Respect of human rights can help
drive the long-term sustainability
and success of any corporation.
For certain strategies that target
sustainable outcomes, we seek to
invest in companies whose output
is beneficial to society and achieved
sustainably, respecting the rights of all
stakeholders.
In considering human rights we need
to understand how they have evolved,
and continue to do so (Figure 1).
The conventions by which we live
were shaped after the second world
war and directed at nation states to
ensure basic economic, social, cultural
and political rights. Life since then has increasingly been influenced by
multinational enterprises so scrutiny
has shifted to the boardroom, though
not yet through legally binding
instruments.
Source: United Nations/OHCHR/ILO.
In 2000, the UN Global Compact
introduced non-binding principles for
businesses to support and respect
human rights, ensuring they are not
complicit in abuse. The UN Guiding
Principles on Business and Human
Rights built on this foundation.
The three pillars of the principles –
protect, respect and remedy – reflect
the responsibilities of nation states
and corporations and the right of
victims to redress if abuses take place.
We may see the principles develop
into a legally binding convention, with
the UN Human Rights Council due to
discuss the third draft of a Treaty on
Business and Human Rights (BHR) in
October 2021.
A ratified treaty could see businesses
obliged to implement Human Rights
Due Diligence (HRDD) and ensure
access to effective remedy for victims
of abuse. The obligations may extend
to communities impacted – even
indirectly – by business operations.
The OECD Guidelines for Multinational
Enterprises give us a taste of things
to come: though not legally binding,
the investigations it prompts can lead
to legal and financial liabilities, and
reputational damage.
A key weakness of the UNGP and
OECD Guidelines concerns the lack of
access to effective remedy for victims
in developing countries. This issue is being addressed in the proposed
BHR. The treaty introduces a state
obligation to regulate corporates under
their jurisdiction or control, including
transnational activities. This means
multinational enterprises may be liable
for human rights abuse in their global
supply chains. To date, it has been
challenging for victims to seek redress
in such circumstances. Attempts are
usually made through the 1789 US
Alien Tort Statute (ATS) or via tortuous
mediation using the OECD Guidelines.
A ratified BHR could make redress
simpler, increasing the prospect of
legal liabilities for companies without
HRDD or those complicit in abuse.
As investors, we need to be vigilant
for digressions and engage where
we have concerns. While third-party
data providers are useful in flagging
potential concerns, changes in
company scores and ratings are a
starting point for us to research,
engage and act. Where there is
tangible evidence of mitigating
action, we can justify ownership and
promote dialogue to ensure concerns
are addressed. In this way we build
relationships with our companies and
realise long-term value.
Teleperformance is a global digital
integrated business services
company listed in Paris. In early 2020,
allegations of poor working conditions
emerged as pandemic-induced
lockdowns took hold. On engaging
with management, it was clear they faced a logistical challenge but had
acted to ensure employees’ safety
and wellbeing. When we spoke to
the CFO in April, the company had
transitioned over 40% of its workforce,
or 120,000 people, to working from
home. Those who could not were
being employed in a clean office
environment, open to independent
inspection. Actions were co-ordinated
through an Executive Crisis Committee,
which met daily, and a broader forum
of 100 senior business leaders.
After our meeting, UNI Global Union,
an international labour union,
submitted a case to the National
Contact Point (NCP) in France
alleging contravention of the OECD
Guidelines. An ESG data provider
cut Teleperformance’s rating. But we
maintained a positive view as we had
evidence of remediation. We followed
managers’ progress closely, meeting
with the investor relations team in June
and the Deputy CEO in August 2020.
While the NCP Final Statement
confirms mitigating action, the
deterioration in dialogue between
UNI and Teleperformance highlights
the challenges of mediation under
a non-binding framework. The legal
basis provided by a treaty could
ensure more rigorous negotiation
and settlement. We continue to
monitor Teleperformance’s progress;
the Covid-19 pandemic may have
permanently changed its operating
model, return profile and growth
prospects.
Nestlé launched its Cocoa Plan in
2009 to help farmers improve their
livelihoods through education and
community support. It was the first in
the industry to develop a Child Labour
Monitoring and Remediation System
(CLMRS) in 2012, acknowledging
problems highlighted by independent
assessors. Impact assessments
published by the Fair Labor
Association and the Danish Institute
for Human Rights are evidence of
progress. In 2019, the CLMRS had
grown to monitor 78,580 children
and engaged with 15,740 of them
to prevent underage employment.
This is achieved through initiatives
ranging from facilitating access
to education by providing birth
certificates, to offering bridging
classes and vocational training.2
These case studies illustrate the
challenges involved in controversy
analysis and anticipating regulatory
change in the field of human
rights. Controversy presents risks
and opportunities, and as much
depends on mitigating actions as the
circumstances in which it was created.
We anticipate further scrutiny in the
wake of BHR discussions in October
and are already holding companies
to account as investor and regulatory
expectations rise. This focus on human
rights will remain a cornerstone of
our approach in the Pan European
Sustainable Outcomes strategy.
