Corporates not providing comprehensive human rights disclosures less likely to be protecting staff.
Low quality human rights disclosures often reflected the poor treatment of workers by corporates throughout the pandemic, especially within supply chains, according to a new study by the World Benchmarking Alliance’s (WBA) Corporate Human Rights Benchmark (CHRB) unit.
The study, which follows the broader 2020 CHRB report, analyses corporates’ responses to the pandemic in five under-performing sectors: automotive manufacturing, extractives, ICT manufacturing, apparel and agricultural products.
The human rights disclosures made to the WBA were measured on the following areas: governance and policy commitment, human rights due diligence (focusing on health and safety and livelihoods), purchasing decisions and grievance mechanisms.
Less than 10% of the companies assessed explained in disclosures how they considered the risks of Covid-19 within their own operations and supply chains, and only 6% consulted with workers’ representatives, communities and vulnerable groups, meaning that the majority didn’t have conversations with their workers or offer them support.
WBA said these are direct indicators that businesses which didn’t adequately disclose their approach to human rights were also neglecting their employees during the pandemic, particularly at a supply chain level.
Despite the five assessed sectors relying heavily on supply chains, “over 70% did not report adopting mitigation measures – such as full and prompt payment for orders placed before the pandemic – for suppliers impacted by changing demands”, the report said.
“In the context of the workplace, too much attention has been focused on direct employees, leaving a blind-spot on the treatment of third-party contractors and supply chain workers. The CHRB data analysis of businesses’ responses in these critical areas is greatly welcomed,” said Martin Buttle, Head of Good Work at non-profit organisation ShareAction – a member of WBA.
Human rights management drives performance
Companies that exhibited robust human rights due diligence and provided examples of best practice proved that they were better equipped to respond to the crisis as they are able to “track shifts in their operating environment and to adapt their response to sudden and extensive disruptions such as pandemics”, said Camille Le Pors, Benchmark Lead of the CHRB.
More than 60% of the companies assessed described the steps taken to protect the health and safety of their workers. These included facilitating remote working where possible, implementing physical distancing protocols and providing personal protective equipment and handwashing facilities.
“This shows that businesses can place human rights at the heart of their response to the crisis, if they choose to do so,” WBA said.
“Continuous and comprehensive human rights due diligence make companies more resilient and better equipped to be part of, and contribute to, a future where no one is left behind,” Le Pors added.
Poor human rights disclosures catch investor attention
Le Pors told ESG Investor that all sectors monitored by the CHRB had scope for improvement, and asserted the importance of human rights due diligence to effective management of human rights risks.
“Nearly half of the companies assessed in 2020 (46.2%) failed to score any points for this part of the assessment in 2020. This likely contributes to why so few companies demonstrated assessing human rights risks in the COVID-19 context specifically,” Le Pors told ESG Investor.
The results of the study prompted WBA to launch its social transformation framework in January, which will measure what 2,000 of the most poorly-performing companies are doing to “ensure people are at the heart of business contributions to the SDGs”, including providing and promoting decent work, acting ethically and respecting all human rights.
“It has become a truism that the pandemic has focused investor attention on the ‘S’ of ESG as the virus has created significant challenges for people around the world as well as exacerbated existing inequalities. We know that corporate responses to the virus have varied and investors need to understand which corporates have responded well and those that have not,” Buttle said.
Investors are increasingly involving themselves in human rights issues. For example, according to a recently released report from Rathbones, the Votes Against Slavery coalition – which includes the Church of England Pensions Board, Legal & General, Rathbones and Aberdeen Standard Investments – has upped pressure on 22 UK companies on the FTSE 350 to better comply with the UK’s modern slavery laws. The coalition is calling for more transparent and comprehensive human rights disclosures.