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Upholding The ‘S’ In “ESG”

November 2, 2022

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After two years of virtual conferences, the 14th annual Engaging Business Forum was back in person. The two-day event convened global business leaders and human rights experts to discuss a common theme: “The Future of Responsible Business Conduct.” With panelists including business leaders, international organizations, industry associations, and advocacy organizations, participants were able to engage in meaningful in-person discussions about the future of human rights due diligence, managing environmental, social and governance (ESG) issues and impacts, and furthering efforts on climate change. A refreshing change from years of Zoom calls!

A central discussion point of the forum was how to effectively tackle the ‘S’ in ESG – and with good reason. The last decade has seen a fundamental shift in corporate approaches to social issues. Where companies used to look at ‘S’ issues – including supply chains, human rights, workplace health and safety, and product quality and safety – statically, they are increasingly recognizing them for what they are: interdependent and interconnected. Tack on the proliferation of technology, artificial intelligence, and mandatory human rights due diligence, and the private sector is being asked to take on a more dynamic approach to social and human rights impacts while directly engaging rightsholders in the process.

Recognizing the complexity of these challenges, the Engaging Business Forum offered a range of panels to initiate and further the conversation. Here are our three key takeaways from the Forum:

  1. Mandatory due diligence should not result in a compliance only approach.  Top of mind for all companies is the emergence of mandatory due diligence regulations from the EU. With regulations such as the German Due Diligence Supply Chain Act set to enter into force in January 2023, companies will be legally obligated to prevent and address adverse impacts on human rights and the environment linked to their activities and business relationships. Panelists encouraged participants to exercise caution in seeing these new regulations as “check box” exercises that don’t actively identify or protect against risk. Instead, companies should see these laws as an opportunity to encourage deeper internal engagement with corporate functions and to pursue more holistic business and human rights strategies grounded in fundamental corporate respect for human rights. Many companies, including Ikea, PepsiCo, Mondelēz  International, and Nestlé, understand this and are making their support of mandatory due human rights diligence known to the public.

  2. Climate justice and just transitions are expanding the definition of human rights. With greater understanding of the role of the private sector in addressing climate change, so has the realization that climate change disproportionately impacts the social, economic, and public health of vulnerable and underprivileged populations. This is the underpinning of the just transition movement and companies are paying attention. Just transitions provide opportunities to reshape existing energy, agricultural and labor systems and supply chains using a human rights-centered approach. This includes promoting social dialogue with vulnerable populations, including women, youth, poor and low-income people, Black communities, indigenous and first nations peoples, people of color, and those at the intersections of these identities.  Forum panelists emphasized that just transitions, in addition to helping save the climate, break silos between corporate leaders and rightsholders and help leaders set ambitious human rights and climate targets and strategies. Corporate leadership on the topic is beginning to emerge, with companies such as Mars, Starbucks and Patagonia already making their climate ambitions transparent to the public.

  3. Grievance mechanisms are not the same as effective remedy. A third theme that emerged relates to the interconnection of grievance processes and remedies. Companies recognize that grievance hotlines touch only the surface of effective remedy. While hotlines have certainly transformed for the better (increasing accessibility in regional and local languages, for example), the solution is no longer simply providing a means to discuss grievances with affected rightsholders but rather providing effective remedies that are tailored to the needs, experiences and interests of rightsholders. A panel of advocacy groups and international organizations, including the UN Working Group on Human Rights, Accountability Counsel and AIM Progress, also urged companies to consider how to ensure remedies protect the most vulnerable from adverse social, physical, and economic impacts. This shift from access to effectiveness is one with no definitive, absolute answers; however, companies increasingly recognize that sustainable rightsholder dialogue is imperative to meeting and sustaining human rights goals and ambitions.  Companies like The Hershey Company, Gap Inc., and Unilever are showing that the private sector can make progress towards more effective remedy.

From Article One’s experience, these issues will continue to remain front and center at future forums. At the same time, we recognize additional themes which are capturing the attention of business and civil society. The first is the imperative of centering rightsholder voices to inform corporate human rights and sustainability strategies and close the communication gap between rightsholder groups and corporate offices. A second is opportunities to address salient human rights issues here in the United States, such as providing living wages, the impacts of political contributions, respecting union organizing efforts, and addressing natural disasters that disproportionally affect Black and brown communities. Finally, there should be more conversation about the need for US leadership on mandatory human rights due diligence.

The Engaging Business Form provides a constructive opportunity for the private sector to engage in dialogue on the future of corporate responsibility. Article One certainly looks forward to seeing how these topics will evolve at next years’ event.

To hear more on how Article One is helping clients with mandatory human rights due diligence, climate justice or responsible innovation, please reach out at hello@articleoneadvisors.com.