Back in May 2020 we published a brief overview of the Corporate Human Rights Benchmark (CHRB) and its intentions to extend the 2020 review to the automotive industry.
The CHRB has now released its 2020 Key Findings Report. In this article, we highlight ways in which the companies included in the Benchmark have been succeeding in their human rights commitments, whilst identifying gaps and challenges that remain.
We also consider how the automotive industry has fared in its first year of inclusion.
The impact of COVID-19
For 2020, the CHRB adapted its approach to recognise the impact of the COVID-19 pandemic on companies. Aside from the automotive sector, which was assessed using the full CHRB methodology, companies were assessed on thirteen indicators taken from only three of the usual six 'measurement themes':
- Theme A: Governance and policy commitments
- Theme B: Embedding respect and human rights due diligence (HRDD)
- Theme C: Remedies and grievance mechanisms
Despite taking a lighter touch to assessment than in previous years, the CHRB emphasised that COVID-19 could not be used as an excuse for companies to lower the bar on their human rights compliance, particularly given that the pandemic and its economic effects have exacerbated human rights vulnerabilities.
What have companies done well?
In terms of the agricultural product, apparel, extractive and ICT manufacturing sectors assessed against the narrowed measurement themes noted above, the CHRB noted that there has been progress on previous years, with ICT seeing a notable increase of almost a third on their indicator scores.
In particular, sectors improved in their public commitments to respect human rights and the establishment of grievance mechanisms.
A basic commitment was demonstrated in more than 80% of companies (in ICT, this was as high as 93%). Furthermore, a majority of companies (ranging between 66%-86% in each sector) expressed commitments to engage with potentially and actually affected stakeholders who may be impacted by company activities.
Although still a minority, at least 36% of companies in each industry had subsequently appointed senior managers responsible for relevant human rights issues within the company. Here, extractives were ahead of the game at 51%, with agricultural not far behind at 49%.
In terms of grievance mechanisms, almost all companies enabled workers to raise human rights complaints or concerns relating to the business. In extractives, 70% of companies also had mechanisms in place for external individuals or communities impacted by business operations. In agricultural and ICT, approximately half had such mechanisms, while in apparel this figure was lower at 42%.
What could companies do better?
Although many companies in the agricultural product, apparel, extractive and ICT manufacturing sectors showed improvement in terms of their public commitments, the CHRB found that work often remains to be done in putting those commitments into practice.
The CHRB observed that the lowest area of improvement related to human rights due diligence (HRDD) which includes identifying and assessing human rights risks within the business, taking appropriate action, monitoring and evaluating the effectiveness of such actions, and reporting results to stakeholders and customers.
In 2019, 95 companies scored zero on all HRDD indicators. In 2020, only 16 of these companies had improved. Of all companies assessed in 2020 (including automotive), 46.2% failed to score any points.
This links also to the fact that only a small minority of companies showed how their stated commitment to engage with stakeholders informed the development of their human rights approach.
Even where companies did score points for HRDD, only a minority described systems for tracking the effectiveness of their actions. Therefore, HRDD is an area in which significant gains remain to be made. The impetus to take action may be provided by developments this year at EU and UN level which, at least in the EU, mean that mandatory HRDD is almost inevitable.
Another area for improvement flagged by the CHRB is how companies respond when human rights complaints are made. On assessment of all 229 companies, the CHRB identified 225 'serious' human rights allegations across 104, including those who scored highly for commitment and HRDD. How the company dealt with each allegation was assessed against three indicators:
- its public response;
- its publicly available policy; and
- whether it took appropriate action to address the alleged impacts.
A majority of companies met points (1) and (2), but in only 22% of cases did they meet point (3), and in only 4% did companies show the remedy was satisfactory to the victims. This meant that, across all companies in the relevant sectors, there was no real improvement in this area from 2019.
In terms of the where issues arose, 85% of the complaints related to actions taken in developing countries, even though 78% of the relevant companies are located within the OECD. This highlights the importance of being pro-active in identifying and combatting human rights risks in global supply chains.
The automotive industry - a first glance
In our article in May 2020, we acknowledged that newly included companies tended to fare worse than those who have been included in the benchmark for some time.
However, the CHRB described the results from the automotive industry's first year of inclusion as 'unequivocal', with an average score of 12% across the industry representing the lowest of any sector since the benchmark's debut in 2017.
The three top rated automotive companies scored between 30-42%, with half of the companies considered scoring below 10%.
The CHRB identified two key weaknesses:
- human rights and climate change separation; and
- supply chain management.
Climate change poses a direct threat to basic human rights, including food, health and ultimately the right to life. Yet, almost no correlation was found between the CHRB and the Climate Change and Energy Benchmarks in their parallel assessments of the automotive sector. So, some automotive companies that scored well on the Climate Change and Energy Benchmark disclosed very little to the CHRB on their management of human rights issues, and vice versa.
Regarding supply chains, 90% of automotive companies were unable to demonstrate contractual arrangements with suppliers to manage associated human rights risks. For example, contracts lacked verification processes determining the age of workers to prevent child labour.
Drawing the two points together, the CHRB highlighted that the move to cleaner power to combat climate change is leading to an increased demand for batteries, but components for the batteries are often sourced from politically unstable locations where child labour is a very real risk.
Looking to 2021
What is clear from the 2020 Key Findings Report is that no company surveyed is fully compliant. Even those who are performing well relative to others still have scope for improvement.
In particular, companies should further build on their human rights policy commitments by improving their HRDD processes and strengthening their grievance mechanisms to ensure appropriate remediation where human rights impacts are identified.
For automotive companies, in addition to learning from the results of other sectors included in the benchmark, the main areas of focus should be to make the necessary links between human rights and climate change and to pay particular attention to supply chains in their HRDD.