With Trump’s migrant clampdown, growing scrutiny on business practices and the rise of supply chain blind spots, human rights issues pose an increasing risk for companies operating around the globe.
Verisk Maplecroft, a global risk analyst, has released its 2017 Human Rights Outlook, in which it assesses key human rights trends likely to impact business in the year ahead.
It comes at a time when the concern for human rights, both amongst corporates and banks, is on the rise.
“Across all sectors, human rights seem to become increasingly important,” Alex Channer, principal analyst at Verisk Maplecroft and lead author of the report, tells GTR. “We have lots of clients who come to us on these issues. Some because they need to comply with regulation, others because it’s part of their values and reputation, and their consumers care about it.”
One major theme of 2017 is that human rights risks are moving closer to home for western businesses. But there’s also good news for companies, and for human rights. A growing market for ethical business, as well as the development of new technologies such as blockchain, could present a range of new opportunities.
Here are some important human rights issues for businesses to watch in 2017:
1. US immigration policy to promote modern slavery
A hardening immigration policy in the US is highlighted by the report as one of the top drivers of human rights risk for businesses in 2017.
Trump’s proposed US-Mexico border wall, as well as a stricter enforcement of deportation rules, will leave the 8 million undocumented migrant workers in the US more vulnerable to modern slavery, Channer warns.
“[The policies] won’t stop the incentive for migrants to move north to the American economy. It will increase the profits of trafficking, and you will have migrants who are in deeper debt to traffickers and therefore more vulnerable to exploitation in the hidden economy in the US,” she says.
The agriculture, construction, manufacturing and hospitality sectors, which are highly reliant on migrants for informal, low-paid work, face the highest risk of migrant labour exploitation, with Verisk Maplecroft’s data revealing that the risk is already ‘high’ or ‘extreme’ in fruit production in Florida and California.
2. Blind spots in supply chains
While companies mostly focus their human rights due diligence on core production and processing activities, some areas of the supply chain are often “neglected and not seen as a priority”, thus being highly vulnerable to labour exploitation, Channer explains.
She highlights transport as one major ‘supply chain blind spot’ globally – a sector that is often overlooked when companies carry out their auditing programmes. Seafarers, who transport 80% of global trade, as well as truckers and warehouse workers, are especially at risk.
An example of such human rights abuses in the transport sector hit the headlines in the UK in June 2016, when an offshore supply ship was detained on the grounds of non-payment of crew wages.
“Seafarers are some of the most vulnerable workers in the world, because many of them are low-paid, economic migrants and they are physically isolated at sea,” Channer says.
She adds that companies are especially exposed to hidden labour rights risk because of the use of a foreign ‘flag of convenience’ where a ship is registered under a flag of a country other than the country of ownership.
“Seafarers often lack state protection because ship owners often register ships under a flag of convenience because those countries offer cheaper rates and less regulation, and in some cases that translates into weaker enforcement of labour standards. That’s a blind spot for companies that they need to be looking at,” she says.
3. Rising scrutiny of land grabs
Land deals are, according to the report, another issue gaining more traction in 2017, and which could be the source of high reputational risk for banks and funds.
Western banks involved in lands deals are likely to be subject to a rising scrutiny by NGOs, media and shareholder activists of the money trail behind land grabs in countries where respect for land rights is not guaranteed, Channer says.
Where land deals go wrong, companies involved could get associated with serious human rights abuses.
“Land investments are being made in countries where there is a very high risk that the land deal that you are associated with could end up violating the rights of local landowners,” Channer says. “There’s the potential of being associated with forced evictions, and in the worst-case scenario, and this is particularly true in Latin America, the potential that you could be associated directly with the death of land rights activists campaigning against these projects.”
The report especially highlights commodities such as palm oil, sugar cane, rubber, corn and biofuels as driving a global rush for land.
British banks are flagged as being particularly exposed to the risk of being associated with land grabs: 85% of the 20 target countries in which UK firms were investing in 2016 fall into the ‘high’ or ‘extreme’ risk categories of Verisk Maplecroft’s Land and Property Rights Index.
4. Expansion of mandatory human rights due diligence
Mandatory human rights due diligence on supply chains could soon become the norm for businesses operating globally.
One trend highlighted by the report is the expanding mandatory reporting legislation in western countries, which means that more companies will be obliged to publicly disclose how they respect human rights.
And in some countries, legal requirements are no longer limited to disclosure: Mandatory human rights due diligence is becoming mainstream, the report says. Such laws have already been passed in France and the Netherlands, and are expected to pass in Switzerland.
Whether it’s on modern slavery, child labour or human rights in general, more countries are adopting new laws. While this may raise the compliance stake for companies, it also creates a market incentive for ethical business.
“Businesses are increasingly going to have to report about what they are doing, and in some cases actually show that they have taken action,” says Channer. “For business, obviously it’s a burden, but actually it’s also an opportunity because greater scrutiny means that governments are creating a market for ethical companies. So companies that try to ensure that workers in their business and in their supply chain are protected will get recognition for that.”
5. Blockchain to transform supply chain management
Blockchain, distributed ledger and other new technologies could transform the way businesses manage their supply chain and thus their human rights impact.
Walmart and BHP Billiton are among some of the companies already piloting blockchain technology, big data analytics and monitoring devices with the purpose of tracking products in the supply chain.
“One of the key challenges for companies is mapping very complex global supply chains, so a lot of companies are blind to the source of their goods beyond tier 1 or tier 2,” Channer says. “So one of the things that distributed ledger technology or blockchain can do to help companies, is provide a system which records those supply chain transactions in a secure manner and in a way that can be accessed in real time. Then that system could potentially provide a record for the final product.”
The development of these technologies is still in the initial stages, but it could have a transformative impact in the future. By increasing transparency in the supply chain, these technologies give businesses a greater chance ensure that goods are being produced by workers in decent conditions. But, Channer adds, technology cannot prevent human rights abuses on its own.
“The power of these technologies is when they are combined with other actions,” she says. “Nothing really replaces taking action on the ground, such as visiting a site, having it audited, working with local unions, collaborating with suppliers. But these new technologies can be used to help identify anomalies and help you identify where you need to go and take further action.”