Blog | Tuesday December 3, 2019

Challenges and Opportunities for Gender Equality in a European Luxury Supply Chain

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What is the significance of the prized “Made in Italy” label that is well known in the luxury world?

Many fashionistas will associate it with glamorous designers creating sophisticated and high-quality products, from ready-to-wear apparel, fashion accessories, textiles and fabrics, and shoes to leather goods and eyewear.

Many experts of the luxury sector will know that many of these products are manufactured by a great number of small- and medium-sized enterprises (SMEs). These are generally highly specialized, yet still predominantly artisanal companies, and they are usually family owned and employ less than 50 employees on average. These companies are considered a fundamental asset to the luxury industry and to Italy in general. For example, Italy represents 87.8 percent of the global supply chain of the Kering Group, one of the major global players in the luxury sector. According to a recent study, a third of the global luxury goods market is Italian, and in 2018, it represented four percent of the Italian GDP.

But with these data, we are just scraping the surface: WHO is really behind your “made in Italy” bag, scarf, your glamorous glasses?

The short answer is: most of the time, women.

The long answer can be found in the report Supporting Women in the Luxury Supply Chain: A Focus on Italy, which found that while women are vital to the luxury sector, gender inequality throughout the supply chain still impacts them in the short- and long-term. However, both brands and suppliers are well placed to lead efforts towards improved gender equality in Italy, in both supply chains and in the country’s overall sociocultural context.

The study presents the results of a year-long research study commissioned by Kering and its family of Italian brands, Bottega Veneta, Gucci, Kering Eyewear and Pomellato. This study was conducted in partnership with local organizations Camera Nazionale della Moda and Valore D. With this project, BSR and a local partner Wise Growth engaged 189 suppliers of the Italian luxury supply chain to gather insights related to gender equality policies and practices as well as perceptions and experiences of 880 workers, including 620 women workers.

Women are key to the luxury sector. As outlined in a report published in 2018 by BSR’s Responsible Luxury Initiative, in 2015, women accounted for 85 percent of luxury sales, representing about four percent of designers and the majority of people entering the industry across the value chain. This gender ratio was also apparent in the research study—across the 189 suppliers involved in the research, women represented 63 percent of the workforce.

Although the “Made in Italy” label is well regarded, Italy itself, like many other countries, still faces difficulties with gender inequality. According to the World Economic Forum Global Gender Gap Report 2018, gender inequality in Italy is particularly evident when it comes to women’s active participation in the labor market as they face more limited access to job opportunities and career progression and greater exposure to vertical segregation and harassment, among other obstacles.

Despite these facts, little was known to date about gender inequalities that may be faced by women working in the luxury supply chain, their status, and the predominant challenges they face. This research intends to contribute to closing this gap of knowledge as well as outlining potential next steps to address the issue. The report draws four conclusions:

1. Women do not have access to the same working conditions and economic opportunities as men: Women represent 63 percent of the workforce, but only 25 percent of management positions, remaining predominantly in traditional roles as blue collar workers within the factories. Lower positions lead to lower salaries and the perception among women of discrimination in remuneration and that they cannot earn a living wage.
2. Women rarely hold leadership positions and have limited opportunities of professional career advancement: Breaking the glass ceiling is particularly challenging, and 59 percent of women feel discriminated against across the employment cycle. Overall, and not surprisingly in the context of SMEs, there is overall limited investment in career advancement and professional training opportunities. Women also tend to accept the lack of career growth prospects as a precondition tied to their interest in having more flexible working hours, and they also stigmatize female colleagues in leadership positions.
3. The impacts of familial responsibilities are seen as obstacles to gender equality: Motherhood in particular is perceived as a burden by 39 percent of women, who fear its consequences on their job upon returning to work and its overall impact on getting and sustaining a job and on professional growth. In addition to that, shared parental responsibilities are still rare: for 69 percent of women, domestic and family care responsibilities still predominantly fall on their shoulders and impact their work-life balance.
4. Women have a harder time voicing challenges and concerns: This study did not uncover highly concerning results in terms of the number of cases of sexual harassment that women may have experienced or heard of in their lives. At the same time, there is relatively low awareness of what constitutes harassment and inappropriate behaviors. Much more would need to be done to educate workers on this issue as well as creating an enabling environment for voicing concerns through grievance mechanisms and speak-up channels and ensuring that women feel empowered and confident enough to voice their concerns.  

In terms of potential next steps, there are clear opportunities for the luxury sector to lead efforts towards more gender-inclusive supply chains in Italy and more generally contribute to breaking down barriers and gender stereotypes in and out of the workplace. To achieve this and to build a potential path forward for future programming in support of gender equality, the report outlines a set of recommendations structured under BSR’s “Act, Enable, Influence” framework.

Following the research and the recommendations outlined in the report, Kering and its family of four brands have committed to take action to help advance gender equality through supplier engagement and in cooperation with relevant stakeholders. We look forward to seeing how this will contribute to driving impact and positive outcomes for women in the Italian luxury supply chain.

If you are interested in learning about how BSR can support you in promoting gender equality in your supply chains, please contact us.

Blog | Thursday April 9, 2020

Three Ways Businesses Can Protect LGBTIQ+ Rights in the Face of COVID-19

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• The coronavirus will hit marginalized groups, including LGBTIQ+ people, hardest.

• The private sector must take collective action to cushion the blow.

• Businesses can consider three strategies when trying to ensure inclusion.

The COVID-19 pandemic has disrupted life as we know it on a scale never seen before. One inescapable point in this crisis is that it will take an increased toll on those groups who were marginalized, vulnerable, and excluded before the pandemic hit, including lesbian, gay, bisexual, transgender, intersex, and queer (LGBTIQ+) people. For LGBTIQ+ people who have experienced a lifetime of discrimination, especially in places with deep poverty, tenuous healthcare delivery systems, and fragile government infrastructure, the sober truth is that this global emergency presents immediate unimaginable challenges.

For example, as highlighted in a recent Openly article, in India transgender people are at heightened risk of poverty and ill health because they already exist on the margins of society. The UN Independent Expert on Sexual Orientation and Gender Identity recently wrote in an open letter about the impact of COVID-19:

“Homeless persons, among whom LGBTIQ+ persons are many, face exacerbated exposure to contagion.…Many LGBTIQ+ youth will now be forced to [isolate] within hostile environments with unsupportive family members or co-habitants.”

Ultimately, as OutRight Action International notes, in too many places—simply because of who they are and who they love—LGBTIQ+ people will have less access to healthcare, will be hard hit by unemployment and food scarcity, will see their already-thin margins disappear, and without life-saving interventions will fall sick and die.

For these reasons, OutRight has launched a COVID-19 Global LGBTIQ+ Emergency Fund to support queer organizations on the frontlines of the pandemic in all regions outside of North America and western Europe. The fund will distribute grants to grassroots LGBTIQ+ organizations that are addressing a range of community needs, including provision of emergency food and/or shelter, access to safe and competent healthcare, safety and security, financial stability, and other unforeseen negative impacts brought about by the pandemic. Fund participants benefit from our coordination, vetting, and distribution of money to capable local organizations in markets where they do business. This is but one example of how the private sector can link up with civil society to respond to the pandemic when systems and government fail or are insufficient.

As COVID-19 strengthens its indiscriminate grip, those of us in the business and social sectors are being asked hourly what more the private sector can do to effectively ensure that those most at risk are not left behind. Our answer: take collective action to address the immediate needs of those affected by COVID-19, while staying focused on and committed to long-held values that prioritize inclusion and equity.

In this regard, purpose-driven leadership has never been more critical. As each company and civil society organization addresses urgent needs in unique and important ways—from building hospitals and tech platforms to manufacturing medical equipment and delivering food to homebound older people—important trends are emerging with regard to the need for, and power of, collective action. Never before has the old adage “there is power in numbers” rung truer.

When the Partnership for Global LGBTIQ+ Equality (PGLE), a global leadership platform to accelerate LGBTIQ+ inclusion in collaboration with the World Economic Forum and BSR, was launched in January 2019 at the Forum's Annual Meeting, we could not have predicted that in only one year its raison d'etre—tackling discrimination in all its forms to ensure that the universal basic human rights of LGBTIQ+ people are acknowledged and upheld—would be a matter of life and death for hundreds of thousands that comprise our global community.

Today more than ever, the business community has an opportunity, in fact a responsibility, to demonstrate leadership. But it can’t do it alone. While the past decade has seen important progress in LGBTIQ+ inclusion in some parts of the world, in most countries, protection against discrimination based on sexual orientation and gender identity is inadequate at best.

Unless we act, discrimination, unequal access, and the denial of universal human rights will only compound the poverty and dislocation that LGBTIQ+ people face around the world and render long-term social and economic progress out of reach.

Three years ago, the Office of the United Nations High Commissioner for Human Rights, in collaboration with the Institute for Human Rights and Business, developed the UN Standards of Conduct for Business to support the business community in tackling discrimination against lesbian, gay, bi, trans, intersex, and queer people. These standards provide five concrete steps that companies can take to align their policies and practices with international standards on human rights of LGBTIQ+ people.

To date, nearly 300 companies have stood up in support of human rights and equality for LGBTIQ+ individuals by expressing support for the UN Standards. If your company has not stood up for the universal human rights of LGBTIQ+ people, now is the time to do so by adding your name to the list of companies supporting the UN Standards.

The pandemic will undoubtedly present a range of new challenges to democracy and human rights. It is undeniable that repressive regimes will use the pandemic in ways that serve their own myopic political interests at the expense of basic freedoms and people’s lives. Unless we act, discrimination, unequal access, and the denial of universal human rights will only compound the poverty and dislocation that LGBTIQ+ people face around the world and render long-term social and economic progress out of reach.

Our community and its allies cannot afford to stand idle, and we must not allow backsliding on hard-won LGBTIQ+ rights. We must accelerate our quest for inclusion, together. In addition to expressing public support for the UN standards, here are three strategies to guide our collective response:

1. Apply a human rights lens to decision-making. Source accurate information when making data-informed decisions, ensure that those decisions are guided by application of a human rights lens and the UN Standards of Conduct for Business, and make sure responses prioritize the immediate and long-term recovery needs of the most vulnerable. In developing individual, sector-wide, and cross-sectoral actions, ensure that all affected stakeholders inform a coordinated, global strategy. Identify local stakeholders and global organizations with deep roots in local communities where you operate to understand their vulnerabilities and how your decisions impact them.
2. Amplify your core values. Content is key in times of emergency. Now more than ever, people will need constant reminders that fear of the Other is the enemy and that inclusion remains the highest priority. Leverage all communications platforms to remind stakeholders that inclusion is a value that should underpin our response—and that inclusion means everyone. Dispel stigmatizing messages that harm vulnerable communities by countering them publicly.
3. Prioritize collective action and share what you learn. It is critical that those in positions of authority around the world understand that none of us are too distracted to uphold basic universal human rights for all or that we are not too preoccupied to hold violators accountable. Through joint public statements or silent diplomacy, make your position known. Help others avoid mistakes and scale successful approaches, including innovative ones. Raise awareness of best practices and assist others in applying them. Now is the time for a big tent approach.

Months and years from now, when we look back on this time, we will be measured by our capacity to lead with purpose, kindness and compassion, and our ability to mobilize together to respond to the needs of our most vulnerable members of society. The time for bold action is now. Let us not fall short or fail to do absolutely everything we can.

First published on the World Economic Forum website.

The Partnership for Global LGBTIQ+ Equality (PGLE) is a collaboration between the World Economic Forum, the UN Office of the High Commissioner for Human Rights, and BSR.

Blog | Wednesday April 22, 2020

ESG Isn’t Going Anywhere: Investor Expectations in the Age of COVID-19

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One of the most important topics in corporate sustainability is the dramatic increase in attention by investors on the integration of environmental, social, and governance (ESG) considerations.   

The COVID-19 pandemic has created a global health crisis, upended the economy, and led to major stock market declines. As a result, many investors are reevaluating both short-term and long-term portfolio strategies, and companies are reevaluating their sustainability priorities. This raises an important question for corporate sustainability professionals: how will the rise of COVID-19 affect ESG investing strategies both in the short term and the long term, and what does it mean for companies?  

Preliminary indications are that the COVID-19 pandemic has—if anything—increased investor attention on corporate ESG management. In particular, investors have been even more vocal about their expectations on issues such as employee health and safety, workforce policies, job security, and business operational and strategic resilience. Front and center are investor concerns about responsible corporate governance, specifically related to COVID-19 response.   

Preliminary Indications Are That Investors Are Full Steam Ahead on ESG 

Leading asset owners and institutional investors are renewing their ESG investing commitments. The Government Pension Investment Fund (GPIF) of Japan, the world’s largest asset owner, and other major asset owners remain steadfast in their expectations of ESG and long-term investing. Even as the virus and market turmoil spread in mid-March, a new round of major asset owners joined GPIF’s letter.   

Larry Fink, the CEO of BlackRock, the world’s largest asset manager, also released a letter at the end of the first quarter in which he emphasized that “the pandemic we’re experiencing now highlights the fragility of the globalized world and the value of sustainable portfolios. We’ve seen sustainable portfolios deliver stronger performance than traditional portfolios during this period.” Blackrock is also continuing to take ESG action as a shareholder even during the crisis, notably voting against a board member at a natural gas distributor based on the company’s inadequate climate-related risk disclosure. 

Early data seems to show that ESG funds are performing better and proving more resilient during this turbulent moment in time. S&P Dow Jones' analysis notes that ESG portfolios have delivered better returns during the COVID-19 crisis and over the longer-term as well.  

BSR has partnered with Polecat since 2017 to deliver real-time corporate reputation and ESG intelligence from global online and social media discourse. Our review of data from Polecat indicates that many ESG topics (e.g., climate change, indigenous rights, etc.) are being reframed in relation to COVID-19, increasing their urgency and reach.   

The Wall Street Journal also envisions that the pandemic could elevate ESG factors in investment decisions, characterizing remarks from the head of research at the British investment bank Barclays: “Companies should expect more investors to ask questions about resilience and contingency planning, viewing the issues in light of the pandemic as relevant to a company’s long-term performance. Down the line, those conversations could evolve to broader ESG discussions…” 

More broadly, COVID-19 has also highlighted enormous disparities in society and corporate performance on the “S” in ESG. As the world assesses the challenges and rebuilds—and invests the capital to do so—it is likely to be guided by the imperative to “build back better” with a more just and sustainable economy. Companies will be evaluated by how they address those challenges in their businesses and being part of global solutions will be both a competitive differentiator and an ESG differentiator. 

COVID-19 Will Demand Emphasis on Different Areas of ESG

Many, if not most, corporate sustainability materiality matrixes will need some updating. The pandemic has demonstrated that many companies might generally have identified the right set of issues but may not be prioritizing them correctly or setting the right agendas to address them. For example, many service companies have not thought that employee health and safety was a high risk for their business. This thinking is obviously now changing.  

In this regard, BSR has seen a variety of material issues emerge as areas of particular interest to ESG investors. These include employee health and safety outside as well as inside the workplace, supply chain and resource risk and resilience, and employer-employee social contracts. It will be noteworthy to see how companies begin to report on COVID-19 in relation to these material issues, especially with the impending release of many corporate sustainability reports.  

COVID-19 has also put a spotlight on building resilient business strategies through scenario planning and considering second or even third-order effects. Issues that may have been deprioritized because they seem attenuated have—by the nature of the virus and its related effects on labor, supply chains, etc.—highlighted that a one-dimensional view of risk is not sufficient in designing resilient business strategies. Using scenario analysis in materiality and integrating the process with enterprise risk management are examples of ways that companies can better identify emerging ESG issues, some of which could manifest as quickly as COVID-19—and manage those risks accordingly. 

COVID-19 Is a Reason to Accelerate Efforts on ESG, Not to Pause Them 

Companies that are more strategically and operationally resilient and that treat their workforces better will likely be more attractive to all investors. In the short term, that means companies should increase efforts to integrate ESG investor expectations, ratings, and perspectives as part of sustainability initiatives, stakeholder engagement, and resilient business strategies.  Corporate leadership should also be conversant in ESG topics that relate to the COVID-19 response as investors ask tough questions and stakeholders evaluate companies on their effectiveness, credibility, and leadership on those material topics. 

Longer-term, COVID-19’s effects and the responses may also become a testbed for ESG analysis that helps create a new understanding of ESG impacts on business. For example, many investors have struggled with how to model and quantify the “social” aspects of ESG (whereas “environmental” are quantitative and more understood), and this may improve understanding of the financial impacts of major social disruptions. If this happens, companies should expect to see an increase in the quality of ESG investor expectations for corporate reporting. 

As we look ahead to the day when COVID-19 is no longer front-page news every day, it will be imperative for companies to learn and apply the lessons of this crisis. We believe investors will in turn hold them to higher ESG expectations. It will only become more important for companies to turn corporate sustainability principles into action, placing robust approaches to ESG at the center of resilient business strategies. 

Blog | Thursday February 20, 2025

Navigating Change: How Business Leaders Can Respond to a Changing Policy Environment

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The new US administration has been in office for 30 days, and changes have come fast and furious, many of them relating directly and indirectly to sustainable business. The public response from business has been minimal thus far, despite the fact that many of these policy pronouncements and executive orders have created significant barriers to existing company commitments.

Some of the orders take direct aim at action on climate, diversity, international cooperation, and sustainable development. High profile moves including the withdrawal from the Paris Agreement, apparent shuttering of USAID, non-enforcement of the Foreign Corrupt Practices Act, and removal of all activities—and language—related to “DEI” have transformed the landscape.

Some of these measures seek to overturn well-established laws and regulations that have been in place for nearly a half century or more, noting that many have been challenged in the courts. This comes at the same time that the European Union’s “Omnibus” is about to appear, with the likely impact of reducing and/or delaying implementation of the world-leading regulatory architecture on ESG in the name of deregulation and competitiveness.

Put simply, there is now immense pressure on companies to diminish or abandon their commitments, de-emphasize climate, diversity, and human rights, and drop public advocacy on these subjects.

This presents a destabilizing moment for companies that remain convinced that sustainability is a way to deliver long-term value, ensure resilience, and innovate.

Through discussions with leaders at many of our member companies over the past month, we are hearing some common themes:

• Changes in direction from Washington present three interrelated challenges: policies are being reversed; funding and incentives are being withdrawn, and there is intense political pressure on companies to reverse their policies and practices.
• Corporate sustainability leaders are digesting the remarkable depth and breadth of recent executive actions. Many leaders expected a “rollback,” and instead have seen an attack. While withdrawal from the Paris Agreement was expected, the removal of well-established, long-standing laws and regulations such as the Foreign Corrupt Practices Act, and longstanding anti-discrimination requirements, are seen by many as departing from the kind of policy environment that enables a stable, predictable environment for business.
• With the European Union’s Omnibus expected to be produced in March, sustainability leaders are also looking at Europe with unease, with the potential for rollbacks or delays on the CSRD and CSDDD, for which companies have been preparing assiduously.
• Regardless of these abrupt changes to the policy and political context, fundamental drivers and stakeholder expectations for sustainable business remain powerful and relevant.
• Even as many companies have quietly–or quite publicly in some cases–reduced their commitments and sustainability communications, most maintain that they continue the lion’s share of the work. In doing so, they are refocusing on business relevance, overall strategy, and enterprise risk management.

Many sustainability leaders inside business also have expressed the concern that their companies are responding to recent developments with short-term thinking that bring negative long-term consequences. Some fear “anticipatory obedience” is diluting business autonomy and judgment, with lasting damage. They also fear that with the withdrawal of reliable policy and economic incentives, the private sector will be left to carry the burden on key issues on its own, resulting in increased costs and decreased predictability.

How should companies approach this moment? Here are some ways to navigate a period of uncertainty and challenge:

• Stay attentive to the underlying reasons sustainable business is important. Despite short-term political pressures and uncertainties, boards and business leaders can only effectively steward their companies if they stay resolutely focused on the strategic implications of changes that will impact them when the current political cycle passes. The mantra of “focusing on the fundamentals” remains important, and many companies are continuing to embrace this.
• Prioritize a sustainability agenda that addresses the needs of a skeptical public. There is little doubt that many aspects of the sustainability agenda have failed to resonate with much of the public. Sustainability should take greater account of the economic opportunities, livelihoods, and risk management that can deliver better outcomes for the public. The “new narrative” that so many have called for should do a better job of articulating how the average person can benefit from sustainable business.
• Decide what’s non-negotiable. Businesses and business leaders have faced pressure to abandon existing principles and commitments. In our view, this is not, well, sustainable. Every company, and every business leader will need to determine what “red lines” they are not willing to cross. Policy debate is a healthy and necessary part of a well-functioning society, and businesses will undoubtedly face moments when they will be expected to “find their voice” about their values and principles, as I noted in my recent chat with New York Times reporter David Gelles.

The abrupt policy changes coming from Washington in no way negate undeniable realities facing business. Challenging “DEI” (without defining the term in many instances) does not negate the fact that American and European societies are growing more diverse by the day, which means companies should be focused on inclusion. Reversing steps in the US and Europe to advance the energy transition should not mean that companies turn away from the real costs and risks of accelerating climate change, or the massive innovation opportunities for companies that meet this challenge. Withdrawing from international efforts to address shared challenges, as slow and imperfect as they may be, only creates more uncertainty and delay that will cost companies dearly; does nothing to stabilize the global economy, and detracts from important efforts to improve public health, address migration, and stabilize the international system.

Regardless of the currently unfavorable political climate, no business leader can disregard the ongoing reasons why sustainable business delivers value, future-proofed companies, and stability. Turning away from these realities presents risks for business and society. Leadership comes from people who are able to see past daily developments to stay focused on strategic needs. That brand of leadership is needed now, more than ever.

Reports | Wednesday February 14, 2018

New Models for Sustainable Procurement

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While the first two decades of the sustainable procurement field focused on codes of conduct, supplier compliance, and auditing, procurement professionals in the vanguard today are looking to do much more with their sustainable procurement efforts, as major forces of change—such as climate change and automation—are poised to impact supply chains in uncertain and possibly unprecedented ways.

This paper captures three key developments that BSR's Procurement Leadership Group tracked, explored, and discussed in 2017: supply chain transparency, supplier engagement, and responses to shifts in trade and globalization.

Blog | Tuesday April 18, 2017

BSR at 25: Meeting the Moment

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This year marks BSR’s 25th anniversary. While such milestones often prompt a look back (and we are doing a bit of that), this juncture in history is a time to stay firmly focused on the future.

We are living in a time of extraordinary change. Virtually every dimension of business is changing. As I have been reflecting on what these changes mean for the future of all companies, I have zeroed in on three big changes that are flowing together: One of the changes is positive, one is neither inherently good nor bad, and one is problematic.

The first change is that we now have a clear roadmap for sustainable business. The arrival of the Sustainable Development Goals (SDGs) and the Paris Agreement have defined a powerful global agenda for the next decade and beyond. Combined with other significant efforts like the UN Guiding Principles on Business and Human Rights and the Women’s Empowerment Principles, we have universally agreed reference points on the core elements of the sustainability agenda. The question today is not where to go, but how to get there.

Second, every business is experiencing disruptions that are presenting existential questions about the future: What business are we in? Who are our customers and competitors? How do we deliver value? How do we secure the natural resources we need? How do we communicate effectively in an era of hyper-transparency? These questions about the future arise even as competitive pressures in the present are unrelenting.

Third, we are experiencing a time of great political uncertainty. The twin shocks of the Brexit and Trump votes in the U.K. and United States last year are still playing out. Whatever happens, there are some clear lessons for business. First, public policy frameworks supportive of sustainability cannot be assumed, especially when governments have a hard time demonstrating the value of open societies and the global economy amid public anxiety over change. The political earthquakes of 2016 also remind us that the sustainability agenda should focus more on basic economic fairness and demonstrate how attention to climate can deliver innovation, competitiveness, and prosperity that reaches throughout society.

As we look ahead from our 25th year, it is good to see clarity about sustainability objectives, even if the business and political environments are far less certain. I am optimistic: We have a golden opportunity to reorient business around the sustainability agenda—an opportunity to use new technologies, new business models, and new ways of delivering value to achieve the vision of the SDGs and the Paris Agreement. Business can use its voice to demonstrate values-based leadership at a time when many of our elected officials have turned away from open societies, collaboration, and a principles-based approach to governing.

At a time of massive change, the question all of us face is simple: Will we meet this moment?

This is the first in a series of blogs on the occasion of BSR’s 25th anniversary that will explore how to redefine sustainable business.

We will also discuss these ideas at the BSR Conference 2017—stay tuned for registration launch in May and join our mailing list to be the first to receive Conference news and updates.

Blog | Monday August 21, 2023

Bringing the Most Vulnerable to Climate Change to the Boardroom

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Boards and executives rarely hear directly from the communities most affected by climate change, who are seldom represented in the boardroom or included in stakeholder engagement. Given the extent of inequities that heighten their exposure to climate risk—low-income livelihoods across supply chains; lack of access to basic financial, legal, and public services; and a plethora of diversity divides—a voice in the boardroom might seem to come low on the list of priorities.

But a different perspective is gaining momentum: boardrooms and governing bodies need people from the climate frontline if they are to take meaningful action on ESG, both to reduce their exposure to climate risk and to address the increasingly recognized climate adaptation gap. 

Current policies will push around 2 billion people out of the environmental and climatic conditions“climate niche” that best support human life by 2030, increasing to around 4 billion—an estimated third of the global population—by the end of the century, according to a recent study.

The climate adaptation gap refers to the understanding that those most vulnerable to climate impacts have the least means of increasing their own resilience. Not only do they lack the funds, access, and rights to invest in and safeguard their future, from building skills to adapt to workforce volatility to developing land and property to withstand climate impacts, they lack the influence to drive action that might mitigate risks. 

The risks to these communities are risks to business. There are vulnerable workers and dependents across the supply chain from farms and plantations; extractive sites; factories; transport; to logistics. The more businesses can understand how these communities are affected, the better they can work with them to counter the risks. This is where a voice in boardrooms and executive leadership can make a difference.

The need coincides with growing calls for more representation at the highest levels of corporate governance, particularly of women and youth, and linked specifically to climate change. As one student wrote in a letter to the Financial Times: "Age diversity is extremely low among chief executives and across most boards of directors in listed companies. At the same time, our species is facing global grand challenges that are profoundly characterized by an intergenerational dimension.”

Changing Expectations from Regulators, Investors and Customers 

Activism on climate action is increasingly reaching the boardroom—with calls for change from regulators, investors, customers and employees. In the EU, the Corporate Sustainability Due Diligence Directive, the Corporate Sustainability Reporting Directive (CSRD), the Green Taxonomy, and the Mandatory Human Rights Due Diligence Directive (HRDDD) are redefining the role of boards by obliging them to oversee climate, social impact, human rights and governance at their companies. In the US, the draft Securities and Exchange Commission rule will likely require disclosures on how the board is overseeing climate-related risks and opportunities, prompting a review of existing governance structures. And the recent International Sustainability Standards Board (ISSB) Sustainability Disclosure Standards also call for an increased board role in reviewing climate-related risks and opportunities. 

Meanwhile, these regulatory requirements are surfacing deep tensions in how companies can best protect and serve all employees. For instance, pressure on reporting brought by recent EU legislation could have the catastrophic impact of squeezing smallholders, who lack the resources to meet new requirements, out of supply chains. Indonesia and Malaysia responded to the recent deforestation law by sending top officials to Brussels to seek fairer treatment for small palm oil farmers.

Beyond legal requirements, expectations of business directors are changing, with investors and other stakeholders demanding deeper board engagement and oversight, more transparency, and opportunities to engage with directors. The financial risks will also become more apparent with the increasing impact of climate change, as well as the challenges it presents to insurance. 

Building Climate Resilience through Stakeholder Engagement 

Business can enable credible action to build climate through diverse representation and engagement at the highest levels of governance, particularly on boards and Stakeholder Advisory Councils . The challenges of a just transition and achieving climate justice demand that businesses co-create solutions with frontline communities. For this, those leading the charge need a firsthand understanding of the risks and impacts. They also need a mindset change, widening their focus beyond near-term value generation to encompass long-term risk mitigation and adaptation, and beyond what’s material to their stakeholders today to monitor shifts that may appear distant but whose impacts could quickly escalate to render business-as-usual impossible.

This is not to underestimate the extent of change required. As David Korngold, Director of Business Transformation says: “Meaningful corporate engagement with stakeholders is set back by transactional or extractive relationships, overreliance on large global voices, and under-engagement with affected stakeholders—including fleeting interactions. Not only this, but engagement is often treated as the end-goal, rather than a means to co-create an equitable future.”

Recommendations for Business Leaders 

Business leaders that act will not only get ahead of regulation, stakeholder expectations, and activism, but they will find themselves better positioned for effective leadership and resilience, thanks to expanded knowledge, competencies, and expertise. Key recommendations include: 

• Prioritize diversity in the representation and engagement of stakeholders at the highest levels of governance

• Develop mechanisms to engage with affected stakeholders, whether through Stakeholder or External Advisory Councils or other direct dialogues in close collaboration with management 

• Use engagements to listen to current issues, maximizing the opportunity to increase directors’ understanding of climate risk and enable thoughtful dialogue with affected parties 

• Empower External Advisory Councils to amplify the voices of stakeholders and enhance their oversight

• Schedule regular meetings to cultivate highly engaged and committed standing groups 

BSR has extensive experience engaging with boards and Stakeholder Advisory Councils, including on climate justice and adaptation. For more information, please contact the Sustainability Management team.

Blog | Wednesday April 21, 2021

Joining the UN Generation Equality Forum is Smart Business

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As the world grapples with the impacts of a global pandemic with women on the frontlines, the Generation Equality Forum (GEF) offers a once-in-a-generation opportunity for actors around the globe, including the private sector, to come together to build an ambitious agenda to empower women and girls. BSR, The B Team, and Women Win/Win-Win Strategies are working together to engage the private sector in making meaningful commitments to promote gender equality at the Forum. We connected with BSR member PayPal to hear more about its role as a GEF Action Coalition Lead and what motivated it to take part in the Forum. 

There’s been a lot of excitement for the Generation Equality Forum, for which PayPal is a private sector lead. Can you tell us more about the Forum and why companies should engage?

The Generation Equality Forum (GEF) is a civil society-centered, multi-stakeholder global gathering for gender equality. Part of the Forum includes the launch of six innovative and multi-stakeholder Action Coalitions. The Action Coalitions engage governments; women’s, feminist, and youth-led organizations; international organizations; and the private sector to catalyze collective action, drive increased public and private investment, and deliver concrete, game-changing results.

PayPal is proud to be a private sector leader in the Action Coalition on Economic Justice and Rights. We believe there’s a strong case for other companies to join us and engage with the GEF.

First, engaging with the GEF is an efficient way to send a strong message to your investors, board, customers, government stakeholders, and employees that your company is committed to ESG outcomes for a more just, equitable, and prosperous future.

Second, without the expensive membership fees of many global communities, your employees will have an opportunity to engage with a dynamic, multi-stakeholder set of actors jointly dedicated to turbo-charging practical change in the world on gender equality and the rights of women and girls. You can join others at global and regional events to amplify the Commitment Maker’s role and contribution in accelerating results on the SDGs.

Third, it is a unique learning exchange and collaboration opportunity across the Global North and Global South. You can learn about what works to advance change on gender equality and women's and girls’ rights. Once you develop the muscles of gender equity, you can cross-apply this acumen to other types of equity and diversity, whether it’s race, religion, sexual orientation, disability, or beyond.

And this is on top of the deep, evidence-based, and data-driven business case. Gender equality is a critical component when considering that closing the gender gap could increase global GDP by 35 percent.

Why has PayPal chosen to engage with GEF and the Economic Justice Action Coalition?

At PayPal, we believe that now is the time to reimagine money and democratize financial services. Every person has the right to participate fully in the global economy. We feel an obligation to empower people to exercise this right and improve financial health. As a leader in digital financial services, we believe in providing simple, affordable, secure, and reliable financial tools and digital payments. With this company mission, it was a no brainer for PayPal to apply to serve on the leadership group of the Action Coalition on Economic Justice and Rights.

I was barely six weeks into my new role when I pitched the opportunity to PayPal senior leadership. It was a Friday night, and before Monday morning, I received not only a green light, but also strong support from our senior leaders (including our President and CEO, Dan Schulman) to submit our letter of interest. We are honored to have been selected to serve on the leadership group of this Action Coalition and to be among a small group of private sector companies that are engaged in the overall Generation Equality Forum.

Advancing gender equality, specifically on the topic of Economic Justice and Rights, is not new to PayPal. We have pursued opportunities to improve outcomes across our stakeholders, including our employees, consumers, merchants, and supply chains. We have made progress in areas like gender pay equity and championing policies that promote workplace and economic equality for women. We are excited to explore the potential of leveraging our products, data, and platform for further impact.

The decision to get involved aligns with our values as an organization and allows us to bring focus and prioritization to the urgency of the gaps, especially as we all strive to overcome the setbacks of the COVID-19 pandemic.

Engaging with the Generation Equality Forum is an efficient way to send a strong message to your investors, board, customers, government stakeholders, and employees that your company is committed to ESG outcomes for a more just, equitable, and prosperous future.

What kind of recommendations are the Action Coalitions making?

Launched at the Mexico City Generation Equality Forum, the draft Action Coalitions Global Acceleration Plan includes recommended actions, and you can add your thoughts to influence the objectives of the Action Coalitions.   

To give you an example, one of the four subthemes of the Action Coalition on Economic Justice and Rights is on productive resources. Namely, the Economic Justice and Rights Action Coalition urges action to expand women’s access to and control over productive resources through increasing access to and control over land, gender-responsive financial products and services, and the number of firms owned by women by 2026. Under this action, we've identified three strategies to advance this ambitious goal:

• First, we must eliminate gender-discriminatory policies, adopt and implement laws and policies, and ensure strategies and investments are underway that realize women’s and girls’ access to and control over productive resources and assets.
• Second, we must support platforms representing women’s groups and scale infrastructure that measurably expands women´s access to and use of productive resources, including affordable capital, financial services, digital products, internet, energy, and equitable access to government services and benefits.
• And third, we must identify and challenge harmful social norms, stereotypes, and practices impeding women and girls from equitably controlling and benefiting from productive resources while fostering positive attitudes validating women’s empowerment and economic contributions.

I really want to emphasize the unique and far-reaching impact of the digital opportunity. Gender-intentional investments in digital payment and ID infrastructure are key to building forward, differently. We imagine more inclusive, resilient, and gender-intentional financial systems that enable women's financial inclusion and women's economic empowerment. Digital payments help women manage time poverty, give women agency, and provide more privacy and increased safety than cash.

Gender-intentional investments in digital payment and ID infrastructure are key to building forward, differently. We imagine more inclusive, resilient, and gender-intentional financial systems that enable women's financial inclusion and women's economic empowerment. Digital payments help women manage time poverty, give women agency, and provide more privacy and increased safety than cash.

These Action Coalition commitments sound inspiring. How are companies thinking about the commitments they can uniquely contribute to support the Generation Equality Forum outcomes?

In a panel hosted by The B Team, BSR, and Women Win/Win-Win Strategies to explore how companies can accelerate gender equality, Celine Bonnaire (Kering Foundation) and Michelle Milford Morse (UN Foundation, Girls and Women Strategy) joined me in a clarion call for the private sector to seize this moment.

The ask is to do something, and the opportunity to draft your corporate commitment is now. The private sector has so much to gain by participating, and we have an astounding level of capital, well beyond the financial commitments when we engage our employee base, our consumer base, and our collective might.

I would push us to think creatively about our different types of capital. For example, the private sector can leverage other types of capital beyond financial capital to help women businesses grow.

• Network capital—we can help women-owned businesses get to market
• Human capital—we can form partnerships to mobilize capacity building of skills specific to their business models and sectors
• Intellectual capital—we can enable technical assistance to support evidence-based and data-driven decision-making  
• Reputation capital—we can share the halo of our brands and voice

I would also leverage the Generation Equality Forum to be the action-forcing enabler to not only put gender equality on the list of company priorities, but also to raise it to the top of the list. Create urgency with fear of missing out on this global movement. Mobilize your employees and customers so the decision-makers say yes quickly to unleash funding, evolve policies and processes, sex-disaggregate the data, and mainstream gender transformational interventions.

There are multiple ways for interested companies to get involved in the Generation Equality Forum. This includes: becoming a Commitment Maker; participating in the Generation Equality Forum Public Conversation; and taking part in the Paris Generation Equality Forum (June 30-July 2).

Blog | Wednesday July 6, 2022

Activating Directors on Sustainability: Six Questions for Your Board

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Directors of companies headquartered in the EU will likely soon face a pivotal shift in their duties regarding sustainability with the upcoming EU Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD). Under the CSRD, companies will have to disclose how sustainability matters are managed at the board level and how sustainability is integrated into directors’ incentive schemes, while the CSDDD sets out ambitious new guidance on the personal duties of directors specifically.

The first blog in the three-part series detailed key recommendations for companies to prepare for the Corporate Sustainability Due Diligence Directive. Here, we draw on our learnings from engaging with boards of BSR member companies and have identified six key questions for boards to determine their readiness to govern evolving expectations. We would also like to highlight the recent recommendations at the World Economic Forum related to human rights and the role of boards as an additional source.

A Holistic Approach across ESG

Governments, investors, and other stakeholders are increasing calls for boards to provide oversight on sustainability and environmental, social and governance (ESG) topics. Examples include the SEC’s draft rule on climate disclosure requirements, which would require board and management-related risk oversight and governance. The International Sustainability Standards Board (ISSB) has also released exposure drafts on sustainability and climate-related financial disclosures.

The EU Commission’s proposed CSDDD is far-reaching in terms of responsibilities, with a comprehensive approach beyond climate, spreading across a broad range of ESG subjects. The CSDDD sets out two provisions on directors’ duties for EU-based companies:

• Directors’ duty of care: When fulfilling their duty to act in the best interest of the company, directors should take into account the consequences of their decisions for sustainability matters, including human rights, climate change, and other environmental considerations, in the short, medium, and long term.
• Directors’ oversight responsibility: Directors are responsible for overseeing a due diligence policy and processes, with due input from relevant stakeholders, including rightsholders impacted by the company’s business activity.

One of the groundbreaking elements of the CSDDD is its potential link between the company’s sustainability strategy and the variable remuneration of directors. As stated by the European Commission,

Where companies' directors enjoy variable remuneration, they will be incentivized to contribute to combating climate change by reference to the corporate plan.

Six Key Questions for Boards

Over the past 30 years, BSR has worked with companies and boards to integrate sustainability into business strategies and operations.  

Based both on that experience and an understanding of the likely impact of these impending changes, it is essential that boards go beyond “check-the-box” compliance to provide effective oversight and governance.

1. Composition: Does the board have access to relevant knowledge and training on human rights and wider sustainability questions?

There is increasing awareness on the part of business of the need to fill the gap in sustainability expertise and skills at board and management levels, including human rights due diligence. Companies can address this gap through dedicated training for all directors to ensure that due diligence becomes integrated into the companies’ processes and by securing external expert guidance. Boards can also review their skillset when considering sustainability risks, including how ESG and human rights topics relate to other company material issues.

2. Oversight: How does the board examine and oversee ESG issues? Is there a dedicated committee or is sustainability integrated across all board committees? 

The entire board must have the right level of understanding of human rights impacts and position these within the company’s wider ESG strategy. Relevant ESG topics can be integrated into respective committees (via nomination, audit, etc.) so they are addressed alongside other board considerations. This may also include a dedicated ESG committee.

3. Company impacts: Does the company have the appropriate approach in place to understand potential adverse human rights impacts on affected stakeholders?

Based on evolving norms in materiality and the CSDDD, companies should understand not just material issues to the business, but also salient human rights impacts. Potential adverse human rights impacts may vary widely, from supply chain labor to the use of algorithms in marketing campaigns to discriminatory effects of services. Such impacts may not be covered under narrower, “traditional” views of the financial materiality of ESG.

4. Stakeholder insight: Is the company conducting stakeholder engagement as a means of understanding relevant perspectives, risks and opportunities?

This could include two main components: Boards can first ensure company management has all necessary processes to create a meaningful and ongoing dialogue with affected stakeholders. In some cases, boards may themselves engage with and/or access regular insights from key stakeholders, including employees, trade unions, and affected community organizations, on salient issues covering sustainability strategy and ongoing relevant emerging issues. One mechanism through which this can be done is the establishment of a stakeholder advisory council, with which Board members may engage, along with management.

5. Emerging risks and strategic implications: Does the board have an approach—such as scenario planning—in place to identify emerging ESG and human rights risks and opportunities?  

Boards look at strategic, capital, talent, and other commitments that will affect a company for years or even decades to come—yet few have a method for considering the profound impacts that social, environmental, and other sustainability-related trends may have on these plans.

Futures thinking employing scenario analysis enables companies to identify emerging risks, opportunities, and their potential implications for the company. While perhaps not standard practice for boards today, directors and leadership teams can use these tools to ensure that their business has allocated the right resources, against multiple “what if” scenarios to ensure they are truly resilient in the face of tomorrow’s disruptions. Whether that’s linked to geopolitical risks such as the invasion of Ukraine, acute physical climate risks, or policy and legal risks on human rights, boards have a duty to long-term governance, versus reactive shifts.

6. Accountability: Is executive remuneration aligned with the company’s sustainability objectives?

Any flexible components of Board and executive remuneration should be linked to the achievement of measurable sustainability targets (time-bound and science-based in the case of environmental targets) set in the company’s strategy and certainly to outcomes beyond share price.

The dynamic business and social context all companies face means that Directors will be most effective when they consider a diversifying set of perspectives and considerations. New EU regulations, whether the CSRD or in this case the CSDDD, mean that heightened and more sophisticated attention to ESG is not only smart practice, but required, to ensure that their Boards’ can be effective stewards of company strategy and performance to deliver long-term value. We invite companies to collaborate with BSR in enhancing board leadership on an evolving and expanding set of questions.

Blog | Tuesday December 14, 2021

Race and Ethnicity: Civil Society Expectations for Business and Recommendations for Company Action

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More than a year ago, the Black Lives Matter movement spurred companies into addressing long-standing race and ethnicity issues and developing or stretching their diversity, equity, and inclusion (DEI) goals.

However, most of these initiatives have focused on the US, and companies are struggling to address these issues in other countries. Nevertheless, racism and ethnic discrimination are global problems, from racist abuse of England’s Black football players to sexual violence against Indigenous women in Argentina—and addressing these issues benefits everyone. Increasingly, there is a growing societal expectation for businesses to look globally at their internal DEI programs, including those that address race and ethnicity, and as part of their product portfolio, supply chain, and presence in local communities. 

Multinational companies are seeking effective practices for addressing race and ethnicity issues globally. We conducted interviews among BSR’s 300 member companies to identify common challenges companies face when addressing these issues and the potential opportunities this can represent for businesses. We also interviewed civil society organizations around the world to understand their expectations for corporate action.

How Are Companies Addressing Race and Ethnicity Issues outside of the US?

Leading companies are setting global policies with executive support and are creating frameworks for local and regional action plans and initiatives to be developed. Global efforts have been framed around “multi-culturalism,” “full spectrum diversity,” and “culture and heritage.” However, companies’ global commitments do not always come through at the local level. Success in this area depends on support from headquarters and local ownership.

Internally, companies are creating safe spaces for employees to reflect, share, and learn from each other’s experiences related to race and ethnicity and providing opportunities to learn about racism and discrimination through trainings, roundtables, town halls, etc. Although a necessary first step, these practices alone will not achieve lasting impact for employees or the company.

Until recently, most company efforts have used “band-aid” solutions for a specific issue, like quotas for representation or philanthropic contributions. Few companies have designed the necessary structural changes required to address the root causes of racism and inequality inside and outside their operations, and industry collaboration remains limited.

What Do Civil Society Organizations Expect of Companies?

Civil society organizations stressed the need to address discriminatory structures and systems instead of trying to change individuals. The organizations we spoke to noted that currently most internal efforts are top down and focus on behavior change or solely on diversity, with less attention paid to inclusion and equity. For example, setting quotas for leadership positions can ensure accountability, but it can also make certain groups feel that there is no longer a place for them or reinforce the idea that someone was promoted because of their diversity characteristics and not their skills and experience.

Reviewing practices that may perpetuate racism and discrimination, such as recruitment or pay policies, allows for a discussion on how employees and stakeholders can work together to create a more equitable system that benefits everyone.

Based on this research, we have developed a set of global DEI recommendations to address race and ethnicity issues that enables localization and long-term flexible investments. Companies can act on issues related to race and ethnicity in their countries of operations and learn from civil society organizations in the following ways:

• Commit to a global, long-term DEI policy with highest-level buy-in from senior leadership and frameworks for local and regional action plans and initiatives. For example, Cisco developed a set of Social Justice Beliefs that inform how it acts as a business for its employees, customers, and communities. As part of those principles, it has developed specific actions to address racism against the Black Community in the US, and it plans to explore expanding these actions to make them applicable to a global context. ID_Brazil works with global companies with footprints in Brazil and other Latin American countries to review policies and practices across operations and identify racism-related challenges and gaps through its Yes to Racial Equality Seal. 
• Focus on dialogue and learning as a first step: Foster safe dialogue for employees to share experiences, connect leaders with underrepresented staff at the local level, and implement training and toolkits for leaders and employees to identify and speak on racism and discrimination (e.g., this toolkit from Berkeley Haas). Accenture has created a training program that supports employees in identifying and speaking on racism (currently available in the US, the UK, and Ireland, and it will soon be available in Canada and South Africa). 
• Co-create through partnerships: Companies cannot and should not aim to address racism and discrimination alone. They can establish community engagement board(s), leverage and support employee resource groups (ERGs), focus on creating an effective reporting and ethics hotline, and join collaborations tackling racial justice to work with other companies committed to addressing these issues, like the WEF’s Coalition on Racial Justice in Business or the European Network Against Racism. Companies will need to commit financial and human resources to support these partnerships and ensure they are not adding additional work to groups that are already under-resourced.
• Advocate for systems change: Using an equity lens, examine your company’s business operations and product development processes to identify if and how it has enabled and benefited from systemic racism. Some examples: Starbucks, Airbnb, and Facebook completed civil rights audits. Companies should also explore how they can use their voice to advocate externally for wider systems change. For example, Ben & Jerry’s call to dismantle white supremacy provided actionable steps, and Dr. Bronner’s pledged funding to four organizations fighting racial justice and called out systemic racism in the criminal justice system.

Meeting today’s societal expectations for social justice and robust DEI programs requires long-term planning and readjusting business strategy. By joining the handful of leaders already committing to address race and ethnicity issues throughout their global operations, companies can strengthen existing commitments to human rights and non-discrimination and become a leader in their industry, especially as DEI becomes less about counting employees and more central to meeting growing stakeholder expectations to embed equity across company value chains. For more information, please reach out to our Equity, Inclusion, and Justice team.