Companies improve their human rights credentials 15% faster when they are subject to shareholder engagement, according to research published this week.
The World Benchmarking Alliance, a non-profit body set up in 2018 with funding from Aviva, shared its reflections on firms’ progress on human rights over the five years, which it said was patchy.
The Corporate Human Rights Benchmark (CHRB), through which WBA has assessed nearly 250 companies, shows they are most willing to improve on their policy commitments and board-level responsibility for human rights issues.
They are much less inclined to implement credible human rights due diligence, address supply chain risks or provide remedies to communities affected by their business activities, WBA found.
“What does appear to significantly influence a company’s progress, however, is the way it is engaged by its stakeholders,” noted the report.
“Companies that were engaged on human rights by their investors, through the Investor Alliance for Human Rights (IAHR), have improved 15% faster than companies that were not.”
IAHR is a shareholder engagement network run by the Interfaith Centre on Corporate Responsibility. Its 240 members include Swedish pension funds AP2 and AP3, Dutch giants APG and PGGM, and asset managers such as Schroders and Robeco.
Companies that IAHR investors engaged with on human rights demonstrated a 15% faster rate of improvement when it came to meeting its criteria compared with those that weren’t. They met an additional 6.8% of the requirements, while non-engaged companies met an additional 5.9%.
“While the absolute difference in improvement is small, the relative rate highlights the positive influence of investor engagement in driving progress on human rights issues,” WBA told IPE.
“It’s clear that companies engaged by investors often feel the pressure that their CHRB assessments can carry significant consequences for their reputation and relationships with key stakeholders,” it added.
“This sense of accountability drives improvement, as companies recognize that their performance is being closely monitored and may directly influence investor decisions.”
The report highlighted sportswear brands Puma and Lululemon as leaders, after improving by 35% over the five-year period – compared with a 1% improvement across the broader universe. The pair now meet nearly three-quarters of responsible purchasing requirements.
WBA’s findings chime with research published earlier this month about the impact of Climate Action 100+, which concluded that companies subject to shareholder engagement through the initiative are more likely to set decarbonisation targets but no more likely to have reduced their emissions.
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