emergent standards & expectations on responsible business conduct: why this matters to your...

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Emergent Standards & Expectations on Corporate Conduct:Why This Matters to Your Business

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[email protected] / www.assentcompliance.com / 1 866 964 6931 / © Assent Compliance 2017 2

Today’s Moderator

Sarah CarpenterAssent ComplianceBusiness & Human Rights Analyst







Agenda

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Corporate Responsibility to Respect

How Do You Satisfy Expectations?

Why Do It? What Are Others Doing?

What’s on the Policy Horizon?

Challenges for Companies

Questions and Answers












INTRODUCTION

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Assent Product SuitesOur Market Leading Platform

Ethical Sourcing

Materials Management

Supplier Information Management

InspectionsConfigurable Surveys & Declarable Substance

Lists

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Today’s Partner

Ariel Meyerstein, PhDUnited States Council for International Business (USCIB)Vice President, Labor Affairs, Corporate Responsibility & Corporate Governance

[email protected] @ameyerstein









USCIB Overview

70 years of global policy engagement

U.S. business’ voice in multilateral policy







USCIB Overview - Members







Feature PresentationPRESENTER, TITLE & COMPANY Feature Presentation

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United Nations (UN) Guiding Principles = Global Consensus

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Source: Shift







Which Human Rights?

Internationally recognized human rights, at a minimum (this is a floor, not a ceiling):

◆ Universal Declaration of Human Rights (UDHR)

◆ International Covenant on Civil and Political Rights (ICCPR)

◆ International Covenant on Economic, Social and Cultural Rights (ICESCR)

◆ International Labor Organization’s 1998 Declaration on Fundamental Principles and Rights at Work (integrating principles of ILO’s 8 core conventions)







Human Rights◆ Gross Human Rights Abuses: Freedom from torture, cruel and inhumane

treatment, including slavery and genocide

◆ Conditions of Work: Freedom of association, collective bargaining, right to join a trade union, right to health and safety at work, freedom from discrimination, right to a fair wage and equal pay, prohibition against child labor

◆ Civic Life and Participation: Freedom of expression, right to political expression, right to peaceful assembly, right to information

◆ Rights Related to the Environment: Right to clean water and sanitation, right to environmental health

◆ Adequate Standard of Living: Right to physical and mental health, right to food, right to housing

◆ Rights Related to Land: Right to livelihood, right to own property, right to participate in cultural life







Scope of Responsibility

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◆ Concerns Risks to People/Planet: NOT risk to business

◆ Applies to All Companies, Everywhere: Regardless of size, sector, location, ownership or structure

◆ Global Standard: Exists over and above compliance with national laws – when faced with conflicts, seek to “honor the principles of human rights”

◆ No Offsets: CSR-related activities may support/promote human rights, but not offset failure to prevent impacts

◆ No Excuses: Just because the government is failing to protect, does not provide a license for companies to fail to respect







Scope of Responsibility

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(a) Avoid causing or contributing to adverse human rights impacts through their own activities (i.e. acts and omissions), and address such impacts when they occur

(b) Seek to prevent or mitigate adverse human rights impacts directly linked to their operations, products or services in their business relationships, even if they have not contributed to those impacts (Guiding Principle 13)

Leverage: ability to use business relationships to manage their impacts unilaterally or through collaboration

Remedy (Guiding Principle 22 & Commentary):

◆ Cause/contribute: Responsible for remedy◆ Directly linked: May participate in remedy, but not required to







Cause/Contribute vs Directly Linked

Adverse human rights impact

Significantly increase chance of occurring without other’s

actions/omissions?

Significantly increase risk of impact, but not sufficient

contribution by itself?

Cause Contribute Directly linked

Is there a commercial relationship or cascade of relationships providing

product or service for enterprise’s operations, products or services?







Scope of Responsibility: Acting on Due Diligence







Embedding Responsibility to Respect: Management SystemsKey elements to integrate into operations:

(a) Policy commitment

(b) Human rights due diligence process to (i) Identify(ii) Prevent or mitigate (iii) Account for (track and communicate on) human rights

(c) Remedy: Legitimate and effective processes to enable the remediation of any adverse human rights impacts they cause or contribute to







Human Rights Due Diligence

Diligence for: Impacts to humans, not impacts to the business

Scope: Will vary relative to the size of the business enterprise, the risk of severe human rights impacts and the nature and context of its operations

Duration: Continuous, as human rights risks may change over time with evolving business operations

◇ Should draw on internal and/or independent external human rights expertise

◇ Should involve meaningful consultation with potentially affected groups and other relevant stakeholders, as appropriate to the size of the business enterprise and the nature and context of the operation

◇ Should be facilitated by deploying operational-level grievance mechanisms







Acting on Human Rights Due Diligence

Should integrate the findings from impact assessments across relevant internal functions and processes, and take appropriate action.

◆ Assign internal responsibility at appropriate level

◆ Allocate budget and oversight to enable effective response to impacts

◆ Prioritize prevention & remediation based on SEVERITY:

◇ SCALE (how serious an impact)

◇ SCOPE (how many people affected)

◇ REMEDIABILITY







Question

Why Bother with the Corporate Responsibility to Respect? (Other Than “It’s the Right Thing to Do!”)







Salient Human Rights Risks Material Risk?







Looking Only at Enterprise Risk Misses Risks to People







ESG Mainstream

SOURCE: US SIF 2016







Laws: Expanding Scope, Reach & “Teeth”

U.S. Exec Order on Human Trafficking for gov’t contractors Need to report instances from due diligence

UK Modern Slavery Act [Doing business in UK; global receipts > € $36 million; signed by director; covers supply chains]

CA Supply Chains [CA retail/manufacturers only; > U.S. $100 million global receipts; website disclosure on policies and procedures]

U.S. 1930 Tariff Act Loophole closed re: banning goods made ‘in whole or part’ by forced labor or child labor

French Draft Due Diligence Law [French companies; serious impacts to people/planet; covers supply chains; fines of up to 10-30 million Euros]

EU Non-Financial Reporting Directive [All public companies in EU of 500+ employees; principal risk of severe non-financial risks (human rights, environment, etc.) incl. supply chains; monitoring and enforcement up to EU Member States]







Federal Acquisition Regulation (FAR)/(DFARS)

◆ Implements Exec. Order 13627 (“Strengthening Protections Against Trafficking in Persons in Federal Contracts”) and Title XVII of the National Defense Authorization Act for Fiscal Year 2013

◆ Requires certain contractors ($500K and above) to certify that after having conducted due diligence, to the best of the contractor’s knowledge and belief:

◇ Neither it nor any of its agents, subcontractors or their agents is engaged in any trafficking activities; or

◇ Abuses have been found, the contractor or subcontractor has taken appropriate remedial and referral actions

◆ Office of Management and Budget (OMB) working on final rule for defining ‘recruitment fees’







California Transparency in Supply Chains Act◆ Applies to retailers and manufacturers doing business in California with

worldwide gross receipts > $100 million

◆ References Department of Labor’s 2009 List of Goods Produced by Child Labor or Forced Labor: 122 goods/commodities in violation of international standards in 58 countries across the world

◆ Companies required to disclose their efforts, if any, to ensure their product supply chains are free from slavery and human trafficking

◆ The five must-disclose themes are: ◇ Verification◇ Audit◇ Certification◇ Internal Accountability◇ Training ◇ Disclosures must be be made accessible on corporate websites







French Law on Due Diligence

◆ Places a legal obligation on French companies (HQ in France with 5K+ employees in France or 10K+ globally) to implement a due diligence plan to prevent “serious impacts on human rights and fundamental freedoms and the health and safety of people and the environment” from their own operations, their direct and indirect subsidiaries, as well as suppliers and subcontractors

◆ The due diligence plan must contain the following elements:◇ Risk-mapping to identify, assess and prioritize risks◇ Procedures for regular assessment of risks associated with subsidiaries, subcontractors or

suppliers ◇ Actions to mitigate risks or prevent serious harm◇ Alert mechanism for the collection of reports and warnings relating to actual or perceived risks,

prepared in consultation with the representative trade unions in that company◇ A process for reviewing and ensuring the plan’s effectiveness







French Law on due diligence◆ Potential Liability:

◇ In the absence of a due-diligence plan, any person with a legitimate interest can petition a court to require the company to create one

◇ Judge can fine the company up to €10 million depending on the seriousness of the breach◇ Failure to comply could create liability to pay damages for impacts which could have been

avoided if the due diligence plan were implemented (cap of €30 million, situation dependent)

◆ Next steps:◇ The law is now before the French Senate for a last reading (early February) and could then go

back to the National Assembly for final adoption ◇ Republican MPs have filed a constitutional complaint; if the law survives the challenge, there

might be further implementing regulations that detail the specific requirements◇ If passed, could enter into force in 2018







UK Modern Slavery ActA commercial organization must prepare a slavery and human trafficking statement for each financial year addressing what steps have been taken to ensure slavery or human trafficking are not present within their own businesses or their supply chains.

Must be approved by board of directors (or an equivalent body) with director’s signature (or equivalent).

StatementOrganization

structure, business and supply chains

Policies

Due diligence

Risks and mitigation

Effectiveness / Performance

Indicators

Training







Question

What Are Companies Doing?







Benchmarks

◆ Know the Chain – Ranking Information & Communication Technology (ICT), Apparel, Food and Beverage on forced labor, human trafficking

◆ Corporate Human Rights Benchmark Initiative – Ranking 100 largest companies across four sectors on ALL rights (42 Extractive, 34 Agriculture, 22 Apparel) – due to be released March 2017

◆ Business & Human Rights Resource Centre – Over 1,000 statements online, FTSE 100 benchmarked to UK Modern Slavery Act

◆ Shift UNGP Reporting Framework – Not ranking, but database allows comparability across reports [30+]

◆ Ranking Digital Rights – Ranking ICT companies’ on online rights protection [< 20 companies]







Forced Labor / Human Trafficking EffortsKnow the Chain

There are a total of 22 indicators across the seven themes. For each theme a company can score a total of 100 points.

THEMES:◆ Commitment and governance ◆ Traceability and risk assessment ◆ Purchasing practices ◆ Recruitment ◆ Worker voice ◆ Monitoring ◆ Remedy

ICT sector average score: 39/100Food and agriculture average score: 31/100 Apparel and footwear average score: 46/100







California Transparency in Supply Chains Act

Assessment of 2,126 potentially qualifying companies:

◆ 1,325 (62%) had a pertinent statement

◆ Average disclosure compliance score was 60% for seven affirmative conduct indicators

◆ Forty-one percent had corporate disclosure score on or above 70%

Source: Chris N. Bayer, PhD







Company Practices

Source: BSR/Globescan 2016







Company Supplier Transparency ExampleMarks & Spencer Suppliers Map







What’s Next? What’s at Stake?

◆ UN Guiding Principles / OECD Guidelines

◆ Draft French mandatory due diligence law

◆ UK Modern Slavery Act

◆ ILO global supply chains / MNE Declaration update

◆ Business and Human Rights Treaty

VS.

◆ Increased legalization / reduced flexibility to problem solve◆ Enhanced accountability for workers several tiers away; increased

global collective bargaining along supply chains◆ Criminal and civil liability for the executives/company for variety

of human rights impacts







Challenges◆ How to separate signal from the noise in expectations/requirements? Swimming in a

tsunami of hard laws, soft laws, stakeholder expectations, ratings, rankings – which matter most?

◆ How to get traction in the company ◇ Enterprise risk vs human rights risk (business case vs the moral case) -

sometimes mixture is best?◇ Embedding responsibility both top-down and horizontally, and finding resources

◆ Finding overlap between salience and materiality

◆ Reporting: How to give stakeholders what they want and not get sued?

◆ How to provide effective remedy? Considered the forgotten pillar, driving push for treaty and other legalized approaches







For Further Information: Laws & Regulations

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http://assentcompliance-1.hs-sites.com/webinar-understanding-eu-non-financial-reporting-directive

http://assentcompliance-1.hs-sites.com/webinar-the-us-ban-on-forced-labor-imports













Upcoming Events: Webinars & Conferences

Learn more about Assent events:www.assentcompliance.com/events

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[Webinar] KPMG & Thermo Fisher Discuss Conflict Minerals Wednesday, February 1st at 10 AM EST

Upcoming Educational SummitsFebruary 8th, 2017 | San Jose






http://www.assentcompliance.com/events




Q&A Discussion

Questions?

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