On Monday, the Corporate Human Rights Benchmark (CHRB) released its widely anticipated pilot assessment of the human rights performance of 98 publicly-listed companies in three high-risk sectors. The CHRB is a joint initiative between the investment community (led by Aviva Investors) and business and human rights NGOs (including the Business and Human Rights Resource Center). The chief aims of the exercise, launched one year ago, are to increase transparency for investors, purchasers, consumers and employees, and to drive greater competition in relation to corporate human rights performance. Here, we provide a brief overview of the endeavor and offer observations on a few key findings.
The CHRB is not the only international initiative promoting corporate accountability and responsibility with respect to human rights, but it is one of the more ambitious. Benchmarked companies were selected on the basis of their size (market capitalization), revenues, and geographic and industry balance and represent 35 of the world’s largest agricultural companies, 30 of the largest apparel companies, and 41 extractives majors. Some companies were assessed against more than one sector based on revenue. The CHRB eventually aims to add 500 companies across additional industries.
There have been publicly-voiced concerns about the CHRB’s implementation, methodology, and information-gathering practices from the beginning, however. First, the CHRB confined its pilot assessment to publicly available information – from company websites, documents, and information companies provided themselves – with the result being that some companies’ non-public, human rights-related practices are almost certainly not reflected in their published scores.
Second, the CHRB has repeatedly emphasized the unique challenges involved in measuring human rights performance. No established, quantitative method for doing so exists. Consequently, the CHRB developed a novel methodology structured around the UN Guiding Principles on Business and Human Rights (or “Ruggie Principles”), along with other standards and guidance focused on specific industries and issues. Published in 2011, the UNGP set out a best-practice framework for companies in scoping, managing, and remedying human rights impacts directly linked to their operations and supply chains. The proxies the CHRB developed were designed to evolve over time, and already have done. The CHRB has published an addendum to its approach, adjusting certain indicators and the weight assigned to them.
Results skew to lower bands
Benchmarked companies were originally notified of their selection to the pilot in February 2016, given their draft scores last summer, and invited to engage with the CHRB until September. Not all companies opted to do so. Based on the initial draft scores and the nature of the undertaking, however, rankings were predicted to be low, which the rankings confirm.
This isn’t surprising: as detailed in Freshfields’ recent publication, Five trends to watch in business and human rights in 2017, companies are at all different stages in addressing issues like those identified in the UNGP. The Ruggie Principles necessarily incorporate provisions for progressive realization to enable compliance over time. And companies are experimenting with and adopting different approaches as they take steps to improve their overall human rights records.
Back to the scores themselves, companies received both an overall score and rankings on six individual, measurement themes. With respect to overall scores, out of the 98 companies ranked, only three companies scored more than 60%, only six above 50%, and the average score is 28.7%.
By measurement theme, even leading companies did not rank highly across the board. On average, companies earned: 2.1% out of a possible 10% on their human rights governance and policies; 4% out of 25% for embedding respect and human rights due diligence in their systems; 2.1% out of 15% for remedies and grievance mechanisms that they make available; 2.8% out of 20% on specific human rights practices around key human rights issues (i.e., forced labor and free, prior and informed consent); 14.6% out of 20% on their responses to serious, human rights-related allegations; and 3% out of 10% for overall transparency.
Praise for policy commitments, room for improvement on actions
In general, the CHRB praised companies for introducing policy commitments to respect human rights – notably, more than 2/3 of all companies assessed have some form of public policy commitment – and to implement high-level governance arrangements to manage their human rights commitments. Some companies have additionally embarked on early stage, human rights-related due diligence.
The CHRB identified a greater number of areas for improvement, however. Most deal with how companies act on the basis of their human rights risks, track responses, communicate the effectiveness of their responses, provide remedies, and undertake specific practices linked to preventing key industry risks. This theme was echoed in the conclusions that the Benchmark drew on how companies respond to serious allegations of negative impacts. The CHRB made plain that while many companies respond publicly to serious allegations and have appropriate policies in place, performance can suffer when it comes to taking appropriate action.
Cross-sector comparisons highlight areas of similarity and difference
As noted above, companies were ranked on a sector-specific basis, aside from some companies that were ranked across two sectors (agriculture and apparel) based on revenue. Interestingly, companies in all three sectors ranked highest on transparency (i.e., how they disclose relevant information on human rights), followed by policy commitments they have put in place to recognize the corporate responsibility to respect human rights.
Companies diverged dramatically by sector when it came to areas where they ranked lowest, however. According to the Benchmark, agricultural companies as a group ranked lowest for company human rights practices specific to business; apparel companies ranked lowest in mitigating adverse impacts on human rights and making grievance mechanisms available; and extractives companies ranked lowest when it comes to embedding respect and human rights due diligence in their systems.
In the immediate future, and in an effort to encourage improvement, the CHRB plans to conduct an open consultation on the pilot. Companies that wish to contest their scores – either because they believe information was public at the time of the original publication deadlines, or shared but not evaluated and factored into their rankings – can appeal their first published scores.
Whatever route a company takes, results need to be viewed in context. The methodology and process are still in an experimental phase. Scores necessarily represent a proxy for measuring performance that will have to be evaluated, and perhaps adjusted, over time. Scores are finally based on public documentation solely, and therefore do not necessarily represent actual, internal practices.
You can find all the detail, including the ability to download specific company scores on the benchmark website. In closing, the use of corporate rankings mechanisms to gauge and create competitive tension in corporate human rights performance was one of five key themes identified in our recent publication. We invite you to read more here. Over the course of the next few weeks on this blog, we will discuss these trends, and what they mean in practice, in more detail.