SIGWATCH’s head of research, Charlotte Moore, explains how businesses need to stop treating human rights as the ‘also ran’ of ESG, but rather, as the issue that underpins them all.

It goes without saying that the Covid-19 pandemic was a point of rupture for many aspects of society. In the West, much has been made of the need to Build Back Better – to take advantage of this rupture in order to reconstruct society using a more equitable mold.

The pandemic also had a significant effect on activist campaigning, even beyond the initial panic as NGOs were forced to move their operations online overnight. SIGWATCH data shows that since mid-2020, campaigning focused on human and labor rights issues has spiked. In other words, the S of ESG is stepping out from the shadows.

As the above graph shows, we saw a similar rise in human rights campaigning around 2013 into 2014, coinciding with the start of the European Migrant Crisis, the collapse of the Syrian state after the Arab Spring, and the first crackdowns on NGO and press freedom in Russia and Egypt. However, the new rise since 2020 is being driven by much less transient factors: increased investor attention on human rights, and the melding of the rights discourse with existing environmental campaigns.

Investors focus on the ‘Social’

As recently as July 2021, the Financial Times lamented investment funds’ lack of action in the face of serious human rights violations in countries such as Belarus, Saudi Arabia, and China. The authoritative business newspaper criticized institutions such as BlackRock, Credit Agricole, and UBS for holding these countries’ sovereign bonds, despite having committed to prioritize ESG and sustainable practices.

That said, institutions have advanced since the pandemic. BlackRock announced in March 2021 that it would start to ask companies in its portfolio how they are identifying and preventing human rights abuses. Since May, investor members of the non-profit platform Investor Alliance for Human Rights have urged companies that scored zero in the 2020 Corporate Human Rights Benchmark to “know and show” their human rights risks, and have supported mandatory human rights due diligence in the EU.

Taking action on the S is not as easy as for the E or G however. Human rights performance is not as easily quantifiable as climate or pollution, and understanding of the underlying issues can be subject to cultural sensitivities. Activist groups through their campaigning are arguably helping companies to better appreciate the issues and their nuances.

Activist groups help to elucidate the issues

Human rights NGOs have been a leading source of information on rights issues for years, particularly since traditional media outlets have had to close foreign bureaus and decrease numbers of ‘on-the-ground’ reporters due to budget cuts. Some publications, of which the Guardian is a notable example, rely on NGO reporting as the main source for many of their stories on human rights.

Corporations would do well to do the same. Activist NGOs are often ahead of the curve on many rights issues, particularly because they have close relationships with the rights-holders in question. Reports from groups such as Amnesty International and Human Rights Watch can help add detail and context to corporate understanding of social issues.

One reason for the strong growth in human rights campaigning in recent years is that activist groups that have historically been much more focused on other areas such as climate or sustainability are recognizing that there is a strong human rights component to these issues too. Thus paying close attention to this discourse can help companies from sectors not typically associated with human rights concerns to understand their potential risks.

Campaigning on agriculture is a good example of this. Where activists would once have targeted agribusiness over the environmental impact of deforestation, they are now also sounding the alarm on its associated violation of Indigenous and local community rights. This new dimension strengthens their arguments, expands the range of interested parties, and increases the points of reputational vulnerability for the companies in question.

More broadly, the recent spate of climate litigation also demonstrates how human rights concerns are being used to bolster environmental arguments. A 2021 report from London School of Economics showed that the use of human rights-based arguments in climate litigation is on the rise. In the recent climate case brought against Shell by environmental Milieudefensie (the Dutch branch of Friends of the Earth), which concluded with the oil major being ordered to drastically reduce CO2 emissions, the prosecution’s argument relied on the detrimental impact on climate change on the ‘right to life’. The authors of the LSE study refer to this as an example of a new wave of “Just Transition litigation”.

Building back better

So how should financial institutions and multinationals address this growing focus on the S of ESG? For many companies, knowledge of these issues is often not in-house, and relevant datasets can be limited and lacking. Unlike carbon emissions, the presence or absence of human rights is currently near impossible to quantify.

However, the difficulties should not detract from the need to build back better and address growing human rights concerns that were exposed by the pandemic. Civil society activism can help elucidate many of these issues for businesses, and more closely align corporate policy with the needs of rights-holders.