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December 04, 2014
Efforts Underway to Benchmark Companies on Human Rights
    by Robert Kropp

A coalition launches project to rank companies on human rights as BankTrack reports that few financial institutions are making progress on the issue.


The annual U nited Nations Forum on Business and Human Rights, the third of which was held in Geneva this week, was originally proposed by Professor John Ruggie, the author of Guiding Principles on Business and Human Rights (UNGP).

Since the Principles were unanimously endorsed by the UN Human Rights Council in 2011, Ruggie stated in his closing remarks at this year’s Forum, they “are becoming embedded in the regulatory ecosystem for business and human rights.”

“Their place in this ecosystem has begun to expand from the international to the national and local spheres,” Ruggie observed.

In an effort to improve the human rights performance of companies, a coalition of groups announced this week that it has launched the first large scale project to rank companies on their performance. The coalition, which includes the research firm EIRIS as well as Calvert Investments, plant to develop “a transparent, publicly available and credible benchmark” to drive improved performance, according to a press release.

Additional coalition members are Aviva Investors, the Business and Human Rights Resource Center, the Institute for Human Rights and Business, and VBDO, a Dutch association of investors for sustainable development. The new benchmark will initially rank 500 top global companies from the agricultural, information technology, apparel, and extractives industry sectors. The selection of industry sectors acknowledges the vulnerability of workers and communities in emerging markets.

“As investors become increasingly aware of human rights-related risk across sectors and asset classes, this framework will be a critical due diligence tool for evaluating how companies are managing those risks,” Bennett Freeman, Senior Vice President at Calvert, stated.

One industry sector that will not be benchmarked in the first iteration of the ranking is the financial sector. However, according to a new report from BankTrack, the Dutch NGO, perhaps it should be added to the rankings soon.

Professor Ruggie designed the Guiding Principles to aid in the implementation of his Protect, Respect and Remedy Framework, which includes “the corporate responsibility to respect human rights, which means to act with due diligence to avoid infringing on the rights of others and to address adverse impacts that occur; and greater access by victims to effective remedy, both judicial and non-judicial.”

In the area of their responsibility to remedy human rights violations, banks performed especially poorly, according to BankTrack; “None of the banks covered were found to have grievance mechanisms in place which meet minimum standards, meaning no transparent means exist for rights-holders to raise human rights impacts,” its report stated. “None had a clearly described process in place to remedy even those human rights abuses identified by their own due diligence.”

Overall, the average score of the 32 large global banks was three out of a possible 12 points; Rabobank scores best with a total of eight, followed closely by Credit Suisse. Of the major US-headquartered banks, JPMorgan Chase scored four points, Goldman Sachs had three, and Morgan Stanley and Wells Fargo scored even lower. Four of the five lowest performing banks are headquartered in China; they were joined by Bank of America, with a score of 0.5.

“To date, banks' efforts to implement the UN Guiding Principles have mainly revolved around producing discussion papers on the best way forward,” report author Ryan Brightwell. “Some three and a half years on from the launch of these Principles, it is time to move onto implementation.”

Notwithstanding the predominance of low scores, BankTrack concluded, “it is clear that the direction of travel is positive. We hope that banks will be spurred by this publication to move further and faster, towards one day acting with genuine respect for human dignity throughout their operations.”

 

 
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