A happy and peaceful New Year from all the Ergon team. As usual at this time of year, this blog contains our thoughts on issues, trends, developments and significant events for 2020 in the field of business and human rights. These are in no particular order. We welcome your feedback and comment.
Real prospect of mandatory due diligence
2020 will see significant steps forward in the area of mandatory Human Rights Due Diligence legislation. There are a number of new pieces of legislation coming on stream in earnest, including the Australian Modern Slavery Act and the Dutch Child Labour Law. Similarly, a new proposal for a Norwegian Law will develop during the course of the year
Pressure for mandatory legislation is not just coming from civil society or human rights advocates and experts. In the last few weeks we have seen letters supporting various forms of mandatory legislation on human rights from 42 German companies, a significant number of investors, and from a range of companies and other actors operating in the cocoa sector.
It now seems clear that the German Government will be obliged to develop legislation as a result of the probable outcomes of the monitoring exercise on the adoption of voluntary measures by German companies under the National Action Plan on Business and Human Rights. This will likely show that a majority of companies have not adopted sufficient measures on human rights due diligence. However, it may be that the German government will put its efforts into developing a multilateral approach at the level of the European Union. Both the Finnish Government, which currently holds the Presidency of the Council of the EU, and the German Government, which will assume the presidency in the second half of 2020, appear to support the development of an EU National Action Plan on Business and Human Rights. Both Governments also appear to be at least open to the possibility of EU level legislative proposals on mandatory HRDD.
The nature of any mandatory legislation is far from clear, with a number of options and difficult questions for consideration. We are looking forward to following and contributing to this discussion in 2020. We are also continuing to support companies and others who wish to understand where there current and future performance on HRDD fits in the context of the emerging legislative environment.
What is the point of companies?
Why do we privilege corporations with the benefits of limited liability and the use of social assets, and what should society expect in return? Although the conventional response is that corporations are sources of growth, tax revenue, and jobs, continuing corporate abuses means that this question crops up every few years. In 2018 the US Business Roundtable issued a much-discussed statement ‘redefining the purpose of a corporation’. Citing customers, employees, suppliers, communities and finally shareholders, the 181 signatory CEOs stated that “Each of our stakeholders is essential. We commit to deliver value to all of them….” While this created a frenzy of coverage, the statement does not abandon the shareholder value model but rather acknowledges that long term success depends on balancing a range of interests.
Going slightly further, although along similar lines, the British Academy published a set of ‘Principles for a Purposeful Business’ arguing that companies should be legally required to state their purpose and should be measured and held accountable to this purpose. Without being prescriptive, an earlier study from the same programme concluded that such a purpose should be to ‘solve the problems of people and planet profitably, and not profit from causing problems.’
It remains to be seen how companies choose to recognise stakeholders’ (sometimes competing) interests and if such discussions contribute to changes in corporate law, or whether these reports and debates will go the same way as previous such discussions – onto a dusty shelf. Political winds and economic performance will probably provide the answer.
Sustainability and the finance sector
Several regulatory or guidance notes published in 2019 will become effective in 2020 and will throw the spotlight further on the role of the financial sector in promoting sustainability. An updated version of the Equator Principles will come into effect on 1 July 2020. EP4 now explicitly incorporates a responsibility to respect human rights in accordance with the UNGPs and provides support to the 2015 Paris Agreement and conservation efforts regarding biodiversity. It also introduces additional requirements regarding climate change risk assessments and FPIC, as well as broadening the scope of the Principles’ application overall.
In November the OECD issued a guidance note for banks to implement due diligence in line with OECD MNE guidelines. The guidance note aims to help banks to determine when they have had a direct adverse impact or contributed to that adverse impact, as well as further guidance on due diligence, mitigation, monitoring and disclosure.
Lastly, the EU has issued a Regulation on sustainability related disclosures in the financial services sector (DSR regulation). Under the regulation investors will be required to disclose information regarding ESG risks on their investments and on the adverse sustainability impact of those investments, and to disclose information regarding their due diligence policies set to identify, prevent and mitigate these impacts. We have also yet to see whether standards will begin to apply to intermediated finance, to contractors used by investee companies and to their supply chains.
Climate change and the human rights
Increasingly, the business and human rights community is paying attention to the interrelation of climate breakdown and human rights, issues which have been largely siloed in the past.
In July, the UN special rapporteur on extreme poverty and human rights issued a landmark report on the impacts of global heating on human rights and poverty, calling out the failure of corporate actors, with government complicity, to adequately address their role. The same month saw the ILO release stark predictions for the impact of the climate crisis on labour: by 2030, even following the most conservative estimates, productivity losses equivalent to 80 million jobs/US$2,400 billion are likely.
The wave of climate activism that swept the globe in 2019 looks set to continue. With it, we can expect an increasing focus on the climate crisis as a driver of negative human rights impacts and the role of business both in contributing to and addressing them. A major step will also occur if (or when) businesses start formally capturing their contributions to climate change as an impact on human rights in their own HRDD.
Human rights and sport
As we anticipated last year, issues in sports are increasingly being viewed through a human rights lens. Big news items this year about Hakeem Al Arabi, Caster Semenya, Raheem Sterling and racism in football more generally, the NBA in China, and Liverpool FC in Qatar, have all highlighted the potential negative human rights impacts that are caused by the world of sport along with the positive role sports has to promote human rights. We continue to support a range of sports organisations and events in terms of policy and due diligence.
Major sports bodies are also now looking to embed their commitments on human rights. In 2020, both Commonwealth Sport and the International Olympic Committee plan to develop human rights strategies, with both looking to place human rights at the centre of their respective upcoming games. Additionally, leaving aside the continuing debate around the suitability of Court of Arbitration for Sport to deal with human rights-related cases, discussion is likely to continue around the role and responsibilities of sports bodies in providing human rights remedies to group and individuals that have been negatively affected by sporting activities.
In this context, the Centre for Sports and Human Rights will continue to play a central role, and will continue to develop and bridge divides between sport, government, business and human rights communities, acting as conveners to promote collective action, and providing guidance to actors in the sports world.
Following up on the ILO Convention on Violence and Harassment at work
To resounding calls of ‘We did it!’ and ‘History is made!’, in June 2019, the annual session of the International Labour Conference adopted a new ILO Convention on Violence and Harassment in the World of Work along with an accompanying Recommendation.
As we commented at the time, C190 is ground-breaking for addressing everyone’s right to a working environment free of violence and harassment, be it formal or informal workers, interns, volunteers, job applicants, and third parties such as clients, and for broadening what is understood by the ‘workplace’. The Recommendation sets out practical guidance, such as what to look out for during a risk assessment and providing for flexible work arrangements and protections for victims. Regardless of the formal process of ratification – Uruguay became the first ratifying State in late 2019 – the Convention is sure to set benchmark standards on the issue that will be useful beyond the traditional legislator context.
Unions – and especially women union leaders – have set in motion campaigns to push their countries towards ratification and to harmonize national law to C190. Countries like South Africa, Kenya and Palestine have made moves towards ratification, from starting tripartite discussions to introducing the Convention in their legislative organs’ agendas. The Convention needs two ratifications to enter into force. The ILO has called on its constituents to ratify C190, which will ‘accelerate action on the ground, including the adoption and enforcement of national laws, systems for prevention and methods of effective redress’.
Living wage initiatives continue to gain ground
Significant attention has been brought to the topic of “living wage” in 2019 which will intensify focus on the issue in the coming year. These efforts have included the refining and publishing of the Salary Matrix for a Living Wage (IDH and Rainforest Alliance), and the launch of the ALIGN tool (under the umbrella of the Living Wage Lab), a guidance tool to help agri-food companies map their supply chains and take steps to reduce living wage and living income gaps in their supply chains. Further steps on the issue during 2019 included The Only Way is Up! Conference in Rotterdam, organised by a consortium of organisations, with support from the Dutch Ministry of Foreign Affairs and the German Federal Ministry for Economic Cooperation and Development.
In terms of practical steps, a number of sectoral commitments have been undertaken in the last year, from which various implementation programs are to be expected over the 2020-2025 period, including the Banana Retail Commitment, the African Sustainability Program (ETP and IDH) and Beyond Chocolate (Puratos). It will also be interesting to follow the progress of various initiatives and organisations, including the Platform Living Wage Financials, the Global Living Wage Coalition and ACT.
W(h)ither recruitment fees
The need to eliminate the recruitment fees paid by workers to get a job in many parts of the world is now broadly accepted. However, considerable challenges remain in practice given the complex nature of some labour supply chains, and the embedded nature of the problem. There will be a greater focus on practical strategies in 2020 based on work by organisations such as the Responsible Business Alliance and also emergent certification standards for labour agents, such as the IRIS standard promoted by the IOM. Ergon blogged about the various international initiatives back in May.
We have been working with the RBA on a good practice note on no fees recruitment (due in early 2020), and also with the Leadership Group on Responsible Recruitment on strengthening its monitoring and reporting on the Employer Pays Principle.
Transport and logistics under scrutiny
Risk assessments are bringing new sectors and activities into the working conditions spotlight. Transport and logistics is one such area, from working conditions in warehouses to those for workers in road and maritime trade routes, including those connected to China’s belt and road initiative.
Shipbreaking has been a focus area for some time and the Supreme Court of Bangladesh has pointed at the ‘systemic risks’ of violations of environmental and labour laws in the sector. Separately the NGO Human Rights at Sea has just launched a platform for the development of a new soft law instrument, the Geneva Declaration on Human Rights at Sea intended to ‘raise global awareness of the abuse of human rights at sea and to mobilise a concerted international effort to put an end to it’.
For road transport, recent tragedies have put the human rights focus on the trafficking of migrant workers, but we also so expect working conditions for truck drivers to become a more salient issue as well as for delivery and fulfilment drivers (‘the final mile’) as gig economy jobs come under further scrutiny.
The rise of HRIAs
Attacks on the utility of social audits and corresponding calls to go ‘beyond audits’ have been around as long as Ergon (see the Clean Clothes Campaign’s most recent critique here) but there is increasing understanding of some alternative tools and techniques. These include landscape-based approaches and human rights impact assessments (HRIAs). Encouraged by NGOs, including Oxfam, a range of supermarkets are now experimenting with deeper, more focused HRIAs aimed at getting to the root of human rights abuses and identifying actions that can address these root causes rather than just the symptoms. In addition, we are seeing an uptake of HRIAs across a range of other sectors, from oil and gas to infrastructure and sports.
With the rise in expectations and requirements for human rights due diligence, there will more consideration about conducting human rights impact assessments. The challenge is that there is no one fixed way of carrying out such assessments, and the concept means different things to different people. We are happy to say that this is an area Ergon has worked on for many years and we can expect a raft of new studies to be conducted in 2019.
Smarter global risk assessment tools
Commissioning an HRIA is often the next step after a broad supply chain human rights risk assessment that identifies the most significant risks for further exploration. Driven by investor demands, moves towards mandatory due diligence and a more general embedding of the UNGPs into corporate processes, we expect these risk assessments to become more granular and to extend into a broader range of non-consumer-facing corporate sectors (see above on transport and logistics).
There is also greater demand for higher quality risk tools from collective platforms. We have been supporting Sedex in the development of a new Risk Assessment Tool which will be launched in 2020 and will have functionality enabling country, sector, vulnerability and site-based factors to contribute to risk scores. Additionally, we are working with Rainforest Alliance to create a risk screen as part of their certification standards. This will also roll out in 2020.