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Blog | Monday July 10, 2017

Shape the Future of Sustainable Business at the BSR Conference 2017

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The BSR Conference 2017 will serve as the centerpiece of our 25th anniversary celebration. So much has changed since BSR launched in 1992. Our very first Conference, in Washington, D.C. in 1993, brought to the plenary stage a new president in his first year: Bill Clinton. President Clinton embraced a view of business that would make a meaningful difference in enabling people to reach their potential, of businesses that knew that a healthy environment was central to their success. He also knew that global trade could—done right—lift billions of people out of poverty.

While the view from Washington looks different in 2017, there is no doubt that in the previous quarter-century, we have developed an amazing ecosystem of sustainability leaders. I am exceptionally proud of the role BSR has played in building a real movement of changemakers in business.

At our 25th annual Conference this year, we certainly will celebrate what we have accomplished, in collaboration with our great network of member companies and other partners. But even more, we will take the opportunity this October to look resolutely to the future.

This year’s event will create the opportunities for networking and learning that so many have come to expect from the BSR Conference. 

In keeping with our approach to the 25th anniversary, we are taking the opportunity to redefine sustainable business—and the Conference as well. The venue itself will provide new opportunities for informal interaction in an inspiring beach-side setting. We have built an agenda that will take full advantage of the natural environment—from our opening night reception and dinner by the ocean to our closing 25th anniversary celebration overlooking Huntington Beach.

The theme for the Conference is “How Business Leads.” At this moment in history, business leadership is essential. More and more, sustainability leadership is crucial to successful business. Sustainability presents unique opportunities for innovation and value creation. Businesses lead through powerful collaborations that are fit for a world of distributed assets and diverse perspectives. And in today’s climate, the voice of business is crucially important, as other sectors often abdicate their leadership responsibilities. 

We have shaped a Conference agenda that will look to the future. This comes at a time when technology, economics, and politics are rewriting the sustainability playbook. We have dedicated a special track, “FastForward 25,” to sessions that will project the kinds of changes that business can create to make good on the promise of the Paris Agreement and the Sustainable Development Goals. Fitting with our location in California, from where so much innovation comes, we also will have multiple speakers looking at new business models, new collaborations, and new ways of engaging consumers.

BSR’s first Conference brought together a small but mighty band of believers who had a vision of a new way of doing business. Today, our numbers are greater, and the vision remains just as powerful as it once was. The scope of our opportunity is just as powerful, too.

Every year, I am excited by the prospect of being with many great leaders whom I consider to be friends and partners. This year, at the intersection of BSR’s 25th anniversary, serious disruptions affecting business, and the need for business leadership and voice, the question I have found myself asking is: “How will we meet this unique moment?” 

Come to BSR17 to shape the answer: Our shared future depends on it.

Blog | Wednesday June 28, 2017

BSR Collaborates with Indian Business Association to Address Sexual Harassment in Garment Industry

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Violence against women is one of the world’s most prevalent human rights violations. In India alone, almost 330,000 cases of violence against women were registered in 2015, equal to a reported crime every two minutes.

Violence against women does not stay within communities and homes; it also happens within businesses. Recent reports show that sexual harassment against women workers, including different forms of verbal and physical abuse, is common in the garment industry in India. Not only does this affect women, it also holds back the Indian economy and businesses. According to the Asia-Pacific Economic Corporation (APEC) Healthy Women, Healthy Economies initiative, workplace sexual harassment programs and policies can increase female workers’ productivity, resulting in gains of up to US$186 million in developed APEC economies and US$57 million in developing APEC economies.

Addressing violence against women will require everyone to take action. BSR recently launched HERrespect—an evidence-based workplace program that builds the capacity of management and workers to challenge social norms and identify, prevent, and address violence—in India. HERrespect represents an important stepping stone toward transforming gender norms in an industry that directly employs 8 millon workers. Support from global brands and donors has been fundamental for getting the movement started, however, strategic partnerships with local business and industry associations are essential to achieve a systemic-level shift to end violence against women in the garment industry.

The government of India has called on Indian business to take action by adopting the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act in 2013. The act makes it mandatory for all companies with 10 or more employees to set up an internal complaints committee and improve employee awareness about what constitutes sexual harassment at work. Research shows, however, that almost half of the Indian companies surveyed have yet to train employees and committee members on topics related to sexual harassment at work.

We are proud to announce a new collaboration with the Confederation of Indian Industry’s Centre of Excellence for Sustainable Development (CII-ITC CESD). The aim of the collaboration is to mobilize commitment from Indian business leaders to ensure a safe working environment for female workers in the garment industry. As an industry-led business association with a wide membership across the textile and apparel sector, CII-ITC CESD plays a unique role in engaging with textile and apparel factories to strengthen the role of business leadership in preventing violence against women.

In recent conversations with garment factory managers in Tamil Nadu, we found that local business leaders need practical resources on how to ensure a safe work environment for women. In response to this need, BSR has developed “Women’s Safety in the Workplace,” a HERproject toolkit supporting managers in the garment industry to take action against sexual harassment in the workplace. The toolkit, which we developed in collaboration with CII-ITC CESD and with support from C&A Foundation, includes ready-to-use training materials and step-by-step guides on how to strengthen workplace systems to prevent and address sexual harassment.

Over the next months, BSR and CII-ITC CESD will co-host a series of events across India for business leaders in the garment industry to discuss how to address sexual harassment in the workplace.

We invite you to join the initiative and partner with us to scale HERrespect in India and beyond. Take action today by sharing the toolkit with suppliers in India and support them to promote a safe working environment for women in the supply chain.

Blog | Tuesday June 27, 2017

Supply Chain Sustainability in the Consumer Goods Industry and the Benefits of Collaboration

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When it comes to building sustainable supply chains, collaboration is critical. It helps companies share best practices and resources and jointly develop principles and standards that amplify impacts. In fact, when BSR set out our Supply Chain Leadership Ladder framework earlier this year, we established collaboration as one of the four dimensions of a robust sustainable supply chain program.

Collaboration is also a core theme of a new AIM-PROGRESS study that BSR led to examine how much progress the fast-moving consumer goods industry is making on supply chain sustainability. The annual study, which BSR has supported for the past two years, is based on information and data submitted by 40 companies representing more than US$800 billion in revenue.

In addition to providing a snapshot of the state of supply chain sustainability in the consumer goods industry, the study also shows how collaboration can drive efficiencies, encourage companies to innovate and act with ambition, and deliver greater impacts in the world. Here are five key findings from the 2016 AIM-PROGRESS Member Benchmarking report:

• Collaboration is generating cost savings: In 2016, AIM-PROGRESS members accepted nearly 2,000 supplier audits commissioned by another member rather than asking suppliers to submit to another audit. In addition to addressing audit fatigue and reducing administrative burdens, this saved members an estimated US$5 million in avoided audit costs.
• Collaboration helps companies implement the international sustainability agenda: When the UK Modern Slavery Act was passed in 2015, one-third of AIM-PROGRESS members had no formal approach to address the risks of modern slavery in the supply chain. AIM-PROGRESS set modern slavery as a priority area for the group, and today, 92 percent of members have an established approach to this issue. 
• Supply chain sustainability goals are now mainstream: Today, 90 percent of AIM-PROGRESS members have set supply chain sustainability goals—an 18 percent increase since 2015.
• Supply chain sustainability actions are reaching a larger number of suppliers: In 2016, companies engaged about 50 percent of in-scope suppliers through a sustainability assessment, audit, or self-assessment—up from 33 percent of in-scope suppliers in 2015.
• Companies are investing in more robust governance and management: In 2016, companies reported a 60 percent increase in the number of people working on responsible sourcing, and a 14 percent increase in program oversight at the vice president level or above.

This survey reveals that company efforts on supply chain sustainability are maturing, as is the collaboration architecture that supports them. Members of AIM-PROGRESS said the collaboration has helped to strengthen their responsible sourcing programs. “We have benefitted substantially from learning from other companies and sharing resources as we have ramped up our program. We use the [survey] insights as a tool to engage our teams and drive further progress,” said Anheuser-Busch InBev Sustainability Manager Clare Flannery. WestRock Director of Supply Chain Compliance and Sustainability Christopher Campolongo added that this kind of work gives AIM-PROGRESS members “greater visibility into common topics that can be improved on a global scale.”

As we mark our 25th year, BSR will build on what we have learned to help our members get the most out of collaboration on supply chain sustainability. Whether through our own Collaborative Initiatives or via partnerships with other platforms, we will continue to champion collaboration as a way to build inclusive, resilient, and transparent supply chains.

Blog | Monday June 26, 2017

Three Steps to Tackle Raw Materials Risks—from the Inside Out

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For global companies, different commodities present a risk for serious human rights abuses, such as the worst forms of child labor, conflict, and forced labor, as well as other social issues and environmental degradation.

These risks have led the Organization for Economic Cooperation and Development (OECD) to publish the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Due Diligence Guidance), which has been codified into law in the United States and European Union and is being debated in other jurisdictions. While some regulation focuses on the sourcing of minerals from specific locations, the EU law forces companies to look for risks in the raw materials wherever they are sourced globally.

Today, the number of raw materials facing scrutiny is also growing: A forthcoming handbook from the OECD will help companies apply the OECD Due Diligence Guidance to palm, conflict minerals, pulp and paper, diamonds and other gem stones, oil and gas, and other commodities. Cotton and seafood are also gaining attention.

This broader geographic and material scope means more companies across industry sectors will need to take action to reduce social and environmental risks in the procurement of raw materials. To make a real impact—and level the playing field so that there is sufficient capacity to protect human rights—collaboration will be critical.

But rather than starting by joining a collaborative initiative, companies should work from the inside out, identifying and assessing their biggest raw materials risks and then finding the right group to join to maximize impact and mitigate risks.

Step 1: Identify your company’s risk profile.

Collaboration may be necessary to create the conditions for improvement at the site of extraction or harvest, but the best place to start is by looking inward: What is your company’s raw material risk profile?

No company has the resources to comprehensively address every raw material in their products, nor do they have the expertise to effectively engage. Therefore, it is critical to create an internal strategy to focus scarce company resources. That requires an internal assessment process, like a materiality analysis, to identify the most important and impactful commodities and materials.

Step 2: Analyze the supply chain of your target raw materials.

The next step is to look at the supply chain of the raw materials you have identified: Where do the materials come from? What are the risks in that region? Answering these questions will allow you to identify the raw materials and regions that present the most immediate, most severe risks.

In an age of hyper-transparency, companies should assume that stakeholders will be able to map the supply chain and link commodity risks to your company. Proactively understanding where your company has raw material and commodity risks puts it in a position to more efficiently meet stakeholder expectations, minimize risk, and maximize impact.

Step 3: Create a collaboration strategy.

Once you clearly understand your company’s biggest risks, you can invest in the collaborations that will have the most impact. These partnerships might focus on the commodity, or they might focus on issues in that region. Different companies will have different types of severe risks depending on the commodities that are important to them. For example, one company may be sourcing a high-risk commodity from a low-risk region and should instead focus on a medium risk commodity from an area where human rights abuses are known to be more likely.

While many companies are responding in a reactive way to industry standards, legislation, or media and NGO reports, some have been proactive in identifying their risks and joining the most relevant groups that are advancing progress on specific issues. Microsoft, for instance, in reviewing its products, determined that tin not only presented risks not from a conflict minerals perspective, but also can present risks in its extraction in Indonesia. Therefore, they joined with a number of other companies and organizations to form the IDH Indonesian Tin Working Group, which focuses on driving the implementation of a roadmap for responsible tin mining in Indonesia.

The risks in raw materials and commodities can be complex for companies, which is why collaboration is important. But collaboration can’t happen until after companies take those first inward-focused steps to review their products and assess and identify their most relevant risks in sourcing raw materials and commodities.

Blog | Thursday June 22, 2017

BSR’s Women in Factories China Program: Moving from Risk to Value in the Supply Chain

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“I was a machine operator and became the first female line manager for my factory. The training helped me understand how to manage a team. I have a new sense of my own career development and how to lead my team toward even better performance.” —Xiangli Lu, factory worker and Women in Factories participant

Over the past three years, BSR’s Women in Factories China Program has delivered more than a million hours of training to nearly 90,000 workers in more than 45 factories across seven different industries in China’s manufacturing supply chain—significantly exceeding program goals and helping empower women as agents of sustainable change.

The Women in Factories program—funded by and in partnership with the Walmart Foundation's Women’s Economic Empowerment Initiative—was designed to build the capability of human resources departments to provide work and life skills for workers, while demonstrating the value of investing in women workers who can become the next generation of leaders. Surveys of participants show that the program has given women workers the skills and knowledge they need to change their lives and how they work, creating value for factories and catalyzing change in manufacturing supply chains.

At a recent half-day event in Shenzhen, China, BSR and Walmart highlighted program outcomes and led discussions about how brands and factories can invest in workers to help China become a manufacturing leader as the industry evolves in the future.

How Investing in Workers Benefits Women and Factories

When BSR Asia-Pacific Vice President Jeremy Prepscius opened the event, he described how brands’ perceptions of factory workers is shifting from a focus on identifying and managing risks to finding ways to add value. Previously, many factory managers didn’t understand the value of investing resources in workers and considered these efforts a waste. As the Women in Factories program progressed, however, more factories and companies began to see that investing in people can transform supply chains by building an internal pipeline of women leaders.

The value of this investment was evident in the survey results and personal stories about the program:

• Communication: 51 percent of participants significantly improved how they respond to disagreements at work, and 90 percent of workers showed improved communication skills.
• Commitment: 40 percent of participants showed an increased willingness to recommend their factories to others, indicating a better sense of ownership and a higher level of commitment to their work. One speaker from Hayco said that after the first wave of training, the company’s factories experienced a sharp decline in trainee turnover rates, from around 14 percent to 1 percent. 
• Stress management: More than half of participants reported a significant improvement in their ability to manage stress, and 83 percent said they felt more capable at their jobs, which supports higher productivity. Lulu Zhu, a factory worker who received the program’s Role Model Women award, said she is now able to cope with conflicts. “Women in Factories enabled me to help my peers focus on the problem itself and find a solution rather than venting negative emotions,” she said.

Professor Li Xiaoping of China Eastern Normal University, who analyzed more than 800,000 data points, said targeted training procedures, strong and interactive content, and timing were keys to the program’s success.

How Training Can Support the Future of Chinese Industry

To close the event, BSR China Director Lin Wang moderated a panel on how industry trends are affecting factories and the labor force, and how investing in workers through the Made in China 2025 government initiative will help China become a manufacturing leader. Panelists included EY Sustainability Director Brian Ho, Harvard Center Shanghai Assistant Research Director Nancy Dai, Walmart Senior Sourcing Director Sophia Yu, and Foxconn Project Director Xuehu Xiong.

China’s prevalent production and export business model is becoming a thing of the past. Today, the industry is poised to become more domestically self-sufficient, service-oriented, and competitive. This poses new challenges and opportunities for workers as more and more factories move toward automation.

Panelists noted that while automation has the potential to threaten factory jobs, it also presents a massive opportunity for job creation. Future employers creating “smart factories” will need to teach new skills and nurture confidence because, even as production processes are streamlined, new jobs will require people to program and maintain machines and emerging technology. Yu said that the Women in Factories program has helped give thousands of women workers the confidence to learn new skills and pursue new opportunities in the workplace, which will support the transition for the jobs of the future.

Ultimately, the Women in Factories program will reach beyond just the 90,000 workers in China’s manufacturing sector. That’s because the program has engaged key actors throughout the supply chain, helping them understand that investing in workers is really about investing in the future. As Prespscius said in his closing remarks, factories are now going from asking, “Why should we invest in our workers?” to “Why not?”

A Women in Factories impact report will be published later this year. 

Blog | Wednesday June 21, 2017

Activist Investors and the Rise of Short-Termism 2.0

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There has long been a tension in the financial markets between long-term growth and short-term returns. In the past decade, short-term pressures have been exacerbated by executive compensation trends, quarterly earnings guidance, and increased shareholder turnover.  Several studies have highlighted executives who admit they would sacrifice a project that would create long-term value in order to meet quarterly earnings expectations.

In recent years, companies have found it even more challenging to focus on long-term value creation due to the rise of hedge fund activist investors. These activist investors are looking to maximize stock price before they sell their shares, and they have been very effective at influencing boards, changing CEOs and management, and driving mergers and acquisitions. There are around 550 activist investors globally, controlling more than US$180 billion in embedded capital—up from US$51 billion in 2011.

There are, of course, many institutional investors who have longer time horizons, and these investors have been instrumental in integrating environmental, social, and governance (ESG) factors as part of this approach. There is evidence that the revenue of long-term firms cumulatively grew an average of 47 percent more than the revenue of other firms from 2001 through 2014. In his annual letter to CEOs this past January, Larry Fink, the chief executive of BlackRock, the world’s largest investor, emphasized the need for long-term value creation:  “ESG factors relevant to a company’s business can provide essential insights into management effectiveness and thus a company’s long-term prospects.”

Despite this positive movement toward long-term thinking, some activist investors are pushing in the wrong direction and threatening to undermine progress. In recent months, we’ve seen significant activist-driven changes at companies that have been focused on sustainability and long-term growth. GE, for example, has a history of positioning itself for long-term growth. But facing pressures to cut costs and boost short-term profits, GE CEO Jeff Immelt announced that he will step down in August. Similarly, Whole Foods had been under intense pressure from activist investor Jana Partners since April, and last week’s surprising acquisition from Amazon is being described as saving the company from the activist investors.

This trend will likely worsen now that the U.S. House of Representatives has passed the Financial CHOICE Act, lifting many of the financial regulations enacted in the 2010 Dodd-Frank Act. This bill would require that investors own 1 percent of a company’s stock for three years in order to file a shareholder proposal. This would greatly limit the ability of most investors to even raise ESG issues.

“This raises the bar for entry to ordinary investors and would make shareholder proposals a billionaire investor’s privilege, when it should be a right for all investors,” said Anne Simpson, investment director, sustainability, at Calpers, the biggest U.S. public pension fund.

Interestingly, amid the debate about short-termism, the negative impacts of ignoring environmental and social issues have become more immediate. Climate impacts on business continuity are no longer 20 years out but affecting operations now. Human rights issues also impact business in near term: Just this year, concerns about the Dakota Access Pipeline have affected investments in Wells Fargo.

Still, the overall impacts of global social, demographic, political, and environmental trends are realized in years, not months. Investing to become a more sustainable business is inherently about understanding future trends and positioning the company for success over the long term. Here’s hoping the activist investor trend is short-lived, so that investors, companies, and society can all benefit in the long term. 

Blog | Friday June 16, 2017

The Digital, Sustainable Future of Supply Chains

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A few weeks ago, the Gartner Supply Chain Executive Conference, attended by more than 2,000 supply chain professionals, was buzzing with stories of companies that are digitally transforming their supply chains: augmented reality head-mounted devices in factories, machines making decisions to approve suppliers, Internet of Things buttons reducing inventory, and artificial intelligence enhancing supply chain planning.

Sustainability was mentioned. The methodology for Gartner’s Supply Chain Top 25 companies now incorporates CSR performance as 10 percent of the overall score. Featured panelists occasionally called out the environmental benefits of a new program. Some digital platforms came with claims of addressing a degree of sustainability risk.

All of which is to say, sustainability was a secondary consideration.

Which invites the question: How can we elevate it to a primary position?

This challenge is not limited to Gartner’s conference. Even as digital technologies are being applied to all aspects of supply chain management, sustainability is often still run on a parallel, Excel-based system or on a dedicated sustainability platform unconnected to other platforms. We aren’t digitalizing supply chain sustainability, and we should be.

The Reality of Supply Chain Digitalization Today

First we must understand that digital transformations are far from guaranteed. A recent Salesforce article estimates that digital transformation projects have an 84 percent chance of failure.

We must also be able to differentiate hype from reality. There has been a lot of recent optimism about blockchain, a decentralized database that keeps records of digital transactions. Blockchain is a technology with great potential, but there is a limited number of use cases for the supply chain today, and most experts agree that it is still years away from becoming mainstream.

We should also keep in mind that supply chains are not monolithic, and they cannot be managed as such. Some areas may digitalize faster—either because the benefits of going digital are more tangible, or because the right technology becomes available and cost-effective more quickly—while others may not keep pace.

The New Mandate

The new mandate for supply chain sustainability is to use this time of transition to embed sustainability firmly into the information, functionality, and end-use of digital technologies as they come into the mainstream. Sustainable supply chain practitioners are primely placed to help companies navigate their digital supply chain transformation. We are not strangers to applying technology in difficult circumstances. For years, we have been using limited technology tools to onboard unwilling traders and agents to share sustainability data, and adapting data capture tools to collect information from farms, plantations, and mines way upstream, where technology access has been limited.

We must apply this skillset now. There is a lot to do: Digitize sustainability indicators, harness digital tools to see further into opaque supply chains, make sustainability systems interoperable, apply machine learning to identify sustainability risks, use augmented reality to enable better worker engagement, examine the social and environmental impacts of these new technologies, and much more.

By increasing our digital sophistication, sustainable supply chain management can lead innovation during the digital transformation.

To discuss these issues with your peers, join the "Harnessing New Technologies for Supply Chain Sustainability" breakout session at the BSR Conference 2017 this October.

Blog | Wednesday June 14, 2017

Impact Sourcing and Inclusive Supply Chains: A Conversation with Microsoft’s Tim Hopper

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Recently, BSR’s Global Impact Sourcing Coalition (GISC)—which seeks to create more inclusive supply chains through procurement—published “The Autism Empowerment Kit,” which offers recommendations and resources for employers to provide workplace accommodations that empower employees with autism. Microsoft, one of the sponsors of this kit, recently shared this resource with its suppliers at an event on disability inclusion. We spoke with Tim Hopper, Microsoft’s manager of responsible sourcing initiatives, about this initiative and the company’s wider commitment to Impact Sourcing.

Sara Enright: Microsoft has been working with its suppliers on Impact Sourcing for several years. Why does this work matter to Microsoft?

Tim Hopper: We have been working on Impact Sourcing for several years together with our suppliers to encourage inclusive employment. For Microsoft, Impact Sourcing is about knocking down artificial barriers to employment and allowing high-potential individuals to bring their strengths to the marketplace. By partnering with our suppliers, we can bring people in who would not otherwise have an opportunity and support their success in the workplace. It’s a business model that strongly aligns with the company’s mission to empower every person and every organization to achieve more.

It’s important to note that the benefits of Impact Sourcing extend to the business as well. As we see in the case studies presented in the autism empowerment kit, together with other case studies on Impact Sourcing that have been developed over time, there are clear business drivers for inclusive employment, including less attrition in work that is at similar quality or higher than that done by traditional workers. This has been consistently demonstrated across all the different categories of Impact Sourcing.

Enright: For the past year, you’ve been leading a working group on disability inclusion in the workplace, leading to the development of this report and other engagement with Microsoft’s global suppliers. Tell us more about this initiative.

Hopper: Recently, we launched a special focus on inclusion of people with disabilities. The clear majority of these people are under- or unemployed.   

We encourage suppliers to partner with us in two ways. First, we include Impact Sourcing as an evaluation criteria in our strategic requests for proposals, offering providers that have inclusive employment programs higher points in the procurement evaluation. Second, we run an annual awards competition to recognize the good work of suppliers who are doing Impact Sourcing. This year’s competition focused on suppliers who empower people with disabilities.

It’s exciting to see how much this work has already caught on within the company and with our suppliers. At Microsoft, we see disability as a strength and encourage individuals to come as they are. 

Enright: The GISC is initially focused on Impact Sourcing in the business process outsourcing industry. What additional categories of supplier do you believe may be a good fit for Impact Sourcing?

Hopper: We believe that Impact Sourcing can work across all supplier categories, from call centers, to facilities management, all the way up to application development. If you think about the variety of people who are long-term unemployed or informally employed, there are opportunities for them to enter the workforce through all industries. Every industry can make an impact.

Enright: As a member of GISC, what opportunities do you see through a collaborative approach to advancing Impact Sourcing?

Hopper: The most challenging thing for Impact Sourcing has been getting to a common definition of what it is, and how to measure it consistently. I think GISC is delivering on that need with the development of an Impact Sourcing standard and measurement toolkit, which will help to ensure that our suppliers are doing impact souring in a way that is measurable, and that offers assurance that they are having a real impact. Coming to a common definition and agreement on a standard is key.

In the long run, we could see Impact Sourcing growing in many exciting directions. Can we create a certification that allows suppliers to register as certified Impact Sourcing providers, so that we can prioritize them in the same way that we do minority-owned, women-owned, and disability-owned businesses? That would be a big deal, allowing companies like ours to offer beneficial procurement contracts to companies that are committed to workforce inclusion. 

Primers | Tuesday June 13, 2017

10 Human Rights Priorities for the Financial Sector

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Human rights are inherent to all human beings. They are defined and established in more than 80 international legal instruments¹ and define the fundamental protections of human dignity, needs, and freedoms, such as food, housing, privacy, personal security, and democratic participation.

Since the adoption of the Universal Declaration of Human Rights (UDHR) in 1948, the responsibility to protect human rights has primarily fallen on governments. Beginning in the early 2000s, however, it became increasingly clear that the freedoms enshrined in the framework could also be violated—and promoted—by the private sector.

In 2011, the UN Human Rights Council unanimously endorsed the UN Guiding Principles on Business and Human Rights (Guiding Principles), the first international instrument to assign companies the responsibility to respect human rights. The Guiding Principles state that governments must put in place good policies, laws, and enforcement measures to prevent companies from violating rights; that companies must refrain from negatively impacting rights even when governments are failing to create or enforce necessary laws; and that victims of corporate abuses must have access to effective remedy. As part of this responsibility, the Guiding Principles require companies to undertake due diligence to identify and manage their negative human rights impacts.

This primer identifies the 10 most relevant, urgent, and probable human rights impacts for businesses operating in the financial sector. The information here is gathered from BSR’s direct engagement with financial sector companies, as well as our 25 years of experience helping companies in all sectors manage their human rights risks.

The financial sector comprises a wide range of businesses and activities, from asset owners and managers to private equity, venture capital, and commercial banking. While each of these sub-sectors will have its own human rights profile and challenges, this brief highlights universal risks for companies operating in finance.

Blog | Tuesday June 13, 2017

What Are the 10 Most Urgent Human Rights Risks for Your Industry?

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Last year, we discovered that human rights is still the most urgent sustainability priority for companies. While the obligations of human rights due diligence are relevant across all companies, the approach varies based on the industry, sizes and types of business, locations, and varieties of operations. These include such things as providing decent working conditions, consulting affected communities, and establishing grievance mechanisms. 

To help all companies assume their mantle as responsible human rights actors, BSR’s global human rights team is developing a series of primers describing the key human rights issues in various industries. The first, released this month, is on the financial sector. Later this year, we will release primers on power and utilities, transport and logistics, information and communications technology (ICT), and extractives. In 2018, we will release primers on healthcare, heavy manufacturing, food and agriculture, and fashion and beauty.     

For every company, carrying out the responsibility to respect human rights must begin with mapping the characteristics, activities, and geographies that will give rise to the greatest negative impacts.

The universal responsibilities of companies to address human rights cannot be implemented without a robust understanding of the contexts in which they take place. For a mining company operating in Africa, for example, providing decent working conditions will require particular attention to personal protective equipment, noise levels, and the stresses of working in remote areas. For a pharmaceutical company operating in northern Europe, the priority issues may be family leave, racial discrimination, and the use of temporary employees.

This approach also applies to identifying vulnerable groups. Watching and safeguarding the people who will suffer the harm from private-sector activities is one of the basic tenets of a human rights approach. For an internet company, the group at greatest risk may be bloggers who are seen as politically threatening by the host government. In contrast, the typical vulnerable population for a manufacturing company might be local women whose personal security is threatened by the male security forces guarding the factory premises.

Companies in different sectors also must be aware of how they may be connected to human rights abuses through their business relationships. For example, a typical apparel company will need to watch the supply chain for things like exploitative labor conditions for a workforce consisting largely of underprivileged young women. While a bank can be connected to human rights abuses by financing a large dam that forcibly relocates populations without compensation or provision for future livelihoods. In contrast, a technology company could be connected to violations through a government buyer, which uses its products to violate the privacy of political opposition leaders. 

BSR’s primers identify the 10 most urgent negative human rights impacts in each industry, considering all the dimensions described above, including impacts of core operations, business relationships, and products and services. We produced these primers based on lessons from BSR's 200-plus human rights projects with a variety of sectors and organizations around the world.

But we don't just want to identify risks. Each primer also includes three ideas for positive human rights impacts for each sector. These, like due diligence obligations, are dependent on the companies carrying them out. For example, extractive companies with 30-year project spans for mines in remote regions have unique opportunities to promote economic, social, and cultural rights. ICT companies have opportunities to support civil and political rights like freedom of expression.

While companies must first and foremost ensure that they take all reasonable measures to avoid human rights harms, we also hope to provide information that will help companies champion and defend human rights. Human rights, after all, are not just an obligation, but also an opportunity. 

Read BSR’s first business and human rights primer, on financial services.