By publishing the fifth iteration of the Corporate Human Rights Benchmark (CHRB) on 21 November 2022, the World Benchmarking Alliance continues to publicly rank companies with the aim of incentivising certain industries to improve their human rights performance by helping them to better understand the current level of practice among competitors.

Methodology

The CHRB focuses on high-risk sectors for adverse impacts on human rights. The CHRB’s fifth iteration assesses companies which have derived at least 20% of their revenue from activities in their respective sector(s), in this case: automotive manufacturing; ICT manufacturing; and food and agriculture.

This iteration of the CHRB might be of particular interest because it is also the first to use the CHRB’s new methodology, which places more emphasis on assessing companies’ implementation of policies and commitments (more detail on the new methodology can be found here).

CHRB’s methodology uses five themes as measurement areas:

1. Governance and policy commitments (weighting: 10%).
2. Embedding respect for human rights and conducting human rights due diligence (weighting: 25%).
3. Grievance mechanisms and access to remedy (weighting: 20%).
4. Specific practices to prevent human rights impacts in each industry (weighting: 25%).
5. Responses to allegations of serious negative impacts on human rights (weighting: 20%).

Each theme is based on indicators which stem from international human rights standards, including the UN Guiding Principles on Business and Human Rights. Companies receive a score in respect of these indicators.

As shown above, ‘embedding respect and human rights due diligence’ is the joint top weighted measurement area, alongside specific practices to prevent human rights impacts in each industry, which demonstrates the importance of context-specific measures. It is therefore imperative that companies seeking to score well proactively take measures to identify and assess human rights risks.

Key findings across the three sectors assessed in 2022

Despite the revised methodology, which aims to raise the standard required to score well, there has been a decrease in the share of companies scoring zero on key human rights indicators. Over 50% of companies in each sector have improved their scores on these indicators since their inclusion in the benchmark. This reflects industries’ drive towards respecting human rights. The CHRB has noted that regulatory action could be the catalyst needed to give companies a final push towards more rapid efforts to respect the human rights of all stakeholders.

Notably, the CHRB found that there is a strong correlation between overall human rights due diligence and companies’ ratings on assigning board responsibility for human rights in addition to responsibility and resources for day-to-day human rights functions. In fact, 70% of companies that scored zero on human rights due diligence did not have a process in place at board level to explore human rights issues.

The CHRB has urged companies to translate their commitments to engaging with stakeholders on human rights into meaningful action. In an assessment by the CHRB in 2020, 66% of companies committed to engage with stakeholders on human rights; however, this year, the CHRB noted that 71% of companies scored zero on their approach to engaging with affected stakeholders on a regular basis.

It is vital that companies focus on supporting and monitoring their supply chains. In the sectors assessed by the CHRB this year, key human rights risks include: child and forced labour; women’s rights; land rights; and living wages. Around 33% of companies were found to have incorporated these topics into contractual agreements with suppliers and in codes of conduct, whereas only 11% of companies assessed go further by working with suppliers on these topics.

In 2021, the World Benchmarking Alliance released its Just Transition Assessment which focused on the social elements of companies’ transition to a low-carbon future. One of the sectors assessed was automotive manufacturers. Interestingly, the CHRB found a positive correlation between a company’s performance in the Just Transition Assessment and its performance in the CHRB’s 2022 assessment. Of the 10 highest scoring automotive companies in the CHRB, eight are also among the 10 highest scoring on the just transition indicators.

Below, we set out some insights for each of the three assessed industries.

Sector 1: food and agriculture (59 companies assessed)

This is the best performing sector in this year’s benchmark with an average score of 20% overall, and the highest maximum score of 50.3%. In respect of every measurement theme, the food and agriculture sector has the highest average score compared to the other two sectors.

While companies scored well in their general commitments to respect human rights, the same cannot be said about their commitments to respect the rights that are particularly relevant to their sector. Most companies are failing to commit to respecting ownership and use of land and natural resources and the rights of indigenous people; only 15% of companies expect their suppliers to respect these rights.

The majority of companies performed poorly on the indicator relating to land rights and acquisition in the supply chain. Although three companies did not score zero, as they include conditions regarding land and tenure rights in supplier contracts, these companies do not work with suppliers to improve land practices or monitor these issues within their supply chains.

Sector 2: automotive manufacturing (29 companies assessed)

Companies in this sector had the lowest average score for every measurement theme. Over 90% of companies scored zero on 16 indicators. This is especially concerning as this is one of the world’s largest industries by revenue. The low scores might be reflective of the complexity of automotive supply chains. There is opportunity for peer learning in this sector as two automotive companies performed well in reaching the top 10 overall in this year’s benchmark.

Board-level accountability for human rights is a subtheme under ‘governance and policy commitments’. Across this subtheme, 69% of the companies assessed in this sector scored zero on all indicators. There is also a deficiency in the number of companies that expect their suppliers to commit to responsible mineral resourcing.

This sector performs poorly in relation to grievance mechanisms. In the food and agriculture sector, 72% of companies have grievance mechanisms available to external individuals and communities, whereas, in the automotive manufacturing sector, around 72% of companies do not have such mechanisms.

Sector 3: ICT manufacturing (43 companies assessed)

With a maximum score of 39.1%, the ICT sector outperformed the lowest-scoring sector (automotive manufacturing) by just 0.1%. Unlike that sector, 79% of ICT companies expect suppliers to commit to responsible mineral sourcing.

Compared to the other two industries, the ICT industry scored the highest on the theme regarding sector-specific human rights-related practices. Over half the ICT companies assessed have commitments to not restrict workers’ mobility. However, on other indicators in this theme, the ICT sector performs poorly. For example, more than 81% of companies scored zero on having plans to pay a living wage to their own employees; an even higher percentage of companies (over 95%) scored zero on requiring a living wage in their supply chains.

Increasing pressure from governments for corporate accountability

The CHRB is encouraging governments to accelerate mandatory human rights due diligence, in line with the wider trend involving various legislative efforts around the world.

Earlier this year, the EU Commission made a proposal for a Directive on corporate sustainability due diligence and amending Directive (EU) 2019/1937, in part due to the observation that voluntary action has not resulted in large scale improvement across sectors. A study for the European Commission on due diligence through the supply chain indicates that corporate risk assessment processes continue to focus on the materiality of the risks to the company, even though international guidance stipulates that the relevant risks for due diligence must extend beyond the risks of the company to those affected.

The proposed Directive’s objectives include:

– improving corporate governance practices to better integrate risk management and mitigation processes in relation to human rights risks and impacts, including those stemming from value chains, into corporate strategies;
– avoiding fragmentation of due diligence requirements in the single market and creating legal certainty in relation to expected behaviour and liability; and
– improving access to remedies for those affected by adverse human rights impacts of corporate behaviour.

In the UK, the Health and Care 2022 Act amended the National Health Service Act 2006 to require the Secretary of State to make regulations the Secretary of State thinks appropriate, with a view to eradicating the use in the health service in England of goods or services that are tainted by slavery and human trafficking. This is particularly important on a symbolic level, as the National Health Service is the biggest public procurer in the country.

Pressure from investors

In addition to pressure from governments, companies that do not address corporate human rights face condemnation by investors. Following the release of the 2020 CHRB, investors representing US$5.81 trillion in assets under management signed a statement which expressed concern regarding companies’ results in the CHRB (and since that date, further investors have added their signatures to the statement).

If you would like to discuss the above or what it means in practice for your business, please reach out to Michael O’Kane, Andrew Wallis and Julia Steinhardt.


The authors would like to thank Paralegal Shaidah Ali for her contribution to this article.