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Blog | Friday March 6, 2020

The Impact of Coronavirus on Workers, Business Operations, and Supply Chains in China

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The coronavirus (COVID-19) outbreak has had an obvious and immediate impact on China’s economy. According to the World Health Organization (WHO), as of March 5, there were 80,565 confirmed cases and more than 3,015 deaths from the virus in China alone. Cities, offices, stores, and factories across the nation have remained closed since the Chinese New Year on January 25, and travel controls and quarantine measures are still being tightly applied throughout the country.

People in all industries, especially workers in the manufacturing and service sectors, continue to be stuck in their hometowns, even though the official date for return to work was February 10. 

While the Chinese Enterprise Confederation (CED) reports that 97 percent of the top 500 Chinese manufacturers have resumed operations, the impact on mid- and small-size factories is much greater. A survey from recruiting platform BOSS Zhipin cited an average resumption of work rate of only around 58 percent in the manufacturing sector as of February 21. Manufacturing for foreign trade in provinces such as Zhejiang and Shandong has only reached 70 percent capacity. 

The Challenge of Workers’ Travel

By comparison, the SARS outbreak in 2003 had a less severe impact on the ability of workers to return to work and of businesses to resume operations. As one factory manager noted, it was less of challenge to get staff back to work in 2003 because the outbreak took place in April, long after the Chinese New Year holiday. 

The coronavirus outbreak, on the other hand, took place during the beginning of the Chinese New Year holidays, when workers across all professions had returned to their hometowns to spend quality time with families and children, often in cities and provinces far from their workplaces. This is a result of the growth of China’s middle class, the significant increase in workers’ incomes, and the country’s poverty alleviation program, which has improved overall wellbeing for the greater population. 

Furthermore, China’s megacities—which have boomed along the Yangtze River, Pearl River Delta, and Beijing areas, as well as many regions in central and western China—have attracted mass migration from the rural areas as people seek professional and educational opportunities. In Beijing and Shanghai, for example, nearly 40 percent of the population are from other parts of the country. The domestic migrant population size is even greater in smaller cities and more industrialized areas. 
To fight the continued spread of the virus, most cities and counties have restricted travel, particularly in regions which have been hit hard by the disease. Even workers with permission to travel—those not showing symptoms for 14 days—face an additional quarantine when they arrive at their destination. This has resulted in a phenomenal logistical challenge for workers and factories alike. The tens of millions of people traveling across the country for work face the challenge of planning for how they will meet their financial responsibilities at home with uncertain work schedules. For factory managers, there are massive challenges on everything, from planning for production line schedules, to the procurement of raw materials, and providing additional living space, food, and personal protection equipment for their workers. 

The tens of millions of people traveling across the country for work face the challenge of planning for how they will meet their financial responsibilities at home with uncertain work schedules. 

Impact on Supply Chains

Labor shortages and suspended manufacturing operations have also impacted global supply chains. Cambodia, Thailand, Vietnam, and Indonesia have all reported production interruptions due to lack of raw materials from China or Chinese factory managers who have yet to return to work. For example, some factories that host BSR’s HERproject, the largest workplace-based women’s empowerment initiative operating in global supply chains, have suspended operations in light of the coronavirus. 

Realizing the challenges that the coronavirus has wrought on supply chains, Chinese local authorities are responding quickly, and many cities have introduced supportive policies and actions to help business and manufactures back to operations. Some measures include: 

• Efforts to help the workers return to factories safely: The Zhejiang and Guangdong provinces, two of China’s biggest manufacturing and export hubs, have organized charter buses and trains to help factories get workers stuck in their hometowns due to travel restrictions and lack of travel options back to the cities where they work.
• Providing financial support: This includes banks offering loans to help business improve their cash flow, policies allowing enterprises to delay and temporarily reduce the percentage of social security contributions (with the baseline not affecting workers' overall benefits), and major retail and property owners reducing rent.
• Offering business solutions: This includes local tax offices using their databases to help manufacturers find raw materials suppliers and logistic solutions, policies to speed up reopening business applications and approval, and expedited import and export tax services at ports.

Despite these positive actions, factories and business are still facing significant challenges regarding shortage of protection products such as masks and disinfectants, quarantine facilities, and costs related to the number of migrant workers that require additional accommodations in line with government health regulations. 

Uncertainty for the Chinese—and Global—Economy

The rapid slowing of China’s economy in the wake of the COVID-19 outbreak has hurt business around the world, from multinational companies to local suppliers. 

On March 2, the OECD predicted that the slowdown could more than halve global growth in 2020, and the World Bank and IMF announced that they have set aside emergency funding for countries seeking to fight the fast-spreading virus. 

The pan-European Stoxx 600 lost approximately 12.7 percent from February 24-28, its worst since October 2008 at the height of the global financial crisis. In the U.S., the S&P 500 fell by 13 percent and Nasdaq by 12.3 percent in just one week. Seven major Asia-Pacific markets have also fallen into correction territory.

On March 2, the OECD predicted that the slowdown could more than halve global growth in 2020, and the World Bank and IMF announced that they have set aside emergency funding for countries seeking to fight the fast-spreading virus. 

This leaves major questions for companies and their workforces to consider:  

• For workers stuck in their hometown: how to resume their career path, family financial plan, and children’s educational arrangements? 
• For businesses with vertically integrated and complex supply chains in China: where to source materials, how to get workers back to work, and how to ship products?
• For the growing Chinese consumer market: where to get products, how to attract consumers, and how to regain the growth and expansion that have suddenly been put on hold? 
• For international trade and business: how to meet consumer demand for products made in China, which have been critical to global retail shelves, and how to source raw materials to needed for production in southeast Asian factories? 

For companies with operations or supply chains in China, understanding the evolution of the impact of the coronavirus on your supply chain is important. This sequence of blogs, written by BSR’s China team, is intended to help illustrate this. 

As the virus situation evolves, companies need to start by asking some key questions, and attempting to gain a firmer understanding of how the virus will impact the financial, employment and raw material situation of their suppliers. We will explore some of the key solutions to many of these questions in an upcoming blog in this series. 

Blog | Thursday March 5, 2020

Beyond Women on Boards: How Gender Lens Investing Can Transform Your Impact Strategy

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The business case for gender equality and women’s empowerment, particularly its critical role as a driver of growth and innovation, has strengthened over the past decade.

A growing body of research shows how greater gender diversity in companies leads to long-term value creation, stability, and even greater returns. At the same time, ignoring women as consumers, a group responsible for 70-80 percent of consumer decisions, means missing out on one-third of the world’s private wealth.

Gender equality is at the heart of the 2030 Agenda for Sustainable Development. While SDG 5 is specifically focused on gender equality and the empowerment of all women and girls, it’s even more important to recognize that we cannot achieve the other 16 Goals if we do not ensure women have equal access to education, health care, decent work, and representation in political and economic decision-making processes.

More impact investors are—slowly—aligning their strategies to the sustainable development agenda and the push for greater gender equality and women’s empowerment. However, understanding on how to unlock the power of capital to support these commitments remains limited and leaves many investors simply counting the number of women reached. This check-box exercise provides little to no information about the actual impact for women and risks missing opportunities for more meaningful investments and greater returns.  

Gender lens investing is a powerful new approach with the potential to change that. It considers the impact of financial investments, both good and bad, on women and girls. It also recognizes investments’ potential to generate financial returns and advance gender equality simultaneously. Gender lens investing can also address other sustainability issues, such as climate change, and can help companies to avoid potential reputational or legal risks related to issues such as discrimination, sexual violence and harassment.

Busting Gender Lens Investing Myths

• Gender Lens Investing is a niche market: While relatively small compared to other types of impact investing, assets under management with a gender lens mandate are growing at an impressive rate, increasing by 85 percent over 12 months in 2017/2018 and reaching US$2.4 billion in 2018. The number of gender lens funds has quadrupled over four years, and the growth of these liquid, low-fee, and low minimum funds are helping to democratize gender lens investing.
• Gender Lens Investing means concessionary returns: Morningstar evaluated the performance of 10 gender-focused funds and found that seven of these outperformed in the top quartiles of their categories. Pax Ellevate Global Women’s Leadership Fund (PXWEX), which invests in companies advancing women through gender diversity on their boards and in executive management, outperformed the benchmark MSCI World (Net) Index in 2017 with a 22.78 percent total return compared to 22.40 percent.
• Gender Lens Investing requires counting the number of women on boards: Women’s representation in leadership is critical to ensure a diverse set of views and experiences when making decisions, but it is not enough to ensure a positive impact for women and girls. Given the existing male-dominated financial ecosystem, it is easy to see how gender lens investing might be watered down to a check-box exercise, but this has its own set or risks including missing out on more meaningful opportunities to invest in women.

Ensuring Meaningful Investments

While the opportunity for gender lens investing is clear, meaningful impact requires thinking about both how you invest and who and what you are investing in. At BSR, our experience shows that gender equality should not be siloed but integrated into every investment decision. This means investing with a gender-responsive approach by:

• Ensuring gender-equal investment teams, providing training and/or guidance and promoting and supporting women in leadership positions. The IFC found that gender-balanced senior investment teams generate 10 to 20 percent higher returns for private equity firms and venture capital funds. However, female advancement in the sector remains staggeringly slow: less than 10 percent of U.S. portfolio managers at mutual funds and exchange-traded funds are women, a figure that has remained stable for many years. While anecdotal evidence points to impact investing firms having higher shares of women, the gender gap remains.
• Considering gender-related issues throughout the investment process. Maintaining a focus on gender perspectives is important, from due diligence to post-deal monitoring and reporting as part of broader ESG criteria. Depending on the context and objective, this may require new tools or strategies focused on ensuring gender issues are proactively considered. This can be accomplished through gender mainstreaming by incorporating gender considerations into existing materials.

In terms of investment opportunities, investing with a gender lens includes:

• Women-owned or -founded business: Research has found that women entrepreneurs tend to do better than their male counterparts in terms of profitability, with one study finding that women-owned startups generate twice as much revenue per dollar as startups led by men. And yet, women-owned and -led businesses are chronically underinvested in, with female CEOs raising just over 2 percent of venture capital in 2018. Recent unicorns are great examples of successful women-founded business reaching new markets, such as Rent the Runway, Glossier, and Classpass, which was recently valued at over US$1 billion.
• Gender-diverse businesses that work to promote gender equality and women’s empowerment internally. Given the strong evidence that gender equality is good business, understanding how companies are performing on all gender issues is critical. Corporate commitments to promote more women leaders and to ensure pay equity and safe and inclusive workplaces are an important first step. But these should be coupled with strong accountability mechanisms, programs, and policies dedicated to supporting women’s workplace advancement. New initiatives are making it easier for companies to assess and track progress toward gender equality, including EDGE Certification, the Gender Equity Now Certification, and the Bloomberg Financial Services Gender Equality Index.
• Products and delivery of services that can substantially improve the lives of women and girls. One good example of this is the “femtech” sector, which aims to improve the health and wellbeing of women through new digital innovations. While investments in femtech have been growing substantially over the past five years, they still lag behind investments in health products and services for men. In addition to products and services, many issues critical to women’s empowerment, such as ending violence against women, are also greatly underinvested in. For example, the Tara Health Fund has committed 100 percent of its endowment to a gender lens portfolio with a focus on women’s reproductive health.

Gender equality and women’s empowerment is not just a missed opportunity for impact investors. When properly addressed, it can be a driver of meaningful impact and catalyze greater and more sustainable change.  BSR brings together deep expertise in the financial services sector and women’s empowerment to develop tools and strategies to support companies interested in impactful and effective gender lens investing.

Reports | Thursday March 5, 2020

Gender Equality and Social Audits e-Learning

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The resilience of global supply chains is intrinsically linked to the status of women on farms and in factories. In many industries, including agriculture, healthcare, apparel, and toys, women make up a majority of the workers. When women’s health, well-being, and access to opportunities are compromised, their productivity and efficiency suffer, which in turn hurts companies. Ignoring gender gaps and inequalities can leave companies exposed to production and delivery disruptions, bottlenecks, and inefficiencies.

Today, most companies use social audits both to verify that suppliers are upholding the company’s minimum requirements and to help design corrective action plans to improve workplaces. However, women’s rights and workplace-specific challenges are often not reflected in supplier codes of conduct and are addressed in very limited ways, if at all, in the auditing methodologies used to verify compliance with such codes. Mainstreaming gender equality considerations within social audits can have beneficial effects on the ability of companies and suppliers to identify and adequately remediate material existing issues for the women in their supply chains.

To support social auditors, companies and a broader spectrum of social compliance regulatory organizations, BSR has developed a Gender Equality and Social Audits e-Learning course. The interactive course, consisting of three parts, covers key gender concepts, the business case for addressing gender in social audits, and considerations for tips for ensuring a gender-sensitive approach throughout an audit process. The three modules should take approximately one and a half hours to complete.

For more information on how to integrate gender issues into social audits, read the full guidance in English and Chinese.

Go to the Online Course

Blog | Monday March 2, 2020

Sustainable Business in Asia: Five Trends That Will Impact the Decisive Decade

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The decisive decade of the 2020s has arrived and will deliver the impact of key sustainability trends on business in Asia. These trends take place within broader technological, demographic, and market changes, as well as the growth of middle classes within individual Asian economies. Within the global context, changing geopolitical, climate, trade, and security issues will manifest themselves via these trends as well.

Through BSR’s work across Asia, including significant stakeholder engagement across the region, we have identified the following five trends. These trends will impact sourcing strategies and supply chains, access to finance, employee engagement, sustainability leadership, and increasingly market and consumer engagement.

1. Supply Chains Spreading beyond China

Supply chains are moving—being driven in part by the war on pollution, by trade flows, and by companies seeking manufacturing locations with lower costs. As supply chains once consolidated into China, the deconsolidation process is now underway. Supply chain strategies, which a number of years back changed from “China centered” to “China Plus One,” now need to continue to change to “China Plus Many.” The current coronavirus issues only underscore the risks associated with overdependence on a single sourcing location.

As no single market can absorb the manufacturing shift out of China, businesses are faced with decisions of where to relocate their plants and/or supply chains. Increased variance and specificities of country development, locations, and proximities to material and component suppliers, workforce skills, and access to markets are of obvious importance in deciding what meets the business’s supply chain strategic needs. As supply chains move across Asia, issues, including graft and corruption, human rights, freedom of association, workforce localization, pollution prevention and waste treatment, community engagement, and expectations for transparency, will vary greatly. Manufacturers will need to learn how to operate in new and different political, stakeholder, and legal environments. Buyers will need to engage more deeply in due diligence and in selecting suppliers that will be able to navigate their new and changing environment.

2. Automation and Digitization: Building Talented Workforces Is Key

The automation trends are not new, but we are beginning to see scale in application. Hon Hai is now at 100,000+ robots in its production in China, and the Chinese government is investing in a “robot revolution.” Applied in one location at scale, automation will impact industry expectations for speed, quality, and price globally, and implementation will proliferate rapidly across borders. Whether through automation of manufacturing in light assembly in China, Vietnam, or Bangladesh, smart farming in agriculture in Indonesia, or artificial intelligence in the business process outsourcing (BPO) industry in Philippines, the 20s will bring scale.

As technological innovation leads to automation and digitization, talent acquisition and retention becomes of ever greater importance. Whether this talent is on the manufacturing floor, working within an increasingly lean and automated environment, within agricultural settings across Asia where the younger generation has fled to cities, or within corporate offices seeking to manage increasingly digitized processes, the war for talent will only increase. Attracting and retaining employees in this environment will mean not only increased wages and benefits, but particularly for the most sought-after employees, alignment with corporate purpose as well as the culture and values of their workplace.  

3. New Technologies Driving Increased Supply Chain Transparency

The increased global prevalence of data and data-linking tools such as blockchain and AI will impact value chain transparency through the ability to link, track, and connect ever deeper into value chains, connecting and allowing traceability and transparency from fields or copper mines to consumer and subsequently post-consumer use as well. 

Over the coming decade, traceability and transparency will enable both great positive attribution and validation of topics from fair trade to carbon content to product safety. At the same time, graft, corruption, malfeasance, and the reputation of the individual actors—be they upstream or downstream—will be pulled increasingly closer to the broader value-chain reputation. Companies will increasingly own their connection to the more distant edges of their value-chains—be it in connection to smallholder farmers in India, migrant labor issues in Malaysia, or the potential connections of their local partners in Myanmar to sanctioned individuals. In addition, wastes (from plastics to packaging to e-waste), particularly as governments are changing their regulatory regimes on waste and plastic across Asia, become all the more attributable.

Within this transparent and interlinked environment, the ability of the various value chain actors to manage their own governance and reputations, inclusive of environmental, social, and governance factors, is already and will be of rising importance.  Who you do business with will increasingly define how your brand is perceived.

4. The Asian E-Commerce Markets Are Your Sustainability Destiny

Asian markets are rapidly digitizing, and the Chinese e-commerce market represents roughly 35 percent of total Chinese retail sales in 2019 (compared to 10.9 percent in the U.S.), representing about 56 percent of total global online sales. Southeast Asia is set to be the next e-commerce superpower after China—the number of internet users in Southeast Asia will reach 480 million by 2020, making it the internet’s fastest-growing region in the world.

As platforms for online shopping evolve and as specialized products, niche sectors, and quality requirements change, integrating sustainability into consumer engagement will evolve. Telling your traceability story to underscore your product safety bona fides, connecting to specific millennial consumer sub-segments by showing your product recycling makes their purchase “healthy for the world,” your sustainability attributes can and will increasingly need to be at consumer fingertips. These trends will play out on mobile phones in rapidly evolving regional e-commerce marketplaces where combining the aesthetic of sustainability, access to information, and enabling consumers to understand and differentiate amongst various sustainability claims will be key learnings, as well as product and brand differentiation opportunities.

5. Increased Global Instability and Rapid Change Means Your Local Team Is Really Important

As the above trends play out, they will have varied impacts on your local markets. Setting corporate policies, strategies, and goals from headquarters is important. However, navigating the local impacts and opportunities with knowledgeable, empowered local teams will be key. Building the capacities and capabilities to integrate sustainability knowledge within local and regional business operations (including strategy, finance, marketing, operations, and procurement) is the key to capitalizing on the opportunities that these trends represent in the Decisive Decade of the 2020s.

Companies with operations, partners, and value chains in Asia should pay attention to these trends. BSR can help to develop strategies specific to operations in the region. Please feel free to connect with us and learn more.
 

Case Studies | Friday February 28, 2020

Kering: Italian Women in Luxury Supply Chains

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Despite the importance of Italy in luxury supply chains and the high prevalence of women in the workforce, little is known about gender inequalities faced by women working behind the prized “Made in Italy” label. Kering and its family of Italian brands—Bottega Veneta, Gucci, Kering Eyewear, and Pomellato—partnered with BSR to understand the status of women working in their Italian luxury supply chain and identify opportunities to support gender equality in the country. The research highlighted significant challenges for women workers and identified clear opportunities for the luxury sector to lead efforts towards more gender-inclusive supply chains in Italy.

The Challenge

Italy represents 87.8 percent of the global supply chain of the Kering Group, one of the major global players in the luxury sector. The Italian supply chain is predominantly composed of small- and medium-sized enterprises (SMEs): highly specialized yet still predominantly artisanal companies, usually family owned and employing less than 50 employees on average. Analysis from BSR suggests that the majority of these employees are women: 63 percent of the workforce of the 189 suppliers engaged for this project were women.

Kering is committed to gender equality: In 2019, Thomson Reuters ranked Kering 10th out of 7,000 global organizations on their Equality & Diversity index. Nonetheless, Kering’s 2025 vision is to go further, with a goal of reaching gender balance and ending the gender pay gap at every level of the Group. As part of these efforts, Kering partnered with BSR to explore the less visible barriers to women’s economic empowerment in Italy and to establish how luxury companies can tackle them. Italy is ranked 76th on the World Economic Forum Global Gender Gap Index 2020, suggesting that gender inequality remains a major issue.  

Our Strategy

We partnered with Wise Growth, an Italian advisory organization, to conduct a range of analyses and data collection activities. Together, we reviewed workplace gender equality policies and practices of 189 suppliers and the perceptions and experiences of 880 workers (620 women and 260 men) across the supply chains of Kering’s family of Italian brands: Bottega Veneta, Gucci, Kering Eyewear, and Pomellato. We collected gender-disaggregated data, interviewed supplier management, and engaged workers to hear first-hand testimony, including through dedicated focus groups with women workers.

Following this, we collated our findings and conducted a landscape analysis, identifying existing initiatives and potential partners for future programs that could help advance gender equality in the Italian luxury supply chain.

Our Outcomes and Impact

The robust supplier engagement strategy and on-the-ground research enabled us to gather the most comprehensive data to date and to produce a robust analysis of a previously overlooked subject. Findings included:

• Women do not have access to the same working conditions and economic opportunities as men: Women represent 63 percent of the workforce, but only 25 percent of management positions, remaining predominantly in traditional roles as blue collar workers within the factories. 
• Women rarely hold leadership positions and have limited opportunities of professional career advancement: Breaking the glass ceiling is particularly challenging, and 59 percent of women feel discriminated against across the employment cycle.
• The impacts of familial responsibilities are seen as obstacles to gender equality: Motherhood in particular is perceived as a burden by 39 percent of women, who fear its consequences on their job upon returning to work and its overall impact on getting and sustaining a job and on professional growth. In addition to that, shared parental responsibilities are still rare: for 69 percent of women, domestic and family care responsibilities still predominantly fall on their shoulders and impact their work-life balance.

Following our analysis, we worked with Kering on a range of recommendations that could be taken up by all luxury brands sourcing from Italy and by their suppliers, using our Act/Enable/Influence framework. Recommendations for brands included collecting and monitoring gender-disaggregated data, applying a gender lens to supplier codes of conduct, integrating incentives into supplier purchasing practices, and supporting the breakdown of gender stereotypes through advertising campaigns.  

Following the research and the recommendations outlined in the report, Kering and its family of four brands have committed to take action to help advance gender equality through supplier engagement and in cooperation with relevant stakeholders. Through collaboration with Camera Nazionale della Moda Italiana—a nonprofit association that regulates, coordinates, and promotes the development of Italian fashion—Kering also disseminated the results widely to ensure that the entire industry could benefit from the findings.

"For Kering, this project was a continuation of our commitment to nurturing the talents of women in our supply chains. We firmly believe that empowering women creates positive social impacts and is also good for our business. This project required engaging and coordinating numerous actors; with their experience in this area and strong knowledge of the local context, BSR was the right partner."

-Géraldine Vallejo, Sustainability Programme Director, Kering Group

Lessons Learned

• Gender inequality is likely to exist across supply chains, including in relatively wealthy and developed countries (where it may be masked by positive global statistics). To address this inequality, rigorous analysis is needed. This begins with collecting gender-disaggregated data, which is critical for companies to detect issues specifically affecting women or men.
• Engagement strategies and expectations must be adapted to the local context and to the reality of small- and medium-sized enterprises. It is important to understand the constraints on suppliers in terms of resources and capacity—including limitations on manpower, money, expertise, information, and time—and how those constraints may affect their efforts to adopt good practices and design response strategies that are geared towards capacity building and support providing and facilitating access to resources that are locally available.
• Wherever companies uncover gender inequality, it is vital to consider the full spectrum of interventions that are available to tackle it. Companies can act within their own operations, enable suppliers and other stakeholders to collaborate with them, and influence the stereotypes and pressures present in society. A holistic strategy on gender inequality will include all three of these elements.

Blog | Thursday February 27, 2020

Purchasing Power: The Opportunity for Women’s Advancement in Procurement and Global Supply Chains

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2020 is a critical year for gender equality and women’s rights. Among other major milestones, this year marks the tenth anniversary of the Women's Empowerment Principles (WEPs), a framework guiding business on how to promote gender equality and women’s empowerment in the workplace, marketplace, and community. Women are essential in global value chains: as producers, employees, business owners, and consumers. The WEPs encourage companies to assess and address gender equality across the value chain, from increasing women’s representation in leadership positions, access to education, and training opportunities to gender-smart procurement that works with suppliers to ensure safe and inclusive workplaces. 

Over the past decade, 2,771 companies worldwide have become signatories to the WEPs. Companies have assessed their own practices to identify major gender gaps, designed strategies to promote more equal employment opportunities though human resources practices, policies, and objectives, and implemented workplace programs to equip women with more knowledge and resources, among other efforts. 

However, despite considerable advancements, we are still decades away from achieving gender parity. The World Economic Forum’s recent Global Gender Gap Report reveals that today, women have lower workforce participation than men (55 percent compared to 78 percent), hold limited leadership positions globally (representing 36 percent of senior managers and officials, with even lower representation in higher positions), face persistent gender pay gaps, and continue to be victims of sexual harassment and violence. 

Slow progress means missed financial and sustainability opportunities—gender equality plays a significant role in the fulfillment of other Sustainable Development Goals (SDGs), and achieving gender equality in the workplace could add USD$12 trillion to global economic growth by 2025.  

Why do procurement and purchasing practices matter? 

Advancing gender equality is transversal within companies and requires engagement from various departments to be fully realized throughout the business. Procurement holds tremendous power to promote gender equality across different profiles of women—as procurement leaders and team members, business owners, and workers of business partners and suppliers. Through employment practices as well as purchasing practices, procurement can enable more equal opportunities for women involved at the different stages of procurement.  

• Promoting women in procurement leadership: Gendered stereotypes widely contribute to women participating less in certain industries and jobs and, while initiatives exist to promote women in non-traditional jobs, such programs are yet to be considered mainstream. Just 14.7 percent of Chief Procurement Officer-level respondents to the Procurement Leaders’ Procurement Salary Survey 2020 identified as female. Furthermore, Oliver Wyman’s 2019 report found that procurement leaders recognize more creative and innovative team dynamics when women are included in the team, as well as more efficiency and economic benefits. 
• Procuring from women-owned businesses: Little is known about companies’ engagement with women-owned businesses. A forthcoming report analyzing the responses from over 1,000 companies who have reported against the WEPs reveals that only 4 percent of companies track the percentage spent on women-owned businesses, and 3 percent publicly report on it. Women-owned businesses still face a number of barriers as women struggle to access and fully participate in local and global value chains. Barriers include limited funding as a result of cultural and gender biases, time constraints given expectations about women’s roles as primary caregiver, and challenging business environments attributed to laws, politics, religions, and culture that negatively affect women. However, women-owned businesses represent the fastest-growing market segment in some regions, and globally, it holds the potential to strongly contribute to global economic growth and to the creation of new jobs.
• Fostering environments that empower women in the supply chain: Women represent a large proportion of workers in the supply chains but continuously encounter gendered challenges that are frequently overlooked, such as occupational segregation, more vulnerable working conditions, unequal pay, poor access to maternity rights, and limited access to training. The upcoming WEPs 2020 report finds that only 8 percent of companies have robust due diligence processes in place to assess potential negative impacts of their operations, particularly for women and girls. Furthermore, poor practices have disproportionate impacts on women. For instance, Human Rights Watch’s rights report on the apparel sector highlights the increase of sexual harassment and abuse as a result of intensified work periods. Empowering women can improve on turnover, absenteeism, and retention rates, foster more inclusive working environments, and provide more dignified working conditions.

So—what next? 

As we enter this new decade that demands real action on achieving gender equality—and with the upcoming International Women’s Day #eachforequal—there are three key questions procurement teams should consider to assess how their practices are promoting (or could promote) gender equality:

• How can your practices and processes enable—or limit—the growth of women in the purchasing department? Assess whether the employment practices and culture of the organization might be unconsciously constraining women’s full participation in the team. Commit to advancing women in your team together with a clear pipeline, metrics, and accountability. 
• How are you engaging with women-owned businesses? How could you contribute to increase and unlock the potential women-owned businesses hold? Set goals that encourage business relationships with women-owned businesses, e.g., through supplier diversity programs. 
• How could you leverage your procurement spend and supplier relationships to promote gender equality across your supply chain and incentivize suppliers to take a stand for women’s empowerment? Raise awareness on gender equality with your suppliers. Review your supplier scorecard and social audit process to integrate a gender perspective. Conduct gender responsive due-diligence to capture specific challenges that women may be facing with your suppliers. BSR has specific and publicly available guidance (linked above) for companies to make procurement tools more gender inclusive and is well positioned to support you in this process.  

Achieving gender equality is right and a human right—and it means better business and more productive supply chains. Let’s make this the decade of action where women share equally in the opportunities provided across global supply chains.  
 

Blog | Tuesday February 25, 2020

Human Rights Assessments in the Decisive Decade: Innovative Approaches for the Technology Sector

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This blog is the second in a series of two about human rights assessments in the technology industry. The previous blog described challenges; this blog proposes solutions.

Previously, we published a blog post describing the challenges that arise when undertaking human rights assessments in the technology industry, such as scale, uncertainty, and the role of the user in shaping impact. In this blog post, we set out approaches to address those challenges—some that we are implementing already and some that would represent innovations for the field.

1. Human rights by design 

As we’ve previously proposed, a human rights by design approach would bring insights from a range of professional communities—business and human rights teams, product managers, research and design teams, and sales and marketing teams—to fully integrate human rights considerations into the design, development, and sale of new products, services, and technologies. It would enhance the product design process by ensuring that respect for human rights is deliberately integrated throughout and that more rights-respecting design choices can be made. Recently, Google took such an approach for their celebrity recognition product, taking a variety of measures prior to product launch—this is one of the best examples we’ve seen thus far of leveraging such an approach.

2. Human rights assessments constitute one part of a broader human rights due diligence framework.

It is easy to conflate human rights assessments and human rights due diligence as the same thing, but they are not. As the UN Guiding Principles on Business and Human Rights (UNGPs) clearly state, a human rights assessment is only one part of a human rights due diligence framework, which should also include integrating the results of assessments into decision-making, tracking the effectiveness of responses to assessments, and communicating how impacts are addressed.

It is easy to conflate human rights assessments and human rights due diligence as the same thing, but they are not.

These elements take on special significance in the technology industry, where human rights impacts can change over time as the real-world use of a product, service, or technology takes hold. Methods may include providing channels to report product misuse, pinpointing data trends that may signify a problem, and communicating revised thinking over time. The Facebook Oversight Board is an excellent example of a human rights assessment being one part of a broader due diligence framework. Beyond social media platforms, channels for identifying and reporting product misuse (for example, when a facial recognition system is leading to discriminatory outcomes) seem underdeveloped.

3. Sector-wide human rights assessments.

As we continue to address the human rights impacts arising from the technology industry, we’ve come to believe that one important constituency needs to participate much more actively: the “non-technology” companies integrating technology into their business operations, strategies, and plans. As we’ve previously written, dialogue about technology and human rights risks being too focused on the technology itself, with insufficient attention given to the companies deploying it. One solution we propose is the completion of sector-wide human rights impact assessments for the industries using technology—such as financial services, healthcare, transportation, retail, and law enforcement—to provide companies and policy makers with actionable recommendations on how human rights impacts arising from technology use can be avoided, prevented, and mitigated by entire value chains acting in collaboration. This would also help address the need for system-wide approaches, another of the challenges we raised in our previous blog post. 

4. More engagement with vulnerable users.

The UNGPs make clear that human rights assessments should involve meaningful consultation with potentially affected groups and pay special attention to human rights impacts on individuals from groups or populations that may be at heightened risk of vulnerability or marginalization. In the technology industry, companies identify “personas” to represent the different user types that might use a product, service, or technology and design with their needs in mind. Human rights assessments would benefit from the more deliberate identification of “personas” from a much more diverse range of backgrounds as well as engagement with real potential users to understand how their rights may be impacted. This would require more deliberate collaboration between human rights and product research teams.

The UNGPs make clear that human rights assessments should involve meaningful consultation with potentially affected groups and pay special attention to human rights impacts on individuals from groups or populations that may be at heightened risk of vulnerability or marginalization.

5. Integrating futures methodology into human rights due diligence. 

Futures thinking, also known as strategic foresight, provides a set of tools for companies to address rapid change, uncertainty, and complexity—the very same characteristics that make human rights assessments in the technology industry so challenging. At BSR, we are experimenting with the use of these tools in human rights assessments as a method of recognizing potential nefarious uses of technology that we might otherwise miss, identifying the human rights impacts associated with these cases, and putting in place measures to address them. Early pilots have been very promising, and companies we’ve worked with have found that uncovering blind spots and broadening horizons enable more informed decision-making and help prepare them for an uncertain future. We believe there is potential to use futures thinking much more than we do today and to broaden participation to stakeholders outside the company.

6. Assessments that inform industry standards and policy, legal, and regulatory frameworks.

Many of the challenges we described in our prior post cannot be addressed by responsible companies acting alone. Examples of this include situations in which fewer rights-respecting companies step in to provide a service where other companies refuse to, when users disregard product terms of service, or if human rights risks are system wide in nature. In these cases, human rights assessments are clearly inadequate in isolation, and we need more comprehensive approaches to eliminate human rights violations. However, by systematically identifying adverse impacts, we do believe that human rights assessments can provide excellent insights to inform the creation of standards, policies, and regulations. For this reason, we greatly welcome companies that publish human rights assessments as an input into a broader policy dialogue—the audience for human rights assessments should not be restricted to the company alone.

We hope these six ideas, each informed by real-life engagements with companies, help enhance discussions about how to improve the implementation of the UNGPs in the technology industry. However, these ideas also rely on companies across the whole industry—not just the leading companies—undertaking human rights assessments and implementing human rights due diligence frameworks, and for this reason, we’re also intrigued by increased calls for mandatory human rights due diligence. It is only when human rights due diligence is the norm and not the exception that these solutions will truly take hold.

Blog | Thursday February 20, 2020

Accelerating Toward Data Insights

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Tech Against Trafficking (TAT) celebrated its collaboration with the Counter Trafficking Data Collaborative (CTDC) at an event last week in London, which showcased the results of the first Tech Against Trafficking Accelerator.

The goal of CTDC is to make it easy to access, analyze, and safely share reliable, up-to-date data from the world’s largest human trafficking case dataset. CTDC, an initiative of the International Organization for Migration (IOM), entered the Accelerator to enhance its data standards and privacy-preserving methodology and refine its partnership engagement process by working with Tech Against Trafficking member companies, including Amazon, AT&T, BT, Microsoft, and Salesforce.org.

Harry Cook, Data Management and Research Specialist at IOM, noted that CTDC was “delighted to have been part of the very first TAT Accelerator Program.” Cook went on to say, “It has been truly enriching to get the perspective of technology sector professionals on our work, and their expertise and contribution will have a positive and lasting impact on CTDC.”

Over the course of the seven-month Accelerator, CTDC partnered with Tech Against Trafficking members and partners across different workstreams related to privacy-preserving mechanisms, data standards, and increased platform engagement.

Privacy-Preserving Analytics

Understanding the scale and scope of human trafficking is essential for effective resource allocation, technology application, and policy development. However, one of the critical challenges of the anti-trafficking community is how to share victim data for analysis while protecting the privacy and safety of the individual victims represented in that data.

Darren Edge, director at Microsoft Research Special Projects, explains the challenge:

“Working on the Accelerator has encouraged us to think about human trafficking data from the perspective of both victims and traffickers and to answer one big question: How can we share data on victims of trafficking while protecting their privacy and safety, especially given the risk that traffickers may retaliate against victims they believe are identifiable in any data release?”

Over the course of the Accelerator, the Privacy Preserving Analytics Platform workstream created a solution that provides access to more data, more accurate data, and the means to analyze it more deeply than would otherwise be possible. The end result is an easy-to-use visual interface of both synthetic data and precomputed statistics, enabling accurate analysis without exposing any data on actual identifiable individuals.

The next step for the work is to publish the resulting data on the CTDC website for use by and feedback from the anti-trafficking community. We hope that the work will set new privacy standards for the analysis of human trafficking data, as well as any sensitive data needed to tackle urgent problems affecting people and society.

Developing Data Standards for Victim Case Management

Recent technology advances have enabled a growing number of organizations worldwide to develop cost-effective victim case management systems and services. However, organizations frequently use different terminology and criteria when assessing and inputting victim information, which makes it difficult to share case data among the anti-trafficking community, conduct meaningful analysis, and understand the scale of the problem.

To address this challenge, the Accelerator’s Case Management and Data Standards workstream collaborated to develop a ‘data standard,’ which established common criteria and language that can be used across organizations managing victim case data.

Working closely with IOM as they plan their upcoming digital case management system, the workstream kicked off with knowledge-sharing sessions on case management operating models, security, mobile technology solutions, and artificial intelligence (AI)/analytics to help improve the security, privacy, and systems integration of IOM’s digital case management. The workstream went on to develop and publish an initial data standard on GitHub that can be used by organizations looking to develop victim case management systems and makes it easier for existing organizations to share datasets and analyze trends.

The next stage of this work will be to engage a community of experts, non-governmental organizations (NGOs), and technology companies in enhancing these standards and developing tools to accelerate their adoption.

Engaging Stakeholders to Drive Impact

It is important to understand how data platforms are currently used and could be used by different stakeholders in order to maximize utility and impact. The Stakeholder Engagement workstream focused on the value of CTDC to businesses and spoke to a handful of companies to understand how CTDC’s platform could help their counter-trafficking efforts. Questions focused on what additional data, trends, or information stakeholders would find helpful and what data could feed into CTDC’s current dataset and platform to add more value.

The workstream identified two main themes: expanding the platform dataset and improving user experience. Insights from the interviews informed recommendations on how CTDC could consider expanding offerings to corporate partners in the future. The workstream also created new material to encourage other organizations to share their data with CTDC and make it easier to integrate new datasets into CTDC’s platform.

Looking Forward

As Tech Against Trafficking concludes its first Accelerator, we look forward to continuing our efforts towards using technology in the global endeavor to eradicate human trafficking. More details from the Tech Against Trafficking CTDC Accelerator will be shared in an impact report to be published shortly.

At Tech Against Trafficking, we want to see technology make a real difference for anti-trafficking organizations. In addition to supporting individual organizations working to advance and scale the impact of their work, we hope to support the use of technology to connect anti-trafficking organizations, share data, raise awareness, and improve case management across the sector. We invite all technology companies and anti-human trafficking organizations who are interested in seeing this happen to contact us to find out how to get involved. 

Blog | Wednesday February 19, 2020

The Coronavirus’ Impact on Chinese Society and Supply Chains

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January 25, 2020 was the Chinese Lunar New Year. As is tradition, families prepared for this important holiday by taking at least one week—or even more—to celebrate: factories closed down and domestic migrant workers happily returned to their hometowns, plane and train tickets were sold out by early January, families and close friends made plans for gatherings, and restaurants were sold out for the New Year holiday banquets. While the holiday is officially seven days long, many workers take as many as 15 days off, extending their holiday until the Lantern Festival, which takes place on the 15th day in the lunar calendar.

However, this year, I received a call on January 22, just days before the New Year, from the chef scheduled to arrange my at-home banquet. He said there had been too many requests for home banquets instead of restaurants because people were started to worry about the “Wuhan Pneumonia”—what we now know officially as the Coronavirus. The chef was suddenly overbooked. As a long-time friend, I agreed to let him go for bigger opportunities since my family dinner would have been rather small and simple—I did not want him to miss a more profitable opportunity. Little did I know that this was my last chance to have someone cook for me.

The following day, January 23, Wuhan was officially closed: no one was allowed to come into or leave Wuhan. The government announced that it would prolong the school holiday until late February.

Everyone was nervous. Our first reaction was to buy masks—but they were all sold out! Very soon afterwards, disinfectants were sold out in shops and on online platforms. Streets emptied quickly, and restaurants and shops were closed.

And many countries, including Great Britain, the United States, and Australia announced cancellations and reductions in flights from China, as well as limits on travel for Chinese citizens and foreign travelers who had been to Wuhan or China.

From that point on, people focused on changing their flight tickets out of China, staying home, and switching to online shopping for food. Four major online platforms—Hema (the supermarket under Alibaba), JingDong, Meiriyouxian, and Dingdong—were overloaded with orders for tofu, green vegetables, eggs, meats, and ginger, among others, and they were often sold out. These online platforms’ delivery services were overwhelmed, and they had to change their policies from delivery in 30 minutes to taking more than a day or not being available at all.

As of today, February 19th, the 27th day after the Chinese year, the Coronavirus has led to more than 2,000 deaths in China—a devastating impact. Across the country, schools are still closed and streets remain empty. Many people continue to work from home. Retail, restaurants, and entertainment companies are nearly completely closed across the country. The big question is when all will return to normal—for communities and families affected by the Coronavirus, for people across the country worrying about their own health, and for companies concerned for their workers’ wellbeing and wondering when production can resume. This has become a significant challenge for all business, especially in the manufacturing and service sectors. The longer they wait, the greater financial pressure emerges for business owners and workers whose income will be impacted.

As the majority of cities and counties are still blocked, plane and train services are reduced. This means workers cannot get back to work. Factories are facing huge financial challenges. Many retailers have closed operations: IKEA closed all its shops, Uniqlo and Levi’s have closed about 50 percent of their shops, and Burberry and Prada hardly have any visitors. Shanghai Fashion Week, originally scheduled to launch March 26, has been canceled.

Business is facing big challenges on how to deal with their stock in the Chinese market and how to place future orders. Since many Chinese factories are closed, manufacturers in Southeast Asia are also affected due to a lack of raw materials and components. The Coronavirus impact on China and global business, especially supply chains, will be enormous. This raises the ultimate question: how to build a resilient sustainable supply chain? As this challenge increases, some local governments are starting to take supportive measures to help factories resume their production, e.g., the Hangzhou and Yiwu government worked with some local governments to bring the workers back to these cities by organizing dedicated trains and transportation and providing support so that factories could maintain good health protocols.

BSR’s China team is planning to write a series of blog posts to provide insights regarding the impact on workers, supplier management, as well as the environmental impact as the crisis of the Coronavirus continues to unfold.

Blog | Monday February 17, 2020

Sustainable Business in Asia: Three Environmental Drivers of the Decisive Decade

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Climate change is a global threat, endangering communities, resources, and economies around the world. For businesses in particular, climate change is a significant risk—to workers, operations, and supply chains. Many companies are already mobilizing: to limit their own impact, many are setting emissions reduction targets; to adapt to the growing risks, some are evaluating where their supply chains are located as well as what energy sources they use.

Companies with operations in Asia will face a unique set of challenges and opportunities as we enter the decisive decade of the 2020s. BSR has identified the following trends relating to climate and the environment that are likely to impact how companies do business in the region. We have identified these trends based on our work with companies in Asia, including our engagement with stakeholders throughout the region.

We expect these trends to impact sourcing strategies and supply chains, access to finance, employee engagement, sustainability leadership, and increasingly market and consumer engagement. For sustainable business to thrive in the next decade, companies need to be aware of:

1. The Increased Focus on Climate and Sustainability Determining Access to Finance

Climate change impacts and risks—such as rising sea levels, increasing cyclone intensity, water stress, and drought—pose a significant threat to Asia. China alone has 14 coastal cities and 154 million people in low-elevation zones. Indonesia has the world’s second largest coastline, exposing 60 percent of its population to sea-level risk and coastal surge; furthermore, Jakarta, its capital, is sinking. 

Climate risks, impacts, and the need for planning and resilience are being integrated into banking risk, banking relationships, and the Task Force on Climate-related Financial Disclosures. This means that the increasing global focus on carbon and climate will impact key relationships between businesses and their financial services providers. As their bankers begin to ask more pointed and specific questions, all businesses—including conglomerates and family-run businesses seeking access to global capital—will need to integrate deeper understanding of climate risks: from hazards such as flooding, to business exposures as demand for products/services change, to vulnerabilities of local infrastructure and communities. The financial imperative to understand climate risk is driving greater CFO engagement on climate and sustainability and will continue to do so. As a consequence, companies are having to develop greater firm-level competency, awareness, and integration of both climate and sustainability into their core business strategies. 

2. China’s Continuing War on Pollution

China has been waging and will continue to wage three battles: for clean air, clean water, and clean land. As this continues over the coming decade and is further integrated into the 14th Five-Year Plan, the war on pollution will continue the changes already being driven: polluting enterprises are being shut down, moving, or needing to significantly invest in pollution control as governmental enforcement, standards, and local government oversight change. Supply chains are experiencing—and will continue to experience—the impacts of this war on pollution in terms of increased supply chain uncertainty and supply chain movement as critical China-based suppliers in tier two or three cease operations or move to new locations.

3. Differing Country Investments in Renewable Energy

Individual countries’ choices to enable investments in renewables (or not) will be important to global supply chains and are highly variable around Asia—with Vietnam appearing to innovate and Indonesia at a crossroads where “an over-reliance on thermal coal and unsustainable sources…will lock the country into polluting energy supplies, for years, if not generations, to come.” Continued use of coal and other fossil fuels affects businesses’ Scope 3 carbon emissions—and most probably lock countries into higher energy costs over the course of the decade. 

As global business begin to contemplate fossil fuel-free supply chains, energy generation options in countries will become increasingly important. Whether is it a carbon tax in the producing country or a carbon tax at the border to the market country, this needs to be accounted when looking at value chain locations. Local energy options and future energy infrastructure development plans will need to be on the radar of procurement and supply chain leadership. 

Businesses already doing business in Asia or those with plans to expand operations and supply chains into the region need to pay attention to these trends as we move into the new decade. BSR’s Asia team can help develop strategies specific to the region to advance your company’s sustainability agenda—please feel free to reach out and connect with us.