Firms challenged on supply chain human rights

Investors have called on global brands including Costco, Ralph Lauren, and Starbucks to improve their performance on human rights within their supply chains. 

The Investor Alliance for Human Rights, a group of 176 global investors representing almost $4.5tn in assets, targeted the worst performing companies in the 2019 Corporate Human Rights Benchmark.

In an open letter to almost 100 firms, the investors said they expect firms to demonstrate “respect for human rights across their operations and value chains”, and to publicly disclose commitments and demonstrate transparency. 

“We are concerned that a lack of public communication on human rights suggests the company has not assessed associated risks or determined how best to mitigate them,” it continued. 

Investors called on the firms to publicly disclose processes to identify and assess human rights risks and impacts throughout supply chains. They have also asked for firms to reveal the actions they have taken to remediate human rights issues and how those actions are evaluated and revised for effectiveness.

Magdalena Kettis, active ownership director at Nordea Asset Management, said: “It is alarming to see so many companies falling short. Like all business actors, investors have a responsibility to respect human rights under the UN Guiding Principles on Business and Human Rights, as well as emerging regulatory developments in different countries. 

“This entails knowing and showing that our investments do not pose risks to people, yet our ability to do so hinges on robust due diligence among beneficiary companies and corporate transparency around such efforts. This letter is a call for prompt and concrete action.”

Meanwhile, the UK government has published its first Modern Slavery Statement, outlining “ assess where the risks are highest across government, where we have greatest leverage, and where we want to prioritise action”.

The Modern Slavery Act currently requires firms with an annual turnover of £36m to report on efforts they are making to eliminate slavery from their supply chains, though public sector organisations are currently exempt. 

Central government spending on goods and services from tier one suppliers was approximately £50bn in 2018-19. 

In the statement, the government said ICT hardware and electronics, construction and service staff including cleaners and caterers were the areas of highest risk for most ministerial departments. 

“We are piloting innovative programmes and taking steps to tackle the root cause of worker vulnerability in these areas,” it said. 

Over 90% of its tier one suppliers are registered in the UK but many have complex supply chains with multiple tiers of subcontracting.

“We have little visibility over where many products are made. We are taking a targeted approach, prioritising steps to achieve greater supply chain visibility where our risks are highest, recognising that workers in the lowest tiers of supply chains are often the most vulnerable,” the statement said. 

“Ministerial departments aim to map their highest‑risk supply chains, beginning with collecting data on their tier two suppliers in those supply chains where it is not held already. By increasing the visibility of their high-risk supply chains, ministerial departments will gain a better understanding of how and where to target their due diligence activity,” it added.

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