Society’s expectations for investors regarding business and human rights are rising. Like all business actors, investors have a responsibility to respect human rights in accordance with the United Nations Guiding Principles on Business and Human Rights, as well as emerging regulatory developments in different countries. This entails knowing and showing that their investments do not pose risks to people on an on-going basis. Their ability to do so hinges on the transparency of the companies that they are investing in, their human rights commitments, due diligence processes and performance.
Every one to two years, the World Benchmarking Alliance publishes the free and publicly available Corporate Human Rights Benchmark (CHRB), which assesses the world’s most influential companies on their human rights performance. Below are some examples of how investors have used the CHRB in their efforts to respect human rights.
1. To collectively engage with companies to encourage them to improve their human rights performances
In 2020, 176 investors, representing over $4.5 trillion in assets under management, sent a letter to all the companies that scored zero points on human rights due diligence in the 2019 CHRB. The letter was coordinated by the Investor Alliance for Human Rights and signed by a coalition of asset managers, public pension funds, and faith-based investors from 15 countries. It called on companies to improve their human rights due diligence by June 2020. The letter caught the attention of the Financial Times
In 2021 the Investor Alliance for Human Rights released a statement on behalf of 208 investors representing over US$5.81 trillion in assets under management calling on companies to improve their recent performance in the 2020 CHRB. The results demonstrated that a considerable number of companies scored zero points across the five human rights due diligence indicators. “We are concerned that a lack of public communication on human rights suggests these companies have not assessed associated risks or determined how best to mitigate them”, the investors’ statement reads.
The statement called on companies to demonstrate respect for human rights by publicly disclosing their human rights due diligence processes.
2. As a resource for evaluating shareholder proposals
Influential proxy advisor Institutional Shareholder Services (ISS) integrates the CHRB into its evaluation of human rights due diligence shareholder proposals. In its updated Policies and Procedures FAQs, the ISS states that it is more likely to side with a company if a board committee has oversight over human rights issues and encourages companies to disclose how they monitor compliance with their supply chain code of conduct – both of which are assessed in the CHRB.
3. To ask specific companies to improve their human rights practices
In 2017 and 2018, when the first two iterations of the CHRB were published, food processing company Kraft Heinz scored in the 0–10% score band. The company was publicly scrutinised over its lack of human rights policies and due diligence processes. Members of the Seventh Generation Interfaith Coalition for Responsible Investment and the Interfaith Center on Corporate Responsibility filed a shareholder resolution, requesting a report on Kraft Heinz’s process for identifying and analysing potential and actual human rights risks in its operations and supply chain.
Kraft Heinz responded by committing to, and later publishing a human rights policy and implementing a due diligence process. The company also established a Global Steering Group which included the head of Corporate Social Responsibility, the Chief Procurement Officer and the Chief Ethics and Compliance Officer to oversee the implementation of the policy, to show evidence that the policy would be taken seriously by both the board and the management. Kraft Heinz also further linked executive performance incentives to the successful implementation of the policy.
In 2019, Kraft Heinz improved its score in the CHRB considerably and moved up to the 10–20% score band.
Then in the 2020 CHRB, Kraft Heinz scored one out of 12 points for embedding respect and human rights due diligence as the company did not, among other things, disclose how it identifies salient risks in its own operations and supply chain, or disclose the actions it has taken in response to its risk assessment. In response to this, the Interfaith Center on Corporate Responsibility filed a proposal on behalf of seven shareholders, requesting Kraft Heinz to publish Human Rights Impact Assessments examining the actual and potential impacts of one or more high-risk products.
Kraft Heinz answered by committing to conducting a Human Rights Impact Assessment consistent with the United Nations Guiding Principles on Business and Human Rights. The Interfaith Center on Corporate Responsibility commended Kraft Heinz for their efforts, stating:
We are encouraged that Kraft Heinz has adopted the UNGP methodology and is moving forward with the due diligence process to address its most salient human rights impacts. We will continue to work with Kraft Heinz, particularly in the area of enhanced disclosures on its implementation plans and audit findings. We would like to see the company dramatically improve its Corporate Human Rights Benchmark score and become a leader among its peers in respecting human rights.
Food processing company Tyson Foods has been included in the CHRB for four iterations and consistently scored zero points across the human rights due diligence indicators. Since 2019, investors have called on Tyson to publish a report on its human rights due diligence process. In 2021, investors filed a shareholder proposal on human rights due diligence, referring to the 2019 CHRB results to support the claim that “there is inadequate disclosure on the outcomes of Tyson’s workplace commitments or implementation of human rights due diligence to address adverse human rights impacts throughout the value chain”.
While the company is yet to publish such a report, investor support for the proposal is growing. Investor Advocates for Social Justice calculated that, in 2021, the proposal received 78.7% support from independent investors (excluding the Tyson Limited Partnership) and 18.4% support overall. This marks an increase compared to previous years: in 2020, 59.68%, and in 2019 22.55% of independent shareholders supported the human rights due diligence proposal.
The TJX Companies
U.S. based apparel and home goods retailer The TJX Companies has been included in the CHRB since 2017 and scored zero points across the human rights due diligence indicators in the 2020 CHRB. In 2021, Northstar Asset Management filed a shareholder resolution, urging the company to oversee a third-party assessment and report to shareholders assessing the effectiveness of current company due diligence. In the resolution and a subsequent shareholder rebuttal, Northstar refers to The TJX Companies’ poor performance on the CHRB due diligence indicator, emphasising the need for such a third-party assessment and report.
4. To call on governments to put policies in place
In 2020, the Investor Alliance for Human Rights coordinated a statement by a group of 105 investors representing US$5 trillion in assets under management. The statement called on governments put regulatory measures in place requiring companies to conduct human rights due diligence. One of these investors – Aviva Investors – cited the CHRB as evidence for this need:
The Corporate Human Rights Benchmark shows that a large number of high impact companies are failing to report on any human rights due diligence at all, despite detailed guidance produced by the United Nations almost a decade ago. A purely voluntary approach has clearly failed, creating risks for individuals, companies, and investors and harming the long term societal mandate of markets. It is important that Governments introduce meaningful mandatory human rights due diligence regimes, particularly for large companies in high impact sectors. Without compulsion, it is clear that corporate laggards will continue to free-ride on the rights of others.
The investor statement was signed by a coalition of asset managers, public pension funds, and faith-based investors from 13 countries across four regions. The statement was sent to governments across the regions represented in the CHRB, including policymakers within the European Union, United States and Canada.
5. To inform their voting and engagement
To help address the lack of tools investors that have traditionally faced in fully understanding the human rights practices of companies, Aviva Investors became one of the founding members of the CHRB. Today, the company continues to integrate the results of the benchmark into its voting and engagement activities, particularly focusing on companies scoring poorly on the benchmark’s human rights due diligence indicators. In their 2020 Annual Review, the asset management fund said:
Aviva Investors recognises that while the credibility of the CHRB is grounded in its multi-stakeholder model, its impact on driving positive changes in corporate behaviours will require investors to be engaged and act on its findings. Consequently, we fully integrated the results of the benchmark into our voting and engagement activities during the year. This included voting against management at nearly 100 poorly performing companies, sending 40 letters encouraging companies to engage with the CHRB on its findings, and undertaking targeted engagements alongside fellow investor signatories with a number of companies, including Amazon, McDonalds, Apple and LVMH.