Second Benchmark of Corporate Human Rights Performance Launches

April 30, 2016

Second Benchmark of Corporate Human Rights Performance Launches
by Robert Kropp

KnowTheChain, founded in 2013 to address California’s Supply Chain Transparency Act, will initially benchmark the human rights performance of 20 companies in the information and communications technology industry sector.

SocialFunds.com — The endorsement, in 2010, by the United Nations’ Human Rights Council of Professor John Ruggie’s Guiding Principles on Business and Human Rights, helped serve notice to major corporations that transparency around human rights in supply chains would be an expectation of sustainable investors and other human rights advocates.

According to 2014 findings by the Interna tional Labor Organization (ILO), an estimated 21 million people are trapped in forced labor conditions worldwide; the illegal profits generated by human trafficking and other forms of exploitation are $150 million, three times greater than previously believed.

“We must now focus on the socio-economic factors that make people vulnerable to forced labour in the private sector,” said Beate Andrees of ILO in 2014.

In March of this year, after more than a year of consultations with over 400 contributors, the Corporate Human Rights Benchmark (CHRB) published its Pilot Methodology and announced that in November it would make public its first round of benchmarking corporations on human rights performance. Initially, the benchmark will include the top 100 companies from the agricultural products, apparel and extractives industries.

A second human rights benchmark, developed by partners in the KnowTheChain initiative, will be published in June. The first benchmark, partners including the sustainable investment research firm Sustainalytics and the nongovernmental organization (NGO) Verite report, will include 20 companies in the information and communications technology (ICT) industry sector. The ICT sector results will be followed by benchmarks of the food & beverage and apparel sectors.

In January, KnowTheChain published a pilot benchmark, reporting on “the transparency and disclosure statements of a small subset of companies with regards to human trafficking and forced labor.”

According to KnowTheChain, the the primary objectives of the pilot benchmark report were three:
1. Develop and test a pilot benchmarking methodology that can be scaled for future, expanded benchmarking studies;
2. identify and highlight examples of strong corporate practices, especially as reporting requirements and national legislation expands and evolves; and
3. provide a preliminary analysis on corporate forced labor transparency and disclosure patterns addressing forced labor in supply chains.

“Corporate disclosure and transparency of efforts to mitigate human trafficking and forced labor in supply chains is poor,” the report states, with an overall average score of only 52 out of a possible 100. The methodology framework developed by KnowTheChain includes seven key themes: commitment and governance; traceability and risk assessment; purchasing practices; recruitment; worker voice; monitoring; and remedy.

Sustainable institutional investors will certainly welcome the evolution of the two benchmarks, as effective corporate policies and practices on human rights have been central to their corporate engagement practices for decades. Last September, a group of 112 investors with over $1 trillion in assets under management issued a statement calling for passage by the US Congress of the Business Supply Chain Transparency on Trafficking and Slavery Act of 2015, which would require companies with over $100 million in gross worldwide receipts to disclose in their Securities and Exchange Commission (SEC) filings “measures they have taken to identify and address the risks of forced labor, human trafficking and the worst forms of child labor throughout their supply chains and, consequently, would have broad international impact.”

“Companies without comprehensive anti-trafficking protocols are exposed to a host of financial, legal and reputational risks with the potential to adversely impact shareholder value,” the investors stated. “Proactively addressing these risks can guard against the negative publicity, business interruptions, lawsuits, protests and reputational damage that may result from undetected human rights violations.”

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