Search Results

Case Studies | Thursday December 13, 2018

Stora Enso: Human Rights Commitment through Prioritization

Preview

For four years, BSR has worked with Stora Enso, a leading forest products company based in Finland, to support the company’s human rights journey. Stora Enso is one of the first companies globally to systematically track its human rights impacts and publish the findings.

The Challenge

Stora Enso initiated a company-wide human rights impact assessment (HRIA) in 2013. It was accelerated by a challenging situation in Pakistan the following year, when child labor was discovered deep in the local supply chain of a company in which Stora Enso held a minority stake. The goal of the HRIA, conducted together with the Danish Institute for Human Rights, was to gain a holistic view of Stora Enso’s potential human rights impacts in all of its 92 business units worldwide. Based on the findings, the company developed a global human rights action plan (HRAP) that features hundreds of action points.

Upon completing the HRAP, which included a collaboration with BSR to implement a local HRAP in China from 2015-2017, Stora Enso partnered with BSR to identify the company’s highest priority human rights issues. The goal was to find those human rights issues that Stora Enso has the most impact on and should therefore focus on when planning its work and allocating resources.

Our Strategy

Identifying Stora Enso’s human rights priorities was a unique project in how it was structured. As the company has transformed from a traditional paper company into a renewable materials company, its human rights profile has changed. A successful project required commitment from all business units and supporting functions; the project also had to reflect the real-world business challenges the organization was facing.

With frequent one-on-one engagement with the project steering group and function heads, BSR and Stora Enso mapped the company’s existing human rights systems and gaps in its processes. This diverse working group identified eight human rights priorities, which were then discussed and approved by Stora Enso’s executive team, making the bigger plan a company-wide effort.

Our Outcomes and Impact

Over the past four years, BSR’s support has helped Stora Enso to identify its highest priority human rights impacts and to develop a plan for addressing them. The eight highest-priority human rights will guide Stora Enso’s future work, which will include an updated due diligence and monitoring program.

Case studies on Stora Enso’s work have been shared within the BSR Human Rights Working Group as topics for discussion and learning, which has directly impacted the group’s member companies and, more widely, the global human rights field.

Lessons Learned

Companies about to undertake the development of a comprehensive human rights program may want to consider these suggestions.

• Remember that it’s not only about scale: Normal risk thresholds may not work when it comes to human rights. Stora Enso was first exposed to serious human rights issues in the supply chain of a minority investment company in an emerging market. The subsequent publicity impacted the company’s reputation heavily for more than two years. 
• Gain internal buy-in: Involve all relevant business functions when developing your human rights program. True commitment and willingness to act come from inclusion in the process.
• Ensure practicality: For human rights recommendations to turn into action, they need to be pragmatic. Introduce plans that are realistic to implement, measure, and assess.
• Get top management sign-off: Having top management approval demonstrates that human rights are important to the company. Involve leaders at an early stage.

Blog | Tuesday December 11, 2018

Are You Prepared for the Future of Business and Human Rights?

Preview

The Universal Declaration of Human Rights (UDHR) was adopted by the United Nations General Assembly 70 years ago on December 10, 1948. While written for states, the UDHR asserts that “every organ of society” shall strive to secure the universal and effective recognition and observance of human rights. We have witnessed huge progress in the role of business as an “organ of society” since the publication of the UN Guiding Principles on Business and Human Rights (UNGPs) in 2011.

As a historian (Dunstan) and a futurist (Jacob), we are naturally fascinated by the relationship between time and human rights. Embedded in the UDHR is the notion that every organ of society should strive toward the realization of human rights, while the UNGPs encompass “actual or potential adverse human rights impacts” (our emphasis). In addition to dealing with current and past harms, both documents are also forward-looking.

The emerging practice of human rights due diligence by business has led to the burgeoning completion of human rights impact assessments and accompanying human rights management and mitigation plans. This is highly encouraging; it reflects the increasingly prominent role played by business in society today when compared to 1948, as well as the desire to proactively mitigate adverse impacts that might arise in the future.

However, the world around us is changing at an increasingly rapid pace, with disruptive technologies, shifting social norms, and turbulent politics (among other forces) transforming the circumstances in which business is expected to meet its responsibility to respect human rights. Indeed, the very definition of “human” will be increasingly problematized by emerging developments in biology and technology.

In this context, one big question looms large: Is the business and human rights field equipped to identify the potentially adverse impacts of the future and put in place effective plans to mitigate them?

One big question looms large: Is the business and human rights field equipped to identify the potentially adverse impacts of the future and put in place effective plans to mitigate them?

We believe that there is huge potential for the business and human rights field to deploy futures and strategic foresight methodologies in ways that significantly enhance the effectiveness of human rights due diligence. One way to do this is through the use of future scenarios.

During the BSR Conference last month, we published a new report, Doing Business in 2030: Four Possible Futures, which presents four such scenarios describing alternate future contexts for business. From climate disruption to automation and artificial intelligence, the changes depicted in the report will create an entirely new operating environment for business, and for human rights.

The scenarios combined rigorous research with creativity to imagine four plausible yet very different versions of what the world might be like in 2030. In the first, challenges to the Western model of capitalism draw emerging economies into China's orbit and eventually drive a shift toward sustainability. In the second, the notion that “all business is political” has taken hold—and the polarization of today has intensified into profound social, economic, and cultural fragmentation. A third envisions a future in which people opt out of consumerism, big business, and social media and rediscover the benefits of local community. The fourth scenario explores a world dependent on incredibly powerful AI, where privacy has largely disappeared, but benefits in health and other areas are profound.

Scenarios are neither predictions nor forecasts, and none of BSR scenarios will “come true” exactly as written. Instead, they are a tool to help us think differently and consider truly radical changes that escape the bounds of our current models. Rather than providing us with a single answer about the future—which would almost certainly be wrong—they enable us to embrace uncertainty, eliminate blind spots, and develop more resilient strategies.

So, how can you use scenarios to enhance human rights due diligence?

First, suspend disbelief and immerse yourself in each new world. Imagine it is 2030, and the scenario you’re reading accurately describes the world your business inhabits. What would your operations look like? How might your products and services be used? What lifestyles would your customers, employees, and communities be experiencing?

Second, explore what new human rights risks and opportunities may arise for your business in each of these scenarios. What new human rights impacts might your business be causing or contributing to through its activities in 2030? How might your products and services be used to violate human rights in each scenario? Which of your rightsholders, especially vulnerable groups and those at risk of marginalization, would be at greatest risk, and why?

Third, consider how you could make your company’s human rights mitigation plan more resilient to the entire set of scenarios. Are there any elements of your current approach that would fail in one of these scenarios, but which could be reconsidered? Are there any actions you could take that would work well across all the scenarios? What system-wide challenges would need to be addressed through collaboration, rather than each company acting alone? Once you’ve identified the most promising activities, consider what you’d have to start doing today to bring them to life.

We are not proposing the deployment of futures and strategic foresight methodologies as an alternative to today’s human rights due diligence—far from it. Rather, our premise is that futures and strategic foresight methodologies offer a promising pathway for improving today’s human rights due diligence methodologies so that they are better equipped to address an uncertain future.

On the 70th anniversary of the UDHR, we believe this is an important new way to promote respect for the rights and freedoms it protects.

Blog | Monday December 10, 2018

Happy Birthday to Your Human Rights!

Preview

Birthdays are a great time for reflection. This week, as the international human rights system turns 70, is a good time to look back on what it has achieved, especially as it relates to business.

This week, as the international human rights system turns 70, is a good time to look back on what it has achieved, especially as it relates to business.

The first thing to acknowledge, and the most often forgotten, is that the human rights system is a major achievement. When the world emerged from World War II, a common set of values, and the institutions to implement them, were far from inevitable. The world had just seen 60 million deaths and was divided by two economic systems and political ideologies, each with missiles pointed at the other. All those actors coming together required dozens of visionary leaders and thousands of individuals to put aside their national interests and work toward a better world. That’s a rare thing, and one that is worth celebrating on its own.

The second achievement of the international community was what happened next. We now have more than 100 international instruments that define and elaborate human rights from freedom of expression to non-discrimination. This, too, is often overlooked. Autocrats who say it’s impossible to deliver basic schooling to all of their citizens, or despots who claim that jailing their political opponents is justified, speak in contradiction of an entire field of law and practice.

From legal jurisprudence to international monitoring to UN investigations, today we have dozens of vehicles to bring human rights abuses into the light and define, precisely, why they breach international norms. All of this comes not only because the foundation stone of the international human rights system was laid down on December 10, 1948, with the Universal Declaration of Human Rights, but also because it’s been steadily expanded ever since.

But one of the greatest achievements took place within our lifetimes, in June 2011. This was the UN Human Rights Council’s unanimous adoption of the UN Guiding Principles on Business and Human Rights—the first time the human rights regime, originally designed for states, was authoritatively applied to businesses.

This offered benefits for all actors. For states and citizens, it gave them a framework for holding companies to account, using the same principles that civil society was already conversant with in applying to states. For businesses, too, the human rights regime gave them clarity, a defined set of obligations at a level above legal regulation and activist demands. The human rights regime defined, finally, the ‘S’ in CSR and the ‘people’ in the triple bottom line of people, planet, and profit. The clarity of the UN Guiding Principles, along with their unanimous backing by actors from the Nigerian government to Amnesty International to Coca-Cola, finally offered a framework that was as international and powerful as the private-sector actors applying it. 

I should also mention, rather selfishly, that this framework also came to underpin BSR’s work. Broad principles and international agencies operate at a speed and altitude that isn’t ready-made for companies. BSR takes those principles and translates them to the day-to-day. For example, we’re currently working with companies to mitigate the knock-on effects of poor labor practices in the supply chain, set up grievance mechanisms in Papua New Guinea, and develop a platform for technology to act as a vehicle for securing human rights.

But no birthday would be complete without a few thoughts on what we have yet to achieve. The human rights system is defined by its shortcomings as much as its successes.

Like anyone else in this field, I could bore you for days with my nitpicks about the human rights system. You’ve heard (or read) most of them before: It’s not binding, it’s slow, the coffee at the conferences is terrible. All that is nothing new.

So here, I want to talk about a shortcoming that doesn’t come up as often, but that I can’t stop thinking about—the difficulty of the international system to deal with systemic human rights abuses.

Companies need to think about their roles in larger economic systems, whether it’s how they promote an inclusive economy or how they contribute to climate change. In this sense, human rights is sometimes too narrow for business. We’ve got to look at the wider ecosystem of laws, society, and structures around the company to fully address its human rights impacts. BSR is currently building out our ecosystems approach to human rights in collaboration with our member companies.

Ultimately, human rights standards are always behind societal ethics. Child labor, for example, first got attention in the industrial revolution, but it took decades to be codified into domestic laws, then a decade or two more before it was enshrined at the international level. We’re seeing this same trajectory with living wage policies and data privacy right now: Information about their social impacts is clear, but it will take years of mobilization before they are effectively settled as law.

Companies, on the bright side, can move faster. While it’s important to use human rights as the basis of action, they can also extend their vision closer to the horizon, to issues where the impacts are clear, but the law is still evolving.

I don’t think we have even started to feel the full effect of the human rights regime on businesses. Governments are regulating more. Civil society groups are demanding and educating more. Investors are asking more questions. And indeed, more C-suite discussions on human rights are taking place than ever before. But no matter how revolutionary this moment feels, we’re still at the beginning.

But no matter how revolutionary this moment feels, we’re still at the beginning.

I think that’s a pretty good attitude to have on your birthday.

Blog | Friday December 7, 2018

The Maritime Anti-Corruption Network: More Members, More Action, More Impact

Preview

The Maritime Anti-Corruption Network (MACN)—a global business network working toward the vision of a maritime industry free of corruption—was founded in 2011 by a small group of companies. It was created with the recognition that for many years, the shipping industry has faced a difficult issue: When a ship travels in and out of ports, there is an opportunity to ask for illegal payments.

For example, one captain told us recently:

“The customs officer threatened to delay the ship and fine us US$60,000 for an error on the luboil [lubrication oil] declaration. Then he asked us for US$7,000 to help us have no problem.”

These corrupt demands are bad for shipping companies, as they can lead to delays or other commercial consequences for those who stood their ground. They are bad for the ports and governments, who acquire a reputation for corruption and have friction in the trading environment. Above all, they are bad for the ships’ captains and crews, who come under pressure to reject demands yet face threats, intimidation, and sometimes violence when they try to do so.

MACN started small, but it’s not small today: In 2018, MACN was delighted to welcome its 100th member. Members come from across the shipping value chain and include the largest vessel owners and operators, as well as associate members like companies that provide agents for ships entering ports. Collectively, MACN members represent over 25 percent of total global tonnage.

A bigger membership means a stronger collective voice when speaking with governments, ports, and customs: With over 100 members, we have real power to bring to the table and push for change. It means more resources to deliver tools and resources to members. And ultimately, it means greater impact and a better operating environment for those on the front line—the captains and crews.

A bigger membership means a stronger collective voice when speaking with governments, ports, and customs: With over 100 members, we have real power to bring to the table and push for change.

Here are some of the things we have been proud to accomplish in 2018 and three reasons why we would love for you to join us.

Collective Action

MACN’s collective action in Argentina has resulted in the successful adoption of a new regulatory framework for dry bulk shipping. This year, according to MACN data submitted through our anonymous incident reporting mechanism, corruption incidents in Argentina have decreased by more than 90 percent. This has been driven in part by high-level support for the new regulatory framework from the customs authorities and also from high-level politicians, including the Argentine President.

Elsewhere, we have completed our collective action project in Nigeria, which was supported by (among others) the Danish Maritime Foundation, the Orient Fond, and Lauritzen Fonden. The project included training over 1,000 government officials and developing a training course on ethics for government officials. We are proud to work with local partner Soji Apampa, founder of The Convention on Business Integrity Ltd.

MACN is also preparing to launch a collective action in India, with a port integrity campaign through which vessels will prominently display signs and posters co-signed by the government about the “Say No” policy and opposition to corruption.

Culture of Integrity

In addition to collaborating with members and stakeholders to find solutions in corruption hot-spots, MACN seeks to influence the wider culture to ensure lasting change. In 2018, MACN was delighted to present its work to the Facilitation Committee (FAL) of the International Maritime Organization (IMO). This was a major step in engaging the broader maritime community, and MACN is following up through a cross-industry working group.

MACN also spoke at several major conferences this year, including Transparency International’s International Anti-Corruption Conference in Copenhagen.

Finally, MACN was invited to provide testimony at the U.K. House of Lords on the U.K. Bribery Act’s effect on the maritime industry. You can watch a recording of the session here.

Our Impact

We’re delighted to see that the word is spreading, and our impact is growing. Around the world, corrupt demands in hot-spots are decreasing, and where demands are still being made, our members are better prepared, with stronger policies, more resources, and the best practices of their peers.  

But don’t just take our word for it. We asked some of our members why they joined MACN, what its value was, and how it can enable fair trade to the benefit of society and all stakeholders. Watch the video below to hear from them, and if you would like to get involved, contact us.

Blog | Wednesday December 5, 2018

Supply Chains Give Us the Opportunity to Measure and Fight Violence against Women

Preview

“There are times when a woman deserves to be beaten.”

That’s what 34 percent of approximately 11,500 workers and managers in factories in India believe, according to a survey conducted by BSR’s HERproject, which works with global brands, their suppliers, and expert local partners to empower women working in global supply chains.

In many countries at the heart of supply chains (such as India), unequal power relations between men and women facilitate and excuse violence and sexual abuse against women. Yet while this may be common knowledge, it is not always easy to demonstrate—and it is certainly not easy to tackle at a societal level.

Workplaces like factories bring together large numbers of women and men every working day. As such, they can be an ideal location to measure and tackle the norms that underpin violence against women.  

That’s why leading global brands and their suppliers are putting their weight behind efforts to address violence against women through workplace-based interventions. 

BSR’s HERrespect, a pillar of HERproject, provides training sessions for managers and both women and men workers, joint sessions between workers and managers to facilitate dialogue, and support for managers to develop and communicate policies. It invites workers and their managers to reflect on the different ways violence might manifest in a relationship, how to recognize it, and its consequences at home and at work. It helps both men and women explore how power relationships might be abused. And it works to change managers’ preconceptions around how supervisors should motivate their workforces.

BSR has implemented HERrespect trainings in nine factories in India (four in the South and five in the North), which included approximately 11,500 women and men workers and managers. Before the training begins, we present all participants with a series of statements and ask them whether they agree or disagree. A month after the training is complete, we return and repeat the process.

The results from the final survey are encouraging. Across all participants, including workers and managers, agreement with the statement, “There are times when a woman deserves to be beaten,” dropped by 55 percent (from 34 percent to 15 percent). In three factories, female workers did not see any justification for violence at the end of the program; the percentage of female workers in agreement with that statement dropped from 34, 48, and 36 percent to zero.

Similarly, we presented participants with the statement: “If a male supervisor makes suggestive comments to a female worker and she seems interested, it is not sexual harassment.” Following the implementation of HERrespect, agreement for this statement dropped by 50 percent (from 36 percent to 18 percent).

These are preliminary data: BSR will continue to review and expand our evidence base on violence. Nonetheless, two things are clear.

First, the scale of the challenge is enormous, because these are issues that stem from deeply unequal norms that workers and managers have internalized. When 34 percent of a group—including a high proportion of women—agrees that there are times when a woman deserves to be beaten, we see how deep the problem runs.

But secondly, there is hope for progress—and business can be a major player in the solution. Global brands and their suppliers have not created discrimination against women, and they cannot be expected to end it on their own. Nonetheless, smart businesses are recognizing that the manifestation of these attitudes in the workplace constitutes a major business risk. Moreover, as employers of millions of women and men in countries like India, global brands and their suppliers have an opportunity to push positive messages that counteract discrimination and reduce violence, playing a positive role as corporate citizens.

The surveys we conducted at the end of the program leave us optimistic that real change is possible. As one worker put it after completing the HERrespect training:

“There was a time when men in my floor would not listen to me. They not only believed that women can’t speak, but also condemned all those who are not educated enough. The combined sessions with men and women really helped to create our own identity in the workplace. During sessions when our male counterparts saw me speak so confidently, I began to realize my own value.”

We encourage other leading brands to join us in HERrespect and become a force for positive change for women. Please contact us for more information.

Blog | Monday December 3, 2018

Why We Need a Just Transition to a Low-Carbon World

Preview

The world is experiencing three massive, interconnected revolutions at once: the energy transition driven and necessitated by climate change; the Fourth Industrial Revolution, which is upending traditional models of employment and work; and demographic and economic changes that bring cycles of disruption more quickly than in the past. Amidst these changes, it is essential that we take seriously their impacts on people and communities.

The just transition is an economy-wide process that produces the plans, policies, and investments that build resilient economies and communities with green and decent jobs, in the midst of these shifts. This requires creating jobs by seizing new economic opportunities, while reducing the disruption people and communities face in moving away from high-carbon business models. A just transition that achieves these objectives will generate economic vitality and stability, and individual companies that contribute to a just transition will better manage the risks from a transition to the low-carbon economy and capitalize on related opportunities.

The just transition is an economy-wide process that produces the plans, policies, and investments that build resilient economies and communities with green and decent jobs, in the midst of these shifts.

Today, BSR launches our report Climate and the Just Transition: The Business Case for Action to highlight how businesses can engage in a just transition that will speed us toward the low-carbon economy. 

The just transition is a key topic at the UN Climate Conference (COP24) this month, at which the Silesia Declaration on a Just Transition will be announced. Interestingly, COP24 is taking place in a region of Poland that has been highly dependent on coal, and where this traditional driver of employment has created opposition to climate action. Indeed, our hosts may be ambivalent about the shift to clean energy, based in no small part on concerns about domestic political support, given livelihoods are viewed as being at risk due to climate action. Poland is not alone: We have seen reversals by new governments in the United States, Brazil, and Australia, all in the name of protecting jobs.

Yet there is considerable evidence showing that decisive climate action in fact generates economic vitality. Most studies indicate that climate policies can result in net employment gains of 0.5-2 percent, or 15-60 million jobs globally, with the ILO estimating a net increase of 18 million jobs. A just transition will maximize the economic opportunities of the low-carbon economy, while minimizing the related disruption.

Business has a crucial role to play in shaping a just transition. For starters, emerging low-carbon business models offer quality employment opportunities. And companies that have made groundbreaking commitments to renewable energy procurement can take steps to ensure that such energy is generated and distributed through quality employment. There are significant investment opportunities to undertake in communities experiencing dislocation as business models based on fossil fuel production decline. 

Social dialogue, through which business engages directly with workers and their representatives on working conditions, is crucial. Several companies, including Enel, Ørsted, and others, have engaged in dialogue with trade unions to develop modern, clean energy jobs on the basis of core labor standards.

Finally, businesses can engage in the development of public policy solutions. Climate is global, and action on the just transition is often local. It is therefore essential that both national and sub-national efforts ensure that workers can shift to jobs that drive carbon-neutral prosperity. At the Global Climate Action Summit in San Francisco in September, the mayors of Vancouver and Oslo expressed their support for just transition. The C40’s new “Inclusive Cities” initiative highlights efforts to deliver inclusive climate action that improve quality of life for all. Business should be at the table as these kinds of solutions are developed.

Business also has much to gain from working toward the just transition. First, there is a high likelihood that the social license to operate would be damaged by the perception that companies are disposing of workers in the name of climate action. Second, through the Pledge for a Just Transition to Decent Jobs, an emerging group of companies is developing positive labor relations with trade unions through partnerships to build the energy transition on the foundation of high labor standards. Third, companies seeking public policy frameworks and incentives needed to achieve mitigation targets are far likelier to obtain that result in an environment in which economic dislocation is also mitigated. And fourth, a just transition reduces the costs of managing the transition risks articulated by the Task Force on Climate-related Financial Disclosures (TCFD).  

This year, the urgency of climate action has been driven home by the Intergovernmental Panel on Climate Change (IPCC) Special Report on Global Warming of 1.5°C, which demonstrates that the time to act is short, and the devastating wildfires in California, which show the profound impacts people and communities face right now. These wake-up calls provide a stark reminder of the need to act.

The just transition is a crucial roadmap to action that shifts climate from a threat to an opportunity. Business would be wise to pick up this challenge and run with it.

Reports | Monday December 3, 2018

Climate and the Just Transition

Preview

Climate change affects every human around the globe, with profound implications for economic opportunity, social justice, and human rights. Health-related stresses; competition for natural resources; and the impacts on livelihoods, hunger, and migration warrant immediate global action. Indeed, rising attention to climate change coincides with fundamental changes in technology, the nature of employment, and the social contract. Only by considering these issues together can we develop effective solutions.

This report examines the concept of the “just transition” to the low-carbon, climate-resilient economy. It provides recommendations for business on how to reduce greenhouse gas (GHG) emissions, while enabling economic vitality and ensuring adherence to global labor standards; how to enhance climate resilience for communities; and how to cultivate effective participation in the social dialogue, which will accelerate such a transition.

This report is part of a series of six climate nexus reports that cover just transition, human rights, inclusive economy, women’s empowerment, supply chain, and health.

Climate Nexus Report Series

Blog | Thursday November 29, 2018

How to Implement the TCFD Recommendations

Preview

For sustainability practitioners, the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) remove a pain point by establishing a single vocabulary of climate risks and opportunities and harmonizing the landscape of climate reporting.

The recommendations are gaining steam: The September 2018 TCFD status report showed they now have support from 513 organizations (including 457 companies). However, it is time to move our discussion from whether to implement the recommendations to how companies should do so.

It is time to move our discussion from whether to implement the TCFD recommendations, to how companies should do so.

For the status report, the TCFD carried out artificial intelligence (AI) analysis of reporting from 1,700 companies, in addition to human analysis of 200 leading companies whose reporting includes the word “climate.” This analysis revealed that:

• Most companies disclose some climate-related information, but financial implications are often not disclosed.
• Disclosures are made in various company reports, including financial filings, annual reports, and sustainability reports.
• Larger companies and European companies disclose more related to the recommendations, but few companies overall implement climate resilience strategies, use different climate-related scenarios, or disclose processes for identifying, assessing, and managing climate risk or integrating it into overall risk management.
• Disclosures vary by industry, with each industry providing stronger or weaker disclosures on specific recommendations.

While the status report analysis is helpful in assessing the status of implementation on yes/no basis, it does not answer the practical question of best practice inclusions. It also reveals what is challenging about implementing the recommendations: Those recommendations that imply organizational change are, not surprisingly, the hardest to implement.

If the objective of the TCFD recommendations is to improve disclosures related to even the hardest recommendations, practical advice is also essential. For this reason, we examined the examples provided in the status report and companies’ disclosures to formulate the straw best practice inclusions below for each of the 11 recommendations.

For each TCFD recommendation, we suggest what should be disclosed, if applicable to the organization. By beginning with those recommendations for which they already have programs or policies in place, companies can take an iterative approach and resolve challenges over time.

Governance

Governance (a): Board oversight

• Clear description of who has ultimate accountability for management of climate risks
• Clear description of roles and responsibilities on climate change
• Experience of board members on climate change
• Specific board committees overseeing climate risks and membership and cadence of meetings
• Climate-specific structures/committees in place (if any) and related decision-making processes
• Methodology for and amount of incentives to promote management of climate-related risks at board level

Governance (b): Management’s role

• Management responsibilities on climate issues, beyond broader sustainability or ESG responsibilities
• Specific ESG functions or committees and climate-specific functions or committees, as well as their scope of concern
• Processes used by management to review climate-related issues and translate them into strategic decisions
• How risk management and sustainability functions collaborate on climate-related risks and opportunities
• Methodology and incentives to promote management of climate-related risks by management

Strategy

Strategy (a): Climate-related risks and opportunities over the short, medium, and long-term

• Risks categorized according to the TCFD typology (physical risks categorized as acute or chronic; transition risks categorized as regulatory, market, technology, or reputation)
• Relevant climate opportunities, in addition to risks
• Time horizons used (short, medium, and long term) and link to business strategy or sustainability strategy goals
• Distinction between risks to operations and those to the portfolio or supply chain

Strategy (b): Impact on business, strategy, and financial planning

• Processes used to determine which climate-related risks and opportunities are material
• Lines of business impacted by climate-related risks or opportunities
• Overarching goals and estimated costs and impacts, committed capital expenditure, and how investments have evolved 
• Links between climate-related risks and opportunities and business and sustainability strategy

Strategy (c): Resilient strategy and scenario analysis

• Scenarios analysis conducted primarily as an opportunity to improve strategic resilience and explore climate vulnerabilities (and not a reporting exercise)
• A broad range of climate risks and opportunities, including both physical and transition risks
• Scenarios grounded in climate science that capture business specifics and focus on the key uncertainties for the company/sector
• Data from diverse sources to reduce the risk inherent in any single projection
• Relevant internal stakeholders consulted to shape scenarios
• Regular review of scenarios as part of business processes
• Methodology and key quantitative/qualitative assumptions for scenario analysis, as well as the impact of scenarios on the business
• How company strategy has been made more resilient through scenario analysis

Risk Management

Risk Management (a): Processes for identifying and assessing risks

• Risk assessment frameworks and criteria for assessment
• Major issues or categories of issues
• Use of internal carbon price, if relevant
• Monitoring of physical climate risks, if relevant, and preferably at local level
• Participation in relevant industry initiatives

Risk Management (b): Processes for managing risks

• Centralized climate risk management processes in a single location
• How the risk register is developed (e.g. from materiality) and how climate is reflected (e.g. combined with other risks, as its own specific risk, or broken down into different climate-related risks)
• How the most material risks are prioritized

Risk Management (c): Integration into overall risk management

• How climate indicators are integrated into projects and business decisions
• Processes of engagement with investee companies on climate-related risks and metrics
• How climate is considered adequately (and potentially separately) in enterprise risk management processes, alongside other ESG risk factors

Metrics and Targets

Metrics and Targets (a): Metrics

• Key information on metrics disclosed in mainstream financial reports
• Metrics and targets complemented with context of a specific project or target, as relevant
• Most decision-useful metrics as identified with investors
• Financial metrics used if available

Metrics and Targets (b): Scopes 1, 2, and 3 emissions and related risks

• Scope 3 calculations, including downstream emissions (e.g. use of sold products)
• Reference methodologies and standards used to measure emissions
• Consistent use of absolute and/or intensity metrics, to enable understanding of progress against targets
• Risks that relate to your largest sources of emissions

Metrics and Targets (c): Targets

• All basic features of a target (e.g. base year, target year, greenhouse gases, and geographies in scope)
• KPIs for climate targets and progress over time (e.g. data from last three years if available)
• Targets aligned to metrics (ex. scope 1, 2, 3) and including most important scope 3 categories
• Links between management remuneration and specific targets

BSR has convened events on the TCFD recommendations this year in San Francisco, Tokyo, Hong Kong, and at BSR Conference in New York. Please join us on December 4 in Paris for our conversation (in French) on this topic, Feedback on the TCFD Recommendations: How to Make Progress on Climate Resilience.

We welcome all opportunities to discuss implementation of the TCFD recommendations with you, so please don’t hesitate to get in touch.

Blog | Wednesday November 28, 2018

Four Steps to Align ESG and Enterprise Risk Management (ERM)

Preview

As outlined in BSR’s recent report, Redefining Sustainable Business: Management for a Rapidly Changing World, resilient business strategies require an enterprise risk management (ERM) approach that effectively incorporates sustainability risks of material significance to the company, such as climate change, natural resource availability, and social volatility.  

An executive we recently interviewed outlined it this way: “Risk awareness needs to become much greater now that we are living in a riskier world and facing issues such as the rise of authoritarianism, cybercrime, and migration. We will see companies having much greater oversight of risk, and investors will be much more demanding of this than in the past.” 

Risk awareness needs to become much greater now that we are living in a riskier world and facing issues such as the rise of authoritarianism, cybercrime, and migration. We will see companies having much greater oversight of risk, and investors will be much more demanding of this than in the past.

There is a clear opportunity for companies to utilize the outputs of sustainability-oriented materiality assessments and align materiality and risk identification processes.  

The World Economic Forum’s 2008-2018 annual Global Risk Reports show that environmental and societal risks have overtaken economic and geopolitical risks in terms of both likelihood and impact. However, companies are not addressing conventional risks and sustainability risks equally. According to WBCSD, fewer than one in three issues identified in sustainability materiality assessments are disclosed as risk factors in legal filings for investors.  

Failing to manage ESG risks can lead to material business impacts, including missed profits, operational impacts, and loss of license to operate. Meanwhile, mainstream investors are increasingly emphasizing disclosure of ESG risks, monitoring ESG performance, and reporting on ESG issues: The recently released 2018 US SIF report found that investors today consider ESG factors across US$12 trillion of professionally managed assets, which represents a 38 percent increase since 2016. Although risk and sustainability teams are often siloed, there is a clear business case for corporate sustainability leaders to collaborate with risk teams on shared goals. 

Incorporating sustainability into ERM can strengthen a company’s understanding of its full suite of risks, improve its sustainability management, and enhance overall business performance. Likewise, incorporating an ERM lens into materiality assessments can help to translate results into language relevant to the business. BSR has assessed the major needs and challenges to align sustainability priorities with ERM and recommends the following four-step approach:  

1. Identify the full spectrum of your company’s risks—including environmental, social, and governance risks. Use ESG risk identification methods, megatrend analysis, and media monitoring (for example, using tools like Polecat), to comprehensively identify both established and emerging risks.  
2. Align on priority ESG issues for inclusion in ERM and modify your ERM inventory accordingly. Conduct a gap assessment of your existing risk inventory, translate specific emerging and existing material issues across priority ESG issues and existing ERM issues, and make necessary adjustments to your materiality analysis and risk inventories.  
3. Evaluate relevant risks for likelihood, vulnerability, and impact. Use high-level risk assessments that consider less conventional criteria like impacts to reputation, speed of onset, persistence, and ability to mitigate to help enhance understanding of difficult-to-measure sustainability risks. You can also leverage forecasting and futures scenario analysis to assess the unique characteristics of longer-term and rapidly emerging sustainability risks.  
4. Maintain ongoing ERM and materiality alignment. Put effective governance structures in place that ensure emerging and evolving issues are captured by both sustainability and ERM teams to support ongoing ERM and materiality alignment. 

This approach can help your company improve its processes to better manage emerging, cross-cutting, significant, and long-term risks. If you’d like to learn more about how we can help your company align your sustainability and risk management frameworks and priorities, please contact us.

Blog | Tuesday November 27, 2018

Business Calls for Strong Guidelines and Increased Climate Ambition at COP24

Preview

At COP24, the world’s governments will convene at the most important climate negotiations since the Paris Agreement was adopted in 2015. This meeting comes in the wake of the release of the IPCC Special Report Global Warming of 1.5ºC and amid increasing global political instability, as evidenced by Brazil’s presidential elections, the ousting of pro-climate action Prime Minister Malcolm Turnbull in Australia, and the Trump administration’s continued dismantling of U.S. climate policy. Moreover, it will unfold in the face of extreme climate impacts across the globe, including the recent deadly California forest fires.

While the IPCC report makes it clear that we must act now to curb potentially devastating climate-related events, it also shows that achieving net-zero greenhouse gas (GHG) emissions by 2050 is both possible and necessary to achieve the Paris Agreement’s goals. In this time of urgency, businesses, governments, and other stakeholders must do this together—reinforcing ambition loops that will drive system-wide progress to reach these goals and create a resilient, just, and zero-carbon future.

Business is contributing to the stability that will help governments feel confident that they can do this. Through We Mean Business, a coalition of nonprofit organizations working with the world’s most influential businesses to take action on climate change, business helps drive policy ambition and accelerate the transition to a low-carbon economy. Over 830 leading companies, representing US$16.9 trillion in market capitalization, equivalent to 20 percent of global GDP, have made more than 1,350 bold climate commitments, through the coalition's Take Action campaign.

Noting the urgency and that we must act faster and more inclusively, business is looking to policymakers to build on the progress to date and step up their ambition. Bold targets and clear timelines from governments give businesses the clarity and confidence they need to put forward even more ambitious commitments of their own, which in turn helps governments further strengthen and enhance national climate policies.

Bold targets and clear timelines from governments give businesses the clarity and confidence they need to put forward even more ambitious commitments of their own.

Business calls for a just transition

The transition from a fossil fuel economy to net-zero global GHG emissions in the second half of this century, as the Paris Agreement envisions, will require significant technological, social, and economic transformations. Companies must deliver a large share of these transformations but will only be able to do so if unions, workers, and communities are engaged and active participants.

For specific regions and sectors that will undergo a major transition, this requires initiating tripartite social dialogue with businesses and workers to secure trust and productive coordination between partners. For high-emitting sectors, this will mean integrating investment in training and skills provision into sectoral decarbonization pathways—as well as providing social security for workers moving from high-emitting jobs into low-emitting jobs—while ensuring investments and policies incentivize new, decent green jobs.

Business calls for government participation in the Talanoa Dialogue

At COP24, governments should participate fully in the Talanoa Dialogue and clearly signal their intention to increase ambition by updating nationally determined contribution (NDC) targets and creating long-term strategies. This includes communicating these targets and strategies before 2020 and aiming for net-zero emissions as early as possible, with leading economies aiming to achieve this by 2050 at the latest. Governments should implement collaborative, participatory engagement processes with key stakeholders; include mechanisms to initiate periodic (e.g. every five years) upwards revisions to targets; and account for employment, education, skills-building, and social planning to ensure a just transition.

Business calls for strong Paris rulebook guidelines

Finally, to ensure the implementation of the Paris Agreement, a strong rulebook with the following guidelines will give businesses the clarity and confidence they need to put forward even more ambitious commitments of their own.

• A global stocktake that drives ambition and considers input from stakeholders, including business;
• Common implementation periods and target years for NDCs to improve their comparability and enable businesses to more accurately calibrate decisions across a global set of NDCs;
• An enhanced transparency framework that credibly tracks progress, making it easier for business to plan their own climate strategies and goals; and
• Strong guidelines to protect the environmental integrity of carbon markets and enable the lowest-cost emissions reductions which enables business to seek out cost-effective emissions reductions.

As we look at the climate policy landscape in 2019, including to the UN Secretary General’s Climate Summit in September, and COP26 in 2020, where the next round of NDCs will be tabled, it is clear that COP24 is a key moment. We urge governments to step up their ambition and partner with business to ensure a successful COP24 that lays down the necessary foundation for a resilient, just, and zero-carbon future.

To read the business call for governments in more detail, please see the full publications here.