Search Results

Blog | Friday October 8, 2021

The Stars Are Aligning

Preview

When I first entered the field of just and sustainable business in the mid-1990s, it was based on a vague notion that big business should “do the right thing” by addressing social and environmental concerns. We had few normative goals, and we certainly had no standards to which we could hold business accountable.

This void was filled over the following quarter century.

The Sustainable Development Goals (SDGs), the Paris Agreement, and continued evolution in international human rights instruments provided a clear destination—“the what” of just and sustainable business.

New global norms, such as the UN Guiding Principles on Business and Human Rights (UNGPs), the OECD Guidelines for Multinational Enterprises, and the plethora of multi-stakeholder initiative codes and principles provided clear guidance for the role of business in reaching the destination—“the how” of just and sustainable business.

New global standards, such as the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), and Science-Based Targets (SBTs) all improved our methods for holding companies accountable—“the show and tell” of just and sustainable business.

And then suddenly, amid a global pandemic, the concept of “Environmental, Social, and Governance” (ESG) criteria came to dominate the discourse.

However, this quarter century of entrepreneurship also sowed the seeds of confusion. Questions such as “what is material,” “material to whom,” and “which standard shall we use” became mainstream. Our jobs in the just and sustainable business field became easier because we had norms and standards to work from. However, our jobs also became more difficult, because confusion, complexity, and inconsistency became a strike against them all.

But the stars are now aligning. We are entering the next era of just and sustainable business with a much clearer pathway, and we should take a moment as a field to reflect on this milestone. BSR has written extensively elsewhere about the details of standards alignment; here, our intention is to sketch out the framework around which the field seems to be coalescing.

• Double materiality: As the EU Corporate Sustainability Reporting Directive makes clear, business is accountable in two ways—to investors, for the creation of enterprise value, and to society at large, for impacts on people and the environment. We need, and now have, standards (e.g., SASB, GRI) for both.
• Dynamic materiality: The two dimensions of materiality are distinct and exist entirely on their own merits, but they are also connected—impacts on people and the environment interact with the creation of enterprise value creation and may become more material to business over time. The two dimensions of materiality are dynamic, and the trick is figuring out how and where they interact and how that should inform business action.
• Performance and reporting: The refrain that reporting alone is insufficient has always rankled because those creating reporting standards never claimed that disclosure alone would solve all ills. Today, we have a collective appreciation of the synergy between performance and reporting, as reflected in the deliberate integration of impacts and outcomes (such as the SDGs and SBTs) and normative process standards (such as the UNGPs) into disclosure standards (such as GRI and TCFD). While more progress is undoubtedly needed on measuring impacts and outcomes, performance and reporting are becoming more connected than ever before.
• The company and the system: Twenty-five years ago, it seemed obvious that by transforming big business, good things would happen in society; however, too often the just and sustainable business field lacked a complete grasp of how business interacted with the broader political, financial, social, environmental, and economic systems. Today, the field better appreciates that institutions, structures, and organizations are impacted by deep-rooted racial, gender, and political discrimination and that climate action is a collective endeavor. Systems need to be reformed if we are to sustain performance over the long term, and companies should understand their connection to the wider context if meaningful and positive change is to be achieved.
• The company and the government: I recall a heated debate, around fifteen years ago, about whether “corporate responsibility” should be defined as all the voluntary actions companies took beyond regulatory requirements. This felt unnecessarily constraining to me and not why I entered the field. Today, there is a stronger consensus that government regulation of business is critical to the achievement of social justice and sustainability goals, that business should challenge governments when they violate human rights, and that a company’s government affairs, social justice, and sustainability commitments must be aligned.

When asked about the state of just and sustainable business, I like to use a framing that our President and CEO Aron Cramer introduced a few years back, that “everything’s changed, and nothing’s changed”—in other words, that by one set of benchmarks, the business community has come a long way, but by another set of metrics, impacts of climate change are becoming all the more real and urgent, democracies are in decline, and economies are becoming less equitable.

We’ve created the infrastructure, but we still need to prove we can deploy it in ways that truly address the climate crisis, place equity at the center of our social, economic, and environmental systems, and ensure the universal fulfillment of human rights. These urgent priorities must dominate the next era of just and sustainable business.

It has taken a quarter of a century for the role of business to become as clearly defined as it is today. It had better have been worth it, because we now only have a decade left to finish the job.

I would like to thank Paloma Muñoz Quick for feedback and dialogue on this blog.

Blog | Wednesday October 6, 2021

Inside BSR: Q&A with Paloma Muñoz Quick

Preview

Inside BSR is our monthly series featuring BSR team members from around the world. This month, we connected with Paloma Muñoz Quick, an Associate Director in our NYC office.

Paloma chatted with us about how her life in Chile and Brazil fostered her interest in tackling systemic injustice, her work on investor action on human rights, and how working at BSR supports her commitment to protecting human rights.

 

Tell us a bit about your background. Where are you from, where are you based, and how have you been since COVID/work from home/etc.? 

I am half American and half Chilean, and I spent my formative teenage years living in Brazil. I’m now based in Brooklyn, where I worked from home throughout the pandemic.

How did you first get involved in sustainable business? How long have you been at BSR? What is your current role and what does that entail?

Born under the dictatorship of Augusto Pinochet and living in both Chile and Brazil—two countries affected by significant socioeconomic inequality—I was drawn to human rights and tackling systemic injustice from an early age. I eventually did a Master’s in International Affairs and Human Rights and landed my first job at the Danish Institute for Human Rights. I’ve now been working on business and human rights for over a decade, initially advising companies on human rights country risk, then building the capacity of civil society around the world to advocate for business respect for human rights, and later advising governments on adopting robust public policy to safeguard human rights from business activities.

Eventually, I realized financial actors—institutional investors in particular—were largely absent from the human rights and business conversation. As the source of capital for business, their involvement is critical for making progress. That’s when I decided to move to the Interfaith Center for Corporate Responsibility (ICCR) and launch the Investor Alliance for Human Rights, whose investor membership now represents over US$5 trillion in assets under management. I later worked for the UN Working Group on Business and Human Rights to develop a global report taking stock of investor action on human rights and a series of recommendations to help scale investor engagement in this area.

What are some interesting projects that you get to work on as part of your role at BSR? What do you enjoy about them? 

All this experience brought me to BSR, where I’ve been leading our work at the intersection of finance, investment, and human rights for the past four months. In this role, I am excited about developing insights on the interlinkages between environment, social, and governance (ESG) investing and the business and human rights framework, as well as practical tools to help further bridge action on human rights and ESG. I am also excited about supporting private equity and venture capital firms in their human rights journey.

What issues are you passionate about and why? How does your work at BSR reflect that?

No surprise here—I’m passionate about human rights. Governments came together to agree upon a standard of achievement for all people, covering a wide range of civil, political, economic, social, cultural, and environmental rights. The standards are clear, and so is the roadmap for business to uphold these standards—namely, the UN Guiding Principles on Business and Human Rights. Yet too often, we see business actors and data providers reinventing the wheel, defining the “S” of ESG in their own way, often missing the wide range of human rights impacts connected to business activities and the business processes needed to address these. My work at BSR enables me to work on this from various angles, including by directly advising financial actors and developing thought leadership.

2020 was undoubtedly a difficult year. What were the things that brought you joy amid lockdowns/quarantines? What are you most looking forward to for the rest of 2021 and looking into 2022?

My dog brought me joy! Together we walked our way around parts of Brooklyn I’d never ventured into. I even discovered a new neighborhood that I moved into halfway through the pandemic. What I look forward to is traveling—anywhere! But especially to Chile to see my family.

Blog | Thursday September 30, 2021

Accelerating Action on SDG 5 across the Jewelry Industry

Preview

Women drive 90 percent of demand for jewelry industry products and are present across the entire value chain. However, women’s roles and opportunities in the jewelry supply chain are conditioned by gender inequalities and discrimination. 

Furthermore, the COVID-19 pandemic has slowed and, in some cases, reversed progress toward gender equality across industries. Many of the hardest hit industries, including retail, are dominated by women. Jewelry retail in particular is one of the hardest-hit consumer goods categories, with sales dropping as much as four-fifths in certain regions in the early stages of the pandemic, and the impacts have cascaded throughout the industry and its supply chain, worsening many of the structural inequalities and challenges women already face.  

In 2020, UN Women launched a ground-breaking campaign: “Generation Equality: Realizing women’s rights for an equal future,” marking the 25th anniversary of the Beijing Declaration and Platform for Action and bringing together multiple generations of women’s rights activists. This culminated in July 2021 in Paris, where business, governments, and civil society committed to an ambitious global acceleration plan to achieve gender equality by 2030. This momentum and the resulting "she-cession" of the global pandemic increased the urgency for business to advance gender equality. Forty companies made individual and collaborative commitments to push for gender equality across their value chains.

“We acknowledge issues on gender equality are complex and deeply rooted, but strongly believe business can play a critical role in changing attitudes, building responsible practices throughout the supply chain, and creating inclusive and safe work environments for everyone.”

Iris Van der Veken, Executive Director of the Responsible Jewellery Council (RJC)

As part of Generation Equality, BSR, in partnership with RJC, engaged with a wide range of industry stakeholders across the globe through workshops, regional roundtable discussions, and surveys. The resulting report, “Gender Equality Report: The time is now to accelerate SDG 5, achieve gender equality, and empower all women and girls,” sheds light on the current state of corporate efforts to advance gender equality in the jewelry industry. The report presents four major insights:

1. Enabling small and medium-sized enterprises (SMEs) to advance toward gender equality is a key opportunity for the entire industry.

Gender equality efforts begin with high-level leadership commitments and transformational business policies that can set the pace for integrating gender equality across business value chains and teams. However, one of the biggest barriers toward achieving these commitments and policies across the industry is organizational size. SMEs often lack internal capacity, expertise, and/or resources to develop formal policies, and gender equality is not prioritized as clearly as in larger organizations that face more expectation to act and commit to external initiatives. As many as 35 percent of RJC members are SMEs who have not developed external commitments or vision statements, and 21 percent of RJC members have shared that they have limited formal policies. However, many SMEs have made internal commitments, have adopted informal policies, or promote inclusivity in other ways, such as company charters.  

2. Social norms on gender and structural factors in companies are impacting access to talent.

In the jewelry industry, accessing and hiring diverse talent, particularly women, is challenging.  This issue is even more acute in particular regions, in the mining industry, and for roles in logistics or STEM-based functions. However, some companies have begun to address these barriers to gender diversity.  So, while many companies still focus on "hiring the best person for the job," which may hamper efforts to increase gender diversity, the survey revealed that 24 percent of RJC member companies are reviewing their job positions and requirements to remove potential biases. In addition, many other opportunities exist to implement hiring, development, and retention plans. Practices, such as unconscious bias trainings for hiring teams, hiring and promotion target-setting, and creating focused development and learning opportunities for underrepresented groups, are still limited across members, meaning there is significant scope for improvement. 

3. Globally, the conversation on diversity in the industry is centred on gender equality.

However, in certain regions, the approach is shifting to broader diversity and inclusion dimensions, such as focusing on racial justice and ethnic diversity in North America and disability and age in Europe. Because different dimensions of identity can create layers of discrimination for an individual, not all women have experienced the same level of progress toward gender equality in recent years. Companies should consider taking an intersectional approach to gender equality and understand how different dimensions of identity intersect with one another. However, a shared challenge across many companies in the industry is where or how to start, as these issues are highly culturally sensitive and the regional context is critical to understanding the challenges and opportunities. 

4. Organizations have an opportunity to amplify their impact and drive change in the industry by looking at their entire value chain.

Businesses can enable more diversity in their value chains by taking a range of actions, including actively sourcing from entities that are led and/or owned by women or other underrepresented groups, focusing on worker well-being throughout their supply chains, and using their marketing practices to challenge stereotypes. However, value-chain initiatives in the industry are still largely limited. Only 2 percent of surveyed companies have commitments to procure from women-owned or minority-owned businesses. Lack of market access for smaller and/or women-owned businesses continues to be a significant barrier to value-chain diversity.

Where to from here?

Our dialogues and other engagements make it clear that industry-wide collaboration will be essential to tackling the systemic challenges to achieving gender equality. BSR and RJC are committed to supporting and stirring this industry-wide collaboration and furthering this dialogue with industry stakeholders to promote progress within individual organizations as well as the broader industry. 

We also encourage jewelry industry organizations to explore the RJC report for more insights on how to move the gender equality agenda forward, including case studies and best practices from industry leaders. And as always, we welcome the opportunity to work with companies and other stakeholders, either directly or as part of an industry collaboration. Click here to learn more about the value of RJC membership, its code of practice, and how to get involved.

Blog | Thursday September 23, 2021

Human Rights Are Not Just an “ESG Factor”

Preview

The notion that investors should use environmental, social, and governance (ESG) considerations to inform their decision-making is having a moment. This is undoubtedly a good thing for those who believe that just and sustainable business has an essential role to play in the creation of a more equitable future. However, there is a risk of fundamental concepts getting lost in the process. One of these concepts is the responsibility of business—including institutional investors—to respect human rights.

The profile received by ESG today may seem sudden, but is happening for good reason: The physical impacts of climate change are becoming more apparent with each season, the global pandemic has forced a renewed examination of human capital across company value chains, and the decline of democracy and trend towards political polarization has significantly increased legal, operational, and reputational risks for companies everywhere. In this context, it is not hard to convince investors of the material significance of ESG to enterprise value creation.

However, this lens—of viewing ESG considerations solely as a series of factors that impact enterprise value creation and financial returns—may jeopardize the very outcomes we are seeking to achieve. 

Put simply, respect for human rights is not just an ESG factor, but a global standard of expected conduct for all companies, including institutional investors. Human rights are not a subset of discreet social topics to be addressed, but a globally agreed upon standard of achievement for all people, covering a wide range of interdependent civil, political, economic, social, cultural, and environmental rights.

...enterprise value creation should only happen when business can meet its responsibility to respect human rights.

In the business context, this is manifested in a responsibility to adopt a human rights policy, embed respect for human rights throughout the business, and undertake human rights due diligence—in other words, a fundamental methodology and mindset, not simply an issue to address. And crucially, taking action to address human rights risks should not be contingent on their relevance to enterprise value creation; enterprise value creation should only happen when business can meet its responsibility to respect human rights.

However, too often the opposite is the case. When investors position risks and opportunities for the business as the core metric for evaluating ESG performance, companies will respond by focusing too much on what shareholders have to say, and not enough on the voices of those whose rights are impacted. And by aggregating ratings across E, S, and G factors, companies may be labeled as strong ESG performers by investors due to their high ranking on financially material environmental criteria, despite contributing to human rights harms on social criteria. 

This is a problem. Many investors misinterpret fiduciary duties as limiting their ability to act on anything that does not demonstrably increase the financial standing of beneficiaries or customers in the short-term. While severe risks to people often converge with risks to business, measuring the returns of paying a living wage (for example) may not be apparent in the short-term. 

Public debates on the merits of ESG too often ignore the growth of business and human rights, such as the incorporation of the UN Guiding Principles on Business and Human Rights (UNGPs) into the OECD Guidelines on Multinational Enterprises and the subsequent creation of responsible business conduct guidance for institutional investors by the OCED. Emphasizing this shortcoming, a recent United Nations report found that “knowledge of human rights, including how human rights are defined, how they are relevant across ESG factors, and what meaningful human rights due diligence looks like remain limited in the investor community.” 

We believe that the business and human rights framework tackles many weaknesses in today’s ESG landscape, and important organizations are moving in this direction too. The EU has taken on a leadership role in re-defining responsible business and ESG investing by codifying the human rights expectations of business actors—for example, the Sustainable Finance Disclosure Regulation requires investors to disclose the adverse impacts of ESG-branded investments on people and planet regardless of financial materiality, while the proposed EU “social taxonomy” is also grounded on human rights standards and frameworks.

The notion of “double materiality,” which features prominently in proposals for a new EU Corporate Sustainability Reporting Directive, is especially promising. Building upon two decades of standards development, double materiality makes clear that business is accountable in two different ways—to investors, for the creation of enterprise value, and to society at large, for impacts on people and the environment. We need standards for both.

The two dimensions of double materiality are connected because impacts on people and the environment increasingly interact with the creation of enterprise value creation. This has become known as “dynamic materiality,” and wise companies will seek to convey to investors how they address this relationship. However, the two dimensions of double materiality—to investors, for the creation of enterprise value, and to society, for impacts on people and the environment—are distinct and exist entirely on their own merits.

Ten years ago, the unanimous endorsement of the UNGPs by the UN Human Rights Council brought new clarity to the notion that all companies, including investors, have a responsibility to respect human rights, regardless of its significance to financial returns. By all means, let’s seize the moment of increased investor interest in ESG to advance more responsible forms of business; but let’s not forget the conceptual foundations that make for truly just and sustainable business, and make sure that the ESG movement meets its own responsibility to respect human rights.

Reports | Tuesday September 21, 2021

Climate Change: Building Resilience While Protecting Human Rights

Preview

Overview

Human rights and climate change are inextricably linked. The impacts of rising global temperatures—natural disasters, the proliferation of vector-borne diseases, climate migration, famine, and drought—negatively impact many human rights, such as rights to shelter, natural resources, mobility, health, employment, and livelihoods.

Whether caused by physical climate impacts (e.g., extreme weather events, flooding, heat stress, the spread of disease) or climate solutions themselves (e.g., communities excluded or left behind as companies install new infrastructure as part of their transition to a net-zero economy), climate change has disproportionate impacts on poor and marginalized communities, and it exacerbates the underlying systemic inequities that these communities already face.

As climate change magnifies inequalities and vulnerabilities, protection of human rights becomes even more urgent: where human rights protections are weak, individuals and communities are less able to adapt and build resilience to climate impacts.

Why This Matters for Business

The UN Guiding Principles on Business and Human Rights (UNGPs) serve as the primary internationally accepted framework for standards and practice regarding human rights and business. According to the UNGPs, companies have a responsibility to respect human rights, which requires that companies (a) avoid causing or contributing to adverse human rights impacts through their own activities and address such impacts when they occur and (b) seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products, or services by their business relationships, even if they have not contributed to those impacts.

In the context of climate change, this means that companies have:

1. A responsibility to address human rights impacts related to their physical climate impacts;
2. A responsibility to address human rights impacts related to their transition to a low-carbon economy; and
3. An opportunity to promote the realization, fulfillment, and enjoyment of rights in a resilient world.

The table below illustrates how physical climate impacts, transition risks, and transition opportunities should be considered in the context of a company’s climate and human rights strategy.

Blog | Monday September 20, 2021

In Memoriam: John G. Ruggie (1944-2021)

Preview

All of us at BSR are deeply saddened by the passing of John Ruggie, leader, colleague, and friend.

John is known to many of us at BSR and in our wider network as the dogged visionary who led the creation of the UN Guiding Principles on Business and Human Rights.  It is no accident that they are referred to as the “Ruggie Principles.” The significance of the Guiding Principles cannot be overstated. They created the de factor global standard on how business should safeguard and advance human rights.  They have been adopted and applied by companies in every corner of the world. John’s vision in steering the Principles to conclusion was matched only by the complexity of the task of achieving a consensus that all stakeholders and nations could embrace.

Aron Cramer, BSR’s President and CEO, recalls that when he spoke with John soon after he was named the Secretary General’s Special Rapporteur on Business and Human Rights, and asked John what he hoped to accomplish, John’s reply was “avoid a train wreck.”  That comment, and his subsequent, painstaking work, showed John at his best: bringing humility, insight, and a strong sense of purpose.  John knew that his task would bring criticism: he never let that deter him, not for one day.

While the UN Guiding Principles are what many of us remember him for—and are deeply grateful for—his professional achievements go well beyond that. John was a close partner with Secretary General Kofi Annan in reforming the United Nations, and he was, along with Mr. Annan and Georg Kell, the architect of the UN Global Compact, to name only two of his signal accomplishments.

Cramer said, “When the definitive history of responsible business in this era is written, John will be in every chapter. He was a master builder who constructed a framework enabling business to shape a better, fairer world, with dignity and respect for all. At a time when globalism is rejected in the name of division, John believed in the universal values of human rights, and was relentless in keeping all of us focused on the vision in the Universal Declaration of Human Rights. John also was an extremely kind person. I had the privilege of getting to know John, and travel to far-flung locations with him, getting to see his great sense of humor. I will miss him greatly.”

All of us hope to leave a lasting impact. John has shown us all what that looks like when it is more than an aspiration. His legacy and memory will continue to guide us, enable progress, and give us a model to which we should aspire.

At a time when human rights and democracy are under threat in all corners of the world, it is now up to all of us to take the tools and vision that John has now passed to us, and make the most of them.

Additional tributes to John Ruggie from our partners and friends throughout the Human Rights community.

• Business & Human Rights Resource Centre: “In Memory of John G. Ruggie: Tribute by Bennett Freeman”
• Institute for Human Rights and Business: “Salil Tripathi on John Ruggie’s Legacy”
• Arabesque: “In Memory of John G. Ruggie”
• Shift: “In Memory of John G. Ruggie”

Blog | Monday September 20, 2021

Only Transformative Net-Zero Implementation Will Meet Our Climate Crisis

Preview

The world’s leading authority on climate science, the Intergovernmental Panel on Climate Change, had not delivered a major report in 7 years. But the installment released last month paints a dire picture of our future. 

On our current path, we will likely breach the Paris Agreement’s stretch target of limiting global warming to 1.5°C above pre-industrial levels in the next two decades, and may breach the fallback target of well below 2°C around mid-century.¹ For these goals set just a few years ago, the 2020s will truly be the decisive decade. This year’s scourge of wildfires in California and Siberia, floods in Germany, and deadly storms like Hurricane Ida remind us of what is to come.

The IPCC report tells us that climate change isn’t a problem we should solve for the next generation; it is a problem we must solve immediately, for ourselves. The impacts of a 1.5°C and 2°C world – extreme heat and weather, species loss, crop yield reductions, fishery decline, disrupted supply chains, public health crises and displaced communities – would arrive during our own working lives. We, not our children, would see how the dice are loaded. The heatwave that happened once every 50 years before industrialization would happen 9 times at 1.5°C and 14 times at 2°C.²

So, the staggering rise of corporate net-zero commitments comes at an auspicious time. Over the past three years more than 3,000 businesses, large and small, have made net-zero commitments now aggregated under the UN’s Race to Zero campaign.³ All of these meet a set of criteria in force as of this June.⁴ This momentum from businesses to build net-zero value chains can change our global trajectory. But net-zero commitments are also increasingly subject to five criticisms which implementation must address to be truly credible and transformative.

1. The first criticism is that net-zero commitments divert attention from immediate abatement, effectively licensing short-term emissions. That is why companies with net-zero targets must also set and deliver an interim emissions reductions target following a 1.5°C trajectory, for example under the Science-Based Targets initiative, or as part of the Race to Zero campaign.⁵
2. A second criticism is that net-zero commitments, which are typically based on a company’s fair share of global net zero carbon dioxide by 2050, should not be inequitable as between developed and developing countries. That is why, companies whose emissions footprint sits largely in developed countries who have high historical emissions, should aim to achieve net zero ahead of 2050.
3. A third criticism is that net-zero commitments, by focusing attention on removals which net out emissions in the target year, divert attention from immediate climate investments outside the value chain needed to keep 1.5°C within reach. Companies can dramatically increase their impact on the climate crisis by not merely abating emissions in the value chain en route to net zero, but also compensating for emissions outside the value chain, for example by investing in climate solutions and methane reductions.
4. A fourth criticism is that net-zero commitments may greenwash business-as-usual action. Building a net-zero value chain requires genuine business transformation across functions, from supply chain engagement and procurement, to finance, and research and development and product design. Net zero implementation then must demonstrate business transformation across these functions, including integration into the company’s business strategy with a clear climate action plan which has been vetted and approved by shareholders.
5. Finally, a fifth criticism is that net-zero commitments perpetuate climate and environmental injustice, for example in BIPOC and low wealth communities. Here a company can support these communities through its net zero implementation. Renewable electricity can be purchased from companies with a proven track record of increasing energy access. Carbon credits can be selected which benefit these communities. Low-carbon products and services can be procured in a manner which improves the equitable distribution of benefits of the net zero economy. This is where net-zero implementation strategies intersect with equity in the sustainability agenda.

These criticisms point towards what climate leadership will look like in future. This includes: 

1. Selecting a net-zero target year earlier than 2050 if your footprint is largely in developed countries;
2. Setting and delivering an interim emission reduction target consistent with a 1.5°C trajectory;
3. Compensating for emissions outside the value chain enroute to your target year;
4. Implementing business transformation across functions; 
5. Supporting communities which have suffered from climate injustice through net zero implementation;
6. Using your company’s influence to advocate for policy which advances climate justice and which supports a just transition for all.

This can be a lot to ask of a company formulating its next climate target and implementation plan. But debate over net-zero commitments is heating up as COP26 approaches and will not slow down anytime soon. Listening to these concerns from the climate community helps companies to make their net-zero implementation commensurate to the crisis at hand.

¹ IPCC AR6 WGI SPM, table SPM.1.
² IPCC AR6 WGI SPM, p. SPM-23.
³ https://unfccc.int/climate-action/race-to-zero-campaign
⁴ https://racetozero.unfccc.int/wp-content/uploads/2021/04/Race-to-Zero-Criteria-2.0.pdf
⁵ The Race to Zero criteria require that companies “[s]et an interim target to achieve in the next decade, which reflects maximum effort toward or beyond a fair share of the 50% global reduction in CO2 by 2030 identified in the IPCC Special Report on Global Warming of 1.5C”.

Reports | Monday September 13, 2021

BSR Submission to EU Social Taxonomy Process

Preview

BSR this month submitted its feedback to the EU Social Taxonomy Process, an effort initiated under a mandate from the European Commission Platform on Sustainable Finance to ensure that vital social aspects of sustainability are integrated into the EU’s Taxonomy Regulation. 

The Platform is instrumental in enabling cooperation among a wide range of stakeholders from the public and private sector, including the best expertise on sustainability from the corporate and public sector, industry, academia, civil society and the financial industry.

BSR’s recommendations on the draft social taxonomy report highlighted six key points for consideration, including the importance of grounding socially sustainable business practices in international human rights standards and relevant frameworks; the necessity of robust corporate governance for tackling sustainability challenges, and ensuring that minimum human rights safeguards are understood to involve proactive and ambitious corporate due diligence.

Blog | Thursday September 9, 2021

Reimagining Investment: Human Rights in Venture Capital

Preview

The increasingly widespread media coverage of surveillance and spyware technologies used to track ethnic and racial minorities and immigrants and surveil journalists, human rights activists, and other prominent figures has put a spotlight on the role of private equity firms, including venture capital (VC) investors, in financing human rights abuses in the United States and abroad.

By providing critical funding for technology start-ups, VC firms play a crucial gatekeeper role, deciding which companies make it onto the market, and ultimately, which technologies shape our lives. This has far-reaching consequences for human rights. While digital technologies present opportunities for economic growth, environmental protection, and the realization of human rights, such innovation can be associated with widespread infringements on privacy and free expression, enable the proliferation of hate speech fueling offline violence, and deepen inequalities, including through "algorithmic discrimination"—affecting people in the job market, accessing loans and public services, and in the criminal justice system.

Despite these societal harms, a July 2021 report released by Amnesty International found that “the vast majority of the world’s most influential venture capitalist firms operate with little to no consideration of the human rights impact of their decisions.” The report concludes that “the absence of human rights policies and due diligence processes amongst VC firms has significant consequences for human rights,” citing a range of examples, such as investments in companies that provide support for the repression of the Uyghur population in China.

These findings run contrary to the global expectation that businesses of all sectors and sizes, including VC firms, take the necessary steps to ensure that their business activities and value chains respect internationally recognized human rights. Unanimously endorsed by governments in the UN Human Rights Council in 2011, the UN Guiding Principles on Business and Human Rights (UNGPs) are the authoritative global framework outlining the responsibility of businesses to respect human rights.

Managing human rights risks is not only good for people—it is also good for business. 

Managing human rights risks is not only good for people—it is also good for business. Public equity investors have already recognized the relationship between human rights risks, including digital and labor rights, and the material costs on return (e.g., SASB standards, Investor Statement on Corporate Accountability for Digital Rights, and digital rights-related resolutions in 2019). A 2019 Harvard study on VC found a link between start-up technology companies that fail and poor performance in addressing environmental, social, and governance (ESG) risks. IPO valuations have also been threatened due to business models that undermine human rights. Firms may even be exposed to legal risks connected to their investments in companies that develop high-risk technologies, while reputational risks are increasing due to the growing focus of NGO advocacy on private capital and human rights.

Tech companies themselves are also realizing this. Growing pressure from regulators, civil society, employees, and shareholders over the human rights abuses connected to their business models, products, and services has led many publicly listed tech companies to adopt human rights policies and take due diligence measures to address risks.

VC firms can meet their human rights responsibilities, help shape a world where technology contributes to social progress, and increase their financial returns by deploying approaches based on the following three principles: 

• Adopt a policy commitment to respect internationally recognized human rights. The policy should set out the human rights expectations of start-up companies, which should be clearly communicated, including during pitching sessions and on the VCs website.
• Conduct human rights due diligence. VC firms should update their core business activities to manage human rights risks. Known as human rights due diligence, this means that VCs need to know the risks to people connected to their investment portfolios and show how they address these risks. This involves assessing how the firm invests and putting in place structures that identify and address risks to people as an inherent part of doing business. This includes processes and mechanisms for engaging stakeholders, including civil society with the relevant knowledge and expertise, to identify the risks and real-world impacts connected to investment portfolios. To show the constructive role they play in strengthening the human rights performance of start-ups, VC firms should also disclose their human rights risk management approach, including through formal reporting.
• Provide space and resources for entrepreneurs to do their due diligence: A core aspect of VC’s own due diligence involves using leverage to enable and support start-ups in their efforts to respect human rights. This may include offering start-ups trainings and tools that support their ability to manage human rights risks, connecting entrepreneurs with business and human rights experts, and encouraging them to assess business models, products, and services to identify human rights risks. Where a VC sits on the board of directors, they should also seek to shape and embed a rights-respecting culture within the company and ensure that the board provides appropriate oversight.

By supporting company founders in their mission to grow their businesses responsibly, VCs can play a transformative role in shaping the behavior and culture of emerging companies and the associated outcomes for society. The UNGPs provide a roadmap for VC firms to reimagine the way they conduct investment, helping to ensure that addressing risks to people is a fundamental part of their core business.

Reports | Thursday September 2, 2021

Access to Remedy

Preview

Introduction

The third pillar of the UN Guiding Principles on Business and Human Rights (UNGPs) states that individuals whose rights are harmed by business must have access to remedy. Despite 10 years of implementation of the UNGPs by companies and states alike, the remedy pillar remains largely undeveloped and under-fulfilled. There is little practical guidance on how to provide effective remedy—including a lack of tools on how to measure effectiveness—and few public case studies, limiting the ability to learn from others and advance the field.

Companies are hesitant to publicly disclose what they are doing on remedy and to admit responsibility for harm they have caused or contributed to out of fear of reputational and financial consequences, precedent-setting, or the likelihood of legal claims. Even businesses that have made a commitment to providing remedy continue to struggle with determining which approaches are most effective and lasting. Many companies avoid providing remedy at all unless obligated to by the courts.

Much of companies’ focus with respect to remedy has been on access to operational-level grievance mechanisms (OGMs), with far too little emphasis on the substance of remedy. It is important to note that merely having a grievance mechanism, no matter how effective, does not mean the company is providing access to remedy. Grievance mechanisms can be critical in the process of obtaining remedy; however, remedy must result in an outcome whereby the individual or group harmed is restored to their position prior to the harm.

Expectations are changing, and companies will increasingly be expected to address the harms they have caused or contributed to through their business relationships. The landscape is shifting toward greater human rights responsibility, including an increasing prominence of ESG factors such as human rights, when evaluating company performance. Additionally, mandatory due diligence legislation is growing, especially in Europe, with some legislation requiring access to remedy.

The Role of Business in Providing Remedy

For companies to get ahead of expectations and fulfil their obligations under the UNGPs, they need to understand the four key roles business has in providing remedy: