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Blog | Wednesday November 18, 2020

Five Steps to Sustainability Reporting in an Evolving Landscape

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Sustainability reporting is no longer optional—it's a stakeholder expectation. Most business leaders understand this: 90 percent of S&P 500 companies now issue public sustainability reports. By reporting, they capture a number of external and internal benefits, which include meeting regulatory requirements, improving relationships with stakeholders, enhancing trustworthiness and reputation, clarifying a company’s performance on sustainability issues (which can trigger a greater focus on improvement), and identifying sustainability risks and opportunities.

However, the reporting landscape is shifting, increasing expectations of what is needed in the sustainability report. In the past few months, several new proposals and announcements have shaken up the space, including:

• A Statement of Intent to Work Together from five reporting framework and standard setting organizations that emphasizes alignment and harmonization;
• A proposal from the International Financial Reporting Standards (IFRS) Foundation to create a new Sustainability Standards Board (SSB) that would develop global sustainability standards;
• Pending changes to the Non-Financial Reporting Directive (NFRD) in Europe; and
• The World Economic Forum International Business Council paper that puts forth a global set of 21 core metrics for disclosure, building on existing sustainability reporting standards and frameworks.

These developments imply future changes to a company’s reporting structure and process. Most significantly, they lay the groundwork for a closer linkage to financial reporting, which would mean that companies will need to treat sustainability information with a higher level of rigor, akin to information included in financial reporting.

Sustainability reporting is both a beneficiary and an enabler of good performance on a company's material issues.

Even with the new developments, two key points remain clear: first, the sustainability report will continue to play an integral role in the future of company disclosure, and second, stakeholders—the users and readers of the report, including investors, customers, suppliers, NGOs, and others—expect high-quality and robust information on both the company’s impact on sustainability and sustainability’s impact on the company.  

Meeting stakeholders’ increasing expectations can be a complex task. As a result, BSR has published a practical guide, Five Steps to Good Sustainability Reporting, to help companies master the fundamentals of decision-useful disclosure that enables positive sustainability outcomes. In the guide, we have distilled the complexities of sustainability reporting into key principles and common steps, combining existing guidance from leading reporting standards with practical case studies from 10 BSR member companies.

As reporting practitioners likely already know, sustainability reporting requires continuous learning and improvement. Accordingly, this guide may be utilized by new reporters and experts alike. Those just starting out on their reporting path can lay the groundwork for their first disclosure and set out a strategy for year-on-year improvement. Expert reporters can "sense check" their reporting processes, learn from other companies, and use the document to educate peers and build capacity internally on what it takes to get the report done.

As report readers and users increasingly seek comparable, balanced, and performance-focused sustainability disclosures, there is an increasing need for companies to not just tell their story, but to also link it back to the core business and be confident that the issues they’re prioritizing and communicating are the right ones. Sustainability reporting is both a beneficiary and an enabler of good performance on a company's material issues. As part of a company’s process of identifying and addressing the sustainability issues that impact their business and stakeholders, reporting is a tool that can not only build a sense of purpose and unity within a company, but also one that promotes change within and across industries.

BSR works with companies all along the reporting journey, from those working on their first sustainability report to expert reporters who need help developing a long-term reporting strategy. If you’re interested in learning more about this work or in joining our Future of Reporting initiative, in which members learn from each other and share reporting best practices, please don’t hesitate to reach out.

Reports | Wednesday November 18, 2020

Five Steps to Good Sustainability Reporting

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About This Report

Sustainability reporting and disclosure on environmental, social, and governance (ESG) issues is increasing globally. In 2011, 20 percent of S&P 500 companies published sustainability reports; by 2019, that number reached 90 percent. This dramatic increase reflects how sustainability reporting is increasingly seen as a way for companies and their stakeholders to see a changing world more clearly and create long-term value. High-quality sustainability reports allow for:

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

The five steps detailed in this report are supported by 10 principles on content and quality that characterize best-in-class sustainability reporting. The principles combine and draw on features of several prominent reporting standards and frameworks, namely GRI (formerly Global Reporting Initiative), the International Integrated Reporting Council (IIRC), the Sustainability Accounting Standards Board (SASB), and the Taskforce on Climate-related Financial Disclosures (TCFD).

So how can you produce a good sustainability report? This new guide is based on BSR’s long experience working on sustainability reporting with companies, a literature review, and interviews with BSR member companies across sectors, including Adobe, AstraZeneca, Flex, Keysight Technologies, Inc., Millicom, PayPal, SABIC, Sempra Energy, and Verizon. It is designed primarily for first-time reporters, offering a clear and simple process framework to structure the reporting journey. If you are an experienced reporter, this guide may nonetheless provide some tips and best practices that can help you improve your process, product, and impact.

Discover the five steps to good sustainability reporting.

Blog | Tuesday November 17, 2020

Building toward Mandatory Human Rights Due Diligence

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This blog is the third in a three-part series. In the first blog, we focused on the current landscape of mandatory human rights due diligence (HRDD), disclosure requirements, and the push towards a more universal approach. In the second blog, we discussed the elements that BSR has found important for effective HRDD. In this blog, we explore some of the challenging questions that the forthcoming European mandatory human rights due diligence (EU mHRDD) legislation should seek to address.

Over the past 25 years, BSR has worked with companies to manage human rights risks, including conducting more than 200 human rights impact assessments worldwide and supporting countless companies with integration and implementation. And due to our strong presence in France, we have also supported companies’ efforts to align with the French Corporate Duty of Vigilance Law (the French Law) requirements and learned a lot about the complexity of moving from soft to hard law.

As we have noted in previous blog posts, we believe that the proposed EU mHRDD legislation is a significant development for corporate human rights programs because it provides a regional-level mandate for due diligence. However, many aspects of the proposed legislation are still largely unclear and up for debate. Based on learnings from our experience working with companies to navigate the French Law, we present the following recommendations on how the upcoming legislation can be most effective.

Include All Types and Sizes of Businesses

In the absence of an official list of companies covered by the French Law, it is often difficult to assess whether a company is within its scope. To avoid such confusion, the EU legislation should establish a clear scope of application and cover all types and sizes of businesses, including state-owned enterprises and small and medium-sized enterprises (SMEs). Beyond reducing confusion, universal scope would strengthen corporate efforts to address human rights impacts. All organizations have an impact somewhere in their respective value chains, including SMEs, and we need all players involved to drive effective change.

Instead of spending time trying to determine the right size or type of company within the scope of the law, a better option would be to cover all entities with appropriate guidance for their type or size and operation to implement the due diligence expectations. By leveling the playing field and requiring HRDD for all business entities, we can effect real change across all types of businesses and encourage more cooperation among all types of companies in tackling human rights challenges, regardless of where they fall in the value chain.

Address All Types of Human Rights

The EU legislation should require business entities to apply due diligence with respect to all human rights across their entire value chain, in line with the UN Guiding Principles on Business and Human Rights (UNGPs). This broad scope is necessary to ensure that all areas of potential risk and impact are adequately assessed, prioritized, and mitigated.

“All human rights” can be understood as, at a minimum, those enshrined in the International Bill of Rights and the International Labour Organization (ILO) Core Conventions, but this can also include other international instruments that can guide companies on specific challenges in relation to child rights, migrants' or indigenous people’s rights, privacy rights, and more. While guidance would be welcome, the EU mHRDD should not be prescriptive in terms of the human rights conventions, standards, and principles within scope since this will always be an evolving field, and such a step would not be in line with the approach articulated by the UNGPs.

Addressing all types of human rights also means focusing beyond just the most severe impacts.

Addressing all types of human rights also means focusing beyond just the most severe impacts. The French Law aims at preventing the most severe adverse impacts on human rights, but a broader scope is important to effectively prevent human rights abuses. Restricting the scope of human rights risks to be covered by the law prevents broader company engagement and structural changes in the approaches implemented based on adequate prioritization.

Cover All Aspects of the Value Chain—Upstream and Downstream

In our experience working with French companies trying to meet the French Law, we have observed that too many focus their due diligence energies exclusively on their supply chains given the law’s requirements. This means that many miss identifying or addressing important human rights impacts, such as those caused by products, services, or other business relationships. As outlined by the UNGPs, proper human rights due diligence should cover all business activities up and down the value chain, including companies’ own operations and supply and subcontracting chains but also products and services and their impacts downstream—from end use to decommissioning and recycling. We have seen companies build robust human rights due diligence programs to tackle supply chain risks while neglecting to assess the impacts of their products and services, thereby missing significant impacts caused by those other aspects of their operations.

Require Stakeholder, and Specifically Rightsholder, Engagement

Stakeholder involvement and consultation is a fundamental component of effective due diligence. It is necessary to ensure that the identification of risk as well as the subsequent mitigation and remediation measures are sound and effective and address the needs of rightsholders and vulnerable populations. This approach helps ensure that companies’ overall approaches are credible and adequately communicated and that those most impacted can weigh in during the assessment process. The first cases brought to the French courts reflect, to some extent, the failure of those companies to adequately involve rightsholders—in particular the most vulnerable and relevant stakeholders—in their mapping exercises and the development of their mitigation and remediation plans. Requiring such engagement will go a long way in ensuring that rightsholder voices are part of the due diligence process.

Stakeholder involvement and consultation is a fundamental component of effective due diligence. 

Apply a “Reasonable” Approach to Liability

As European Commissioner of Justice Didier Reynders put it, “a regulation without sanctions is not a regulation.” We believe that expecting companies to conduct HRDD that meets a “reasonableness” threshold is the right approach to liability, though a transition period to develop an understanding of what “reasonableness” entails is warranted. Under this middle-of-the road approach to liability, companies can be held liable for not meeting reasonable due diligence obligations—which will be established over time through binding case law and other guidance—should their due diligence programs and processes not meet basic expectations. This would prevent companies from hiding behind a claim of being unaware of certain human rights impacts of which they should have been aware or avoid liability altogether by simply not conducting any diligence.

Conclusion

While the EU mHRDD law has been proposed during a very challenging year, it is an extremely promising development that can positively build on the lessons learned from the French Law to harness the strength of the private sector to contribute to (re)building a more just and sustainable world. By requiring companies to perform robust, comprehensive, and inclusive human rights due diligence programs that carry some liability for companies that either fail to perform these exercises altogether or fail to meet a minimum threshold of diligence, we can anticipate greater attention, identification, and efforts to mitigate human rights impacts wherever they may take place.

Blog | Thursday November 12, 2020

Meeting the Moment on ESG Investing: Q&A with Lauren Abbott, Global VP, Anheuser-Busch InBev

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The year 2020 has been extremely challenging for business, from dealing with COVID-19 and its economic impacts to addressing the worsening climate crisis. Amid these challenges, investors have increased their focus on how companies are acting on environmental, social, and governance (ESG) issues. How can companies best prepare for investors’ current demands?

To address this new era of ESG investing, Lauren Abbott, Global Vice President, Investor Relations at Anheuser-Busch InBev, shared her expertise at BSR Conference 2020 this past October. After the event, we connected with Lauren to hear her thoughts on what business, in particular those working in sustainability and investor relations functions, should do to meet the current moment of ESG investor interest and ultimately build a more equitable, sustainable future.

In light of 2020’s crises—the COVID-19 pandemic, its economic fallout, the climate crisis—we’re seeing growing attention from investors on how companies are handling ESG issues. How can companies meet the moment of ESG investor interest? What should ESG investor engagement look like?

Our approach to ESG investor engagement has evolved quite a bit over the last 5-6 years. In the beginning, our ESG investor engagement was done through targeted 1- or 2-day roadshows in select European cities (e.g. London, Paris) because the demand was very precise and not broad-based.

Fast-forward to today—we now do 5+ day roadshows per year across a variety of European cities (of course, virtually this year) as well as several ESG-focused investor conferences in both Europe and North America in light of accelerated demand and interest. We have also participated in conferences and events pertaining to specific topics, such as water stewardship, in a variety of countries including South Africa and Brazil.

Based on these experiences, I believe it is fair to say that ESG investing has become a global trend and that I only expect this to continue. Engaging with ESG investors is done in conjunction with other teams at our company, specifically legal, corporate affairs, and sustainability.

Investors are increasingly becoming more thoughtful and sophisticated in their questions. They understand what’s material to our operations and value chain, and they look for sustainability actions that are strategic and integral to our business.

2020 has been a year of huge disruptions and uncertainty. How have the events of 2020 changed investor expectations for companies, as related to ESG issues? How have these expectations evolved from recent years?

What we have seen with COVID-19 is that there are greater expectations of corporate companies. We speak often with investors and analysts now about the health and safety measures taken to protect the well-being of our people (including their mental health) and the initiatives in place to support the communities in which we operate, from converting our operations to produce and donate water and more than three million bottles of hand sanitizer in over 25 countries to creating platforms to advertise local delivery options for pubs, bars, and restaurants.

We have found that investors are genuinely interested in the work being done by our company to support our people, our communities, and our customers during these uncertain times. We intend to continue communicating such initiatives proactively to keep our investor base informed of how we are focused on being part of the solution.

Within a company, the investor relations and sustainability functions are often quite separate. In what ways do you collaborate with the sustainability team at AB InBev? Can you share any best practices with us on how the teams can work together to satisfy ESG investor interests?

As mentioned before, our ESG engagement is done together with our legal, corporate affairs, and sustainability teams, who are fantastic partners. In particular, I personally have found that a close partnership with our sustainability team—who really drive the agenda and are leading the work every day—is an effective structure. Our sustainability team is so knowledgeable in their space that they offer deep and unique insights to our investors that they would only get from the people that lead the work. I believe this offers our investors a deeper understanding of our strategy in an authentic and credible way.

With that said, it’s on all of us to advance our sustainability agenda and, in particular, reinforce our commitment to the UN Sustainable Development Goals (SDGs). For example, our CFO, Fernando Tennenbaum, is a founding member of the UN Global Compact CFO Taskforce, whose goal is to align corporate investments and finance to the UN SDGs. To support this commitment, one of our sustainability directors and I are part of the CFO Taskforce Working Group, which will deliver a detailed blueprint for how to implement the taskforce’s principles within our organization.

Blog | Wednesday November 11, 2020

The Sustainable Business Agenda in a Biden-Harris Administration

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Now that the results of the United States presidential election are in, it is time to focus on what business can do to promote a policy agenda that will accelerate the transformation needed to shift to a truly just and sustainable economy. 

The U.S. government has been either absent or counterproductive on sustainability issues over the past four years. This will change in a Biden-Harris administration. How much it changes will depend greatly on the actions and influence of the business community.

BSR exists to catalyze business leadership to achieve a just and sustainable world. We believe strongly that sustainability is a primary source of strategic business advantage.  We believe that comprehensive business action calls for companies to “act, enable, and influence,” creating change both through actions in the “real economy” and also in advocating for policy solutions.  With a new government coming into power, now is the time for business to use its voice and influence to call for decisive action from a more receptive administration in Washington.

With this in mind, here is the agenda that BSR urges businesses to call on the Biden administration to adopt, in the spirit of the campaign’s “build back better” mantra.  

Employment and Economic

• Repairing the safety net: It is time for business to engage with government in remaking the social safety net for the 21st century. 2020 has exposed the serious holes in the safety net, not least access to health care. It is also time to develop a consensus on portable benefits for people who change jobs or who work outside traditional jobs. Innovations like the tax-deferred “401(j)” accounts proposed by Al Gore to allow employees to save for lifelong learning would also be a good step. These steps would not only enable economic security and mobility, they would also ensure opportunities for innovation and a dynamic workforce that businesses need.
• Income inequality: It is long past time for Americans to reverse the deep and widening inequality that plagues our country. While there are multiple reasons for this problem, three topics deserve to be made a priority. First is the need to raise the minimum wage to a level that is a genuine living wage. This would both enable families to support themselves and also reward labor in an economy in which capital has been rewarded more than it should be.  Second is executive compensation, which has continued to rise far too fast. It is time for business leaders to take voluntary steps to reduce executive pay and for Boards to commit to the same. Third, income inequality strikes communities of color especially hard and all pathways to prosperity need to address the wealth gap directly.
• Future of work: The changing nature of work is accelerating due to the confluence of COVID-19 and automation. Contingent or non-traditional work is the fastest growing category of work. There is no consensus on the rules governing such work or universal benefits people can access regardless of how their work is classified. Dialogue between business, government, and workers’ representatives is needed to establish the rules of the road.

Climate and Environment

• Net zero target for the U.S.: Returning to the Paris Agreement will happen January 20—that is only the start.  The U.S. should commit to a net zero target the way that the European Union, China, Japan, South Korea and others – including many U.S. states and cities – have. The need for renewed climate diplomacy, with the U.S. playing a crucial role along with the EU, China and Japan, could not be more important in the run-up to COP 26.
• Climate justice/just transition: Awareness of the disparate impacts of climate – mainly hitting communities of color and those with less formal education – means that environmental justice should now come to the forefront. The shift to net zero is a generational opportunity for progress, not only removing the most toxic elements of the existing energy system, but generating economic opportunities in the clean energy economy as a means of combatting poverty and discrimination. Business should insist that the transition to net zero include policies that prioritize the phase out of toxic impacts on communities of color, incentives for investments that ensure that the clean energy economy delivers training, and employment for people who need opportunities the most, in both rural and urban communities.
• Green infrastructure: Even with divided government, investment in green infrastructure is possible as a means of generating employment at a time when it is badly needed and to reduce the operating costs of U.S. infrastructure. Business should advocate for built environment and transport systems that accelerate and prepare for the net zero economy. The long debated Green Infrastructure Bank should become a reality, not least with the rise of green and “olive” bonds.  And this is also the place where serious—and badly needed—resilience objectives can be achieved.
• Regenerative agriculture: At long last, there is mainstream recognition of the deep intersections of climate, human health, and the vibrancy of America’s agricultural economy.  What’s more, the political opportunity to bring the country together through heartland interest in thriving agriculture and coastal interest in climate action is one that could help unify a country that is divided against itself on climate action.

Social

• Racial justice: The Biden campaign made clear that racial justice was one of its four priorities, along with climate action, economic opportunity, and public health. In fact, these four topics are interrelated and should be addressed as such. The business community should make sure that the many statements of support for Black Lives Matter in 2020 are strengthened by a long-term commitment to ensure that decisive action is taken to end the centuries-long scourge of systemic racism. As noted above, the wealth gap that exists in communities of color is a legacy of longstanding oppression. Steps taken to address climate, strengthen the social safety net, restore public health, and invest in green infrastructure offer great promise in addressing the wealth gap, and business should support this objective vocally. In addition, business should also make clear its support for criminal legal system reform, starting with policing, but also including access to the court system and incarceration rates. Finally, business should call for mandatory disclosure of employee demographic information, which leverages transparency in support of greater equity.
• Technology and human rights/privacy: It is well understood that policy moves more slowly than technology. At a high level, the U.S. government should establish the principle that new technologies should adhere to international human rights standards in their design, development, and use. In addition, the U.S. government can introduce a federal privacy law along similar lines to the GDPR, ensure that any revisions to Section 230 of the Telecommunications Decency Act of 1996 are consistent with the protection of human rights, and introduce sector-based approaches to regulating disruptive technologies, such as artificial intelligence, machine learning, and biometric technologies. Companies from all industries should advocate for a technology policy and regulatory context that protects interdependent rights such as freedom of expression, privacy, security, freedom of assembly, non-discrimination, public health, and access to remedy.
• Restoring support for human rights and democracy: The U.S. government has provided implicit and explicit support for some of the governments most responsible for the worst human rights abuses over the past few years, The business community shied away from calling this out the way they challenged the Trump administration’s approach to climate. It is time for business to make clear that it wants and needs strong support for human rights, with renewed action from the White House and State Department at a minimum
• Human migration and refugee policies: The xenophobia that was unleashed in the first days of the Trump years must be relegated to the past. Business has consistently called for immigration policies that enable the U.S. to welcome the breadth of human capacity that comes from literally every corner of the world. This is needed both for humanitarian reasons, which speak for themselves, but also because of the positive impact open societies have on economic vitality and innovation.  What’s more, this will also help to restore America’s soft power around the world, something that benefits U.S. businesses and which has been seriously damaged since 2016.

Governance

• Corporate governance reforms and listing requirements: It is time for Boards to reflect more fully the world in which business actually operates. This means diversifying Board composition. It also requires that so-called “non-financial” considerations be embedded in corporate governance and listing requirements. A good first step towards integration of ESG into corporate governance would be business advocacy for making the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) mandatory. This can then be extended to other steps including mandatory human rights diligence, executive compensation, and workplace diversity.  All these steps will strengthen the resilience of business and bring America’s trading rules in sync with advances in Europe and elsewhere.
• Restoring democracy: 2020 has made clear, yet again, that there are significant structural flaws in American democracy. Business associations stepped up to call publicly for democratic processes to be honored—and have continued to call for this post-election. This remains important as many have chosen not to honor the clear outcome of the election.  Despite this, American democracy appears poised to survive in the wake of this unusual election, but issues remain. Business should use its voice to call for reforms that address voter suppression, campaign finance, gerrymandering, and a judicial system that has been infected by hyper-partisanship. This is an issue that many CEOs will seek to avoid for fear of appearing to pick sides, and that is understandable. But the reforms called for here should not be seen that way, since they are necessary for our system to function, for all people to have their voices heard, and for faith in the system be restored.
• Rules-based trading system with multilateral agreements: The U.S. was the primary architect of the rules-based trading system in the wake of WWII and the primary protector of that system over the past 75 years. While this system certainly needs significant reforms, the past four years have taken a scorched earth approach that leaves us no hope of managing an interdependent world well and fairly. Business could not have more of a stake in restoring support for the concept of multilateralism and more of a need to make sure it is fit for purpose in the 21st century.
• Procurement: Finally, business should call on government to partner more aggressively on procurement policies.  The U.S. government has immense purchasing power and it is not being used as fully as it could be to promote the creation and efficiency of markets for sustainable products and services. This is also a uniquely valuable way to address the wealth gap, with government partnering with BIPOC-owned businesses as suppliers.

There will be a time to get more specific on policy solutions. For now, however, it is essential to define the areas where progress is necessary. Much of what is advocated here is also found in BSR’s call for business action to promote a 21st century social contract.

The temptation to “go back to business as usual” will be strong for many, but that would be a mistake. Building a just and sustainable world has never been about opposing any single political leader. It has always been about building a future in which we can all thrive. It is about what we are for, not what we are against.

After four years when the U.S. government failed to embrace—and often thwarted—the achievement of sustainable business, the business voice remains a powerful tool in creating an economy that works for all.  

Blog | Wednesday November 4, 2020

Climate Justice: How Business Climate Action Can Reduce Environmental Racism

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For decades, black, indigenous, and people of color (BIPOC) in the U.S. have sought environmental justice as a civil right, but now, the grave disparities in environmental harms are coming into national prominence. This year’s COVID-19 crisis and racial justice movement have highlighted the systemic inequities in the U.S. and revealed how crises disproportionately affect certain populations. The urgency of now is underscored by the climate crisis and the need for climate justice. 

Businesses continue to lead on climate in the absence of U.S. political will. And while we have a long way to go, businesses are also stepping up in the fight for racial equity—some leading the pack, like Starbucks, and beginning to integrate equitable strategies across their business, particularly in their climate solutions. Whether we say climate justice, climate equity, the intersection of climate change and people, or the social impacts of climate change, one thing is clear: business has a role to play in addressing the structural inequity that causes low-income populations and communities of color to bear the brunt of the climate crisis. 

Extreme heat and storms, sea level rise, intense wildfires—climate change may threaten everyone, but many BIPOC communities are more vulnerable to climate impacts. These communities also suffer disproportionately from the broader socioeconomic impacts of climate change, such as disrupted access to social services and increased energy costs—so much so that race is the most salient indicator in the U.S. of how the climate crisis affects people. This includes poor air quality due to proximity to polluting facilities such as fossil fuel power plants and refineries, which compounds the impacts of crises like COVID-19. 

The Business Role in Climate Justice 

Business has an important role to play in helping to bring climate justice and racial equity front and center while shifting the finance for the energy transition. Business action, supported by government regulations, investments, and incentives, is absolutely critical for transitioning to net-zero emissions by 2050. Achieving this not only addresses the climate crisis writ large, but it also improves local environments and economies to be more sustainable for everyone. 

The move to a net-zero GHG emissions economy will require systemic transitions in business operations; however, the benefits of this shift are immense both for business and for broader society. Billions of dollars will be spent, saved, and made during this transition. A fair, just, and inclusive transition with justice at its core calls for climate investments to alleviate or eliminate existing disparities in environmental, social, and economic opportunities and outcomes. Traditionally, climate action has too narrowly focused on only the global benefits of reducing greenhouse gas emissions, ignoring the potential to generate immediate benefits for community well-being, such as “improving local air quality and economies through investments in infrastructure, restoring ecosystems, and increasing community vitality.” 

Stakeholders, people, matter to business—whether through direct employment, raw material production in value chains, or markets. The barriers that prevent BIPOC communities from thriving also hinder business growth and sustainability. No longer can businesses ignore entrenched social inequality—greater inequality leads to greater environmental degradation. This phenomenon, also known as intersectional environmentalism, means that instead of one bottom line, there are three: environment, economy, and equity. Businesses can and should design all activities, especially those that address the climate crisis, with a racial equity/justice lens. As we transition, we must bring BIPOC communities along with us; otherwise, there’s a risk that they’ll continue to be left out, even in the new structure we create.

What Business Can Do about Climate Justice

While many businesses are stepping up by setting the necessary ambitious climate targets in line with the Paris Agreement, it simply isn't enough to protect those most affected by the climate crisis. The good news is, there are many things businesses can do to promote climate justice activities, including learning from what others have done already. For example, learning from the cities of Portland, Oregon and Oakland, California, businesses can take steps to place social justice at the center of their core activities, including those related to climate, within their own operations; enable others to do the same; and influence policies to reduce systemic inequities at their roots.

The City of Portland’s 2015 Climate Action Plan and the City of Oakland’s 2030 Equitable Climate Action Plan (ECAP) center climate solutions that address existing disparities, transitioning away from fossil fuel dependence while increasing community resilience. A companion document to Oakland’s ECAP, the Racial Equity Impact Assessment & Implementation Guide (REIA), describes how to identify the most impacted communities and reduce equity gaps in resource allocation and climate vulnerability. 

Here are more ways in which businesses can lead: 

• Center climate justice and racial equity in climate activities. Commit to a net-zero GHG reduction target by 2050, or sooner, across the entire value chain. Identify the business activities that disproportionately impact communities on the basis of race, and develop solutions centered in climate justice and racial equity. This can include reducing harmful on-site emissions as well as off-site fleet electrification in high pollution areas. Companies can also develop green jobs in a just manner that respects human rights and livelihoods. Resilience solutions should also ensure that those across the company operations and value chains are protected from climate-related events (i.e. employees, factory workers, smallholder farmers, vital communities). 
• Engage those most affected by the climate crisis. Assess your business’ climate impact, and compile data showing the impacts on the communities and stakeholders most affected by the structural inequalities (climate risk and vulnerability assessments). Engage them in community-driven climate resilience planning. For example, businesses can diversify the value chain to support small disadvantaged business enterprises (DBEs) with sustainable practices and enter Community Benefits Agreements with residents living near business facilities to increase climate benefits such as urban tree cover, home weatherization, and electric vehicle (EV) access.
• Educate and build awareness about climate justice. Educate leadership and employees internally on how race intersects with the climate crisis. Build awareness externally and help educate others on the issue. Earlier this year, the B Corp Climate Collective launched their Climate Justice Learning Task Force, intended to help others access resources about climate justice.
• Collaborate to scale impact. Solving the climate crisis is too big to only act alone—companies should collaborate with others across industries and with expert stakeholders. For example, companies can commit to the Business Pledge for Just Transition and Decent Green Jobs. And Starbucks is collaborating with partners to identify areas across their business to incorporate climate justice, including how they procure renewable energy and build infrastructure. 
• Leverage influence and advocate for public policy. Call on all levels of government to integrate a justice lens into their climate solutions. The climate action plans developed by the cities of Portland and Oakland are great examples of how to integrate racial equity into government plans. 

We commend the efforts that businesses have already made, with over 1300 commitments that formally recognize the transition to a net-zero economy. But businesses are only starting to scratch the surface on climate justice solutions. When business solutions center those most affected by global crises—whether a pandemic or climate change—and improve these communities, everyone benefits. When they are left behind, everyone’s harmed. Now’s the moment to build a truly inclusive future.

Blog | Thursday October 29, 2020

Amid COVID-19, BSR20 Highlighted Action, Collaboration, and Leadership

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In a year with so many reasons to be concerned about the state of the world and the future, last week’s BSR Conference leaves us with reasons to be optimistic.

The dozens of speakers from all corners of the world were clear-eyed about the need to face up to the climate crisis, ongoing structural discrimination, economic dislocation, challenges to democracy and human rights, and, hanging over all of it, a pandemic that is again gaining strength.

It is abundantly clear that the community of leaders we were proud to assemble has a clear vision and powerful purpose that is ready, in the words of the conference theme, to “meet the moment and build the future.”

BSR is here to help business leaders see a changing world more clearly, to provide advice that creates long-term value for business and society, and to build collaborations that take solutions to scale. The community that came together last week —virtually of course—showed how important these attributes are.

The urgency of addressing systemic racism, the climate crisis, economic dislocation, and disruption of familiar business models ran through the conference. If the 2015 conference was all about climate action (in advance of COP21), the 2018 conference about gender equity (in the midst of #MeToo), then the 2020 conference made clear how deeply embedded racial inequities demand our attention. In a closing session, Nancy Mahon of the Estee Lauder Companies put this well: “we don’t need to put on a DEI [diversity, equity, and inclusion] lens, we need Lasik surgery” to see things differently all the time. It is impossible to achieve needed change without seeing challenges clearly, and that awareness shined through the exchanges throughout the week. We as citizens would be far better off if public policy discourse reflected this vision more often.

It is impossible to achieve needed change without seeing challenges clearly, and that awareness shined through the exchanges throughout the week. 

Vision without action doesn’t mean much. There is good evidence from this week that we are moving from ambition to action. Bernard Looney of bp made clear that his company’s net-zero commitment will require investment and execution and that he knows that investors, colleagues, and the wider world will be watching very closely. Gillian Tett related how she and her Financial Times colleagues wondered in the spring whether COVID-19 would wipe away the growing interest in economic, social, and governance (ESG) investing, only to see the opposite happen. And we heard numerous examples of companies taking action to promote DEI. Rose Stuckey Kirk of Verizon placed her company’s commitment to advancing colleagues from historically disadvantaged communities in the context of the last half century of American history, beautifully reinforcing the importance of tangible action. It is clear therefore that companies are not only sustaining their commitments—they are expanding them.

And individual company action, as important as it is, will not take leadership to scale. François-Henri Pinault of Kering spoke about how the Fashion Pact is aiming to reorient an entire industry behind decisive action on climate, biodiversity, and preserving our oceans. BSR colleagues spoke with partners from our collaborative initiative HERproject on how collaborative action is aiming to preserve the livelihoods of women working in the apparel sector across Asia and Africa. And we joined with the Swedish International Development Agency (SIDA) to launch a new initiative to generate new collaborations to reduce poverty around the world.

The events of 2020 are accelerating change and delivering new challenges. As profound as these changes are, let us not forget that we hold in our hands the ability to bend the arc of history towards a better future.

We still face a set of “wicked problems.” An economic and public health catastrophe that has thrown more than 100 million people back into extreme poverty. Extreme weather and loss of Arctic ice continue on the march. Democracy and human rights under threat. 

I opened the conference by noting that it is up to us to determine what the events of 2020 will mean. These events are accelerating change and delivering new challenges. As profound as these changes are, let us not forget that we hold in our hands the ability to bend the arc of history towards a better future. Our businesses depend on it. Our societies depend on it. Our ability to thrive depends on it.

What I heard last week leaves me more confident that we will rise to the occasion.

Blog | Wednesday October 28, 2020

Building the Future Starts Now: Reflections from BSR Conference 2020

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

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

Be Uncomfortable

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

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

Put People First 

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

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

-Smita Nimilita, HERproject representative

Use Your Influence

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

Act with Urgency

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

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

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

Blog | Tuesday October 27, 2020

Four Features of Effective Human Rights Due Diligence

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

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

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

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

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


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

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

Blog | Thursday October 22, 2020

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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