Report: 90% of Global Companies Miss Mark on Human Rights, Ethical Conduct
The vast majority of corporations are failing when it comes to ensuring human rights, ethical conduct and decent work across their operations and supply chains.
In fact, 90 percent of the world’s 2,000 most influential companies are completely missing the mark on these three objectives, according to the World Benchmarking Alliance’s (WBA) first social benchmark study.
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The group assessed brands across the apparel, footwear, food, energy, technology and supply chain space that are responsible for 45 percent of the world’s GDP, employing 95 million people directly and hundreds of millions within their value chains, and found that nine out of 10 companies aren’t even halfway to achieving fundamental societal expectations tied to human interests.
What’s more, more than 30 percent scored between 0 and 2 points out of 20 possible points for their efforts. Only 4 percent of companies were found to pay employees a living wage, and only 3 percent currently comply with the International Labor Organization’s (ILO) standards on working hours. Just one-fifth conduct due diligence measures or risk assessments, and only 29 percent actively monitor the health and safety of their suppliers’ workplaces.
These figures fly in the face of both internally set sustainability goals and the United Nations Sustainable Development Goals, which many companies have signed onto and have pledged to achieve by 2030. According to WBA, there’s a major disconnect between what society expects from corporations and what they’re actually reporting.
“These are systemic issues,” WBA social transformation lead Namit Agarwal told Sourcing Journal. Only about 10 percent of companies that were assessed performed decently in the group’s measurement areas. “When we look at issues at a systems level, there’s a role for policy, for civil society organizations, for investors and businesses to come together and address this,” he explained.
Notably, companies based in countries with human rights legislation in place scored a whopping 60 percent higher on average on human rights due diligence (HRDD) than countries without such regulations. Still, only about 6 percent of companies on the whole have implemented due diligence policies.
Companies within that 6 percent have certain attributes in common: they’re chiefly from regions with robust government guidance, like Europe and parts of East Asia, and they’re often part of sectors that have been subject to public scrutiny.
“Governments can set minimum legal standards of behavior expected from companies of all sizes and operating contexts on HRDD to prevent and address their human rights risks and impacts in alignment with the U.N. Guiding Principles on Human Rights, while investors and the civil society should continue applying collective pressure on low-scoring companies and advocating for robust due diligence processes,” the firm recommended.
But it’s not just about regulation, Agarwal echoed. “What we have found is also in sectors like apparel, where there has been a lot of spotlight, there is sectoral guidance, and there is generally more awareness of the negative impact or the potential positive impact that companies can have,” he explained.
Notably, companies in the apparel, footwear and retail sectors outperformed their peers, scoring highest out of all industries assessed. While the average performance of all 2,000 companies was dismal (23 percent achievement of goals), apparel and footwear scored 33 percent, and retail scored 28 percent. “Companies in those sectors also tend to perform better,” Agarwal said, and that may be due in part to the fact that they or their supply chains are based in locales with modern slavery acts in place or supply chain transparency laws.
Regulation, guidance and external pressure are all necessary to push businesses to accelerate progress, Agarwal believes.
“In the apparel and retail sector there has been a longstanding trend of consumer demands on brands; I think even investors are quite conscious about it,” he said. “Companies are also aware of what could be the potential pitfalls of them not performing in a better way…. because there have been a lot of controversies in the past in the apparel sector.”
Regionally, companies headquartered in the Pacific (excluding Central Asia), Europe and North America performed better than the rest of the world, representing the top 10 percent of companies. Asia performed the best overall (35 percent), while Europe displayed the largest proportion of companies that disclose their employees are already being paid a living wage or that targets are in place, contributing to the region’s 33 percent achievement of goals.
Meanwhile, companies based in North America came in third, regionally, with an average score of 24 percent. Among the top scoring companies was VF Corp.
“VF Corporation scored quite a few points across the three measurement areas, particularly initial stages and steps of human rights and decent work,” Agarwal said. “However, they have a lot of unmet requirements in the third measurement area, which is on ethical action.”
“Because they are in the apparel and footwear sector supply chain, a lot of labor and transparency [is required], so it shows that they are aware of their responsibilities, what kind of steps they need to take and what commitments they need to make for decent work and the human rights issues.”
Comparatively, companies based in the Middle East and North Africa scored lowest, with an average score of 11 percent across measurement areas. Just 6 percent of companies in these areas commit to the ILO core labor rights in their own operations, while none demonstrate efforts to pay workers in the supply chain a living wage.
But Agarwal believes the problem isn’t a regional one, really—because so many industry supply chains are diverse and global. “What we are trying to show is there needs to be harmonization of policies, of actions and what companies do across these regions,” he said.
“There are a lot of nuances across sectors and regions, but because of the mainstreaming of a lot of these expectations—whether it’s about wages, working hours, health and safety, human rights issues—there is a lot of awareness now in boardrooms, in companies, on shop floors,” he added. “So now I think the next milestone would be for companies to convert and translate that awareness into action.”
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