Steve Waygood: Our measure for corporate human rights performance could have a profound impact

Companies’ human rights risks are material and it matters to shareholders. But markets don’t currently work in a way that demands better human rights performance. If the markets were working, investors would analyse corporate performance on human rights, allocate capital to companies performing better, and then act as good owners making decisions that reward companies doing well and address failure.

But, as an investment community, we lack the analytical environment to assess corporate human rights performance and effectively fall at the first hurdle; how can investors allocate capital and act as good owners if we don’t know what better performance looks like?

It is pretty complicated: we do not have a base unit for measuring corporate human rights performance. It is not meters. It is not kilograms. It is not money. Human rights are fundamentally qualitative and hard to measure. So we need a proxy for this.

The United Nations Guiding Principles on Business and Human Rights are inspirational; they take the Universal Declaration on Human Rights and make it work for business. After they were developed, I eagerly waited to see how companies would score against them, but no public scores materialised. They were being created, but on a paid for and therefore less accessible basis that meant there was a missed opportunity for wide-scale impact.

It is that frustration that led Aviva Investors to work together with other likeminded organisations, knowing it would take a collective effort to develop something robust enough to achieve the proxy measure that was needed. We formed the Corporate Human Rights Benchmark with five other organisations, and committed to publishing that proxy score as a public good, available to all stakeholders – investors, business, civil society, trade unions, academia and the media.

We recognise that it will be tough to do justice to the complexity of issues involved. That is why over the last two years we have consulted around the world on multiple iterations of the methodology. Over 400 individuals and organisations have been involved, and what we have arrived at is a robust approach to assessing corporate human rights performance, in the vein of the principled pragmatism infused in the UN Guiding Principles.The Benchmark will provide a comparative snapshot year-on-year of human rights performance of the largest companies on the planet, assessing public information disclosed by companies on their websites, on other platforms or through the CHRB Disclosure Platform. The Benchmark focuses on companies’ policies, processes, practices and responses, grounded in international and industry-specific standards on responsible business conduct.

When the Pilot Benchmark is published in November 2016, the CHRB will rank the top 100 companies from the Agricultural Products, Apparel and Extractives industries. Crucially, the scores will be public, meaning the best businesses will be able to be proud of their achievements and the rest will feel the forces of the market using this information.
The result will only ever be a proxy for that base unit. As long as we all treat it as a proxy and not a fundamental measure, the impact that such a measure could have by creating a race to the top and driving better performance will be profound.

It will be up to the owners of a business to engage with their human rights risks and improve their approaches to managing them, to ensure the company is delivering responsible human rights performance for all. But company owners will also know that civil society, media, governments and competitors can also see the scores. This makes the business case for a company to deal with human rights issues even more compelling, because stakeholders will want to know why they are falling down at certain hurdles and what they will be doing to overcome their challenges.
Benchmarks are a tool for promoting better corporate performance on any issue, as long as they are felt to be robust, credible and to provide a fair and scrutinised analysis. I am convinced that our methodology does exactly this. We look forward to presenting the Pilot Benchmark in November 2016 and contributing to the greater accessibility of transparent information needed to drive improved corporate human rights performance around the world.

Steve Waygood, Chief Responsible Investment Officer at Aviva Investors, is Chair of the Corporate Human Rights Benchmark.