Until recently, putting the words “corporate” and “human rights” in the same sentence would have seemed meaningless to many, to others awkward and embarrassing.
Human rights was about governments, prisons, refugees, Amnesty International, the media — not companies.
If Western businesses were expected to avoid anything with a taint of human rights infringement, they would have to skirt much of the developing world — and how would that help the poor in those countries?
That narrative is out of date. Famous cases like the accusations in 1996 that BP’s Colombian arm was implicated in murder and torture of rebel guerrillas have forced captains of industry to realise that human rights is their problem as well.
But while no respectable CEO would any longer profess not to care about human rights, there is a long way between that and doing your utmost to make sure human rights are never abused as part of your business activity.
The Corporate Human Rights Benchmark, launched in 2017, is an attempt to beef up the role of capital markets in improving companies’ performance on human rights.
Investors also want to do the right thing on human rights, and recognise their responsibility. If they are shareholders in a company that behaves badly, that is in a sense partly their fault: they are the company’s owners.
But where should investors start? How do you make your concern rigorous and systematic?
A wide range of environmental, social and governance data providers, such as MSCI, RepRisk and Vigeo Eiris, exists to help investors assess and score organisations they invest in.
But their information includes human rights as one element among many. It may not be detailed enough to enable investors to clearly distinguish the quality of human rights performance at different companies. And you have to pay for the information — so it can only be used by investors behind closed doors, not picked up by the press and public.
To sharpen up the dialogue, by giving investors and companies more specific things to talk about, a group of investors and NGOs started the Corporate Human Rights Benchmark.
It’s a non-profit venture that provides open information on 100 of the biggest listed companies in three sectors: extractive industries, agricultural products and clothing.
Aviva Investors, Nordea and APG, the Dutch asset manager, have paid for it, together with the UK, Dutch and Swiss governments and the Joseph Rowntree Foundation. Many organisations have contributed expertise.
So far, the benchmarking exercise is not aiming to rule on whether companies have actually been responsible for abuses. It looks at whether companies have policies in place to prevent human rights abuses; and how well set up they are to deal with allegations when they happen.
This week, the CHRB has published its second annual progress report, showing what companies have been doing since last year’s benchmarking exercise.
This year’s results will not be out till November — until then, research is going on and companies can still haggle.
The bad news
But some conclusions can already be drawn. They are not all encouraging.
As the group puts it, “the average performer is a poor performer”. A third of companies have not even made a public commitment to respect human rights; less than half can demonstrate that a board member is responsible for human rights policy.
Three fifths of the companies score less than 20% on the CHRB’s scale; none gets above 80%.
All that was known last year. Last June, a group of 85 investors wrote to the chairmen of all 100 companies, asking them to engage with the process. They might have been expected to get attention: they manage a combined $5tr of assets.
Yet still, 28 companies failed to reply, having ignored the exercise throughout the past two years that the investor-NGO group had been preparing the CHRB.
They include the three luxury brands mentioned above; North American retailers Macy’s, Costco and Couche-Tard; and resources groups Gazprom, Norilsk Nickel, CNOOC, Sinopec, PetroChina, ONGC, Coal India and Valero. And Kraft Heinz.
Way to go
Does this indifference mean investors are beating their heads against a brick wall?
No. Slowly but surely, this pressure is going to work. And the benchmark will provide a valuable case study of how investor pressure and an interactive reporting exercise can produce results. Year by year, it will measure policy improvements and how much attention companies pay.
Already, the benchmark is having an effect. Rio Tinto, Nestlé and BHP Billiton, three of the best performers, have said they are taking note of their scores, know they leave room for improvement, and are striving to do better.
Union Investment has started to exclude poor performers from its sustainability funds. Consultants and law firms have said they are getting rising interest from clients in strengthening their human rights policies.
Firms like McDonald’s, Anheuser-Busch InBev, Wal-Mart, Rosneft and Lukoil, which had ignored the 2017 pilot phase, have since begun to engage with CHRB. Coca-Cola published its first human rights report in October.
This is not just altruistic. Any whiff of human rights trouble in a company’s vicinity, even if it is not really to blame, can look very ugly when splashed in headlines or sprayed over Twitter.
Think how many column inches Foxconn started getting when there appeared to be a spate of suicides among its Chinese employees in 2010. Apple, one of its biggest customers, was forced to issue a statement about it and conduct an investigation. Foxconn’s chairman had to address the issue very seriously, and the company put up wages.
Contrary to the adage, not all publicity is good publicity.
But for human rights, bad publicity can lead to good results.