity. Now What?

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Amid a wave of societal commitments to action on diversity, equity, and inclusion (DEI) and racial justice, investors are stepping up commitments and vowing to intensify engagement with companies on DEI.  Despite some progress made to reflect a country’s demographics in the corporate office, in the U.S. and around the world, we are now amid a racial reckoning that calls on all of us to reflect on the real progress made and what needs to advance for real change.

So, what does that mean for companies, and how should they prepare to meet the moment?

The business case for diversity in the workplace is crystal clear. The most recent evidence includes a McKinsey report finding that companies with greater gender diversity are 25 percent more likely to experience above-average profitability compared to their counterparts. In the alternatives space, the average earnings growth of portfolio companies with two or more diverse board members has been nearly 12 percent per year greater than the average of companies that lack diversity, according to private equity firm The Carlyle Group.  

Investors Want Transparency from Companies on the Diversity of Their Workforces

Investors, passive and active alike, are more than ever urging companies to go further and to do so transparently as DEI is integrated into investment decisions and corporate engagement activities. There is a clear and unambiguous ask from investors for U.S.-based companies to disclose annual data on the composition of their workforce disaggregated by race and ethnicity, gender, job category, and, as of recently, pay equity, using the U.S. Equal Employment Opportunity Commission’s (EEOC) EEO-1 form. These reports tell a story of the makeup of a company’s workforce over time.

Currently, only a fraction of companies, or 4 percent of companies of the Russell 1000, release the full data they are required to collect each year and disclose through an EEO-1 report. A more recent survey by Bloomberg revealed that in the S&P 100, as many as 25 companies have released their EEO-1 report, many for the first time, and others plan to do so in 2021. First-mover companies that publish their EEO-1 report are likely to be better off for it by holding themselves accountable to the progress they have committed to make and in doing so proactively rather than reactively.

There is a clear and unambiguous ask from investors for U.S.-based companies to disclose annual data on the composition of their workforce disaggregated by race and ethnicity, gender, job category, and pay equity.

Investors also request disclosure beyond the EEO-1 report, including turnover by region, and critically, what the company strategy on DEI is across the enterprise, including its governance. As pressure continues to build around diversity of board and executive leadership, proxy advisor Institutional Shareholder Services (ISS) has directed letters to U.S. companies asking for self-identified race and ethnicity data at the director and senior executive level. Likewise, the Workplace Equity Disclosure Statement—with investor backing of US$1.88 trillion in combined assets under management (AUM)—calls on companies to release meaningful data on policies, practices, and outcomes related to workforce composition, promotion, recruitment, and retention rates, as well as pay practices.

Investment managers are also increasingly requesting privately-held companies to provide data on race, ethnicity, and gender, particularly at the executive and board levels. In addition, some private equity firms are setting targets to improve DEI in their portfolio companies over a three- to five-year timeline. 

Investors Want Companies to Take More Action on DEI

There is clear investor support for broader actions on diversity. Large institutional investors have articulated their expectations on diversity, from disclosure to strategy and implementation, through letters to the board chairs of the public companies in their portfolios, while active investors have filed several proposals on these topics. Investors and advocacy groups making a broader case for a diverse workplace will expect to see evidence of how companies are recruiting, retaining, and promoting diverse talent across corporate functions, including recruitment of board members.

Investor coalitions like the Racial Justice Investing Coalition seek to engage with, amplify, and include Black voices in investor spaces and company engagements, taking direction and guidance from their lived experience. The Thirty Percent Coalition, known as the Coalition for U.S. Board Diversity and representing over US$6 trillion in combined AUM nationally and internationally, has articulated the resolve of institutional investors to continue to press for more board diversity across gender, race, and ethnicity.

Investors and advocacy groups making a broader case for a diverse workplace will expect to see evidence of how companies are recruiting, retaining, and promoting diverse talent across corporate functions, including recruitment of board members.

As investor action on DEI escalates, we may see more investors and stakeholders taking litigious steps to demand action. For instance, earlier in 2020, shareholder derivative lawsuits were filed with the boards of three large technology companies for failing to deliver on diversity in their boards and executive ranks. Complaints have been filed with other companies for breaching their fiduciary duty by making false assertions about their diversity commitments.  

Investors may also:

• Ask for disclosure on additional categories of diversity, including LGBTIQ+
• Scrutinize how companies’ products and services can impact DEI, whether they are conducting relevant human rights impact assessments, and how they make DEI part of product design and roll out
• As a result of the point above, diversity as an element of broader human rights company engagements could also take shape

Investors Will Take Action during Proxy Season

Investors want a clear strategy on the role that diversity plays at the management level and on the boards of companies. Outcomes from the past few proxy seasons have demonstrated that these are issues companies will likely hear about in the 2021 proxy season.

Investor requests for additional quantitative and qualitative information, such as the role that diversity plays in the firm’s broader human capital management practices and long-term strategy, will increase. Companies that delay or do not engage with their investors could expect to receive shareholder proposals asking for key metrics such as median gender and racial pay equity and diversity data. Blackrock, State Street, and Vanguard, among others, are going further in seeking to understand company performance across a variety of diversity-related issues. While institutional investors typically do not file shareholder proposals, they will exert their influence through proxy voting.

The impact of the use of mandatory arbitration on companies’ employees and workplace culture in employment policies is becoming a key indicator of policy actions to drive equity and inclusion. Investors and advocates see the use of arbitration as being a facilitator of the prevalence of harassment and discrimination in the workplace and on employees’ ability to seek redress for claims of discrimination.

It is imperative that companies respond to these investor interests by developing clear DEI strategies, integrating them into their core business, developing cross-functional communications between sustainability teams, human resources, investor relations, and the C-suite and board of directors, and, not least, engaging their investors.

How Companies Can Respond to Investors’ DEI Interests

Across the capital structure, we see companies making efforts to reduce the gender and race divide. BSR believes it is imperative that companies respond to these investor interests by developing clear DEI strategies, integrating them into their core business, developing cross-functional communications between sustainability teams, human resources, investor relations, and the C-suite and board of directors, and, not least, engaging their investors.

It is time for a deliberate, thoughtful, and humble reset of the role that the corporate world will play in creating diverse, equitable, and inclusive workplaces. The theme for BSR Conference 2020 is an active sentence: Meet the Moment, Build the Future. If you’re interested in learning more on this topic, please join our conference session, How Can Investors Better Address Diversity, Equity, and Inclusion? and contribute with your thoughts, questions, and ideas to advance DEI in your organization. To learn more about BSR’s work on DEI, please don’t hesitate to reach out to our team.

Blog | Tuesday October 6, 2020

Is Your Company Ready for the Future of Reporting?

Preview

The field of sustainability reporting is entering a significant phase of transformation that has the potential to set direction for disclosure over the next decade and more.

The significance of this moment gets to the heart of why we believe companies should report in the first place: reporting is not an end itself, but rather a way to inspire transformation and performance improvement at companies, and a means by which investors, civil society organizations, and governments can make better decisions and judgments about how to create a sustainable and more equitable future.

The list of developments giving us cause for optimism is long and the trajectory of travel on multiple fronts is encouraging. BSR member companies have a great opportunity to shape outcomes by engaging with governments and multi-stakeholder standard setters that are working to improve, align, and harmonize global reporting standards and their governance processes.

We’ve listed some of the key developments at the end of this blog, including those from the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), the Task Force on Climate-Related Financial Disclosures (TCFD), the International Integrated Reporting Council (IIRC), the International Financial Reporting Standards (IFRS) Foundation, and Accountancy Europe. We are especially pleased to see the emphasis on alignment and harmonization in CDP, CDSB, GRI, IIRC and SASB Statement of Intent to Work Together Towards Comprehensive Corporate Reporting, and regulatory action coming from the proposed changes to the Non-Financial Reporting Directive (NFRD) in Europe.

BSR’s objective is to strengthen sustainability reporting by promoting alignment, harmonization, and integration into business, and we are engaging with many of these entities with this intent in mind.

We believe that the sustainability reporting ecosystem and the use of sustainability reporting frameworks and standards by companies should achieve three complementary outcomes:

1. Business transformation and performance improvement at companies, by enabling investment in resilient business strategies that improve company performance.
2. Better outcomes for sustainability, by focusing board and management attention on how the company can help achieve Sustainable Development Goals, accomplish the Paris Agreement targets, and fulfill international human rights standards.
3. Decision-making that accelerates progress towards an equitable and sustainable economy, by eliciting information from companies needed by investors, customers, civil society organizations, and governments to make informed decisions that support a rapid transition to sustainability.

However, as three decades of sustainability reporting has clearly illustrated, these three goals can only be achieved if reporting frameworks and standards are practical for companies to implement.

With these impacts and outcomes in mind, we have developed a perspective—arising from nearly three decades of BSR insight into what works and what doesn’t—to guide our engagement in dialogue about the future of reporting. This perspective is summarized in the following chart, which combines common elements of reporting frameworks and standards, such as reporting principles and metrics, with the practical solutions that we think are needed to achieve our three desired outcomes.

We believe that the future of reporting should be based on the following interrelated and interdependent components:

• Reporting principles: Principles are fundamental to effective reporting by helping ensure that the right information is reported and is of sufficient quality. In combination, the IIRC and GRI provide well-established reporting principles that can form the basis of a more aligned and harmonized approach.
• Resilient business strategies: Companies should describe how they establish resilient business strategies that create long term value for all stakeholders. The TCFD’s core elements of governance, strategy, and risk management—and especially scenario planning and futures thinking—provide an excellent model for an approach that links reporting with business strategy. This structure can replace other conceptual frameworks for describing company management approaches.
• Comparable disclosures and metrics: Ideally, companies would be able to utilize a long list of potentially material sustainability disclosures that, though arising from different standards-setting organizations, are aligned, consistent, interoperable, and of similar quality. Taken in combination, these disclosures and metrics would meet the information needs of a wide range of report users and enable enhanced company performance and tracking.
• “Core” reporting: Five years ago, Accountancy Europe shared the concept of “core and more” as a model for smarter corporate reporting. Inspired by this model, which is conceptually very similar to BSR’s own “reporting triangle approach;” we believe that companies can publish succinct “core reports” that meet the needs of (a) investors, via annual reports and (b) a broader range of stakeholders, via sustainability reports, with clear connectivity between the two. Further, while annual reports have a consistent structure—we all know our way around a Form 10-K—the goal of creating a more equitable and sustainable economy would benefit from a similarly consistent structure in sustainability reporting.
• “More” reporting: Companies can publish more detailed reports that are targeted at specific audiences; examples include disclosures covering tax payments, country- or site-level impacts, product-level impacts, diversity and inclusion, human rights, climate change, lobbying, privacy, and freedom of expression. We believe that issue-specific reporting is an especially exciting area for innovation, as captured by Uber’s recent safety report and transparency reporting on law enforcement relationships.

These elements can be brought together with an integrated, joined-up, and interoperable approach to standard setting by the various reporting framework and standards organizations, a direction they all appear to be moving in.

This thinking brings together proposals we and others have developed and shared previously. Most notably, our perspective is very similar to the Statement of Intent to Work Together Towards Comprehensive Corporate Reporting recently published by CDP, CDSB, GRI, IIRC and SASB, a very encouraging initiative that we are pleased to support.

Indeed, it is this convergence of thinking—and the very practical nature of it—that gives us the most cause for optimism that a better future for reporting is well within our collective grasp.

Business urgently needs to embrace resilient business strategies, supported by a system of company reporting that is fit for that purpose; we are optimistic that a tipping point leading in that direction is finally here.

Blog | Monday October 5, 2020

The Future of Human Rights Due Diligence: Legislation and Regulation for a Level Playing Field

Preview

Authors' Note: This blog is the first of a three-part series. In this blog, we will focus on the current landscape of mandatory human rights due diligence (HRDD) and disclosure requirements and the push toward a more universal approach. The second blog will discuss the elements that BSR has found important for effective HRDD, and our third blog will focus on further unpacking the various options being proposed in the European Union’s mandatory Human Rights Due Diligence Legislation (henceforth referred to as EU mHRDD proposal).

Between a global pandemic, accelerating impacts of climate change, and the erosion of democracy worldwide, the year 2020, like the several years preceding it, has caused many of us significant stress and anguish about the state of the world.

One positive development in the human rights landscape is the push for mandatory human rights due diligence. In particular, the recent EU mHRDD proposal is noteworthy as it is the first attempt to mandate HRDD at the regional level, putting in motion an evolution originally envisioned as part of the state duty to protect under the UN Guiding Principles on Business and Human Rights (UNGPs), which are currently only a voluntary set of principles. By establishing mandatory requirements at regional or international levels, we anticipate improvements and clarity in methodologies and approaches, greater visibility on the human rights impacts of the operations of companies around the world, and a push toward greater cooperation and collaboration among private sector actors to address these impacts and provide remedy.

The EU mHRDD proposal, anticipated to take effect in early 2021, is expected to be cross-sectoral and will require EU operating companies to identify, prevent, and mitigate adverse human rights and environmental impacts of a company’s own operations and value chain, even if the impact takes place outside Europe. Already, multinational corporations have welcomed these potential improvements and, as such, are lending their voice and influence to promote such measures. In addition, civil society organizations have also expressed their support, recognizing the most important potential outcome of all, greater respect for and protection of human rights around the world.

Current Landscape

Over the last decade, we have seen a flood of mandatory due diligence and reporting regulatory requirements from all corners of the world. These can be lumped into a few broad categories:

• Issue-specific legislation, including the U.S. and EU Conflict Minerals Rules, the UK and Australia Modern Slavery Act, and the Dutch Child Labor Due Diligence Act
• Mandatory disclosure requirements without significant implementation mechanisms, like those listed above but also including the California Transparency in Supply Chains Act and the EU Non-Financial Reporting Directive (EU NFRD)
• National-level mandatory due diligence and reporting requirements that cover all human rights, such as the French Duty of Vigilance Law, the proposed Swiss Responsible Business Initiative, and the proposed German Supply Chain Due Diligence Act

The evolution away from issue-specific or disclosure-only regulations, more popular in the first half of the 2010s, to general mandatory human rights due diligence requirements is a welcome one. While laws such as the Modern Slavery Acts and Conflict Minerals Rules were positive in raising awareness among the business community on an international scale, their focus on reporting and disclosure over due diligence and specific issues over the broad spectrum of human rights means that the impact for rightsholders may not be as significant as intended.

Conversely, the move toward broader mandatory human rights due diligence requirements, such as the EU proposal, are more likely to bring the intended outcomes: a leveled playing field, greater legal certainty and harmonization, increased respect for human rights where companies operate, remedy for the impacted rightsholders, and non-negotiable standards to increase leverage with third parties. If such requirements are consolidated at a regional or international scale and hopefully supplant issue-specific disclosure requirements, companies can dedicate more time toward developing a holistic, comprehensive human rights due diligence approach—ultimately leading to improved remedy and outcomes for rightsholders.

Mandatory HRDD: A Positive Development

While there are many open questions about what the specific requirements will be in the final version of the EU mHRDD proposal, in general we believe that a regional or international mandatory HRDD approach is a significant improvement over the current landscape for the following reasons.

1. Drives prevention of human rights impacts. By holding companies to a standard duty of care with regard to how risks are identified and subsequently mitigated or remediated, we can anticipate meeting the original goals of the UNGPs in a much more impactful way—mitigation and remediation of human rights impacts on rightsholders and vulnerable populations across corporate value chains.
2. Creates a level playing field and drives legal harmonization. While the scope of applicability of the EU mHRDD proposal is yet to be determined, a regional or international legal requirement will provide legal certainty, harmonization, and clear and consistent expectations for the private sector, moving away from a hodge-podge of issue-specific disclosure or diligence requirements.
3. Creates a clear legal duty. Though the details of what liability looks like are yet to be finalized, we can anticipate that with time, a consistent duty of care will be established in terms of how HRDDs must be carried out and what corporate obligations are in terms of providing remedy.
4. Encourages a holistic approach. Human rights violations do not happen in a vacuum—there are systemic issues that result in such impacts, and thus a systemic approach to addressing them is needed. By requiring all companies to undertake HRDD across their full value chain and working collaboratively to address those risks, we move closer to a systemic approach to human rights management.

Many of the details of the EU mHRDD proposal are yet to be finalized: open questions remain around the required scope of the HRDD program, including what entities will be in scope, what the expectations are for providing remedy and redress for victims, and what liability and penalties will mean.

Still, we believe that the proposed legislation will remove many of the lasting hurdles that prevent impactful corporate HRDD programs today. In the rest of the blog series, we will explore what constitutes good HRDD practices from an impact perspective and discuss the various permutations of the EU mHRDD proposals.