Human Rights a social performance and CSR context

Transcription

1 Human Rights a social performance and CSR context 04 August 2017, Mumbai Insert then choose Picture select your picture. Right click your picture and Send to back. Copyright 2017 by ERM Worldwide Limited and/or its affiliates ( ERM ). All Rights Reserved. No part of this work may be reproduced or transmitted in any form or by any means, without prior written permission of ERM.

2 Contents Why do businesses need to understand Human Rights How international regimes are changing to include a sharper focus on HR Approaches to assess human rights risks HRDD and HRIA How legal regimes in India consider HR Labour and Human Rights in supply chain Looking at CSR from a HR lens 2

3 Human Rights Scandals & Value Erosion Apax Partners & Takko Holding Carlyle Group & Yakjin Holdings Care Homes, Various BridgePoint Deliveroo Apax Partners portfolio company, German retailer Takko Holding, was found to have used a garment factory in Myanmar that employed underage workers. Financial News (2017). Yakjin Holdings, a Korean garment manufacturer in which Carlyle Group acquired a 70% stake, was at the centre of labour disputes in Phnom Penh which shook the Cambodian capital in Five people were killed and 38 injured in an army crackdown on strikers. A key Carlyle investor, the California Public Employees' Retirement System (Calpers), raised questions on the labour strife and use of military force Forbes Magazine (2014). The UK s largest care home operator Four Seasons, owned by Terra Firma, could run out of money this year in part due to the rise in the minimum wage FT (2016). Care provider Carema, acquired by Triton and KKR from 3i in 2010, was forced to scrap its bonus system and restructure its financing following accusations of patient neglect UnQuote (2011). In 2011 Blackstone was accused of asset stripping the care home operator Southern Cross Mail on Line (2011). Deliveroo in court cases in UK over worker rights allegations as delivery riders are contractors rather than workers provided minimum wage and benefits. Deliveroo drivers took strike action over proposals they said could see them earn barely half the National Living Wage Accused of exploiting workers with 'unintelligible' contracts. Committee of MPs said seemed designed to stop workers asserting their rights. If the tribunal rules Deliveroo's riders are in fact workers, the company could be forced to give them statutory benefits including sick pay, paid holiday, and minimum wage.

4 Business and Human Rights 4

5 Role of Business Protect, Respect and Remedy Framework Protect States have a duty to protect against human rights violations Respect Companies have a responsibility to respect human rights 5 Remedy Mechanisms should be provided for victims of human rights

6 Human Rights and Business What are the drivers at Corporate, Investor and Project Levels? UN Guiding Principles in expectation that businesses are responsible for human rights Covers not only risk to the business but also the risk to rights holders Civil society expectation and a desire to hold businesses to certain standards increased UNGPs increasingly incorporated into other guidelines (e.g. OECD Guidelines, Equator Principles), the development of national action plans by government, and increasing regulation (e.g. the UK modern slavery act) Also attracting increasing investor interest and enquiry 6

7 WHY Business need to consider Human Rights : ESG related stock indices & outperformance Harvard Business Review - A focus on material ESG issues drives greater returns According to the Harvard Business Review 1, companies which address material ESG issues and ignore immaterial ones outperform those that address both material and immaterial issues by 4 percent and outperform companies that address neither by nearly 9 percent (see Figure 1). Fig. 1: Effect of financial returns of investors treatment of environment, social and governance (ESG) issues, annualised alpha High + 6.0% + 2.0% 1 Mozaffar Khan, George Serafeim, and Aaron Yoon, Corporate sustainability: First evidence on materiality, Harvard Business School working paper. Mar , hbs.edu Performance on material issues Low Low - 2.9% + 0.6% High Performance on immaterial issues

8 WHY Business need to consider Human Rights : Human Rights helps SDGs efforts Businesses can use Responsible Sourcing/ Human Rights efforts to also report their CSR impact toward SDG (Sustainable Development Goals): Help Suppliers cause increased wages down the supply chain.. Ensure Suppliers don t pollute water or air, reduce carbon/ghg emissions, resource use Kate Larsen, London office, Kate.larsen@erm.com March 2017

9 Business Case for Respecting Human Rights Business drivers for respecting human rights include: Protecting company values: respecting human rights is the right thing to do Protecting the bottom line: human rights due diligence is good risk management Raising the bottom line: human rights creates business opportunity Reputation/ Brand Image Attractiveness to Investors Strong stakeholder relationships Business disruption/ Cost of strikes/ protests from workers Restricted access to capital Litigation costs from lawsuits Increased productivity from motivated employees Improved reputation and brand image Increased recruitment and business partner attractiveness A trusted Business Partner Reluctance of governments to grant permits Improved ratings on the capital market Attracting & retaining talent/ Employee morale Loss of social license to operate/ Public relation costs Increased likelihood of project completion on time 9

10 Expectations from Business Companies are expected to have three core elements in place: 1. A policy commitment that supports embedding respect for human rights throughout the company; 2. Human rights due diligence processes, consisting of processes for: a. Assessing impacts, b. Integrating and acting on identified impacts, c. Tracking performance, and d. Communicating on performance 3. Remediation processes for situations where the company identifies that it has caused or contributed to a human rights impact. 10

11 Complicity Direct Complicity A company assists a state in violating human rights Example: A company transfers equipment to state security forces when it knows or should have known that it could be used to violate human rights. Beneficial Complicity A company benefits directly from human rights abuses committed by a state or its agents Example: State security forces use disproportionate force in protecting the company. Silent Complicity A company fails to challenge systemic human rights violations, whether or not these relate to its business Example: A company refuses to engage the host government about the general human rights in the country and/or concerns related to its operations. 11

12 Case study: Conflict Minerals Company: Vodafone Group Plc Context: Assessment of the presence of conflict minerals within the 3TG metals within the electronic equipment that the company procures and sells Trigger: Rule 13p-1 (the Rule ) under the U.S. Securities Exchange Act of 1934 (the Exchange Act ) Process: Determining applicability for its supply chain and contract manufacturing Assessment of product related spend category for presence of 3TG metals Finalizing three product spend categories: handsets, home devices and data cards Review of purchase orders to assess sourcing from conflict countries and through contract manufacturers Reporting and disclosure of supply chain due diligence process Compared smelters and refiners identified by suppliers with the CFSI list of certified Conflict-Free Smelter Program ( CFSP ) Commencement of Due Diligence Process of suppliers based on OECD Guidelines Narrowing down to 30 in-scope products and 12 suppliers Outcome: The company accepted its inability to determine the origin of all conflict minerals contained in its inscope products. However, it was able to demonstrate reasonable good faith effort to collect and evaluate the information concerning 3TG smelters and refiners on the basis of the information provided by its suppliers and determine engagement strategies.

13 Challenges Companies tend to focus first on impacts where they have the greatest leverage or control Mapping issues or mapping rights instead of impacts Companies tend to consider and discuss impacts already on their radar rather than making efforts to learn about new impacts Many companies are still wary of engaging critical friends 13

14 HRDD and HRIA HRDD and HRIA 14

15 Approaches Do Nothing Due Diligence Human Rights Impact Assessment Issues to consider weak or corrupt governance, local context, past history, stakeholder concerns and issues Issues that may site outside a conventional SIA (e.g. security, labour, influx management, gender & discrimination etc.)

16 Applying a human rights lens Focusing on risks to the human rights of stakeholders and not (just) risks to the business (eg. reputational, financial or legal risks Looking across the value chain to include not just the company s own activities but also the full range of business relationships Engaging with affected stakeholders, including when identifying and prioritizing human rights risks Understanding that human rights due diligence should be ongoing, broad and systematic, and able to respond to changing circumstances Companies tend to use the ESHIA process to identify human rights, however, an ESHIA does not use a language of rights. 16

17 Normative ESHIA Example 17

18 Human Rights Impact Assessment 18

19 Implications In applying a human rights lens it is important to understand a human rights baseline in comparison to the recognised international standard in which all rights are enjoyed; In understanding impacts to rights the assessment identifies which rights are at risk of being impacted; If rights are well protected and enjoyed it should be possible to avoid or mitigate negative impacts to rights; However, if this is not the case then even where the project / operation impact on resources is limited it may still impact human rights and significant effort may be required to assure and demonstrate respect; Taking a human rights perspective provides an added layer to help a project or operation to understand the complexity and challenges faced by those living around it. In this way a human rights perspective helps to identify complexity and is a potential trigger for managing broader potential risks; Whilst the focus here is on the enjoyment of rights by community members, rightsholders are not only outside the fence. (e.g. a consideration of protection of workers and the supply chain and the approach to security management) 19

20 Due Diligence Issues that might sit outside a typical social impact assessment Labour practices Security Migrant workforce Gender and discrimination Influx management Risks in the supply chain

21 Human Rights Baseline (e.g. Myanmar) Recent Social Issues Associated with the Oil and Gas Industry in Myanmar: Oil and Gas projects have been alleged to have impacts on the livelihoods of local fishermen and farmers; Oil and Gas projects located near ethnic regions have seen a rise in activism by the local ethnic groups as they often face military offensives that aim to clear the project areas; The benefits of the oil and gas projects have not adequately passed on to the local communities; There are reports of forcible relocation without compensation. Potential human rights challenges in the baseline: Who is influencing local government? What are the mechanisms that have been pit in place to safeguard international human rights laws? Considering the military occupation in Myanmar, how would local communities view private security arrangements? What are the rights of affected people in terms of their ethnic status? Does this lead to additional vulnerabilities? 21 Is conflict based on ethnic, national or military issues prevalent at the local level?

22 Gender Baseline - Example 22 Credit to Matt Gilbert, UK ERM Intern

23 Trends in Regulations 23

24 Evolving human rights themes Living Wages Modern Slavery Vulnerable Social Groups Food Security Water Land Tenure Resilience Supply Chain

25 The UK Modern Slavery Act Someone is in slavery if they are: forced to work - through mental or physical threat; OR owned or controlled by an 'employer', usually through mental or physical abuse or the threat of abuse; OR dehumanised, treated as a commodity or bought and sold as 'property'; OR physically constrained or has restrictions placed on his/her freedom of movement. Requirements for Business under the new Law A commercial organisation (doing some or all its business in the UK) must prepare a slavery and human trafficking statement for each financial year of the organisation. This must include steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place; (i) in any of its supply chains, and (ii) in any part of its own business, or (b) a statement that the organisation has taken no such steps. A slavery and human trafficking statement must be approved/signed by the Board of Directors An slavery and human trafficking statement may include information about: (a) the organisation s structure, its business & its supply chains; (b) its policies in relation to slavery and human trafficking (S&HT); (c) its due diligence processes in relation to S&HT in its business and supply chains; (d) the parts of its business and supply chains where there is a risk of S&HT taking place, and the steps it has taken to assess and manage that risk; (e) its effectiveness in ensuring that S&HT is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate; (f) the training about S&HT is available to its staff. Slavery and human trafficking statement must be published on the Company website (with a link to the slavery and human trafficking statement in a prominent place on that website s homepage.

26 Hard and Soft Laws are increasing. Standard Year in effect Type Requires Dodd-Frank USA Conflict Minerals Law (re DR Congo) rd party supply chain (forced labour) audits (traceability) & reports (publishing) to public & SEC. California Transparency in Supply Chains Act, (US Federal discussed), The UK Modern Slavery Act Australia, Netherlands considering EU Directive on non-financial Reporting French law Human Rights reporting UK, Canadian, German courts started accepting cases over corporate responsibility for human rights/safety in supply chains. UNGPs (Guiding Principles) on Business & Human Rights OECD Guidelines for Multinational Enterprises ILO (International Labour Organisation) Conventions (proposed): Would then become Hard Law in countries which ratified a convention Hard law Publishing of statement on effort to eradicate slavery by businesses Disclose (publishing) re policies, risks, outcomes on environmental matters & respect for human rights, etc Due Diligence to assess human rights risks, engaging to influence improvements, provide remedy, communicate (publishing) , revised 1979, 1982, 1984, 1991, 2000, discussion Soft Law Could become Hard law Respect human rights Unclear: *Stakeholders (NGOs, Unions, etc) called for a Convention for MNC responsibility for Human Rights in Supply Chains. This was Agenda of ILO annual Conference 2016, Geneva. A Living Wage to all in the supply chain was a key demand.

27 Transparency movement and Big Data/ scraping algorithms colliding Transparency increasing: 2014: Bangladesh Rana Plaza collapse let to reports on safety in over 3000 Bangladesh Apparel factories being published 2015: ILO Better Factories Cambodia programme publish factories not remediating critical laboursafety issues, plan extend to Vietnam, etc 2016: LaborVoices publishing Donor funded reports of conditions 1000s factories Bangladesh, Turkey (working on China, Cambodia) 2017: Formerly about 10 apparel, 3 IT, an auto and a few other firms published their supplier factory lists. In 2016 an NGO coalition called on 72 apparel brands to publish, 42 now do, other NGOs expanding to other industries. 2017: UK Modern Slavery Act Transparency in Supply Chains, California Transparency in Supply Chains Act causing more companies to report on supply chain efforts Big Data scraping increasing: SRI led investor analyst movement increasing use of algorithms to scrape reports on Company-Supplier-Conditions/Issues and rank companies: Business & Human Rights resource centre; Corporate Human Rights Benchmark; UN Guiding Principles on Business & human rights database Through machine learning and big data, Arabesque S- Ray systematically combines over 200 environmental, social and governance (ESG) metrics with news signals from over 50,000 sources across 15 languages. NGOs ranking brands faster as more data, and tools available e.g. : Oxfam Behind The Brands Fashion Revolution Transparency Index 2016: 9 human rights NGOs formed coalition to advocate for transparency in apparel supply chains: Global unions: IndustriALL, ITUC, MSN, Worker Rights, Consortium Intl Corporate Accountability Roundtable, Inlt Labor Rights Forum. Increased worker literacy and access to internet and smart phones to post about conditions 27

28 Human Rights: Framework landscape for business PS1 Assessment and Management of Environmental and Social Risks and Impacts PS2 Labour and Working Conditions Universal Declaration of Human Rights (adopted in 1948) International Covenant on Civil and Political Rights (1966) International Covenant on Economic, Social and Cultural Rights (1966) Operations/ Projects HSE & Social Policies & Risk Management Processes PS3 PS4 PS5 PS6 PS8 Resource Efficiency and Pollution Prevention Community Health, Safety and Security Land Acquisition, Involuntary Resettlement Biodiversity Conservation & Sustainable Management of Living Natural Resources Cultural Heritage PS9 Associated Guidelines: e.g. General EHS Guidelines International Bill of Human Rights LEGAL OTHER Project Financing / Investor criteria (Equator Principles) IFC Performance Standards and Associated Guidelines Voluntary Principles on Security and Human Rights NATIONAL LEGISLATION/ REGULATORY REQUIREMENTS INTERNATIONAL LEGISLATION (To which GFI countries of operation are a signatory) PROJECT/ OPERATIONAL PERMITS (e.g.) EIA Approval Letters and Certificates Waste and Hazard Permits Operational Permits & Licenses Core Standards of the International Labour Organization Forced Labour Conventions (1930 & 1957) Freedom of Association and Protection of the Right to Organize and Collective Bargaining Conventions (1948, 1949)) Equal Remuneration Convention (1951) Discrimination Convention (1958) Minimum Age Convention (1973) Worst Forms of Child Labour Convention (1999) UN Guiding Principles on Business & Human Rights OHSAS 18001/45001 Health and Safety Management Systems Specification World Bank Operational Policies and Associated Guidelines ISO Environmental Management Systems Standard International Good Practice Standards Supply Chain/ Commodity Certification Schemes/ HSES Standards FAO Guidelines on Responsible Governance of Land Tenure EBRD Workers accommodation: processes and standards OECD Guidelines for Multinational Enterprises UN Global Compact ICMM/IPIECA Guidance ISO 26000:2010 Social Responsibility Guidance UN Sustainable Development Goals

29 Shift in India laws: Stakeholder s perspective 29 India has a body of legislation for human rights, labour, environment and consumer rights and for protection of vulnerable groups (e.g. women, children, SCs, STs etc.); Human rights activities have however called this framework patchy, outdated and cumbersome to implement, especially when it comes to mechanisms that can provide access to communities adversely impacted by corporate activities (e.g. the Bhopal Gas Tragedy); Some existing laws continue to perpetuate human rights violations e.g. child labour India is yet to ratify the ILO Minimum Age Convention one of the 8 core conventions. Activists have lobbied for a holistic approach especially linked to corporate accountability; There is a passing reference to human rights in the National Voluntary Guidelines, 2011 and the Companies Act, 2013 (social development obligations, opening up companies to class action suits etc.); On 26 th June 2014, GoI voted in favor of a resolution to establish an international treaty to impose human rights obligations on businesses, especially on MNCs. However, no such framework has been developed thus far. Even when such a framework comes into place, India-specific challenges (e.g. implementation for the informal and unorganized sector enterprises) will remain.

30 Meanwhile, some trusted brands have come under scrutiny Mercury clean-up F&B and Water 30 Forest rights of communities Consumer rights

31 Forest rights issues: Recent precedents Cement Company (Meghalaya): Payment of up to INR 100 crores (direct and livelihood restoration work) to compensate for loss of betel nut, rubber and black pepper plantations; Coal Block (Madhya Pradesh): MOEF Condition: Payment of compensation to the villages living adjacent to forest land; Payment of Annuity for NTFP (village level) to be finalized by district & state and certain employment commitments; Gram Sabha reconvened in one village (Aug 2014) to due to NGO allegation of fraudulent consent process. A major International steel manufacturer: Several committees (government) recommended stop-work due to forest rights violation; Validity of the gram sabha process under scrutiny. 31

32 The new Land Act (LAAR 2013) and Human Rights It focusses on livelihoods and not on property rights based acknowledgement of entitlements. It includes people without formal rights It brings in the concept of consent, and discourages involuntary land acquisition Discourages the state to intervene, and encourages negotiated settlements within market influences Provides access to more robust grievance mechanism, and not just redressal through court Recognises the concept of replacement value. 32

33 Labour as a core theme of Human Rights 33

34 Examples: Construction Industry Developer not willing to take accountability for construction labour issues Poor labour camps Vulnerable migrant labourers, women, illegal immigrants Significant health and safety risks, patchy management (depending on 34contractor) Use of dailies for low skilled but sometimes hazardous work

35 Example: Living Wages 35

36 Example: Kafala System Regulatory framework in Qatar kafala formally bind migrant workers to their employers or sponsors; Deceptive recruitment processes (including passport and contract substitution as well as charging of excessive fees) Limited/no recourse when abuse of human rights occur Abusive workplace environments, threats of deportation, control of wages and identity documentation by recruitment agencies; UN action against Qatar to abolish the kafala system and change legislation on migrant worker policy in the context of the 2022 World Cup Housing arrangements -subjected to curfews Return ticket home at the end of a 36 time-bound contract

37 Shifting focus: a rights perspective Minimum wages Living wages Forced labour Modern slavery Contract Workers Supply chain workers

38 Labour audits as a tool Labour abuses and poor working conditions remain widespread despite a legal framework and auditing regimes. How do we differently approach a due diligence? Broadening the scope of the due diligence over and above legal compliance requirements; Upfront mapping of the direct, contractual, temporary and informal workforce ; Detailed inspection of areas with heavy worker footfall (e.g. labour camps, worker welfare facilities, high density shop floor areas; first-aid centre etc.); Random selection of workers for interviews; Triangulation through other stakeholders: e.g. trade union representatives (non managerial), apprentices, sub-contractor representatives, local labour authorities; Mine the data behind the data 38 Example: Pulp & Paper Industry in Malaysia Withholding passports without consent Malpractices in recruitment of foreign workers Unequal conditions between local and migrant workers Poor standards of accommodation and safety for temporary workforce

39 Extension into the supply chain 39

40 Benefits 40

41 Collaboration in Supply Chain The sector represents 20% of GDP and 80% of export earnings Ray of hope: Employment opportunities to over 3.8 million persons in Bangladesh Indirect benefits: Contribution towards poverty alleviation, awareness on health etc Industry at Cross Roads Tazreen Fashions (Nov 2012) Rana Plaza (April 2013) International attention to the plight of garment workers Tripartite Action Plan Pledge with ILO on improving working conditions Government Action ( ) Buyer Coalitions (2014) Amendment of Minimum Wages Eurasia, Australia, North America Accord/Alliance focusing on multiple issues and parameters Change in labour laws Labour Reforms 41

42 The Human Rights Lens on CSR Designing CSR programs to not gloss over structural and basic Human Rights issues, but try and address them in whatever small way in the need assessment as well as in the CSR strategy and program e.g.: Minimum wages Establishing more formal rights for those that do not have it Maximize inclusion and explore affirmative action Aligning grievance processes as an effective remedy mechanism for rights holders; Getting a baseline that captures human rights related data and the larger context within which the program is located. Designing monitoring processes and indicators that bring sharp focus on how human rights have been addressed and resulted in an improvement. Introduce human rights impacts as a part of the program evaluation and review. 42 Influence the use of a human rights lens on evaluating social performance in general and community engagement in particular.

43 Reflections, Questions, Discussions Source: 43