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EIM warns companies

08 March 2013


Celebrity-supporter: the actor Richard Gere hugs the Chinese civil rights activist Chen Guandong, after awarding him the 2012 Lantos Human Rights Prize, in Washington, at the end of January

Celebrity-supporter: the actor Richard Gere hugs the Chinese civil rights activist Chen Guandong, after awarding him the 2012 Lantos Human Rights Pr...

FAILING to shoulder responsibility for the impact of its actions on human rights at home and abroad can have "catastrophic" effects on a company's reputation and licence to operate, a new report from Ecclesiastical Investment Management (EIM) warns.

The report Human Rights: Human Wrongs: An emerging corporate risk sets out how EIM assesses companies when considering whether or not to invest in them.

The annual Human Rights Risk Atlas, produced by Maplecroft, which maps risks for companies, charities, and the UN, says that nearly half of the countries pose "extreme" or "high" risks of complicity in human-rights violations to companies. The EIM report states that the globalisation of operations and supply chains have "considerably heightened the risk". Unilever, for example, has an international supplier base of 160,000 companies. Businesses may have to address risks, including slavery and torture, caste and disability discrimination, and child labour. The report gives the example of Foxconn, a supplier to Apple that operated in China, where 13 employees commited suicide in 2010, focusing attention on working conditions.

EIM says that the UN, in 2011, adopted the Guiding Principles Framework, which clarifies a company's responsibility to respect human rights. It also notes that "companies supportive of human rights can run into cultural clashes where human rights are seen as 'Western' or 'colonial'."

The senior Socially Responsible Investment analyst at EIM, Neville White, said that when deciding whether or not to invest in a company, EIM conducted "a thorough screening process, whereby we apply a positive screen on all potential and on-going investments on a case-by -case basis, whereby companies operating in 'oppressive regimes' will be closely analysed." EIM did not invest in companies with "material operating interests" in Burma (Myanmar) and Sudan, and did not invest in state-owned enterprises in China.

Mr White said that EIM sought out companies "making a tangible commitment to civil society, and contributing towards economic and social progress within communities, which will ensure that our funds return profits alongside principles".

Positive examples quoted in the report include the UK stone-paving company Marshalls, which set up health checks to raise standards at quarries in India.

The latest annual report from the Fair Labour Association notes that three billion people in the world live on less than $2 a day, while "millions of consumers throughout the United States and Europe demand more, faster, cheaper". It also reports, however, the emergence of "another class" of consumers who "want to know that the products they buy have been produced in conditions that don't exploit workers".

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