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Blog | Tuesday March 19, 2024

Five Ways Companies Can Help Smallholders and SMEs Prepare for Upcoming Regulations

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A host of incoming regulations, such as the EU Regulation on Deforestation-free Products (EUDR) and the Corporate Sustainability Reporting Directive (CSRD), as well as national laws such as the German Supply Chain Act, French Duty of Vigilance Law, US Uyghur Forced Labor Prevention Act (UFLPA), and China’s new ESG disclosure rules, are set to transform the global business landscape.

One concern leveled by critics of such regulations is the potential impact on smallholders and small- and medium-sized enterprises (SMEs). Smallholders may not currently comply with the EUDR regulation and therefore would not meet compliance requirements to trade with downstream businesses. Critics fear that supply chains might consolidate around compliant, larger companies, resulting in a business ecosystem where large companies predominantly work with each other. This could sideline smaller, less compliance-ready smallholders, resulting in reduced diversity and resilience in supply chains, as well as continued inequalities for smallholder farming households.

The first implementation of the EUDR will apply from December 2024 and is seen by some as an opportunity for downstream companies to develop programs and processes that will enable them to respond to the fast-approaching regulations. In particular, the companies will need solutions that address the potential implications for smallholders in value chains affected by the regulation, specifically cocoa, cattle, coffee, palm oil, rubber, soya, and wood. Due to the EUDR, Indonesia initially accused the EU of “regulatory imperialism.” Along with Malaysia, also a major palm oil producer, Indonesia later initiated dialogue with the EU to address concerns regarding the increased regulation requirements for smallholders.

Smallholders make up 84 percent (more than 450 million) of farms globally. Despite their importance to global supply chains, smallholders and SMEs often struggle with regulatory compliance due to their size and limited resources, and they rarely receive support to recognize and reap the benefits of complying. Informal workers, homeworkers, and vulnerable groups like women and migrants face similar challenges and are often excluded from many companies’ social policies and due diligence processes.

A Window of Opportunity

Timing to develop effective interventions is limited, but there is still a window of opportunity. To support diverse and resilient supply chains, downstream companies would be wise to invest in inclusive compliance approaches for smallholder farming households and SMEs.

Large businesses could spearhead initiatives to support smallholders and SME inclusion, such as pre-competitive company collaborations at jurisdictional scale, including public-private partnerships and open-source studies on the implementation and learnings from regulation implementation. Landscape approaches, or multi-stakeholder collaborations focused on a specific geographic area, can support alignment around common goals and actions to enhance sustainability performance. Such approaches can improve sustainability; mitigate risks in value chains; rebalance power, risk, and reward; promote digital inclusion, and focus on farmer-centric governance and data ownership.

Businesses that take a holistic, long-sighted approach to compliance will be supporting the development of new global standards and could reap first-mover benefits, particularly if other markets were to follow the EU’s lead. Contrary to the common perception of regulation as a business burden, it can facilitate and even strengthen business performance, driving companies to be more ambitious and creative, while promoting transparency and traceability.

Below are five recommendations for downstream businesses to support smallholders and SMEs in complying with incoming regulations.

1. Financial Compensation and Strategic Investments

• Ensure a living income or wage and consider fair pricing and revenue-sharing models to enable smallholders to invest in meeting new requirements.
• Use a downstream business’ finances to support smallholders to meet the reporting requirements and operational costs, such as infrastructure, certification, and documentation processes.
• Invest in more sustainable practices, such as regenerative agriculture, to enable smallholders to meet incoming standards.

2. Implement Capacity-Building Programs, Resources, and Training

• Invest in programs to strengthen the ability of smallholders and SMEs to comply with human rights and environmental standards. Downstream businesses could then encourage the suppliers to adopt self-assessment practices and enhance their due diligence processes. 
• Offer free training, webinars, documents, and other online resources or technical assistance to suppliers.
• Provide sample documentation on policies, ensuring suppliers understand and can implement necessary processes effectively.

3. Foster Long-Term Partnerships

• Invest in long-term partnerships with both suppliers and implementing partners. This will drive impacts through continuous evaluation of improvements at a farm or factory and redirect financial flows to help smallholders make the appropriate investments in long-term solutions.
• Foster consistent, credible, and equitable stakeholder engagement.

4. Adopt Systemic and Flexible Approaches

• Take systemic approaches and invest in landscape or jurisdictional programs. Conduct research, implement data systems, and promote digital inclusion. Support open-source databases.
• Be creative and flexible with suppliers, considering their specific contexts and challenges. This can include accepting a variety of certifications and verifications, including local versions; giving relative importance to priority local issues; and adapting the requirements for different types of suppliers so they reflect their different contexts.

5. Influence Policy to Ensure Inclusive Development of Standards

• Work with governments to ensure that regulations are functional and effective and that the choice of metrics being requested from suppliers is feasible.
• Join sector-wide collaborative initiatives, particularly in sourcing and production markets, to influence policy, support compliance, raise standards across the board, and play a crucial role in helping companies identify and address shared risks and opportunities.

In addition to these actions for downstream business, governments can create an operating environment conducive to compliance. For instance, cocoa producer Ivory Coast has provided over 700,000 electronic cards to nearly three-quarters of farmers to support the tracking and tracing of cocoa in response to the EUDR.

Regulators should make efforts to maximize the capacity of smaller businesses and independents to comply. The EU regulations, while stringent, offer funds and assistance to countries most impacted by them, including support tools for SMEs. However, there is a notable lack of financial and capacity-building support for suppliers, an issue highlighted by the limited examples of European buyers investing in their partners' development. This gap is often filled by local civil society organizations and EU development aid agencies.

There is also a pressing need for suppliers, especially those in the Global South, to be actively included in creating sustainability-related legislation, which is predominantly being developed in the Global North.

The evolving landscape of regulations presents both challenges and opportunities for SMEs and smallholders. A balanced approach that considers the unique needs of smaller businesses and fosters inclusive, sustainable growth will enable incoming regulation to achieve its intended impact.

Blog | Thursday March 14, 2024

Business Leadership Amidst 2024 Elections Around the Globe

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Election night is a big thing in every newsroom. Pizzas are ordered and journalists hunker down for a long night of watching the returns arrive. In 2024, at a global newsroom like the one I help run, we're going to have scores of election nights. All across the globe, voters will be heading to the polls in what is shaping up as one of the biggest years ever for elections. It's worth taking a pause, as a group of us did in Davos, to consider the many risks that those elections could face, and what the role of business ought to be in ensuring that the polling is free and fair.

Marc Lacey, Managing Editor of The New York Times

The stage is set for 2024 to be the biggest ever year for elections. This is the inescapable truth that was at the core of the dialogue we convened at the World Economic Forum Annual Meeting in January.

In Davos, geopolitics, AI, disinformation, citizen trust, and questions around leadership presented a perfect storm of risk this year when more than half the world’s people live in countries where elections are scheduled. Already, 20 companies have made specific commitments to deploy technology to combat the deceptive use of harmful AI content in the 2024 elections at the Munich Security Conference in February.

But, if the ability of global institutions to fulfill their duty is being questioned, as over half of the world’s voters go to the polls, then what are the stakes for businesses?

Do business leaders have a duty to ensure that democratic processes are protected, and if so, what is it? When employees, citizens as well as consumers demand businesses take a stand on the issues that matter, why might business leaders feel hesitant or ill-equipped to do so? BSR and Kite Insights hosted a discussion to explore that very subject: Business Leadership Amidst 2024 Elections Around the Globe. A discussion that one of our speakers, Sandrine Dixson-Declève, Co-President, Club of Rome, said was ‘one of the most important’ of 2024.

Rebuilding Trust amidst AI, Deepfakes and Misinformation

In a year with over 64 national elections (plus the EU) around the world, Sandrine’s reflection is well-founded. New York Times Managing Editor Marc Lacey, who moderated the roundtable, took it a step further, inviting the speakers to ponder if these ‘60+ elections’ should in fact constitute “one big election”. In today’s polarised societies, elections can feel like an emotional referendum on which national and political institutions voters trust most, if any.

The upcoming European Parliament election embodies this question of institutional trust in the context of the rise of far-right populism, noted Daniel Sachs, Founder and CEO, P Capital Partners, and Vice-Chair, Open Society Foundation. At the same time, he pointed out how “populism and polarisation are not necessarily an ideological battle. If you poll why people switch to the fringe, it’s because they want change from the status quo and they don’t see centrist parties as credible leaders of that change”. So, perhaps a valuable question for business leaders to ask themselves is how can they represent and facilitate inclusive systemic change while remaining politically central or even neutral?

One option might be how you show up publicly in the right way. But artificial intelligence has disrupted and destabilized how leaders are perceived publicly and whether the public information about them is authentic, pointed out Teresa Hutson, CVP of Tech for Fundamental Rights, Microsoft.

AI may be the next big business opportunity, but it also poses unique challenges to democracy and elections. Digital innovations, such as generative AI, are producing a seemingly infinite number of ‘deepfakes’, or digitally generated artificial content, ready to distract and deceive the public. Mistrust and populism are amplified by such misinformation and disinformation.

Teresa Hutson shared her concerns around how nation-state and non-state actors are already targeting democracies and sowing the seeds of disruption through online deepfakes. In India, for instance, where 945 million people are eligible to vote in what was called the “largest coordinated event in history”, the impact of audio deepfakes on voters is particularly worrying. “If you are on the internet, you can be faked”, Teresa said. And, in a world where deepfakes are so good that candidates themselves cannot always see the difference between their own voice and digitally generated copies, “how can you ensure voters are getting quality information while able to distinguish trusted speech from a deepfake?”.

It's an unnerving thought. That’s why Teresa and Aron Cramer, President and CEO, BSR, call on other tech companies and civil society to work together to enable online communities to respond in the face of misinformation and disinformation: “Businesses can use their voice to move regulation in a positive direction, they have the legitimacy to speak up”, said Aron, while acknowledging that this can be an uncomfortable space for business leaders to operate.

How businesses—and business leaders—can build trust in the context of 2024’s elections?

Nonetheless, in this perfect global risk storm, business has again emerged as the most trusted institution, according to the recently published Edelman Trust Barometer. On issues like climate change and inequality, over half of survey respondents want business to do more; and just a tenth of respondents feel business is overstepping on these issues.

Why might consumers and employees trust business? “People trust what they know”, commented Teresa Hutson. Workers might be inclined to trust their employers in the same way that people trust their family, neighbours, or university: because they are close to them and well-understood. At the very least then perhaps there is time for some kind of localized informal legitimacy and even duty for business leaders to engage in these topics on behalf of their employees.

Today, individuals have immeasurably more power than ever, meaning that people increasingly demand and expect what Aron Cramer calls “a DIY world: people want what they want, when they want it”. This consumer and people-led world marks a departure from the great political or civic institutions that traditionally drove change. “We are wrong if we think the battle of democracy is won at the ballot”, said Daniel Sachs. In a time when institutions are weak and businesses enjoy public trust, “it’s no longer enough for the private sector to support civil society to challenge institutions. We need to engage in non-partisan democratic systems change”. Facilitating and unlocking the latent potential in citizen and employee-led action can help them do that in a way that is a more comfortable space to business: through democratic innovation.

For some business leaders, the most obvious action is to influence change through politics. But ‘influence’ can be a dirty word in the murky world of public-to-private sector relationships, as Aron noted. In some democratic systems, business is seen as having too much influence, highlighted Sandrine Dixson-Decleve: through political capture of regulators by corporates; lobbying of lawmakers; and obstruction of intergovernmental processes like United Nations climate change meetings. If influencing regulation is uncomfortable ground for businesses, then business leaders should perhaps seek to steward systems change, helping inform and guide governments toward the level of change that societies need. This is the ethos behind Steve Waygood’s concept of macro stewardship, which could serve as a helpful framework for business leaders in a year of unavoidable political interdependency.

We get the political leaders we deserve. How do we get the political leaders we want?

So, how should business leaders go about engaging and inspiring the political leadership we want and need?

First, businesses can look at their own leadership to ensure that it is diverse, equitable, inclusive, and empathetic. To facilitate systemic change, businesses must themselves be the change they seek to influence by creating an environment where inclusive leadership is rewarded, not attacked.

When women public figures face gender-related abuse, observed Sandrine Dixson-Declève, that further reduces women's incentive to step up and lead in business and politics. Both Sandrine and Daniel Sachs reflected that the negative way we speak about political leaders in society and culture has made it an undesirable career and diminished society’s trust in leaders, a cultural narrative that businesses could help revert. “We should talk respectfully about it and encourage others” to enter politics, Daniel commented.

Business leaders can also take decisive action toward systemic change in areas they’re directly involved with. This means anticipating and proactively mitigating the potential harms of their products, suggests Teresa Hutson. For instance, AI-generated audio helps people who have lost their voice, but it can also be used to create audio deepfakes. Similarly, thoughtful engagement between private and public sector leaders around the challenges that businesses understand best can help strengthen the role democratic institutions can play in systemic change. “Business leaders need to engage in the dynamic of change of political systems”, as Daniel Sachs put it: less so in the individual issues of the day and more so in the practice of informing, incentivising, and stewarding systemic change, because healthy democratic systems and stable elections are good for business, for society and for the planet.

With over half of the world’s population voting in an election this year and the perfect storm of geopolitics, AI and misinformation, this year’s elections are facing broad, deep and new risks. Business leaders have the opportunity—and duty—to help re-establish trust that leads to outcomes that enable progress on crucial social, economic and environmental questions, and contribute to building social cohesion amidst polarization and fragmentation. But where might a business leader start? Three possible steps resonated throughout the discussion:

1. Promote citizen engagement and action, including your own employees.
2. Raise awareness of the risks in the digital information ecosystem, so that the citizens and employees have reliable information on which to base their judgements.
3. Use your voice as a leading business to reinforce the importance of democracy and rule of law.

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Sophie Lambin

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Marc Lacey

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Blog | Monday March 11, 2024

RISE: A Reflection on Women’s Advancement Beyond Supervisory Roles in the Garment Industry

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Despite the fashion industry being a female-dominated industry—82% of customers and 60% of workers in the garment supply chain industry are women—women in leadership roles in factories remain low. In Bangladesh, for example, only 9% of supervisors and managers are women while 84% of the women are working in lower-paying roles. The limited opportunities for women to advance provides industry and its partners with a chance to re-evaluate career paths that better reflect the needs and aspirations of factory workers. 

At RISE, an initiative to support collaborative industry action to advance gender equality, we gathered women workers perspectives on how they define career advancement. In Bangladesh and India, we spoke to 132 factory workers, 24 managers and 20 community members. We then supplemented these findings during interviews and discussions with more than 50 global stakeholders including international buyers, international organizations, local suppliers, academics, and women's organizations.

At the same time, we mapped 25 separate programs in garment supply chains that address women’s leadership and advancement. Over 90% of them focus on workers’ and supervisors' capacity building to promote women to supervisory roles. Whilst a valuable part of the solution, these programs don’t fully address the concerns of workers. 

Women identified various barriers to upward mobility approaches, including a significant increase in stress and work responsibilities—including being the subject to new forms of violence and harassment, risk of being ostracized from the community because it goes against social expectations, risk of not fulfilling family responsibilities and expectations of a new role, and risk of losing rights such as ability to unionize and access to mandatory childcare—to name a few. While a supervisory position may result in an income increase, women workers felt this might not compensate for these new risks. 

By taking a too narrow view on progression and leadership, there is a risk that programs targeted at women might overlook additional paths for advancement beyond supervisory roles. 

Against this backdrop, RISE wants to collaborate with the industry to redefine what women’s advancement and leadership means. Here are three key findings from the research and mapping that we bring with us into this.

1. Adverse social norms compound what is already an uneven playing field 

Women face systemic hurdles in their pursuit of progress on the factory floor due to informal social systems such as rooted gender norms and biases and formal ones like legislative frameworks.  

Social norms such as management preferring men over women to fill a leadership position or a job that requires machine operation directly impact women’s ability to advance. Often, women are held to higher skill level standards than their male counterparts, and traditional skills and traits perceived as ‘male’ such as confidence, charisma, a loud voice, and control over others are preferred by factory management. Also, the lack of family support discourages women from pursuing advancement opportunities in the industry; some women avoid growing in their careers due to fear of losing family and community networks.  

“The RMG sector is trying to incorporate more women in leadership positions, but the barrier comes mainly from the family.”

Factory Manager, Bangladesh

In addition, companies and other industry players should be aware that the regulatory framework in some countries penalize women that advance into supervisory positions, and initiatives that seek to increase the number of women in those positions might have unintended consequences. For example, in Bangladesh workers moving to supervisory positions might be refrained from unionizing; and access to rights as childcare benefits and overtime payment are unclear; which makes such roles unattractive for women.  

2. Unpaid care work and childcare responsibilities must be taken into consideration when exploring women’s advancement. 

Many of the women workers we spoke to said that caring and providing for their family is an important duty which they associate with success and societal status. Conversely, in some workplaces, women’s caring duties can be seen as a burden and obstacle to investing in women’s progression, a view expressed by some managers and male peers during our interviews. In addition, the lack of quality childcare services and care public policies adds up to the challenge. We heard from women that a lack of good quality, accessible and sufficient childcare is a significant challenge. In Bangladesh, carrying out unpaid care work is the main reason women leave the factory, which can reduce their income by up to 85%.  

3. Any women’s advancement intervention should consider the future state of the industry. 

In exploring new approaches to women’s advancement, it is critical to look at considerations of women's advancement within a future of work scenario, including how women will be impacted by industry changes, such as automation, climate change, circularity, migration patterns and economic uncertainties. 

The industry is experiencing a decline in women labor, in countries like Bangladesh, the proportion of women garment workers has continued to decline from 80% in the 1980s to 54% in 2021. As such, there is a unique opportunity for the industry to broaden women’s advancement to increased opportunities beyond entry-level, with increased decision-making influence and increased income. The garment and footwear industry must create multipronged and long-term pathways for its workers to progress and thrive.  

Women’s advancement should not be about “fixing” women or advocating for them to follow traditional career progression routes that were molded for men. Rather, an approach to advancement addressing gender norms and responsive to women’s needs, realities, and aspirations has the potential to increase their income and agency within the workplace, their household, and communities. It can lead to broader career options beyond the linear progression from line operator to supervisor while contributing to business resilience and sustainability. 

In practice, this includes opportunities for vertical progression of women to supervisors or managerial roles while at the same time enabling horizontal advancement through access and representation in good quality and highly demanded jobs, such as machine operation. It also allows women to voice their concerns, make decisions by participating in collective action through unions or workers’ committees and be represented in the marketplace as business owners.

Amidst the current decrease of female labor participation in the industry in some countries, advancement should also contemplate expanded opportunities for women outside the factory. To succeed in this endeavor, looking at systemic challenges such as childcare provision and changing social norms and creating an enabling legislative environment is also essential.

This is why we call for industry partners to help us shape—through an industry roadmap—a new narrative of Women’s Advancement together with women workers. If you are interested in collaborating reach out to Laura Macías lmacias@bsr.org. 

RISE would like to thank research partners Consiglieri Private Limited, Colors Consulting, and Eva Ehoke.

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Sharmishtha Nanda

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Blog | Friday March 8, 2024

Closing the Gender Gap: Addressing Wage Inequality

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The theme of International Women's Day 2024 is “Inspiring Inclusion.” A key component of inclusion is to ensure women receive equal pay to their male counterparts for equal work to create "a gender-equal world" and end discrimination. According to a recent report, there is no equality for working women in any country in the world, and women are at a greater risk of not being paid a living wage due to existing inequalities.

There has been minimal change in gender pay gaps in recent years. In 2022, women earned an average of 82 percent of men's earnings, which has only improved by 2 percent since 2002. The stagnation over the past two decades contrasts sharply with the progress witnessed in the 1980s and 1990s. At the current rate, it will take 257 years to close the gender pay gap.

Women often make up a significant portion of the labor force in many industries, particularly in textiles and agriculture. However, they frequently face discrimination, unequal pay, and limited access to resources and opportunities.

An approach to supporting women workers in these industries is to ensure that companies are advocating for a living wage across the supply chain. In today's landscape, there's a growing expectation for companies to uphold human rights standards across their global supply chains. One area that often goes unexamined is the disparity in wages between male and female workers. This discrepancy could serve as an indication of underlying discriminatory practices.

Where Does Gender Come into the Living Wage Conversation?

It is reported that it will take more than 300 years to achieve full gender equality. Research indicates that achieving gender equality can add US$12 trillion to the global economy.

Gender equality is closely intertwined with discussions about living wages in the following ways:

• Gender wage gap: Addressing living wages involves ensuring fair compensation for all workers, regardless of gender. The reality is that women account for 80 percent of the global labor force in the apparel sector, but the actual labor costs account for just 0.6 percent of the retail price.
• Unpaid care work: Women often bear a disproportionate burden of unpaid care work, such as childcare and household chores. This limits their ability to participate fully in the workforce and contributes to their vulnerability to low wages. Implementing living wages can help alleviate financial pressure on women and recognize the value of their unpaid care work. The WageIndicator Foundation, Anker Research Institute and Living Wage for US methodologies assume two working adults per family, with one of the two adults working based on the national labor participation rate to account for unpaid care work. 
• Childcare costs: Until recently, many living wage methodologies did not explicitly account for the cost of childcare, even though this is often a prerequisite for women to be able to work. The Organisation for Economic Co-operation and Development (OECD) estimated that "without any support measures, in EU countries on average, gross full-time childcare fees for two children aged two and three represent nearly 25 percent of the median full-time wage for women.” To address this issue, the Anker Methodology now includes a post-check on education costs, including preschool and nurseries for regions where these costs are commonly incurred, and the Living Wage for Us methodology includes the average cost of childcare per county in the US.   

Benefits of Closing the Wage Gap in Value Chains

In many value chains, women make up the majority of the workforce. There is disparity between men and women in work and pay due to gender stereotypes and social norms. This is despite increasing access to education and higher rates of participation of women and girls in the labor market.

Additionally, women farmers often have less access to resources such as land, credit, seeds, fertilizers, and agricultural training compared to men. This limited access can hinder their productivity.

If there was no gender gap in farm productivity and no wage gap in the agrifood system, it could increase gross domestic product (GDP) by 1 percent or nearly US$1 trillion dollars. As a result, this would reduce global food insecurity by 2 percent and reduce the number of food-insecure people by 45 million.

Many women are further discriminated because of intersecting identities such as age, class, ethnicity, caste, migration status, gender identity, faith, sexual orientation, and other factors. This may not be evident to companies as there is a lack of data, meaning women workers in value chains are "invisible."

Data is Key to Closing the Gender Gap

Most businesses are aware of the need to address pay fairness and introduce a living wage across all global operations, but there are a range of operational and strategic hurdles and cost implications. For example, living wage levels fluctuate depending on the location and the calculation method employed.

There is a lack of data across multiple regions on topics such as fair pay, gender, and ethnicity pay gaps. Using data to examine living wages will enable employers to analyze, comprehend, and narrow the gap.

Steps for Companies to Address the Gender Gap

1. Invest in data: Gathering data on all employees, gender, job categories and hours of work will help employers to understand and close gender pay gaps for all genders within company operations. For instance, companies can use data to look at gender distribution for various job categories and identify any disparities in wages.
2. Incorporate a gender lens into living wage analysis: Companies can select from multiple gender-sensitive approaches to calculate the living wage. One recent development is the concept of a single-earner living wage benchmark, which considers how many families do not have a two-parent household. 
3. Build internal management and capacity to incorporate gender-transformative approaches into living wage strategies: Involve both women and men in participatory and inclusive processes aimed at closing the gap in living wages and promoting gender equality. Offer training to address unconscious gender bias, stereotypes, and cultural norms that restrict women's job opportunities. Ensure that procurement, recruitment practices, and other aspects of the business model do not hinder the payment of living wages in core operations and value chains as part of capacity building efforts.
4. Develop a gender-inclusive strategy for living wages to close the gender gap: Some companies are starting to conduct their annual living wage analysis alongside their gender equity analysis to identify where these risks are overlapping.
5. Implement living wages in tandem with action on other issues such as gender equality and child labor. Living wage is the starting point, and not the end goal. Companies can consider assessing systemic barriers to achieving living wages and collaborate with partners to address them. Cross-sectoral action is essential for successful implementation. For instance, ACT is a global initiative driving systemic shifts on living wages and economic inequality.

Having worked with over 35 companies for 20 years on this matter, BSR understands that this is a complex and daunting task to undertake. For more information on BSR’s work on living wage, contact us.

Blog | Wednesday March 6, 2024

Demystifying Social KPIs under CSRD: Six Recommendations for Business

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With the introduction of the Corporate Sustainability Reporting Directive (CSRD) and the expected Corporate Sustainability Due Diligence Directive (CSDDD), companies in the European Union and beyond are required to report on their social and environmental impacts within a broad range of sustainability topics, creating a growing focus on what can be quantified and verified. The directives will make it mandatory for companies to mitigate and report on impacts throughout their entire global value chain, which many find challenging as there is less visibility and control over sustainability issues upstream and downstream.

In the case of environmental issues, this is fairly straightforward both in terms of what the regulators are asking companies to disclose, and already well-established metrics and tools to measure GHG emissions reductions. When it comes to the social part of a company’s ESG agenda, however, setting targets and measuring impact is not as simple. 

Challenges of working with the social impact agenda have been expressed by several BSR members, who are less certain about the right way of setting social targets and KPIs, precisely: what to measure and how to measure it. Through several projects with members, we have been able to develop a roadmap on how to identify meaningful social KPIs and targets covering the entire value chain.

Key recommendations include: 

• Benchmark against regulation and best practice: Start with researching existing and upcoming regulations, industry frameworks, and guidelines on social sustainability; this will give an overview of what is already in the market and help prioritize. Benchmark yourself against best-in-class peers, to identify priority topics and leadership practices from companies that have already gone down this road.

• Prioritize: While the CSRD requirements help set the right direction, it is a daunting task to try to cover everything in one go. Start focusing on the areas where you are mature, and pilot identified social KPIs here.

• Build on what already works: A crucial step is a mapping exercise to capture what metrics are already in use within the organization, to avoid coming up with ‘on-top-of measuring.’ This gap analysis will not only help to build on what you already have, but also make it easier to see how new social KPIs can be embedded into existing set-ups. 

• Engage internal stakeholders from the start: Make sure to involve the right internal stakeholders; soliciting expert input serves to reality-check the value of the proposition, but also to make sure there is buy-in, letting people contribute to the agenda. As one of our members put it—“to make the project successful, people need to be able to relate to it internally.” 

• Dig where you stand and align with materiality: Social initiatives tend to be more successful when aligned with existing corporate strategies, as they can take advantage of operating capabilities and capitalize on existing knowledge. At an early stage, test and make sure that your social KPIs and targets support and reflect the strategic and operational focus of your organization, and are anchored in your materiality assessment.

• Involve the digital team: They play a crucial role in collecting relevant data and making sure it is valid; involve them in the pilot phase and work closely together to ensure the data collection is rigorous and realistic. To operationalize your social KPIs, you need to ensure accuracy and security in how the data is gathered.

Identification and measurement of social impacts provides a great opportunity for businesses to explore what truly matters to their affected stakeholders and the organization. We recommend embracing this process as a discovery, with CSRD as a reference for what to comply with, best practice examples from peers, and a thorough consultation process within the organization. The outcome ought to be tailored to your overall impact and role in society, bringing people together, and creating a shared understanding of the journey to come once the social KPIs are set.

For more information on setting Social KPIs under the CSRD, contact BSR’s Sustainability Management team.

Blog | Tuesday February 27, 2024

Collaborating to Advance the SDGs: Three Considerations for Business Leaders

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The latest UN progress report on the Sustainable Development Goals (SDGs) highlights that the world has fallen behind on the 2030 Agenda. Only around 15% of the SDGs are currently on track for 2030. The SDGs, and in particular SDG 17 – Partnerships for the Goals, highlight that urgent and decisive action and collaboration between actors such as business, government, and civil society are needed to advance a future in which no one is left behind. 

Against this backdrop, BSR’s recently published report “Advancing the SDGs through Collaboration” explores the role that business-led multi-stakeholder collaborations can play in promoting the 2030 agenda. The report draws upon BSR’s extensive expertise in incubating, designing, and facilitating collaborative initiatives and leverages concrete examples of collaborative initiatives incubated through the CoLab SDGs program, a partnership with the Swedish International Development Cooperation Agency (Sida).

The report identifies three critical lessons learned that are particularly important to business leaders and collaboration practitioners, individuals who design, participate in, or manage collaborations: 

1. Striking the right balance between participation and decision-making: Good governance in collaborations not only enables successful partnerships, fair decision-making, and transparency but also creates legitimacy. BSR’s governance framework that is based on two factor—decision-making and participation—identifies four governance models that are particularly useful when designing business-led collaborations that may allocate governance seats to stakeholders other than businesses including NGOs, governments, unions, workers representatives, or industry associations. For example, the Sustainable Coconut Partnership makes decisions via a steering committee made up of industry members that founded the initiative, but also allows participation of diverse stakeholders. Given its recent growth, this approach facilitates governance by delegating to a group of members on decision-making. There is no one-size-fits-all approach to governance, and governance models need to be carefully designed based on the vision, mission, intended outcomes, and participants of the collaboration. 

2. Centering the rightsholder perspective: Business-led collaborations that focus on the SDGs frequently run the risk of designing solutions for rightsholders without including their voices in the process. It is paramount for collaboration practitioners to map their stakeholders and rightsholders carefully; design engagement approaches that are appropriate, culturally sensitive, and accessible; and consult or engage them systematically throughout the entire collaboration lifecycle—from ideation to launch as well as daily operations. By including the perspectives of women workers through continuous engagement in their native language and via local partner organizations or representatives, RISE, a leading collaboration advancing gender equality in the global garment, footwear, and home textiles industries, manages to center the voices of key rightsholders in a meaningful way. RISE also guarantees that women workers are represented at every level, from governance to project implementation, ensuring that the work responds to their real needs and priorities. Collaboration practitioners must integrate the voices of multiple and diverse stakeholders and rightsholders—either directly or via representatives such as labor unions or grassroots organizations—to ensure that collaborations contribute effectively to sustainable development for all. 

3. Measuring collaboration impacts in a systematic manner: Finally, collaboration practitioners must keep in mind that not all ideas for partnerships result in formal business-led multi-stakeholder collaborations—and that’s okay! For example, some ideas may not be pursued due to duplication with other existing initiatives, a lack of buy-in from business or other stakeholders, or a lack of resources. However, the decision as to whether to form a collaboration is often informed by extensive landscape research, exploratory projects, and stakeholder discussions, all of which significantly help advance knowledge on critical sustainability issues. For example, Keeping Workers in the Loop, a project that explored the impact of circularity on jobs in the fashion industry, uncovered the need for further research on the ecological, social, and economic impact of global used-textile product flows. While the project has not resulted in the launch of a formal business-led collaboration, a clear need for further research and dialogue was identified. This demonstrates that measuring collaboration success must be done systematically, considering not only the direct outcomes (i.e., whether an initiative has been established or not) but also understanding that positive benefits and impacts can play out in several different ways. 

Business-led multi-stakeholder collaborations will be key in addressing many of the world’s systemic sustainability and development challenges. They will require strong collaboration practitioners as change agents who are aware of the potential pitfalls of developing and launching collaborations—from governance to rightsholder engagement and measuring collaboration impacts.

Blog | Tuesday February 27, 2024

Three Approaches for Integrating Human Rights into Company Risk Registers

Preview

As emerging regulations seek to mandate that companies implement risk-based human rights due diligence, it is increasingly critical that companies identify human rights risks in their operations. One such opportunity is through including human rights risks in risk management approaches.

One mechanism for this is through leveraging a risk register, which companies use to record potential risks that could affect a project. While leveraging risk registers presents an opportunity to ensure that human rights issues are identified and assessed—and can lead to further corporate respect for human rights—they also present some inherent challenges due to their nature and historical function.

The Challenge

A fundamental challenge to integrating human rights into both risk management approaches broadly, and risk registers specifically, is that both primarily focus on risks to the business rather than harms to people, which is a critical lens for assessing human rights under the UN Guiding Principles on Business and Human Rights (UNGPs). It follows that traditional risk registers are not set up to evaluate human rights risks from a “risks to people” point of view.

Given this focus on risks to business, leveraging traditional risk register criteria (e.g., legal risks, economic risks, etc.) is not the most effective way to measure risks to people. Rather, further action must be taken to ensure that human rights risks are being captured from a “risks to people perspective” and not only when and if those risks also pose a risk to the business. 

Three Approaches 

To begin ensuring that risk registers effectively measure risks to people and that human rights risks can emerge with adequate gravitas, BSR outlines three potential approaches: 

1) Maintain a traditional risk register but strengthen language on impacts to people in the risk and consequence descriptions. 

This approach is largely consistent with a traditional risk register but allows for the integration of human rights risk and impact through lighter touch edits. It will entail ensuring that each relevant risk description provides context on how it impacts people, and that consequences are framed to clearly capture these impacts, not just risk to business, when considering the severity of a topic or risk.

2) Update a traditional risk register to include a new category dedicated specifically to risks and impacts to people. 

This approach requires more significant edits to the traditional risk register. In addition to the edits in approach one, this will also entail creating a new category of risks to people. While traditional risk registers often include a column for stakeholders that records how risks to stakeholders emerge as business risks, this new column would focus specifically on how each risk will impact people outside of business impacts. If a risk comes up “low” across business consequence categories, like financial or legal risk, it still has an opportunity to come up “high” when considering how it impacts people.

This approach will also involve creating new consequence descriptions focused on impacts to people/human rights. In alignment with the UNGPs, this should consider how many people may be impacted (scope), how severe the impact may be (scale), and if the impact is remediable.

3) Create a second risk register to capture risks and impacts to people and develop a process to ensure that both the traditional risk register, and the human rights risk register are considered together and weighted equally.

This approach involves creating a second risk register to effectively capture human rights risks and impacts to people and developing a process to integrate the two registers. Consistent with approach two, the new register should include criteria on scope, scale, remediability, and likelihood of occurrence. Leveraging these criteria, the register can prioritize the greatest risks to people and their enjoyment of human rights.

Integrating the two registers would entail developing a process to ensure that both the traditional risk register, with its focus on risk to business, and the human rights risk register, with its focus on risks to people, are considered together. This may include integration within the tools themselves, a separate dashboard that captures the high risks and actionable items from both registers, or a matrix that captures both risks to business and risks to people.

BSR’s Analysis and Recommendations 

As the lightest touch, approach one is likely to be the easiest option to action and implement. However, several issues remain. Primarily, traditional risk registers likely already cover some impacts to people, so updating the language may not be enough to ensure that human rights risks rise to the top. In addition, business and human rights experts advise against full integration of these impacts in risk registers, instead suggesting that risks to business and risk to people be kept separate to maintain focus on people.

Building on approach one, approach two goes a step further to help site-level staff better understand impacts on people and gives them a place to consider the severity of these risks outside of the business context. Adding a category dedicated to impacts to people could also help to ensure that risks that have high consequences for people may be elevated even if it does not have immediate impacts on the business. 

Ultimately, however, while this does go a step further in integrating human rights principles into the risk register, impacts to people are still largely evaluated through criteria that was designed to measure risks to the business. Important aspects of how to assess risks to people, including how many people may be impacted, the severity of the impact, and the possibility of remediating impacts, as outlined by international human rights standards, may not be fully captured in this approach.

Though approach three can rightly be considered the most intensive and resource-heavy option, it is also the best option to ensure that human rights issues are captured and that they rise to the top.

A second risk register will allow site-level staff to evaluate impacts to people in alignment with international human rights standards and principles and follow leading practices as outlined by business and human rights experts. Following these principles, the register will be able to more accurately capture high risk areas for human rights impacts. This approach is also aligned with the latest requirements for Double Materiality, including assessing internal impacts (risks to the business) as well as external impacts (risks to people), and plotting both these risks on one matrix or dashboard. 

As long as practitioners are diligent to ensure that the human rights risk register is treated with the same weight as the existing business risk register and that the human rights risk register has a clear process for non-human rights staff to successfully leverage the tool, this will be the best and most robust option to making a risk register an essential and useful tool in any company’s arsenal for respecting human rights.

Regardless of the approach selected, it is essential to evaluate risks to people, not only risks to business, in company risk management procedures, including risk registers. At BSR, we recognize that these changes may need to be made gradually and call on companies to start somewhere. Even if it is not currently possible to go as far as creating a second human rights risk register, centering human rights in risk management is an important first step to capturing risks to people.