Chart of the Week: Companies That Provide Human Rights Disclosure Outperform Those That Don’t
In this week’s chart, we take a closer look at corporate disclosure on human rights policies. In our 2021 Rankings, the second most important priority for corporate America – according to the American public – is to uphold human rights standards across the supply chain, and accounts for 9.2% of a company’s score. Americans want to see companies be transparent about their efforts to address child labor, forced labor, and other abuses of people in their supply chains, and require suppliers to uphold basic human rights standards.
Our analysis looks at one of the data points we use to measure a company’s performance on human rights issues – whether its Supplier Code of Conduct or Human Rights policy, as it pertains to suppliers, explicitly mentions human rights. Of the 928 companies we ranked in 2021, 458 provide this human rights disclosure and outperform those that do not by 3.2% over the trailing year.
Human rights violations within a company’s supply chain were thrust into the spotlight after the 2013 Dhaka garment factory collapse in Bangladesh, prompting organizations and governments to call for a heightened level of supplier due diligence. The World Benchmarking Alliance puts together an annual Corporate Human Rights Benchmark Report, which aims to shine a light on human rights policies by evaluating how 230 public companies across five high-risk sectors track and manage risks related to forced labor, child labor, and freedom of association and collective bargaining within their supply chains. Looking at the automotive sector, they found a “majority of automotive companies failed to demonstrate that they work with suppliers or set core expectations through contractual arrangements to verify the age of workers, prohibit recruitment fees and prevent intimidation or harassment of trade union members and their representatives.” Only one company, General Motors (#28 overall in our 2021 Rankings), provided evidence of mapping its direct and indirect suppliers.
As evidenced in our chart above, it is clear that there is a correlation between financial outperformance and the implementation of human rights supplier policies, further building the case for companies to prioritize supply chain practices. With fewer than 10 years to achieve the 17 sustainable development goals put together by the UN, corporate leaders can start by implementing a human rights supplier policy in order to begin understanding the risks in their supply chains. In turn, this will set the steps in motion to identify, address, prevent, and report publicly on human rights risks, leading to further transparency and more just business practices.
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