Benchmark results and discussion at the UN Forum on Business and Human Rights
At this year´s UN Forum on Business and Human Rights, taking place from 16 – 18 November 2020, the results of the Corporate Human Rights Benchmark 2020 (here) were presented by Camille Le Pors, Lead, Corporate Human Rights Benchmark World Benchmarking Alliance. In general, the report shows improvement across all sectors compared to last year. The indicators that saw the most improvement were public commitments to respect human rights and grievance channels for individuals and communities. On the other hand the benchmark highlights the concerning disconnect between these commitments and their implementation on the ground. An interesting panel and the audience discussed the findings at the UN Forum summarized in this blog post.
Since 2017, the Corporate Human Rights Benchmark (CHRB) has assessed and ranked some of the world’s largest companies in respect of the “policies, processes, and practices they have in place to systematize their human rights approach and how they respond to serious allegations”. Originally monitoring 100 companies in three sectors, the 2020 review expanded to consider a total of 229 companies across five sectors: agriculture, apparel, extractives, ICT manufacturing and, for the first time, automotive manufacturing.
The goal of the benchmark is to create positive competition amongst participants, drive accountability and provide evidence for policy intervention.
The CHRB is now part of the World Benchmarking Alliance (WBA). It is currently developing a number of benchmarks that aim to measure and rank companies, that have been identified as those most influential in contributing to the SDGs across seven critical systems transformations. These are decarbonisation and energy, food and agriculture, circular, digital, urban, financial and social. The social transformation (ie the CHRB), which focuses on respect for human rights, equality and empowerment, is the center of this model and aims to enable the six other transformations.
Methodology and changes to the 2020 CHRB assessment
The data for the benchmark is harvested from public sources such as company websites, annual and sustainability reports, policies, statements and other public documents. This data is then used to award each company a score against usually six ‘measurement themes’, including how well the company embeds respect for human rights and human rights due diligence, responds to serious allegations or discloses information in respect of its human rights safeguards.
In light of the COVID-19 pandemic and associated impacts around the world, the CHRB adapted its approach in 2020. Except for automotive companies, which were benchmarked for the first time and assessed against the full CHRB methodology, all other companies were assessed on a subset of the methodology (governance and policy commitments, embedding respect and human rights due diligence and remedies and grievance mechanisms). This approach aims to take into account that the crisis had, and still has, a strong impact on many companies, and that some of the focus has shifted to managing the situation.
2020: key findings
- A growing number of companies are getting better at the fundamentals, but many still lag behind:
- On average across all sectors, companies improved their score on approximately two out of the 13 CHRB core UNGP indicators.
- The indicators that saw the most improvement were public commitments to respect human rights and grievance channels for external individuals and communities.
- The lowest areas of improvement relate to the human rights due diligence process, according to the benchmark. This highlights the ask for regulation on human rights due diligence to see here improvement. A regulatory framework would support business to decide what to disclose to minimize the risk of shareholder activism and other reputational or financial risks and to give in addition as much transparency as possible.
- The automotive sector faces particular challenges, according to this benchmark; this sector was included for the first time this year, with 30 companies in scope. A specific issue identified for the sector was in demonstrating how supply chain risks are managed.
- ICT manufacturing companies are catching up: They have been assessed last year for the first time and showed only after nearly 12 months an increase of almost a third on their UNGP indicator scores.
- A just transition is undermined by a disconnect between human rights and climate issues: The UN Secretary General, António Guterres, stated earlier this year that any action taken to achieve a net zero-carbon economy, without consideration for human rights, will only increase existing inequalities and the potential for exploitation of already vulnerable communities. The automotive companies included in the 2020 CHRB were also assessed by the Climate and Energy Benchmark. When comparing both assessments, CHRB analysts found almost no correlation between a company’s relative performance on either benchmark, which shows, according to the benchmark, the challenge to unite climate change and human rights ambitions.
- Too many companies are failing to meet investor expectations on human rights due diligence; This inconsistent performance highlights, according to the benchmark, the need for regulatory action to raise the bar and ensure that companies respect the rights of all potentially affected stakeholders.
- Companies need to move from commitments and processes to impacts on the ground: According to the benchmark, there seems to be a concerning disconnect between these commitments and processes and impacts on the ground. How do we get from commitments and processes to actual practices on the ground?
- Negative human rights impacts are overwhelmingly felt in developing countries: The 2020 CHRB assessed 225 allegations of severe human rights impacts. The most common of these involved situations of forced labour, child labour or health and safety breaches that resulted in death or injury. Despite the fact, that 78% of companies assessed are based or headquartered in OECD member countries, 85% of all alleged impacts occurred in developing countries. The countries where most negative impacts allegedly occurred are India, China and Indonesia.
At the UN Forum of Business and Human Rights in November 2020 potential explanations and solutions for the gap between commitment and implementation of the measures were discussed amongst panelists from CHRB, S&P Global, World Business Council on Sustainable Development, Principles for Responsible Investment, UN B-Tech Project, Business and Human Rights Resource Center as well as the UN Working Group on Business and Human Rights and the audience:
- Time and existing data play a role: Businesses need time to gather data on the state of play and time to implement their commitment into management systems; harmonized data, businesses can rely on globally, are needed;
- Businesses have complex goals to achieve: Now and in the coming decades, emissions-intensive sectors, face the major challenge of shifting to a net zero-carbon economy while upholding the central promise of the SDGs to leave no one behind. Demonstrating success in both areas is paramount to ensure a just transition.
- Lacking harmonized disclosure framework: there is no common standard in place for businesses around the world to disclose on their progress. There is a high risk for companies to disclose in this area, because of shareholder activism or other reputational and financial damages. The lack of disclosure makes it difficult to judge what is actually done and how actually big is the gap between commitment and action. This is another call for harmonized regulation on due diligence and disclosure that would encourage and protect business initiatives to provide more transparency.
- The topic is not yet in every board room: harmonized regulation and legal obligations would help to bring it on the board´s agenda and to move things forward.
- Existing standards are not sufficient: The UN Guiding Principles and the OECD Guidelines are good, but have not the same status and strengths in the market than would binding regulation.
- Benchmarks as a tool for monitoring human rights engagement: scores which rely primarily on data in the public domain do not necessarily reflect the true state of affairs. Nevertheless, benchmarks provide an overview how companies are perceived in the public domain and can help structuring their disclosure practices. It should be in the interest of every stakeholder-oriented business to be perceived in the public domain according to their own and measurable sustainability strategy and implementation.
Beyond the pandemic: rethinking the supply-chain
This year´s Covid-19 crisis has put additional pressure on the management of supply-chains. At the Freshfields `Beyond the pandemic: rethinking the supply-chain´ hub we provide an overview, what needs to be considered now and what the legal issues are, to navigate as best as possible through this crisis.
Further development of the benchmark
The CHRB is now part of the World Benchmarking Alliance (WBA), which aims to launch collective impact coalitions (CICs) in 2021. These CICs (pronounced ‘kicks’) will bring together companies, financial institutions, policy makers, civil society, academics, experts and others to work up these solutions jointly, focusing on the seven systems transformations identified by WBA.
A growing number of companies are getting better at the fundamentals, but need to focus now on the implementation, taking a just transition into account.