Starbucks and Kraft Heinz are among a dubious roll call of American firms that scored less than 10% on the Corporate Human Rights Benchmark, where Germany’s Adidas took first place
American companies performed almost twice as poorly as European firms in the Corporate Human Rights Benchmark, published earlier this week.
The average score on this year’s benchmark, which ranks 101 of the largest companies in the apparel, agricultural and extractives sectors on issues such as forced labour, protecting human rights activists and the living wage, was 27%. US firms did particularly badly, scoring an average 22%, compared with 41% for European firms.
At a launch event in London, Steve Waygood, chief responsible investment officer of Aviva, who is chair of the benchmark, said it was “deeply concerning” that a quarter of companies had scored less than 10% and 40% had scored no points at all for human rights due diligence.
US household names were prominent among those scoring less than 10%, including Starbucks, Kraft Heinz, Monster Beverages, Macy’s, Costco, Nordstrom, and luxury fashion house Tapestry, which owns the Kate Spade, Coach and Stuart Weitzman brands. European brands in this band included Prada and Hermes International.
John Morrison, CEO of the Institute for Human Rights and Business, said the index is based on information that companies are required to disclose publicly, in line with the UN Guiding Principles on Business and Human Rights.
With Coca-Cola, Kellogg, and Gap among the top 15 'there are in effect no real excuses' for US companies
He said the US has a more litigious corporate environment than Europe and fear of being sued may mean some US companies “are doing many more positive things than they are willing to disclose”.
But he said with Coca-Cola, Kellogg, and Gap among the top 15 of the 101 companies ranked, “there are in effect no real excuses” for US companies.
He also pointed to the progress made by Walmart, which moved up from the bottom of the 10-20% bracket to sit mid-bracket in 20-30%, with McDonald’s making a similar journey.
As Phil Bloomer of the Business & Human Rights Resource Centre pointed out in a comment for Ethical Corporation, the ranking reveals a widening gap between a few leaders at the top, which have improved their scores since last year, and the “unacceptably large group of companies who … appear content to hide in the pack of under-performers”.
The top spot this year went to Adidas, which scored 80-90%, up from the 50-60% band last year, with Rio Tinto and BHB Billiton following on its heels at 70-80%. They leapt over Marks & Spencer, whose scoring at the top of the 60-70% band stayed unchanged from last year.
William Anderson, vice-president of the German sportswear company, said: “Adidas has used the CHRB benchmarking process to drive improvements in the public reporting of our human rights efforts.” In the past year, he said, “we have shared publicly our ongoing assessment of supply chain risks, in conformance with the UK Modern Slavery Act, updated our migrant labour standards and also published our approach to safeguarding women’s rights both operationally and along the value chain.”
If the market was working properly Unilever would have been in a position to bid for Kraft Heinz last year, not the other way round
But even the leaders are falling short in some areas, with virtually no company demonstrating strong commitments to ensuring living wages are paid to workers in their own operations and supply chains, the majority of clothing and agricultural companies failing to do enough to prevent child labour, and fewer than 10% committed to respecting human rights defenders, including those exercising their rights to freedom of expression, association, public assembly and protest.
Waygood called on all investors to “step up and behave like an owner not a gambler” by integrating environmental, social and governance (ESG) considerations in their investment processes and using their leverage to demand better performance from companies. Aviva, APG and Nordea, who manage over a trillion dollars between them, have all agreed to use the 2018 benchmark to inform their investment decisions.
“If the market was working properly sustainability would be embedded in the valuations of businesses,” he said. “Companies that do this stuff well would be able to out-compete their peers because they would be able to raise money more cheaply. At the moment this isn’t happening.”
He referred to last year’s abortive attempt by Kraft Heinz, which was at the bottom of the ranking, to take over Unilever, which scored just below Marks and Spencer.
“Kraft’s cost of capital doesn’t fully reflect its sustainability performance. I think its [cost of borrowing] should be higher, just as Unilever’s cost of capital doesn’t reflect how good it is, and should be lower. To my mind the takeover we almost saw last year should have been the other way around.”
Waygood said the failure of markets to align with sustainable development had led to a “huge escalation in policy interventions by governments and inter-governmental bodies around the world”, such as the European Commission’s Non-Financial Reporting Directive, which requires companies to report in line with the UN Guiding Principles.
“It’s no coincidence that European companies are doing so well on the benchmark,” he said.
CHRB Starbucks aviva UN Guilding Principles Human rights apparel agriculture extractives