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The lesson from human rights benchmarks is that company commitments need to be followed with action

Companies need to walk the talk: implementation is key

Gyms have built their business models around people committing to take action, but not actually doing so. Membership at some of the cheaper gyms averages around 6,500 members while the gyms only hold 300 people. They count on a significant number of members signing up but not walking the talk. 

Some companies seem to follow a similar thought process. The recently released 2019 Corporate Human Rights Benchmark  (CHRB) ranked the human rights performance of 200 of the world’s largest global companies in four high risk sectors: agricultural products, apparel, extractives and electronics manufacturing. Given their size and number, it’s likely at least some of these companies will be in most investors’ portfolios. 

Ninety-four percent of the companies assessed have a basic public commitment to respecting worker rights, at least in their own operations. Similarly, KnowTheChain, which assesses corporate efforts to address forced labour risks in supply chains, found in 2018 that over 90% of the 119 companies it benchmarked publicly commit to addressing forced labour. 

This is positive while unsurprising, given these are the largest global companies in sectors with the most risk of human rights abuses and forced labour.

Yet when it comes to implementation a very different image emerges: The average overall score for the 200 companies assessed by the CHRB in 2019 is a meagre 24%. This covers policy commitments but also human rights due diligence, approach to remedy, specific human rights risks and how companies respond to serious allegations of negative human rights impacts. 

The average score for companies benchmarked by KnowTheChain is a bit higher, at 33%. This is likely due to transparency regulations that require companies to publicly document their efforts to address modern slavery, such as the Australia Modern Slavery Act, California Transparency in the supply chain Act, UK Modern Slavery Act, and the Dodd-Frank Act in the US. 

However this is still worryingly low given the risk of modern slavery in the sectors KnowtheChain looks at, namely apparel, food, and electronics.

This high risk of forced labour is reflected in these benchmarks’ findings. Out of the 149 allegations of severe human rights impacts that the CHRB identified, over 50% were related to labour rights, with forced labour being the most common human rights allegation issue. 

In its 2020 ICT benchmark, KnowTheChain will be including 23 forced labour allegations regarding 15 companies, up from three allegations around three companies in 2018.

When negative impacts occur, companies should step up and ensure that workers, including those in their supply chains, are remediated. Yet only 23% of the 200 companies assessed by the CHRB in 2019 take steps towards remediation. And in only 3% of cases where allegations have been identified do companies show that they provided remedy that was satisfactory to the victims. 

Similarly, KnowTheChain found that only 18% of companies have a remedy process in place and only 28% could demonstrate having taken steps towards remediation for labour rights abuses.

Enhanced scrutiny by companies and investors, and adequate human rights due diligence, are needed to ensure the rights of particularly vulnerable groups, such as migrant workers, are respected. It is essential for companies to identify, assess, and act on risks related to their own operations and supply chains, particularly as traditional tools such as audits often fail to detect them. 

For example, in 2018 forced labour was detected at Top Glove, a Malaysian rubber factory. Migrant workers reported having paid very high recruitment fees, worth months if not years of their salary, in order to secure a job at the company. Yet the 28 audits undertaken in 2017 and 2018 from well-known audit firms failed to detect these abuses.

When looking at how companies address risks around the exploitation of migrant workers, KnowTheChain found that only 41% of 119 large global companies in three high risk sectors prohibit worker-paid recruitment fees, with more ICT companies tending to have such policies than apparel and food companies. 

Yet when it comes to implementation, the numbers go down significantly. It is alarming that only 8% of all benchmarked companies (nine out of 119) disclose evidence that they have reimbursed recruitment-related fees to workers in their supply chains. 

Similarly, only 15% of the companies (18 out of 119) disclose how they support ethical recruitment in their supply chains, such as having in place a screening and selection process for recruitment agencies used in the company’s supply chains; supporting the development of ethical recruitment schemes; or engaging policy makers to improve standards for recruitment agencies. 

These findings mirror the CHRB results. While over 50% of companies (and again, ICT companies more often than apparel and food companies) prohibit debt bondage and other unacceptable financial costs, such as recruitment fees in their supply chains, few companies demonstrate strong implementation, with only four companies receiving full points on the relevant indicator.

There are consequences for companies that do not show any willingness to avoid negative impacts to individuals and communities. This month, Norway’s sovereign wealth fund banned UK security services company G4S from its holdings due to poor treatment of migrant workers. It’s likely more and more responsible investors will take similar actions. 

A month earlier, the US Customs and Border Protection stopped the import of five products from five different countries due to the products being made by forced labour. But more needs to be done and change needs to happen quickly. If the largest global companies don’t take strong action, others are unlikely to follow suit. 

Companies – especially in high risk sectors – should take a bold stand and publicly demonstrate their efforts, rather than treating human rights commitments like a gym membership. Empty words aren’t good enough; the lives and dignity of real people are at stake, and investors have a key role to play in driving investment and company practice towards improved standards around the world.   

Camille Le Pors is Programme Manager at Corporate Human Rights Benchmark and Felicitas Weber is KnowTheChain Project Lead.