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Blog | Tuesday February 27, 2024

Three Approaches for Integrating Human Rights into Company Risk Registers

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

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

The Challenge

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

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

Three Approaches 

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

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

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

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

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

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

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

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

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

BSR’s Analysis and Recommendations 

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

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

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

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

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

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

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

Blog | Thursday February 22, 2024

Investing in Women Workers: How Training has Helped Build Financial Resilience in Shea Supply Chains

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From moisturizer to chocolate, shea butter and oil—an ingredient extracted from the nut of the shea tree fruit—is used by food and cosmetic companies to create a variety of everyday items. The supply chain behind these products involves over 16 million women, who collect shea fruit, and process the nuts found in the fruit. Given women workers’ role in the value chain, their financial inclusion is crucial to ensuring the sustainability of shea—a commodity that has been under pressure given climate variability and increased clearing of shea trees for farmland.

Workers that focus on nut collection face a restricted timeframe during the summer months when ripe shea fruits allow for earning a sustainable wage. However, workers involved in processing shea nuts into shea butter may have a more stable income due to year-round work yet only garner profits from collecting during the shea season. Given that most women are uniquely shea nut collectors, and processing at scale requires several resources not readily available to everyone, the dependence upon the shea yield often leads to unstable income streams and difficulty predicting women’s disposable income. 

To increase the financial independence of shea workers from Ghana, BSR, the Estée Lauder Companies Charitable Foundation, and other partners, developed a financial resilience training program for over 1,000 women working in shea in Northern Ghana.

The pilot’s scoping took a community-informed approach, gathering feedback from women shea nut collectors and processors in the identified villages. For over ten months, we delivered training in two co-operatives in the Tamale region: one in Mole Crema with mainly women shea nut collectors, and one in Janshegu with women that both collect and process. Peer educators and community volunteers were first trained on a range of financial literacy topics—including financial planning, saving, budgeting, products and services, and family financial decision-making—and then supported in delivering the training to other women in their shea cooperatives.

The results have tangible impacts on women’s livelihoods and surfaced some interesting takeaways for companies looking to improve outcomes for workers in agricultural supply chains. 

How Can Business Take Action? 

Financial resilience boosts women’s independence and their overall well-being and confidence. 

Despite representing 43% of the global agricultural labor force, women face major barriers to realizing their full economic potential, such as disproportionate burdens of care, unequal access to resources, limited ownership and control of land, and lower remuneration.

Surveys captured before and after BSR pilot training in two co-ops have shown a positive change in gender dynamics in several households, with men taking a more active role in household chores and women more involved in daily decisions. The percentage of women believing that they should have as much access to credit and financial services (savings account, insurance, loans...) as men, increased from 54% to 98% following the pilot.

The financial resilience training dramatically increased women’s overall understanding of financial planning and boosted savings rates. Nearly all women started saving monthly after the training, versus 36% in Janshegu and 60% in Mole Crema before the training. As a result, many women took on entrepreneurial initiatives that helped them diversify their income streams—for instance, by purchasing sewing machines to mend garments or freezers to sell cold drinks.

We simultaneously observed an overall growth in confidence, an increased sense of joint decision-making power between partners, and reduced perceived limitations around savings, leading women to save more of their earnings. This training model proved to not only support women in achieving higher financial confidence but also amplified their sense of agency in their communities and their shea cooperatives.

Given women worker’s pivotal role, applying a gender lens can not only strengthen agricultural supply chains but can also enable entire communities to improve their social and economic well-being. 

Collaboration between business, civil society, and local stakeholders is key to empowering workers and strengthening bonds that enable sustainable supply chains. 

The pilot program in Ghanaian shea is a testament to the value of taking a collaborative approach, whereby business can amplify social inclusion and community impact by empowering female workers in their supply chain. Women who participate actively in financial decision-making, as well as engaging with resources like savings groups or financial institutions, are enabled more autonomy regarding how they manage and improve their shea business. This engagement with financial resources, and active decision-making can increase their resilience in the face of volatility in the shea market.

Tapping into the local networks of cooperatives enabled an extended reach, as beneficiaries engaged their wider communities, thereby increasing women’s economic empowerment across more of the supply chain. Engaging with local partners and suppliers at the raw material level built stronger business networks while also increasing women’s interest in continuing to work within shea. 

With diversified businesses and more tools at their disposal, shea businesses can continue despite times of downturn, which has the potential to secure a more stable supply. Financial learnings can also enable investment in increased shea butter production and output with one training beneficiary saying:

“When I heard the word budgeting, I always related it to government. I never knew I could personally budget. This training has explained budgeting [and] I can [now] budget for to buy more of the shea nuts for shea butter processing."

Shea Woman Collector

The pilot program in Ghanaian shea demonstrates the value of taking a collaborative approach, whereby business can amplify social inclusion and community impact by empowering female workers in their supply chain. Working through local cooperative networks extended the reach of the impact as the women who received training shared learnings with their communities. Engaging with local partners and suppliers at the raw material level built stronger business networks while also increasing women’s interest in continuing to work within shea. 

By participating actively in financial decision-making and leveraging resources like savings groups or financial institutions, women are enabled more autonomy in managing and investing in their shea business and can increase their resilience in to market volatility. 

Investing in collaborative financial resilience trainings for female supply chain workers—at both the business level and industry level—can reduce supply chain volatility, mitigate disruption risks and ultimately create lasting impact on women’s economic empowerment. 

Next Steps 

To build on the pilot’s successes and expand impact for female financial resilience in supply chains, BSR and the Estée Lauder Companies Charitable Foundation are currently scaling this training intervention throughout 2024. In seeking to scale, we are strengthening the capacity of several local suppliers and their field officers—who interact regularly with the women workers—to make the training more accessible to actors across the shea industry. 

Further to this, we are creating a radio program with the Farmers’ Voice Radio Network (FVRN) to educate its farmer and shea nut collector and processor listeners across rural areas in Ghana on financial topics. The approach of using different models aims to increase women’s financial wellbeing in the sector. 

In testing the effectiveness of different models, BSR will share learnings, successes, and best practices from the project scale-up to inform efforts for investing in women working in agricultural supply chains and advancing worker and supply chain resilience.

Learn more about this initiative here, and if you would like to get involved in the scale-up, please contact us.

Blog | Wednesday February 21, 2024

2024’s Elections: A Defining Test for Business Leadership

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As more than half of the world’s voting-age population heads to the polls in 2024—more than in any previous year in human history—there is a wave of anxiety cutting across business, civil society, governments, and in many places, the very citizens whose voices are to be heard at the ballot box. 

It is, indeed, an epochal moment. Most of us take democracy, and the rule of law, as a stable constant in our public life. But it’s not something we can take for granted. The rise of anti-democratic parties around the world has set off alarms. It is far from clear, however, that business has faced up to the urgency of the moment. Although, according to a recent report in Fortune, business leaders increasingly recognize that political disruptions do pose a significant risk. 

Business cannot thrive in an environment where trust in democratic institutions is undermined, where objective facts are under attack, where social consensus is unattainable, and where populism stokes resentment and interferes with global collaboration.  

All of those things are in play in 2024’s elections, from India to Mexico to the United States, to the European Union, and dozens more jurisdictions.

This would, at other points in history, be considered a political question that is not front and center for business. For multiple reasons, that mode of thinking is a luxury that businesses cannot afford. 

To start, while elections ensure that the people have their say in governance, there are many reasons why this year’s spate of elections may not have that effect. First and foremost is mis/disinformation, including AI-powered deepfakes, which generate false information that distorts outcomes and destroys trust.  

Already this year, in the US and Pakistan, false information and deep-faked communications ostensibly from candidates and officeholders have distracted and confused voters. There is considerable evidence that both domestic and foreign actors are using the digital playing field to influence outcomes and erode trust in democratic processes.

There are also many barriers to free and fair elections having nothing to do with digital tools. Political parties and candidates in many countries have actively cast doubts on the legitimacy of elections, established legal and practice barriers to voting. And in the United States, the flood of money from opaque sources undermines both the reality and the perception of free and fair elections. 

In addition to questions about the legitimacy of election processes, some outcomes present risks for companies committed to just and sustainable business. Across the world, populist movements are causing a turn away from climate action, progress on equity and diversity, respect for disfavored populations, and global cooperation.

Concerted progress on climate and nature, for example, will be virtually impossible if the COP processes—as imperfect as they are—buckle under the weight of geopolitical conflict and nationalism. Scapegoating and xenophobia interfere with business commitments to diversify businesses from the boardroom to the factory floor and contribute to a vicious cycle in which human rights and rule of law are sacrificed in the name of national glory. And the momentum towards the harmonization of regulatory standards relevant to “ESG” is also under threat. 

The stakes, in my view, are clear. The question then is what can businesses—and business leaders—do? 

For many businesses, this presents uncomfortable questions, and a sense that while there is risk in inaction, there may be equal or greater risk in taking action.

We believe that the best approach is to establish a “playbook” that offers companies a range of options that they can fit to their circumstances and assets. All companies, for example, can encourage voting and help their employees strengthen their media literacy to avoid false or misleading information. All business leaders can speak with their peers in various forms and engage in quiet diplomacy with government officials to promote legitimate elections. Indeed, this was seen in the run-up and aftermath of the 2020 elections in the United States. 

Other steps may be appealing to some companies and not others:

• Coalitions of companies committed to preserving and advancing workforce diversity and climate action—with a clear statement of business and economic benefits—can send a powerful message.

• By reinforcing the economic value of cooperation to address global challenges, business can help to legitimize the economic case for a truly sustainable economy.

• Demonstrating the human progress that individual companies—and macro financial and economic systems—can deliver through an enduring and purposeful commitment to sustainability further reinforces positive outcomes.

Not all companies will want to make these efforts, but this is essential in a world where a sense of economic precarity is fueling fear-based politics.

BSR is supporting its member companies in understanding the stakes, identifying leverage points, and supporting collaboration, including with like-minded stakeholders. Seldom has there been a time when the achievement of free and fair elections and sustainability goals have been so closely tied. 2024 is not only a stress test for rule of law and democracy; it is a test for business leadership as well. The opportunity for positive impact is great, and the price of inaction is too high to risk. 

People

Kaia Ling

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Kaia works with BSR member companies across industries on sustainability management, with a focus on climate change, supply chain sustainability, and consumer sectors.

Prior to joining BSR, Kaia supported the development of the innovation and sustainability department in an alternative protein start-up, where she focused on developing a holistic sustainability roadmap and strategy and performing a baseline assessment to identify opportunities of improvement in sustainability performance. She started her career in a boutique sustainability consultancy firm focusing on plastic waste advisory and has experience working with private companies and governmental agencies, such as the Supreme Committee for Delivery and Legacy in Qatar, to promote the management of plastic waste in their operations and supply chain.

Kaia holds a B.Sc. (Hons) in Environmental Earth Systems Science, specializing in ecology, from Nanyang Technological University, Singapore. She is fluent in English and Mandarin.

Blog | Wednesday February 14, 2024

China’s Climate Commitment and its Impact on Scope 3 Targets

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China’s national climate commitment aims to achieve carbon neutrality by 2060 and an emissions peak by 2030. The country has indicated a firm resolve to achieve these targets, while also emphasizing a trajectory that is “independent of external influences”. This blog explores the business implications of these climate policies, offering insights that are particularly relevant for global companies with substantial manufacturing operations in China and recommendations for how to leverage opportunities to address Scope 3 emissions in this dynamic landscape. 

China's engagement in COP28 provided valuable insights into its evolving energy strategy, accompanied by potential 2025 targets. In addition, the Sunnylands Statement, jointly released by China and the U.S. signifies an elevated commitment to collaborative efforts in addressing the climate crisis. While abstaining from the Global Renewables and Energy Efficiency Pledge due to reservations, China’s stance reflects concerns over side agreements and meeting the outlined targets.

Introduced before COP28, the EU's Carbon Border Adjustment Mechanism (CBAM) faced some criticism, particularly from China, reflecting an acknowledgment of CBAM’s potential impact on trade dynamics and the imperative for enhanced climate emission reductions.

Propelled by climate policies, Chinese provinces, including Beijing, Shanghai, and Guangdong, are actively implementing comprehensive strategies for green, low-carbon development, emphasizing technological innovation, carbon neutrality, and the integration of sustainable practices across various industries. 

Renewable energy is experiencing rapid growth in China. This upswing has a ripple effect on market performance, fostering growth in sectors such as electric vehicles (EVs), energy storage, and other emerging industries and technologies. However, despite the increasing share of renewables in the total electricity mix, coal usage is projected to rise, driven by China's post-COVID emphasis on economic development--a trajectory likely to continue until the nation reaches its emissions peak.

At the corporate level, businesses spanning manufacturing, construction, and logistics are embracing transformation by integrating solar panels, incorporating EVs, and adopting diverse clean energy practices. Notably, local enterprises, whether state-owned or private, are demonstrating proactive efforts to embrace emission reduction goals, potentially shaped by implicit government compliance expectations. This complex interplay of factors reflects China's evolving energy landscape, which is driven by priorities both at the national and local government level, followed by market changes including investment in the energy sector and carbon tax schemes. 

Global companies operating in China, especially those with significant manufacturing, can take the following actions to meet their Scope 3 reduction targets in the context of evolving climate policies: 

1. Craft a Comprehensive Climate Strategy that Aligns with Broader Business and Sourcing Strategies:

   Global companies are increasingly setting clear climate strategies, particularly net-zero targets. However, a challenge lies in these strategies predominantly addressing Scope 1 and 2 emissions, leaving out Scope 3. To truly embrace a holistic approach encompassing Scope 3, it is crucial to intertwine climate strategies with broader business strategies. This integration ensures that actions to decarbonize supply chains align with business priorities and commitments, fostering collaboration with suppliers on climate performance improvements. Importantly, climate strategies should not burden suppliers but instead, serve as a collaborative framework for shared sustainability goals. 

2. Empower Supplier Engagement for Scope 3 Reductions:

   In alignment with China's climate policies, many suppliers within the country express a willingness to embrace clean energy practices and invest in sustainable, long-term emission reduction solutions. However, some encounter challenges, ranging from where to start their sustainability journey, to calculating the return on investments. Many suppliers are eager to form partnerships with buyers, seeking collaborative opportunities for improvement and knowledge-sharing. Global companies and buyers can actively support these suppliers in their continuous efforts to collectively achieve Scope 3 emission reduction targets. Explore additional BSR resources on Buyer-Supplier Engagement, Supplier Engagement Guide, and a case study from Denmark for effective strategies.

3. Strengthen Partnerships with Leading Suppliers and Industry Initiatives for Collective Scope 3 Solutions:

   Within the global supply chain, many Chinese suppliers excel in innovation, production, energy efficiency, and emissions reduction. Many have already established climate reduction targets and actively engage in industry-wide collaborations, such as the UNFCCC China group's initiative in the apparel industry. Global companies and buyers can leverage active suppliers in China, capitalizing on their commitment to ongoing improvement, robust investments, and dedication to low-carbon practices. 

4. Integrate Just Transition Considerations:

   While examining how to achieve specific Scope 3 targets is crucial, it is equally important to incorporate a holistic perspective on an accelerated and sustainable transition to a net-zero economy, considering the well-being of individuals, workers, and local communities. By integrating social considerations into climate goals, companies can contribute to a just and sustainable transition, ensuring a positive impact on both the environment and the communities in which they operate. 

In navigating China's dynamic and evolving climate policy landscape, global companies often cite the challenges posed by uncertainty and frequent policy changes. However, amid these complexities, it is increasingly vital for companies to establish their own climate strategy and clear goals in alignment with the 1.5°C global ambition. This strategic clarity will enable them to adeptly navigate through China's climate policy shifts, whether gradual or abrupt. Recognizing China's significant role in raw material supply and production, and as a major consumer market, companies should leverage these vast opportunities for resources and partnerships. 

For more guidance on navigating the evolving climate policy landscape, contact BSR’s climate and supply chain experts based in China.

Blog | Tuesday February 13, 2024

The Sustainability Leader Checklist for 2024

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2024 is set to be yet another year of polycrises: violent conflicts, turbulent geopolitics, fractured societies, extreme weather, and unharnessed AI, to name just a few. The difficult news waves will cross the CEO’s desk and land on the laps of the Sustainability team, in conjunction with other teams. How you as a sustainability professional interpret these conflicts will be critical—both to your mental health, and the health of the company.

The sustainability leader’s job, broadly stated, is to chart a transformation that will deliver results, and build resilience, in a turbulent economy. It requires both mastery of the company’s core value proposition, and vigilance on external events. But it also requires facing the myriad tensions inherent in the sustainability remit. These start with the existential angst of internalizing what the current (climate, nature, fill-in-the-blank) crises portend for the viability of our economy and society—while at the same time responding to near-term issues like new mandatory disclosure requirements with C-suite accountability. 

A second conundrum is how to establish ambition on issues like climate, nature and human rights. Anchoring goals in past practices can make them achievable but insufficient; scaling them to the scope of the problem can be logistically overwhelming—or so detractors will argue.

This introduces organizational capacity. A company fortunate enough to have a robust, competent team might be tempted to deploy it in the name of efficiency. The danger is leaving the rest of the company behind; in effect, missing an opportunity to build capacity. A related question: When should a sustainability leader take a stand internally and externally, and when should they lean back or ask permission?

While all executives face challenges, few have implications for the future of humanity. And few are as new to the executive table. The combination of diverse, serious issues and a lack of organizational muscle memory can prevent companies from acting expeditiously. Instead, they crescendo into crisis, putting companies at a disadvantage and sustainability leaders at risk of burnout.

If this sounds familiar, consider these 3 steps: 

1: Start with yourself 

A wise rabbi once advised me, “If you want to change the world, think in concentric circles—starting with yourself. How will you model the change you want to see? Then, how might you cascade it to your network, your community, and beyond?”

Here’s a way to start:

• Self-assess. Are you getting enough sleep, nutrition, exercise, “downtime”? If not, fix it. Sanity and health are essential to the kind of change you seek to lead. 

• Name it. The stresses are real. Existential angst? Disruptive co-worker? Precise diagnoses lead to better solutions.

• Prioritize your goals. Find quiet time to think through what you need to accomplish. What does “good” look like? What’s essential, and what’s nice to have? What roadblocks need to be overcome?

• Take account of your assets. Outdated assumptions, rigid practices, and a lack of actionable information often stall corporate action. Consider how you might leverage personal attributes, structural opportunities (the corporate cadence of budgeting, risk assessment, investor meetings, etc.), and external events and actors as resources.

• Reframe the narrative. Many of the key pivot points in sustainability stem from reframing the narrative. Revisit yours. Is it fit for purpose, given your newly refined goals? 

2: Consolidate your Braintrust

Sustainability leaders have a lonely job. Few colleagues have had prior experience, and help can come with strings. You need a braintrust: like-minded professionals who can offer perspective, advice and the occasional pushback.

The braintrust I built in Hong Kong was called "The Breakfast Club”. Over tea and muffins, we shared market insights, confronted challenges and built career paths. Projects were born and catastrophes were avoided. Most importantly, we became each other’s go-to for the professional support we all craved. 

You don’t need a formal convening. Build a roster of confidants, including:

• Trusted advisors with whom you can debrief and detox—and then refocus and ideate.

• Sustainability practitioners to share, strategize, and iteratively support you as you navigate the process ahead.

• An opt-in network, ideally managed externally, providing expertise and a safe space to explore new ideas. BSR is uniquely suited for this purpose; provides an external perspective, invaluable to sense-check market observations and ground-truth operational strategies, intersectional expertise, with depth in both core issues and the critical interfaces (e.g. climate and justice, nature and supply chain); a focus on critical intersectional issues, such as its host of Collaborative Initiatives and exploration of Beyond Growth strategies.

3: Prepare your Pitch

A dog trainer once told me that canines need to hear something 75 times to learn it. The estimate for people varies from far less to far more.

Prepare your pitch and be able to tailor it. You’ll know it’s working when you start hearing your words emanate from others. Here are some tips:

• Frame it. A succinct framing of the ambition, in a manner that resonates with your audience, provides an essential common point of reference.

• Bound it. There’s a difference between riding a wave and boiling the ocean. Demonstrating that distinction can earn you trust – and enough interest from your stakeholders to continue the conversation.

• Identify big goals. How you define your goals will have a bearing on which competencies, and colleagues, will be needed to achieve it. Consider your resources, and those you can influence. Then think about what it would take to institutionalize change. How might you optimize your resources and network to achieve the ambition you framed?

• Propose a process. This was a big takeaway from my tenure leading sustainability in Asia for German chemical manufacturer BASF. Starting with the ‘right’ answer pressures colleagues to respond right away—and can end in disagreement or de-prioritization. But initiating a process allows them to opt in, or—implicitly—stay out of the way. A well-designed process yields a shared understanding of the challenges, priorities, and options, and coalesces toward a plan. Does this take more time? Yes. Use that time to loop back, with your team and your braintrust, to test assumptions and course-correct. The result: a better chance of organizational alignment (and forward movement).

2024 is set to be a rough news year. Taking a renewed approach can help you surf the oncoming waves—and redirect that energy into impact for your company, value chain, and industry.

Blog | Friday February 9, 2024

A Human Rights Assessment of the Generative AI Value Chain

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Recent advancements in generative AI (GenAI) have accelerated the benefits and risks of the technology. Although publicly available tools were launched just over a year ago, a recent survey found 22% of employees are already using them at work. While early models such as GPT-2 only worked with text, new models like Gemini and GPT-4 are multimodal: they can simultaneously process and understand different types of inputs, including text, images, and sounds. Such features improve product performance but also create human rights risks, including new ways to produce harmful content, conduct surveillance, or carry out cyberattacks.

To help companies identify, prioritize, and mitigate these risks and maximize opportunities, BSR will be conducting a sector-wide human rights assessment (HRA) of GenAI over the coming months. The assessment will identify human rights risks across the value chain of GenAI, from upstream data workers to model developers and end-users, and make recommendations on how to address these risks.

The Human Rights Assessment will be informed by interviews with leading companies that develop and deploy GenAI and with a broad range of stakeholders, such as civil society organizations, intergovernmental organizations, and academics. The assessment will also draw on diverse research sources, including industry papers, academic literature, and NGO reports. 

The HRA will use the proven and internationally recognized methodology provided by the UN Guiding Principles on Business and Human Rights (UNGPs) to provide practical guidance for companies on how to identify, prioritize, and mitigate GenAI-associated risks. The HRA will specify how GenAI developers and deployers can integrate that methodology into existing AI governance workflows, such as model evaluations, impact assessments, and institutional review boards.

To align existing processes and frameworks, the HRA will also explore how rights-based approaches can complement the ethics or trust and safety-based approaches that dominate current industry practice. Company-specific AI Principles have already helped to ground responsible AI product development and deployment in good practice, but integrating rights-based approaches will help companies better meet their commitments by ensuring methodological consistency across the industry. It will provide a more comprehensive understanding of risk that focuses on impacted stakeholders (“rightsholders”), particularly the most vulnerable. 

The HRA is coming at an important inflection point in the responsible AI field. Stakeholders are increasingly emphasizing the importance of a rights-based approach to responsible and safe AI, while the EU’s provisional agreement on the AI Act includes a mandatory obligation to assess high-risk AI systems for impacts on human rights (fundamental rights impact assessments (FRIA).

Civil society stakeholders, many of whom lobbied for the inclusion of FRIAs into the AI Act, continue to call for a rights-based approach to AI governance, but there is a lack of public analysis and resources that show companies how to take a human rights based approach to AI in practice. We aim to help fill that gap. 

The HRA will build on BSR’s existing work on GenAI and human rights with a variety of companies, as well as our recent collaborations with the B-Tech project of the UN’s Office of the High Commissioner for Human Rights (foundational paper on the value proposition of the UNGPs, overview of current company practice, GenAI human rights risk taxonomy) and our FAQ on the ethics and human rights implications of GenAI.

We’ll coordinate closely with peers undertaking related research and analysis on the responsible design, development, and deployment of GenAI to ensure the HRA complements rather than duplicates other work. We’ll also engage with a broad group of experts and stakeholders to inform our analysis. 

We aim to publish the HRA and accompanying practical guidance for companies in Q3 of 2024. We look forward to contributing to the vibrant public debate on generative AI and producing helpful, practical resources for the public domain.

For more information on this project please reach out to Hannah Darnton (hdarnton@bsr.org) and Lindsey Andersen (landersen@bsr.org). 

Blog | Wednesday February 7, 2024

BSR and NACD: Activating Directors to Meet Boardroom Challenges

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In the past decade, sustainability has moved from the glossy pages of corporate social responsibility brochures to the black-and-white disclosures of the 10k. With this increase in strategic importance, external scrutiny, and governance mandates, sustainability has become a crucial topic on the board agenda.

In light of these shifts, BSR and the National Association of Corporate Directors are proud to launch Oversight of Corporate Sustainability: A Board Primer. As BSR President and CEO Aron Cramer and NACD President and CEO Peter Gleason note in their forward to the report: “We hope that in combining our organizations’ resources, expertise, and reach we can jointly empower directors and transform boards to stay on the leading edge of corporate governance and efforts to build a just, sustainable, and thriving world.” 

Understanding the Board’s Role in Sustainability Oversight 

Boardroom focus on sustainability is essential for companies to anticipate and address profound and intertwined changes in the economy, society, and the environment that affect their businesses.

• New technologies, such as artificial intelligence and advances in facial recognition, not only promise to unleash innovation but also hold the potential for massive economic disruption and impacts on human rights.

• Geopolitical uncertainty and threats to democratic norms imperil global stability, freedom, and connectedness—along with the flow of trade, talent, and ideas.

• A radically changing workforce and talent landscape shaped by a reinvigorated labor movement, new workplace technologies, and the changing expectations of rising generations.

• Inequality continues to hold back human potential and harm individuals and communities.

• The impacts of climate change are highly disruptive: 3.6 billion people are already living in areas highly susceptible to climate change, and it is estimated that the global cost of climate change will be between $1.7 and $3.1 trillion every year by 2050. 

Each of these developments creates major risks and presents opportunities to the economy as a whole, to industries and value chains, and to individual companies.

The importance of these developments is also increasingly recognized by governments, regulators, investors, employees, and other stakeholders. Taken together these contribute to a broad set of drivers for board action on sustainability, including in response to 

• Investor expectations

• Regulatory compliance and legal risk management

• Customer demands

• Employee attraction and retention

• Civil society advocacy and public scrutiny

• Business value protection and creation

• Business resilience 

These drivers have also propelled a wave of legal and regulatory action that affects companies and their boards. For example, the EU Corporate Sustainability Reporting Directive mandates extensive disclosures overseen by the board. Two new laws in California mandate corporate disclosure on climate emissions and related financial risk. According to a recent survey, “Nearly three-quarters (73%) of organizations say that ESG disputes will be a risk to them in 2024,” making it the “top litigation risk” in the study. 

Consequently, boards of directors are recognizing the relevance of these topics to their long-standing duties and taking on more formal, direct, informed, and active oversight of how sustainability and ESG relate to corporate governance, strategy, and risk.

The 2022-2023 NACD Board Practices and Oversight Survey found that nearly 60 percent of public companies’ directors reported that their boards have increased the prioritization of ESG issues, and only 3 percent reported that their boards have decreased the prioritization of ESG issues. 

As Ghita Alderman, Associate Director, ESG Content at NACD, explains: "Rooted in the traditional duties and role of the board, effective oversight of sustainability is now recognized as a fundamental part of good corporate governance, strategy, and risk management for all companies. That’s why we are seeing first-hand a surge in directors seeking more information and insight to bolster their ability to provide that effective oversight.”

Four Challenges for Boards 

Oversight of Corporate Sustainability: A Board Primer examines four major challenges for boards to address and proposes a series of solutions and good practices for each. 

• Challenge 1: Setting Direction and Establishing Oversight for Your Organization 

• Challenge 2: Integrating Sustainability into Company Strategy 

• Challenge 3: Enhancing Ongoing Governance and Management 

• Challenge 4: Addressing Increasing External Expectation 

In responding to these challenges, boards may encounter a range of sustainability issues. Individual companies benefit from understanding which topics are “material” to the company—relevant both to business success and to impacts on society and the environment. To that end, the report provides guidance on board oversight of the process to identify material issues, as well as on key topic areas ranging from understanding climate risk to the role of the board in overseeing human rights.

By grounding board oversight in the solutions proposed in the Primer and a focus on “material” topics, directors can promote a robust approach to corporate sustainability, thereby helping to fulfill their duties as directors, stewards of long-term value creation, and overseers of the company’s impacts on society and the environment. 

NACD members may access the full report via NACD; BSR members may access the report via the BSR member portal or by contacting their Relationship Manager.

Audio | Thursday February 1, 2024

What’s at Stake for Sustainable Business in 2024

Preview

Aron Cramer, BSR President and CEO, chats with David Stearns following his recent blog on the pivotal questions shaping sustainable business in 2024 to explore questions such as:

• What can and should business be doing to uphold the rule of law in light of elections that will impact nearly two-thirds of the world’s population in 2024?
• Are businesses aware of what’s at-risk with these elections and are they taking steps to prepare?
• For fast-evolving technologies such as AI, what role can governance play in ensuring its responsible use and development?
• What gives you hope that we can emerge from 2024 in a better place?

Case Studies | Wednesday January 31, 2024

Conducting a DEI Assessment in Asia Pacific

Preview

Introduction 

In 2021, BSR worked with Zuellig Pharma, a healthcare solutions company increasing accessibility to healthcare in Asia Pacific (APAC), to conduct a Diversity, Equity, and Inclusion (DEI) Assessment. Using BSR's methodology, the assessment gauged the effectiveness of Zuellig Pharma's DEI efforts and determined its level of maturity and ability to continuously improve. This included an assessment of the company's DEI-related policies and procedures, internal DEI governance, and the existing level of external reporting on various DEI topics. The assessment revealed that Zuellig Pharma was in the early stages of its DEI maturity journey. BSR provided valuable recommendations for Zuellig Pharma to proactively address identified gaps and fortify its existing DEI initiatives. The strategic guidance helped Zuellig Pharma strengthen its DEI commitment and evolve its DEI program into a more robust and established framework. 

Background 

Zuellig Pharma is a healthcare solutions company covering 16 markets across Asia, with the mission of making healthcare more accessible to the communities it serves. The company provides distribution, digital and commercial services to support the growing healthcare needs in this region.  

Zuellig Pharma's Sustainability Framework is built on four pillars. One of these is “Nurturing Talent,” which defines how the organization creates an inclusive and safe work environment that empowers employees to reach their full potential. This covers focus areas such as talent recruitment, development and retention, employee well-being, and DEI. Given the diverse cultural landscape within the region that its operations cover, there is a high level of diversity within the organization, leading to Zuellig Pharma identifying DEI as a material topic for the company. 

The Challenge 

Zuellig Pharma expressed a collective desire to operationalize and formalize its commitment to DEI to build upon its diverse environment and to comply with prevalent industry requirements and existing ad hoc DEI initiatives. Recognizing the pivotal role that DEI plays in the company's overall success, the senior leadership sought to enhance both internal and external DEI support across all offices in the APAC region, and the company prioritized fostering cross-cultural sharing and gaining insights into the varied interpretations of DEI across its different offices.  

Prior to launching a comprehensive DEI program, which involves formalizing commitments at the highest levels and cultivating a DEI strategy and culture throughout the organization, Zuellig Pharma recognized the need to assess its existing internal DEI efforts. The company aimed to understand its current standing, identify best practices, and pinpoint opportunities for further engagement. Consequently, Zuellig Pharma enlisted the expertise of BSR to conduct a thorough DEI assessment. 

BSR’s Response 

The assessment’s objectives were to identify opportunities to integrate inclusive policies and practices across its business; understand the gaps, challenges, and opportunities by creating a diverse, equitable and inclusive workplace; improve stakeholder experience and engagement across Zuellig Pharma’s business; and identify opportunities for further engagement with a view to develop a DEI strategy via a clear roadmap. The intent of the findings from this assessment was to enable Zuellig Pharma to strengthen its commitment to DEI. 

BSR's DEI Assessment methodology included a review and gap assessment of Zuellig Pharma’s internal policies and procedures, as well as a series of confidential discussions with the company's DEI taskforce (including senior management, which gave leadership buy-in for this exercise) on key DEI material topics, such as: LGBTIQ+ Allyship, Cross-Generational Exchange, Mental Health and Wellness, Race, Religion, Ethnicity, Cultural Awareness, Socioeconomic Empowerment, and Gender Equality. 

An employment perceptions survey, deployed across 13 geographies/offices in the APAC region, gathered insights from employees across cohorts in the following geographies: Brunei Darussalam, Cambodia, China, Hong Kong, Indonesia, Korea, Macau, Malaysia, Myanmar, Philippines, Singapore, Taiwan, Thailand, and Vietnam. 

The results of the employee perceptions survey (both qualitative and quantitative) offered in-depth insights and perspectives into the employee experience, including opportunities, challenges, and concerns. These insights and perspectives provided views around three key questions:  

• What are the key social issues that are important to you as an employee of Zuellig Pharma? 

• What is Zuellig Pharma doing well to foster DEI? 

• What activities could make the company more diverse, equitable, and inclusive? 

Impact 

The successful conclusion of the DEI assessment highlighted that Zuellig Pharma had a strong foundation for further developing its DEI program, and it helped the company understand the gaps and challenges. Through the DEI assessment, offices across 13 geographies were able to identify contextually and culturally specific priorities, and the internal regional assessment allowed teams from different countries to engage on similar goals related to DEI.  

The DEI assessment established a baseline for Zuellig Pharma to not only identify best practices but also uncover opportunities for enhancing its commitment to fostering a diverse and inclusive workplace via the integration of inclusive policies and practices. With strong support and buy-in from senior leadership, Zuellig Pharma formed its DEI Core Committee, comprising six pillars and informed by the DEI assessment. This exercise was an important first step in informing Zuellig Pharma's subsequent DEI efforts in fostering a more inclusive workplace since it helped prioritize DEI topics that were important to its employees.  

Building on the DEI assessment, Zuellig Pharma achieved several DEI milestones. It launched various initiatives informed by the priority areas from the DEI assessment: creating an inclusive environment for working mothers (addressing Gender Equality), bringing generations together to discuss ways to better work together and leverage each other’s strengths (Cross-Generational Exchange), normalizing talking about mental health issues at the workplace (Mental Health and Wellness), and conducting a survey to identify opportunities for further conversations to support the LGBTIQ+ community (Employee Engagement).  

Key outcomes arising from the DEI assessment and the initiatives and improvements resulting from the assessment include:  

• More than 50 percent of Zuellig Pharma’s employee base and middle management positions are now occupied by women, and the company has made progress in increasing the representation of women in senior management roles over the years. 

• The average unadjusted gender pay gap at the company is 0.16 percent for equivalent roles and skill sets (in comparison, the global average is 20 percent). 

• 100 percent of its employees has completed anti-discrimination and harassment training.  

“BSR has been a steadfast partner of our Sustainability efforts, bringing to Zuellig Pharma the expertise and support to create meaningful impacts. In the field of DEI, our work with BSR sets us on the path of sustainable excellence, which can only be achieved through equal opportunity, cooperation, and a progressive mindset. With BSR we strive to foster a culture of continuous progress and a workplace where the success of our employees knows no bounds.”"

- Jean-Gaetan Guillemaud, VP, Corporate Affairs

Conclusion 

Against a global backdrop where DEI approaches are increasingly used as a strategic tool to improve competitive advantage, elevate employee engagement, and foster a more supportive and inclusive workplace that values diversity, a similar trend is emerging in the APAC region. The growing interest in understanding and implementing DEI practices in APAC is underscored by the diverse maturity levels and ambitions of companies, coupled with varying perspectives on DEI across regions. Recognizing this diversity, there is no universal framework or 'one-size-fits-all' approach. 

In this context, establishing an ambitious long-term vision and mission for DEI requires a strategic initial step. For companies embarking on their DEI journey, undertaking a DEI assessment becomes paramount. This first step allows organizations to comprehensively understand and evaluate their current internal DEI initiatives, while pinpointing opportunities for further engagement. In the case of Zuellig Pharma, the DEI assessment helped the company to recognize the diverse landscape of DEI perspectives and practices as the foundational step to establishing a baseline for its DEI roadmap. 

Get in Touch 

This case study was written by Kelly Scott and Jiajia Chen. Please direct comments or questions on working on DEI in the APAC region to the EIJ team.