Pressure mounts on companies over management of human rights

Two major reports assess companies’ behaviour as Corporate Sustainability Due Diligence Directive goes to trialogue.

The World Benchmarking Alliance named 12 companies this week that have made “remarkable progress” on human rights.

Amazon, ENEOS, Heidelberg Materials, Hermes, LPP, NLMK Group, Nornickel, OMV, Puma, Ralph Lauren, UltraTech Cement and Wesfarmers have all, according to the NGO’s latest Corporate Benchmark on Human Rights, made significant improvements over the past five years.

This compares with incremental improvements by most of the 110 apparel and extractives companies assessed.

The benchmark has been running since 2017, but the latest update is especially timely – coming just 48 hours before EU legislators gathered in Strasberg yesterday to discuss the details of the Corporate Sustainability Due Diligence Directive (CS3D).

Corporate Sustainability Due Diligence Directive

In the face of relentless lobbying, political pushback and very tight deadlines, CS3D’s chances of getting through the legislative process are looking increasingly slim. But if it does survive, it could transform how companies operating in Europe are held accountable for human rights abuses relating to their business activities and suppliers.

Essentially, CS3D will require firms to demonstrate that they are taking adequate action to identify and mitigate social and environmental breaches taking place in their value chains.  

Yesterday’s debate set the parameters for next month’s trialogue – expected to be the final debate on the file – in which co-legislators will argue over the most important and contentious elements of the law.

This includes which entities will be covered by the rules. The original proposal was for all large companies with significant operations in the EU to be in scope, regardless of where they’re headquartered, but European Council wants the finance sector removed and there have been warnings (mainly from the US) that forcing companies outside the EU to comply would be extraterritorial and unconstitutional.

During yesterday’s trialogue, European Parliament reportedly agreed to increase the threshold for the number of employees a company must have to be in scope, although final details are still to be agreed.  

When it came to human rights in particular, there was less movement: European Council stood firm on its call to limit the number of human rights frameworks used in the rules – namely to leave out expectations around Free, Prior & Informed Consent as per the UN Declaration on the Rights of Indigenous Peoples, and International Labour Organisation conventions.

A technical discussion will take place next week to clarify various elements before the final debate in December, including how the sale of products should be treated under the rules.

How are companies performing at the moment?  

More than two thirds of apparel and extractive companies assessed by WBA this week had improved their performance on fundamental indicators like policy commitments, due diligence and grievance mechanisms.

“Some companies show that transformative change is possible within five years,” said the NGO, which identified a handful of actions behind the success of the 12 fastest improvers.

These include assigning the topic to someone senior in the company, structuring its day-to-day management, providing internal training and introducing external grievance mechanisms. Crucially, WBA said, they had improved the way they identify, assess and integrate human rights risks and impacts.

“Notably, other companies whose rankings have fallen significantly since their first assessment have stopped disclosing information on these topics, and companies that are stuck at the bottom have yet to start implementing or disclosing information on any of these practices,” it added.

Focus on modern slavery and recruitment fees

Asset manager CCLA this week ranked 100 of the UK’s largest listed companies on their performance on modern slavery.

Only six were deemed leaders: Kingfisher, Marks & Spencer, Next, Reckitt Benckiser, Tesco and Unilever. Just one – Indian telecom company, Airtel Africa – had no modern slavery statement.

The rest were distributed relatively evenly between “barely achieving compliance”, “meeting basic expectations” and “evolving good practice”.

CCLA and WBA both emphasised the need for firms to ban the use of recruitment fees for migrant workers.

An investigation by a number of respected media outlets last month highlighted alleged labour abuses in the supply chains of companies including Amazon, McDonald’s, Chuck E Cheese and InterContinental Hotels Group.

Interviews with tens of current and former migrant workers showed many were charged illegal or unaffordable recruitment fees. The companies’ responses to the allegations can be found here.

CCLA urged companies to adopt what’s known as the ‘employer pays principle’, describing it as “a key step that businesses across all sectors can take to combat exploitation, forced labour and the trafficking of migrant workers in global supply chains”.

However, it noted, the principle had been incorporated into the recruitment practices of just 30 of the 100 companies it had assessed.