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".