Companies: assess your human rights risks

​Many large companies do not yet sufficiently understand their human rights risks, according to Cedric Scholl.

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PGGM considers it essential that companies in which we invest respect human rights throughout all of their operations. Think of land rights, safe working conditions, a living wage or children's rights. Fortunately, almost everyone agrees on this. However, despite of this broad shared agreement, for many of our investee companies, it is unfortunately still not possible to fully eliminate human rights violations.

Large listed companies have vast and complex supply chains, often including thousands of production sites and suppliers all around the world. Due to its size and complexity, human rights violations can still occur somewhere in those supply chains, often without companies knowing about it. Examples include land ownership conflicts between mining companies and indigenous people or textile industry workers who barely earn enough to meet their basic needs.

Precisely because it is virtually impossible to guarantee that human rights are respected in the supply chain, it is important that companies identify human rights risks. This is why setting up a so-called human rights due diligence process is essential1. This process is described in the OECD Guidelines for Multinational Enterprises and consists of the following six steps2:
  1. Embed responsible business conduct into policies and management systems;
  2. Identify and assess actual and potential adverse impacts associated with the enterprise’s operations, products or services;
  3. Cease, prevent and mitigate adverse impacts;
  4. Track implementation and results;
  5. Communicate how impacts are addressed;
  6. Provide for or cooperate in remediation when appropriate.
Research done by the Corporate Human Rights Benchmark (CHRB)3 shows that nearly half of the two hundred companies surveyed do not report on any of these due diligence steps. It is important for PGGM that companies in our investment portfolio report on their human rights due diligence, the more so because this in turn helps us identify our own human rights risks. We do this so that we can also mitigate and where possible prevent human rights risks in our investment portfolio. We exercise our influence as a shareholder by entering into an active dialogue with our portfolio companies.

To encourage companies to report on their human rights due diligence, we support the Investor Statement of the Investor Alliance for Human Rights4, urging companies to report publicly on their human rights due diligence to improve their CHRB scores.

1) See page 18-19 of the UN Guiding Principles on Business and Human Rights (UNGPs): https://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf
2) These are described in the OECD Due Diligence Guidance for Responsible Business Conduct: http://mneguidelines.oecd.org/OECD-Due-Diligence-Guidance-for-Responsible-Business-Conduct.pdf.


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