Industry

Companies Not Improving on Human Rights Despite Mounting Investor Pressure

Many firms failing to show progress since 2019; automotive ranked lowest among five sectors covered.

Many of the world’s most influential companies are failing to demonstrate their human rights due diligence despite growing investor pressure, according to a new report by the World Benchmarking Alliance (WBA).

In the fourth edition of its Corporate Human Rights Benchmark (CHRB), the Alliance assessed 230 global companies on their human rights disclosures across agricultural products, apparel, extractives, ICT manufacturing and, for the first time, automotive manufacturing.

Nearly half of companies assessed are not conducting human rights due diligence in line with the United Nations Guiding Principles on Business and Human Rights (UNGP).

Investors have been increasing their focus on human rights issues, including via the release a three-step approach for integrating respect for human rights into investment practices by the UN-backed Principles for Responsible Investment.

In March 2020, a group of 176 international investors, representing US$4.5 trillion in assets, sent a letter to the 95 companies that failed to score any points on the human rights due diligence indicators in the 2019 CHRB assessment, calling for urgent improvement. Of those 95 companies, 79 continue to score zero on human rights due diligence, with only 16 companies having improved this year.

A significant challenge identified in the report is the lack of willingness and commitment by the majority of companies to focus attention on human rights. While there has been general progress in scores across all sectors, more than a third companies failed to improve on their 2019 scores, with many low scorers “still refusing to budge”.

Starbucks, Ross Stores and Phillips 66 are among 24 low-scoring companies which scored below 10% in the 2019 report, with no improvement in any of the CHRB core UNGP indicators in 2020.

“Little to no progress” on rights due diligence

“There is a concerningly large group of companies who have made little to no progress in the last 12 months. We’re sensing a real reluctance from the laggards to improve. When we look at the companies assessed for the first time this year, 70% failed to score any points on human rights due diligence,” said Camille Le Pors, CHRB Lead at WBA.

“While a small group of companies are demonstrating strong commitment and processes, it’s not always clear that these deliver their intended effects. Clearly, businesses alone won’t raise the bar and with COVID-19’s compounding impact, there is a real need for regulatory action, as planned by the European Union, as well as increased investor pressure to force change,” she said.

Another key finding was a disconnect between companies’ commitments and processes and impacts on the ground.

“Of the 229 companies assessed, 104 had at least one allegation of a serious human rights impact meeting the CHRB severity threshold, with 225 allegations reported in total,” the report states.

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