By Jonathan Isted and Emily Holland
Benchmarking initiatives are driving businesses to scrutinise the governance of their human rights policies and practices, both within their own organisations and in their supply chains. Here we consider some of the opportunities and challenges.
Non-regulatory initiatives designed to gauge and compare corporate performance are changing the landscape of human rights reporting. Their goal is to increase the information available on the way in which businesses are implementing UN Guiding Principles on Business and Human Rights, and to try to promote a “race to the top” in terms of adherence to the Principles.
Benchmarking initiatives range from topical and sector-specific reports by corporate “watchdogs” to broader programme reviews by global, multi-stakeholder initiatives – some like the Corporate Human Rights Benchmark and World Benchmarking Alliance (described below) involving investors. All of the benchmarking initiatives allow for some level of comparative analysis on what is, in most cases, self-reported data.
While there are many examples to draw from, prominent human rights and broader responsible business benchmarking initiatives include:
- BankTrack: assesses banks on their implementation of the UN Guiding Principles and maintains a database of what the authors describe as “dodgy deals” (projects or companies financed by private sector banks identified as “damaging to the environment or society”)
- Behind the Brands: scorecard on the agricultural sourcing policies of the world’s largest food and beverage companies
- Corporate Human Rights Benchmark: rating and ranking of just under 100 companies in the agriculture, apparel and extractives sectors on how well they are performing against the UN Guiding Principles, on a comparative basis (pilot results discussed here)
- Development International: analyses disclosures made pursuant to the California Transparency in Supply Chains Act and conflict minerals reporting under Dodd-Frank Section 1502
- Know the Chain: evaluates how companies in the apparel and footwear, food and beverage, and ICT sectors address forced labour and human trafficking risks in their supply chains
- Modern Slavery Registry: central repository of UK Modern Slavery Act disclosures, which also provides commentary on compliance and the quality of reporting. As recently discussed here, the Australian government is already considering benchmarking corporate disclosures made pursuant to its proposed modern slavery requirement.
- Ranking Digital Rights: rates ICT sector companies on their respect for free expression and privacy
- UNGP Reporting Framework: guidance for companies on writing strong human rights disclosures that communicate their performance and progress towards implementing the UN Guiding Principles. The UNGPRF is not a benchmarking exercise but has been used in the UNGP Reporting Database to anaylse company human rights disclosures.
- World Benchmarking Alliance: recently launched initiative that plans to compare companies’ sustainability performance and contributions towards achieving the UN Sustainable Development Goals
With those examples in mind, what are some of the benefits, and difficulties?
Tracking the impacts
At a high-level, benchmarking provides a potentially useful and meaningful tool for companies to measure their performance in the human rights space, and to assess their performance relative to peer companies or by entirely different industries. In an area where legislation is not particularly directive and guidance may be difficult to come by, benchmarking can provide a detailed basis for reporting expectations.
By furnishing readily accessible information to investors, consumers, CSOs and governments, benchmarking better enables commentators to understand the market. It can incentivise and help to build the case for companies to improve management of their human rights impacts and inform multi-stakeholder collaborative efforts.
There are, however, also important challenges associated with benchmarking.
Given the evolving nature of industry benchmarks, with standards and metrics still being developed and refined in a field that is itself developing, inconsistency exists in how the benchmarking processes work. There is confusion with respect to how rankings initiatives overlap with or are differentiated from each other.
Benchmarking methodology can seem opaque and indicators prone to lack of clarity and purpose, or oversimplification. As a result, companies may unwittingly provide incomplete information, under-reporting in some areas and over-reporting in others. This can create the appearance of “patchy” reporting and may not accurately reflect the breadth and depth of business activity. This in turn limits the conclusions that can be drawn and can result in inappropriately low scores for some benchmarked companies.
There are also underlying information challenges to consider. Some data relevant to benchmarking may be proprietary or otherwise unavailable. This is especially true with respect to human rights allegations that companies may quite properly choose to handle privately.
Companies’ responses to benchmarking exercises have reflected some of the challenges identified above.
Some companies have striven to improve their rankings and changed practices with a view to increasing their scores. Examples include banks distancing themselves from deals highlighted by BankTrack.
Other companies have challenged (in some cases publicly) the rigid nature of benchmarking, noting that it does not always easily adapt to all business models, while maintaining their commitment to upholding human rights and articulating future plans to improve activities. Examples include published responses challenging the credibility of the benchmarking analysis, but nevertheless pledging to take account of the findings.
And in some cases companies have gone further. A lawsuit recently filed against Greenpeace International, Earth First! and BankTrack alleges, among other things, that the groups disseminated false and misleading information about companies involved in the Dakota Access Pipeline.
Unsurprisingly, the Corporate Human Rights Benchmark, or CHRB, has generated and continues to generate considerable attention from companies. Corporates have expressed confusion on what information was expected of them (i.e., what is relevant or material) and why company responses on certain indicators were discounted altogether.
Consultations on suggested changes to the methodology have just concluded. The CHRB is currently reviewing all feedback received and plans to publish a revised methodology in December.
While the ultimate value of (and buy-in to) benchmarking will only be determined over time, the current increase in benchmarking activity which we are seeing provides new insights into human rights compliance across industries and sectors.
As benchmarking continues to become more sophisticated and mainstream, it is vital that a close focus is maintained on quality and precision in the process. Otherwise the goals of the benchmarking approach will not be achieved.
In the future, it will not be surprising to see companies adopt firmer stances in relation to benchmarking initiatives which are perceived to be unfair, where the company in question can point to reputational or other damage caused by the way it has been treated in a benchmarking process.