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Blog | Thursday September 9, 2021

Reimagining Investment: Human Rights in Venture Capital

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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

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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:

Blog | Tuesday August 31, 2021

Creating Opportunities for Action: Advancing Children’s Rights in the Palm Oil Industry

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In January of this year, we published a blog highlighting practical steps that palm oil companies can take to respect child rights and address child labor in their operations and supply chains. In June 2021, the ILO and UNICEF reported that the number of children in child labor had increased from 152 to 160 million globally—and these numbers are expected to rise as the COVID-19 pandemic continues to affect Southeast Asia. COVID-19 is expected to further obstruct efforts to eliminate child labor as more children are expected to drop out of school and fall into hazardous work.

We can see these impacts playing out in the palm oil industries in Indonesia and Malaysia. Companies wishing to eradicate child labor from their supply chains may be best served by looking beyond their own value chains to the wider context in which they source and manufacture products and by partnering with other actors to address structural drivers and systemic issues which require an industry-wide approach.

Why Industry Collaboration Is Critical

Companies cannot tackle child labor in isolation, given its entrenched nature and complexity. While greater progress is needed on engagement and collaboration with governments and civil society, forming partnerships across the palm oil industry can be an impactful way to systemically address the issue. Here’s why:

• Industry partnerships can be integral to the success of strategies needed to leverage companies and their suppliers to prevent or mitigate child rights violations through promoting awareness and understanding of complex issues, encouraging others to act, and developing solutions together.
• Greater collaboration between businesses can identify and scale effective solutions and facilitate shared learnings while avoiding potential duplicated efforts. Individual company responses may not be as effective in tackling an issue rooted in poverty, for example.
• Increased collaboration can enable companies to share the risk and create a more level playing field.

A wide range of voluntary, business-led, industry-wide, and cross-industry initiatives has emerged in recognition of this need for greater collaboration.

How Palm Oil Companies Can Act on Child Labor

While the UN Guiding Principles on Business and Human Rights acknowledge the complexity of addressing human rights issues, they encourage companies to engage with a wide range of stakeholders. In addition to conducting human rights due diligence in their own operations and supply chains, as well as adhering to national and international laws and standards, companies can address complex issues such as child labor in several ways:

• Raise standards through the creation of industry guidance on due diligence, remediation, and monitoring to define corporate behavior regarding child rights violations.
• Work with relevant, local stakeholders to understand risks, look at potential solutions, or address a specific impact. For example, companies could partner with peers and local civil society organization (CSO) networks to lobby the government to make legislative changes. They could also advocate for a national action plan on child labor.
• Use leverage to engage with less resourced companies within supply chains and build capacity, raise awareness, and share best practices and lessons learned through training. Companies could work in partnership with leading organizations to develop training and/or guidance for suppliers on child rights, challenges, and practical solutions.  
• They could also join a leadership platform on child labor to build on and strengthen existing efforts for collective action and practical solutions.

At BSR, we work with key players in the palm oil industry, including producers and buyers, to tackle child labor by integrating children’s rights into plantation policies and practices. Last year, we supported the development of agribusiness group Wilmar’s Child Protection Implementation Manual, in collaboration with global buyers. This year, we’re continuing our work with Wilmar—in collaboration with The Centre for Child Rights and Business and the Earthworm Foundation and with the support of global palm oil buyers— to pilot and test the manual’s practical applicability with a participating supplier and share lessons learned with Wilmar’s supplier base and the wider industry. A key deliverable of this project will include a manual, which will be adapted for the Malaysia context aimed at addressing complex issues related to foreign workers.

The manuals will not only be used as a guideline for the industry to respect and promote child rights, but more importantly, the pilot also demonstrates proactive steps toward risk management, accountability, collective action and building a shared understanding of how to address child labor in different geographical contexts. This is an important opportunity to share lessons learned within the Indonesian and Malaysian palm oil industries with a view to expand learnings across other sectors. As we move into the next phase of work, we will continue to engage palm oil industry players to leverage collaborative efforts to invest in sustainable change for children.

For more information on BSR’s work on business and human rights, including children’s rights, please reach out to connect with our team.

Blog | Monday August 30, 2021

Sustainable from the Start: Embedding ESG into High-Growth Business Strategy

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We are experiencing a profound shift in stakeholder expectations and business growth strategy: sustainability is more important than ever before. Younger, high-growth companies—those that either are privately held or recently went public—face unique challenges and opportunities as they expand business while also considering environmental, social, and governance (ESG) factors, be it climate change, privacy, diversity, or a range of other material issues. 

Over the past two years, we have hosted quarterly convenings for high-growth companies to share challenges and approaches on a variety of ESG topics. In these meetings, BSR spoke with company sustainability leaders, who shared how their experiences might apply to younger businesses. Based on the outcomes of these discussions, what are the main considerations for a high-growth company at the start of its ESG journey?

First Up: Identify Material ESG Issues

Conducting a materiality assessment is an essential “do this first” step to jump-starting an ESG strategy. A materiality assessment is a widely used approach to help companies develop ESG priorities by understanding the most important topics. It identifies key areas of overlap between enterprise value creation (“impact inwards”) and impact on society and the environment (“impact outwards”).

Materiality can help a young company: 1) align on relative priorities and clarify the rationale; 2) enable better allocation of resources to address priority issues; and 3) communicate more effectively, internally and externally, on the most material issues. 

We explore other key steps in a recent report published in collaboration with Morgan Stanley, which addresses why, when, and how high-growth companies can develop ESG strategies that support value generation and meet growing stakeholder (i.e. investor) expectations. 

So, you’ve taken the initial recommended steps. What do you need to consider first among the ESG dynamics at play?

Environmental Issues

Acting on the climate crisis is more urgent than ever, no matter where a high-growth company is in their sustainability journey. While younger companies may have a smaller environmental impact than more established ones, they must not ignore issues such as climate change and energy use because extreme, systemic climate risks can be disruptive to the global economy and all businesses.

To develop a climate strategy that fits a company’s business model, scale, and stakeholder expectations, start by measuring the company’s greenhouse gas emissions footprint, which will provide a baseline to make informed decisions, commitments, investments, and operational changes moving forward. Once the company understands its footprint, it can then create a strategy to meet an ambitious climate action commitment, as exemplified by Atlassian’s Science-Based Target and net-zero goal and Okta's 100-percent renewable energy commitment.

Social Issues

The COVID-19 pandemic, ongoing social justice movements, and recent social media deplatforming events have put a spotlight on how companies need to address the “S” in corporate ESG issues—and younger companies whose workforces are rapidly growing cannot wait to act.

While studies continue to show that diverse and inclusive teams provide many business benefits, companies big and small still struggle with creating a workforce where employees enjoy equitable opportunities in a welcoming environment. BSR recommends that high-growth companies adopt equitable and inclusive practices early on, such as ensuring job descriptions don’t include gender-biased language and working with a third party to conduct an annual study to ensure pay equity. We also encourage companies to promote social justice by leading with equity. 

Additionally, collaborative efforts with partners like the Tech Equity Collaborative, Alliance for Global Inclusion, and Partnership for Global LGBTI Equality are great ways for younger companies with smaller teams to work with others to help improve DEI practices and realize benefits at the company and industry-wide level.

Governance Issues

High-growth companies develop with such speed and scale that they often lack strategic approaches and governance structures for managing various ESG issues and are often not resourced with dedicated ESG staff. In turn, the management and communication of ESG efforts can be often an overwhelming task, leaving employees looking around and asking, “who’s responsible for what, and how does any of this get done?”

In establishing an ESG governance structure, first look at team members. Senior leadership support for and awareness of the business case for addressing material ESG issues is critical to gaining resources and realizing the benefits of action over time. Regardless of whether a dedicated Head of ESG position is an option or not, a cross-functional approach—in which senior leadership engages with various business units, be it human resources, investor relations, legal, sales, or product engineering—helps to ensure shared ownership and management of ESG issues that are often interconnected.  

When it comes to communications, start with a featured section of the company website that transparently shares where the company is in its ESG journey. Then consider more robust reporting frameworks, such as the Global Reporting Initiative and the Value Reporting Foundation, to identify indicators to use when reporting annual progress on the company’s material ESG issues.

It is never too early (or too late) to embed ESG into a high-growth business model. Embracing ESG practices early has shown to improve valuation and ultimately long-term success. BSR continues to run our high growth webinar series both in the US and EMEA—if you want to participate, don’t hesitate to reach out.

Blog | Thursday August 12, 2021

China’s 14th Five-Year Plan: Broad Insights for the Healthcare and Pharmaceutical Industries

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2021 is witnessing the beginning of China’s 14th Five-Year Plan (14th FYP), which charts the next five years of China’s journey to build a modern socialist country and achieve its second centennial goals. It provides a comprehensive framework for how the country’s society and economy will develop by 2026 and includes the strategy to build a “Healthy China,” which aims to improve overall social conditions, including healthcare.

As a country with a population of 1.4 billion, China faces many health challenges. These include high medical care costs and resource disparity between urban and rural areas, resulting in poverty due to illness, especially in rural areas (approximately 20 million people faced disease-causing poverty as of 2015). Other challenges include an increasingly aging population and rising rates of noncommunicable diseases (NCDs) linked to lifestyle factors like smoking.

So how does China’s 14th FYP impact the healthcare and pharmaceutical industries? Here are three ways these companies can help advance the “Healthy China” strategy.

1. Improving Affordability of Healthcare Services

Primary healthcare reform in China over the past decade has included extensive plans to broaden basic healthcare coverage and establish a national essential drug system. While “Healthy China” aims to improve overall health through healthy lifestyles and prevention approaches, there is an opportunity to enhance medical coverage for the entire population through better integrated rural and urban health insurance programs, to expand insurance schemes to allow more diversified commercial health insurance options, and to further cut down medical costs for patients.

Developments and reform in medical insurance, as well as drug pricing, will indisputably exert pricing pressure for pharmaceutical companies in China. However, experts believe that the policies will trigger convergence toward a developed-market profile for mature brands and will prompt multinationals to reevaluate their returns on investment and to transform business models to improve productivity and sustain profitability.

Moreover, there are enormous opportunities for pharmaceutical and insurance companies to collaborate on creative approaches to improve access to healthcare. For example, in 2015, Roche China started a partnership with the Shenzhen Reimbursement Authority and the leading Chinese insurance company Ping An to cover four of Roche’s targeted cancer therapies in the municipality’s health insurance program, which gave millions of people unprecedented access to innovative cancer treatments and diagnostics.

2. Strengthening Accessibility in Healthcare

The 14th FYP also covers recommendations to deepen reform of public hospitals and to provide equal access to basic public healthcare services, such as digital primary care, remote medical treatment, and rehabilitation services for seniors. The recommendations also support development of traditional Chinese medicine (TCM), which is significantly more accessible and affordable in China.

As China plans to significantly promote digitalization in healthcare, there is huge potential for the private sector to play a role in accelerating delivery of Internet-based healthcare services through artificial intelligence, machine learning for diagnostics and treatment, and augmented-reality surgeon training. Already, some Chinese companies are piloting related initiatives, such as Pingan Good Doctor, Tencent WeDoctor, AliHealth, and JDHealth.

We encourage companies to expedite the move online by deepening their understanding of new user behavior and providing support. Digitalization is becoming essential for customer and patient engagement: According to a Bain survey, 97 percent of Chinese respondents expressed interest in digital health services if the costs were covered by an insurance provider or employer, and 64 percent expected to use telemedicine within the next five years.

Companies could also play a role in supporting local governments to achieve their public health and environmental goals related to medical waste and supply chain management. Specifically, Shanghai aims to become one of the safest cities for public health by 2025, opening up opportunities to participate in a range of initiatives covering infrastructure, operational efficiencies, and new capabilities, all with the goal of building an intelligent platform for public health.  

3. Enhancing Cultural Focus on Well-Being

According to officials, objectives in the 14th FYP, compared to previous Plans, have shifted to have a greater focus on public health promotion and prevention, rather than on treatment. The healthcare and life sciences industries are promoting early warning and prevention of infectious diseases and NCDs, vaccine research and development, online medical services, and, perhaps most importantly, patient awareness raising that emphasizes healthy lifestyles and physical fitness.

Most multinational pharmaceutical companies already place emphasis on enhancing acceptability or delivery of healthcare and have piloted various sustainability and community programs in China dedicated to patient education and raising awareness—and more companies can follow suit.

Moreover, the preventive healthcare strategy calls for more innovative efforts to support public health awareness, which are cost-effective and ultimately improve overall health and quality of life. In this regard, companies have the opportunity to engage more in public education and facilitate effective patient engagement programs by building these activities into their sustainability strategies.

Learning from COVID-19

The fight against COVID-19 shows both weakness and resilience in China's healthcare system, as well as its ability to mobilize resources in both communities and in the private sector. 

Post-pandemic, we can expect greater attention on public health, prevention, and development of primary care at the central government level. At local levels, leaders will likely pay even more attention to healthcare as a leading indicator of their performance and draft ambitious blueprints for their local healthcare systems. Business and local communities can participate and play an active role in promoting a healthy life—BSR’s HERhealth program illustrates that businesses can support workers to improve their health awareness, achieving a positive impact in the workplace.

While the “Healthy China” strategy creates many possibilities for the healthcare sector, we can anticipate that wider healthcare coverage in China—as well as increasing local needs for healthcare services that are more accessible, affordable, and acceptable—might stimulate continuous ramp-up of local manufacturing and production.  

Supply chain management with a particular focus on environmental practices, such as proper water management and wastewater treatment, will need extra attention to ensure manufacturing practices are aligned with China’s national climate and environmental protection targets. Companies will also need to ensure proper control of medical waste and manage social protection—especially workers’ benefits—well.

What’s Next

BSR’s China team will continue to unpack business impacts of the national plan. Future blog posts will provide more details on industry impacts and how businesses should prepare through insights and dialogues with climate and energy experts and other important stakeholders across sectors. 

If you are interested in learning more about how BSR can help shape your China strategy, please reach out.

This blog is part of a series examining the business impacts of China’s 14th FYP, which has drawn great interest among the international community, from policymakers to business. To learn more, read our previous posts on what business can expect, China’s climate goals, and impacts for investors.

Blog | Tuesday August 10, 2021

The Urgency of Private-Sector Action on Gender-Based Violence

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Gender equality can only be achieved when women and girls live free of violence. And as of now, they do not.

Violence against women remains a globally pervasive human rights violation. One in three women worldwide will experience physical and/or sexual violence at the hands of men at some point in their lives. Women experience violence in homes, public places, and the workplace, including factory environments in global supply chains. In India and Bangladesh, for example, around 60 percent of garment workers have experienced sexual harassment in the workplace.

The COVID-19 pandemic has exacerbated these high levels of violence, with lockdowns trapping women in violent relationships. What’s more, women have also lost their jobs and livelihoods at a far higher rate than men.

An effective response to this crisis means widespread change in social norms to prevent it from happening in the first place. Public and civil society efforts and investments are not enough—the private sector must play its part.

In June 2021, BSR, in partnership with the Sexual Violence Research Initiative (SVRI) and global mining company Anglo American, hosted a panel at the Generation Equality Forum on how the private sector can prevent and address gender-based violence. Here are our key takeaways.

The Critical Role of the Private Sector

While governments invest heavily in vital response programs—such as providing critical services like health care, psychosocial support, shelters, and medico-legal services—the private sector can use its reach and influence to focus on prevention.

Prevention programs intervene early. They can include parenting interventions that address violence against both women and girls, school-based programs that address gender equality and violence, and those that aim to shift community-based social norms.

The private sector also has considerable power to change mindsets through large-scale communications campaigns, educating audiences about these prevention programs, why they are important, and the impact they create.

Case Studies in Successful Gender-Based Violence Prevention

Gender-based violence is still a pervasive issue, but several programs demonstrate that, through concerted action, significant progress is possible.

Global mining company Anglo American’s Living with Dignity initiative aims to confront gender-based violence in its host communities and operations and focuses on internal advocacy, evidence-surfacing, and strategic partnerships. It can serve as a best practice example for companies looking to implement similar programs.

Living with Dignity has produced wide-ranging changes in Anglo American’s South African workplaces, which are underpinned by vocal commitment and model behavior from leadership teams. For example, leaders across the business have received coaching on gender-based violence and harassment. And sexual harassment is seeing an increased prominence in meetings across the business and features regularly on leadership calls and town hall agendas.

Cross-sector collaborations also can help take solutions to scale. BSR’s HERrespect program, a HERproject initiative, seeks to encourage gender-equitable attitudes and relationships between women and men in global supply chain workplaces. And its impact has been palpable.

Throughout implementation of the program, HERrespect has driven lower acceptance of violence against women, increased awareness on what constitutes sexual harassment, less acceptance of gender-unequal statements, a greater sense of empowerment in stopping violence, and more awareness on internal support mechanisms for affected women.

For example, at the start of the program, 34 percent of participants believed that there are times a woman deserves to be beaten. At the end, only 15 percent agreed.

Our experience has shown us that gender-based violence is preventable. But to successfully achieve that, a multi-stakeholder approach is necessary—one that includes community-based organizations, researchers, consumers, donors, and, indeed, the private sector.

The socioeconomic impact of COVID-19 on the lives of women has created a sense of urgency for the private sector to mobilize and act. Whether it’s responding to the needs of workers in the workplace or partnering with organizations that conduct research and implement community-based programs, the opportunity for companies to address and prevent gender-based violence is massive. To learn about how your company can get involved in this work and hear from the experiences of this group, reach out to HERproject, SVRI, or Anglo American.

Reports | Monday August 9, 2021

Addressing Forced Labor and other Modern Slavery Risks: A Toolkit for Corporate Suppliers

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Businesses operating in global supply chains are more likely to encounter situations of forced labor or other forms of modern slavery than their multinational counterparts, yet many lack simple guidance on how to identify, prevent, and manage these risks effectively.

To address this gap, this toolkit from the Global Business Coalition against Human Trafficking (GBCAT) aims to help businesses that work in corporate supply chains to quickly identify areas of the business which carry the highest risk of modern slavery and develop a plan to identify, prevent, and address risks. While the toolkit is designed particularly for small- and medium-sized enterprises, it can help businesses of all sizes who are new to understanding modern slavery risks.

GBCAT has also released a one-page infographic highlighting practices to avoid the use of forced labor and has compiled a list of resources for suppliers for additional guidance on its supplier portal.

Blog | Tuesday July 27, 2021

Reflections on a Sunset: Lessons Learned from the Global Impact Sourcing Coalition

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It has been seven months since we sunsetted the Global Impact Sourcing Coalition (GISC), and I’m still troubled by the question: “Did we fail?” 

If we measure our progress against our ambitions, the answer is “yes.”  

But I’m also compelled to make the case for “no.” While it didn’t live up to its full potential, we did something extraordinary. Our effort was valuable for those who participated and positively impacted thousands of employees’ lives around the world. The experience is worth learning from.

The GISC officially launched in 2016 with the aim of building more inclusive supply chains through Impact Sourcing—a business practice where companies prioritize suppliers that intentionally hire and provide career development opportunities to people who otherwise have limited prospects for formal employment.

We began with 20 members, and by the end of 2020, we had the support of over 75 companies and stakeholder organizations hailing from 32 countries. But ultimately, at the end of last year, BSR and the GISC Steering Committee made the responsible decision to disband the GISC, releasing the resources and energy we had centralized back into the universe to support new opportunities.

At BSR, we believe that collaborations go further and deeper when they are designed for impact and that the practice of multistakeholder collaboration is very much a work in progress. In our efforts to continuously improve, we are sharing a Lessons Learned report that seeks to capture both the successes and missteps that we encountered while running the GISC—so that other collective action efforts can build on our experience. 

What Worked Well

GISC’s premise was simple: By prioritizing suppliers that have established inclusive employment initiatives, GISC members could send a powerful market signal to all corporate suppliers—which employ a fifth of the global workforce—encouraging them to compete based on their social impact. Inspired by the supplier diversity movement, we held the ambition for all large companies to pledge a percentage of their procurement spend toward suppliers that intentionally offer good, career-advancing jobs to people who formerly lived in poverty.

To our delight, this market-driven approach began to work. Many supplier companies launched or expanded their inclusive employment programs to better distinguish themselves to their clients. They also began to update their policies and practices in accordance with the requirements of the GISC’s Impact Sourcing Standard and, as a result, created more inclusive workplaces and good jobs for all employees.

Due to the commitments of companies like GISC’s supplier members to hiring the most vulnerable in their communities, the business process outsourcing (BPO) industry is both expanding its talent pool and more evenly distributing gains across entire communities.

Our most visible success resulted from a multi-year Impact Sourcing Challenge that led GISC suppliers to pledge and then meet their goal to employ over 29,000 impact workers in good jobs from 19 countries around the world. This included people on the autism spectrum in the United States, long-term unemployed youth in South Africa, and people who formerly lived in poverty in India and the Philippines. Furthermore, suppliers reported to the GISC many additional business benefits that companies often report experiencing with more inclusive and diverse cultures, such as decreased turnover and a more highly motivated workforce, further reinforcing their commitment to inclusive employment.

What We Could Have Done Better

At the same time that we were seeing these advancements, cracks in our business model began to appear, and they only deepened as the GISC grew.

Among other important lessons, we should have worked to secure, from an early stage, multiple funding partners who shared the GISC’s vision for market-driven poverty alleviation across supply chains and who could provide strategic injections of philanthropic and patient capital to support this long-term vision.

We found that a business model built entirely around membership dues was weighted by the requirement to deliver member benefits, making it more difficult to engage in forward investment and the creation of public goods. To continue our progress, we would have needed to invest in in-depth measurement and evaluation, rightsholder engagement and consultation, due diligence, advocacy to reach new audiences, and to build up an emergency fund to better react to unexpected circumstances.

And because of these missteps, just as we had the evidence that our theory of change was robust and it was time to hit the accelerator to reach scale, we ran out of the funds necessary to do so.

Through the GISC, we managed to rally a wave of professional and personal energy whose ripples continue to spread around the world in new and exciting ways. We are proud to note that, beyond GISC’s tenure, many former member companies, industry networks, and other stakeholders have stepped up to continue to champion the Impact Sourcing movement, utilizing their influence, communications, and networks to inspire more companies. Several GISC members have gone on to launch Impact Sourcing chapters and working groups, taking collaborative efforts forward in key geographies such as North America, India, and South Africa.

We hope that, in reading the Lessons Learned report, you see that we were able to go further through collective action than any one organization could have alone and that there are many metrics beyond a collaboration’s continuation that might better define impact and success.

BSR continues to support companies in developing their Impact Sourcing strategies, so please contact us to learn more. And be sure to join the Impact Sourcing Champions LinkedIn group to connect with like-minded professionals.

Reports | Tuesday July 27, 2021

Lessons Learned from a Market-Based Approach to Inclusive Employment

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BSR developed this report with the support of The Rockefeller Foundation to capture lessons learned from the launch, implementation, and sunset of the Global Impact Sourcing Coalition (GISC). We aim, through this report, to help current and future collaborative initiatives to benefit from our learnings, progress, and missed opportunities. We also seek to inform philanthropic foundations and other donors of the opportunity to support high-impact, private sector-led partnerships for sustainable development.  

The report provides an overview of the Impact Sourcing movement and the GISC, followed by an analysis of the GISC partnership against five key success factors for high impact collaborations, highlighting both successes and missed opportunities. It concludes with recommendations for the Impact Sourcing movement, future collaborations, and donors and other contributors to collaborative initiatives for sustainable development. 

Blog | Thursday July 22, 2021

Dynamic Materiality: How Companies Can Future-Proof Materiality Assessments

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This is the second in a four-part blog series dedicated to enhancing the value of materiality assessments. In the first blog, we discussed why companies should assess double materiality. Here, we explore how companies can monitor dynamic materiality.

If you conducted a materiality assessment in 2019 and are wondering if you need to refresh your assessment in light of 2020’s extraordinary events, raise your hand!

Indeed, we can expect the materiality of environmental, social, and governance (ESG) impacts to change over time for many different reasons: stakeholder activism, new regulations, or a global pandemic, to name just a few.  

The concept of “dynamic materiality” was first introduced by the World Economic Forum (WEF) in early 2020 and is gaining traction. Now, the five reporting standards—CDP, Climate Disclosure Standards Board (CDSB), the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC), and the Sustainability Accounting Standards Board (SASB)—affirm that materiality should be considered dynamic and that sustainability topics can become financially material over time. Not only that, but according to WEF, “the ability to anticipate stakeholder reactions to emerging sustainability issues and how they could affect a business and its performance is therefore critical.”

Here is how it works in theory: Businesses may take actions that negatively impact society, either through their products or their operations. Initially, the interests of companies and society are misaligned, but society tolerates this. For example, although pharmaceutical contamination of the environment has been known for years to negatively impact water supplies and human health, “companies have not yet been held responsible for this externality.”

Then a catalyst—either a change in company behavior or in societal norms—widens this misalignment. After this, stakeholder activism, regulatory responses, and corporate innovation may all push the issue from immaterial to material, whether for a single company or the whole industry.

Looking back at the concept of double materiality, impacts outward become impacts inward. Take the #MeToo movement that shed light on harassment in the workplace: Through increasing public awareness, workplace harassment rapidly became a material issue for companies like Alphabet that had to settle shareholder lawsuits related to sexual misconduct scandals. 

However, while WEF’s “framework for action” notes that increasing evidence and transparency, escalating stakeholder activism, growing responsiveness of key decision-makers, and expanding investor emphasis on ESG are all driving increased dynamism in the materiality of ESG issues, they and other reporting experts offer little guidance in discerning which ESG issues might become material in the future.

A Scenario-Driven Approach to Dynamic Materiality

Given the myriad of uncertainties about the macro environment shaping societal expectations—whether political shifts, technological innovations, or environmental changes—BSR takes a scenario-driven approach to dynamic materiality.

This entails stress-testing a materiality assessment against a set of plausible scenarios for the future to ascertain which ESG issues are likely to become more material over time, which currently immaterial issues may become material, and which ones are highly volatile—that is, highly sensitive to unpredictable shifts in the operating context.

Taking this foresight-driven approach is useful for several reasons:

• It transforms a materiality assessment from a static reporting exercise into an opportunity for strategic foresight. Internal stakeholders consider more deeply how the macro environment is driving stakeholder concerns and what drivers could reshape them in the future.
• It helps firms develop more resilient business strategies that anticipate different versions of the future and hedge against critical uncertainties. This ensures that strategy is developed looking at the road ahead rather than in the rearview mirror.
• It bolsters reporting—helping external stakeholders better understand how the company’s "materiality signature" may change over time and offering assurance that proactive steps are being taken to prepare.

Brendan Seale, former director of corporate sustainability at Scotiabank, recently spearheaded a project with BSR in which we used scenarios to stress-test materiality for his company. He said:

“As we began our materiality assessment in the fall of 2020—in the throes of the pandemic and the swelling consciousness of systemic injustice—it was obvious that many issues had become more important for Scotiabank than they were six or twelve months earlier. We wanted to explore potential changes to materiality over time, and future scenarios helped us to consider how our ESG strategy can be resilient and evolve in our rapidly changing world.”

No business can perfectly predict the future. But applying strategic foresight to materiality will improve outcomes for businesses and stakeholders alike.

To get involved in this work, contact the Sustainable Futures Lab.