12. MEASURING AND TRACKING PERFORMANCE

PROM Savada, NAIM Sakona, RADU Mares

Introduction

Once a company has made a commitment to respect human rights by adopting a code of conduct (chapter 8), has conducted an impact assessment to understand the harms it operations might create (chapter 9), and has put in place management systems and taken corrective actions to minimize harms (chapters 10-11), the company needs to find out if its systems are working as intended. In other words, have the efforts of the company to address harms been effective or not? The only way to find this out is to collect data and measure performance. Such tracking of performance should be participatory, that is, be done together with stakeholders (chapter 14). Having a complaint mechanism (chapter 7) also offers a company information whether its efforts are reducing discontent or not. Also being more transparent (chapter 13) about its policies and due diligence efforts enables companies to gather feedback from stakeholders and build a relationship based on trust. Measuring human rights performance is a fast developing area with key indicators being developed in recent years. That will enable benchmarking against peers and comparisons among companies in the same sector. Armed with such indicators and comparisons, market actors can more easily reward and punish companies. Not surprisingly, ethical investors and other financial actors are most keen to have such comparative information and have therefore supported the development of rigorous indicators. Lawmakers are already trying to harvest the regulatory potential of markets by passing transparency regulations (chapter 4), often with the encouragement and support of responsible investment funds, which need this type of information. Monitoring performance can quickly become a technical or subjective (value-laden) exercise and therefore ‘participatory monitoring’ – involving local communities and independent experts in addition to business and state representatives – is seen as good practice and as necessary to build trust (chapter 27). This emphasis on participation replicates the emerging practice of participatory impact assessments, which are also about gathering data, but doing so already before a project has commenced (chapter 9).

Cambodia is host to more and more initiatives to measure and track human rights compliance among local suppliers from multinational corporations. Once a corrective action plan is agreed with their local partners, the international brands should establish a reliable follow-up mechanism to monitor the progress of such action plan or to verify whether it was implemented correctly, effectively, and transparently. To measure and track such performance, the brands employ different methodologies to collect necessary data and information from workers and affected people, for example through internal assessments, third party audits, hotlines, surveys, anonymous complaint channels, transparency portals, etc. However, some criticisms has been raised by relevant stakeholders concerning accuracy and reliability of third party assessment reports provided that some assessment visits are announced in advance giving a chance for the suppliers to prepare beforehand and that workers are sometimes not free to give accurate information. The Better Factories Cambodia (BFC) program of the International Labor Organization is a pioneering and long established program in tracking compliance with working conditions in garment and footwear factories in Cambodia. BFC offers both assessment and advisory services and some global brands rely on BFC’s assessment reports to monitor the compliance status of their local suppliers without needing to conduct their own monitoring or engaging another private third party. 

Main Aspects

• Stakeholder participation (feedback)
• Complaint mechanisms (operational-level grievance mechanism)
• Indicators (qualitative and quantitative)
• Participatory monitoring (joint fact-finding)
• Vulnerable groups
• Internal audit (review)
• Review of multistakeholder initiatives
• Feedback loops (consultation and grievance mechanisms)
• Human rights due diligence (processes and results)
• Red flags
• Severity of impacts and level of tracking
• Forms of tracking: verification (of requirements being met), monitoring (of situation) and validation (of actions being effective)
• Company functions involved in tracking (corporate departments playing a role)
• ‘Choke points’ in the supply chain
• Tracking regulatory risks
• Working hours
• Dams (in extractive industry)
• Water
• Minerals

Background

UN High Commissioner of Human Rights, An Interpretive Guide^[1]

It is generally recognized that “what gets measured gets managed”. Tracking how an enterprise has responded to both potential and actual adverse human rights impact is essential if its personnel are to be able to account for its success in respecting human rights, whether internally to management or externally to shareholders and wider stakeholders. (…)

Tracking human rights issues and responses will also help it to identify trends and patterns. This provides senior management and others with the “big picture”: it highlights repeated problems that may require more systemic changes to policies or processes, and it brings out best practices that can be disseminated across the enterprise to further reduce risk and improve performance.

Global Perspectives Project, Doing Business with Respect for Human Rights^[2]

The third step of human rights due diligence is tracking the company’s performance on preventing and mitigating negative human rights impacts and drawing lessons from this for the business. Tracking enables a company to know whether its human rights due diligence has ‘worked’ and is central to any continuous improvement and change process. For many companies, in addition to their own operations, tracking performance is likely to include monitoring the performance of suppliers, customers and other business partners, since many of their human rights risks will arise through their business relationships.

Rio Tinto, Why Human Rights Matter^[3]

Monitoring and evaluation of human rights impacts and performance is essential in order to:

• measure progress against our commitments to human rights, including the rights of women and Indigenous peoples;
• measure compliance with internal and external policies, standards, and commitments;
• assess whether human rights issues and impacts have occurred on a one-off or systemic basis, including gender and cultural considerations;
• identify whether project management procedures and plans are being implemented and are achieving their objectives;
• identify whether impact and risk mitigation measures are effective;
• determine the cause, and provide a basis for corrective actions if our procedures, plans and activities are ineffective;
• identify any unanticipated human rights issues and impacts that have occurred, their consequences, and the response taken; and
• identify whether management is receiving effective ‘early warnings’ of new human rights challenges, including appropriate advice on how to resolve these challenges.

Instruments

UN, Guiding Principles on Business and Human Rights^[4]

20. In order to verify whether adverse human rights impacts are being addressed, business enterprises should track the effectiveness of their response. Tracking should:

(a) Be based on appropriate qualitative and quantitative indicators;

(b) Draw on feedback from both internal and external sources, including affected stakeholders.

Commentary

Tracking is necessary in order for a business enterprise to know if its human rights policies are being implemented optimally, whether it has responded effectively to the identified human rights impacts, and to drive continuous improvement.

Business enterprises should make particular efforts to track the effectiveness of their responses to impacts on individuals from groups or populations that may be at heightened risk of vulnerability or marginalization.

Tracking should be integrated into relevant internal reporting processes. Business enterprises might employ tools they already use in relation to other issues. This could include performance contracts and reviews as well as surveys and audits, using gender-disaggregated data where relevant. Operational-level grievance mechanisms can also provide important feedback on the effectiveness of the business enterprise’s human rights due diligence from those directly affected (see Principle 29). (…)

Operational-level grievance mechanisms perform two key functions regarding the responsibility of business enterprises to respect human rights.

• First, they support the identification of adverse human rights impacts as a part of an enterprise’s on-going human rights due diligence. They do so by providing a channel for those directly impacted by the enterprise’s operations to raise concerns when they believe they are being or will be adversely impacted. By analyzing trends and patterns in complaints, business enterprises can also identify systemic problems and adapt their practices accordingly
• Second, these mechanisms make it possible for grievances, once identified, to be addressed and for adverse impacts to be remediated early and directly by the business enterprise, thereby preventing harms from compounding and grievances from escalating.

UN High Commissioner of Human Rights, An Interpretive Guide^[5]

When identifying appropriate indicators, much will depend on: the combination of human rights issues that the enterprise is typically having to address; whether there are already well-established indicators for those issues; what data can reasonably be obtained by the enterprise; how easy it is to solicit direct feedback from affected stakeholders, and so forth. In labour rights, for example, audits and indicators are relatively well established. In other areas such as health and safety and environmental impact, technical standards also exist, including at the international level, though there may be differing views on which standards to use. With regard to community consultation and community resettlement, there is also increasing guidance from international organizations and other credible bodies on how to assess performance. (…)

If there are human rights issues that result from environmental impacts—for example, related to water and health—there may be established and quite precise international as well as national standards that offer ready metrics. This does not necessarily mean that those who believe they are being harmed trust those standards or trust the enterprise (or any third party paid by the enterprise) to be honest in the measurements it provides. In situations such as these, the enterprise should consider the scope for agreeing with affected stakeholders on an individual or organization that all concerned will trust to provide accurate assessments. Alternatively, joint fact-finding by company and community representatives may be possible. This will often require either that affected stakeholders are able freely to identify an expert to represent them in that process, or that one or more of the affected stakeholders are themselves trained so they have the necessary expertise to participate in the joint process. (…)

Some indicators will be quantitative and others qualitative. There can be advantages to quantitative indicators, given the precision they offer and the ease with which they can be integrated into, or correlated with, indicators used in other areas of the business. However, since respect for human rights is about the dignity of people, qualitative indicators—that include, as far as possible, the perspectives of affected stakeholder groups—will always be important. In some situations, qualitative indicators will be important for the accurate interpretation of quantitative ones: for instance, assessing whether a reduction in reports of worker safety breaches reflects a reduction in such incidents, a lack of faith in the reporting system or intimidation that prevents reporting. (…)

            The purpose of engaging with relevant “internal and external sources, including affected stakeholders” in the tracking process is to draw as accurate a picture as possible of how well an enterprise is responding to human rights impact. It helps reduce the risk of bias that may arise when those being measured do the measuring. (…)

An operational-level grievance mechanism can also play an important role in this regard. Such a mechanism can provide a channel for feedback on whether human rights impact is being addressed effectively from the perspective of the affected stakeholders. Equivalent mechanisms for employees can be similarly important with regard to impact on their own labour or other human rights and in enabling them to speak up when they see problems with the enterprise’s response to impact on the human rights of individuals outside the enterprise. (…)

IFC, Performance Standards^[6]

Assessment and Management of Environmental and Social Risks and Impacts: Monitoring and Review

22. The client will establish procedures to monitor and measure the effectiveness of the management program, as well as compliance with any related legal and/or contractual obligations and regulatory requirements. Where the government or other third party has responsibility for managing specific risks and impacts and associated mitigation measures, the client will collaborate in establishing and monitoring such mitigation measures. Where appropriate, clients will consider involving representatives from Affected Communities to participate in monitoring activities.

IFC, International Finance Corporation’s Guidance Notes^[7]

GN86. (…) In certain cases (such as projects with potential significant adverse risks and impacts), due diligence conducted by financiers may result in the imposition of additional monitoring and/or verification of client monitoring (for example, as part of the supplemental action plan agreed with the client), including the appointment of qualified and experienced external experts to independently verify monitoring results. Findings of these external monitoring activities should be included in corrective or preventive actions, as appropriate. Participatory monitoring (i.e., involvement of Affected Communities) should be considered where appropriate (projects with potential significant adverse risks and impacts). In these cases, the client should evaluate the capacity of those participating in the monitoring and provide periodic training and guidance as appropriate.

Global Perspectives Project, Doing Business with Respect for Human Rights^[8]

Main company functions likely to be involved in the process

• CSR/sustainability: May have a key role in reviewing implementation of the human rights policy
• Internal audit/assurance: Monitors compliance with company policies, including human rights commitments, and evaluates effectiveness of internal procedures
• Procurement: While various specific functions are likely to have a role in tracking, monitoring supply chain performance on human rights is relevant for most companies
• Legal/compliance: Awareness of a range of risks in light of company’s legal obligations that can feed into the impact assessment process
• Human resources: Responsible for monitoring effectiveness of measures involving the company’s own workforce

When a company wants to begin or refine its human rights tracking efforts, there may be some simple ways to find information using existing tracking processes:

• Information from existing grievance mechanisms such as reports from whistle-blower hotlines or complaints boxes, or feedback from trade union representatives, will contain relevant information (for example, reports of allegations of worker harassment or excessive overtime);
• Employee surveys often contain valuable human rights-related information, such as experiences of discrimination, perceptions of employee engagement or the listening capacity of management;
• Internal audit processes will already include relevant indicators in many companies;
• Country reports prepared by country directors or regional offices may contain relevant information on the national human rights situation and its connection to the business.

Common pitfalls to avoid

Tracking what can be measured rather than what is important to track

Because tracking of human rights impacts beyond health and safety is still relatively underdeveloped, there has been little guidance to date for companies on how to do it well. Therefore, there may be a tendency to focus on what it is possible to track rather than what is important to track and report on. If quantitative data is not available, anecdotal evidence and case studies may be more important than tracking ‘hard’ data on an irrelevant issue or on processes (such as the number of audits or training sessions conducted) that do not provide any insight into the effectiveness of those approaches.

Exclusive focus on auditing

Research and anecdotal evidence has shown that policing-based auditing models lead to limited sustained improvements in relation to human rights (see discussion in the box above). Audits can provide important snapshots in time but are not enough, on their own, to address improvements in supplier performance. Companies can learn from a growing body of experience with engagement and capacity-building approaches, and reflect on what may make most sense for their business given their salient human rights risks.

OECD, Due Diligence Guidance for Responsible Business Conduct^[9]

Track implementation and results     

4.1 Track the implementation and effectiveness of the enterprise’s due diligence activities, i.e. its measures to identify, prevent, mitigate and, where appropriate, support remediation of impacts, including with business relationships. In turn, use the lessons learned from tracking to improve these processes in the future. See Annex Q41-45

Practical actions

a. Monitor and track implementation and effectiveness of the enterprise’s own internal commitments, activities and goals on due diligence, e.g. by carrying out periodic internal or third party reviews or audits of the outcomes achieved and communicating results at relevant levels within the enterprise.

b. Carry out periodic assessments of business relationships, to verify that risk mitigation measures are being pursued or to validate that adverse impacts have actually been prevented or mitigated.

c. For human rights impacts the enterprise has, or may, cause or contribute to, seek to consult and engage impacted or potentially impacted rightsholders, including workers, workers’ representatives and trade unions. See Annex Q8-11

d. Seek to encourage periodic reviews of relevant multi-stakeholder and industry initiatives of which the enterprise is a member, including their alignment with this Guidance, and their value to the enterprise in helping it identify, prevent or mitigate adverse impacts linked to its business, taking into account the independence of these initiatives. See Annex Q12

e. Identify adverse impacts or risks that may have been overlooked in past due diligence processes and include these in the future.

f. Include feedback of lessons learned into the enterprise’s due diligence in order to improve the process and outcomes in the future. See Annex Q44

Q41. What information is tracked under due diligence?

Tracking involves first and foremost assessing whether identified adverse impacts have been responded to effectively. In addition to following up on responses to identified adverse impacts enterprises may review their due diligence process, or relevant multi-stakeholder and industry initiatives, more broadly to ensure that they are effective. This can occur periodically or be triggered when tracking activities reveal that significant adverse impacts are not being effectively addressed.

Establishing appropriate qualitative and quantitative indicators can be helpful to tracking. For example, relevant indicators may include:

• Percentage of impacted stakeholders engaged who feel adverse impacts have been adequately addressed.
• Percentage/number of agreed action points that have been implemented according to planned timelines.
• Percentage of impacted stakeholders who feel channels for raising grievances are accessible, equitable and effective.
• Rate of recurring issues related to the identified adverse impact(s).

Indicators may be context specific and vary according the objectives and actions associated with the enterprises due diligence process.

Q43. Who is involved in tracking implementation and results within an enterprise?

Responsibility for tracking implementation and results may be assigned to a number of individuals across business units or offices within the enterprise, as relevant. For example:

• A sourcing office within an enterprise may have the primary responsibility for tracking the implementation of supplier assessments and corresponding corrective action measures.
• An enterprise’s buying department may hold the primary responsibility of tracking rates at which orders are placed late, changed, or cancelled – all practices which may contribute to labour risks with their suppliers.
• Operational level staff may seek feedback from impacted stakeholders and rightholders on whether the impacts have been addressed (e.g. through consulting local communities, collecting feedback from people who attend meetings and forums, taking note of issues brought to remediation procedures).

Senior management oversight of an enterprise’s progress with respect to implementation and results can provide a more complete picture of the enterprise’s progress across the organization as a whole.

            For example, systems that collect information at a local level (e.g. supplier assessment data), but then are aggregated at a centralised department (e.g. headquarters or regional office) may help to identify trends more widely and can be used as a basis for sharing lessons learned across the enterprise.

OECD, Due Diligence Guidance for Responsible Supply Chains^[10]

Expectations under the OECD Guidelines: Track

The OECD Guidelines call for enterprises to account for how impacts are addressed (OECD Guidelines, II, A10). Accounting for impacts means both ensuring that the measures taken have been effective and communicating what steps an enterprise has taken and why.

Important terms

Verification – Confirmation that requirements have been filled. “Requirements” may be agreed-upon actions under a corrective action plan and/or legal regulations. For example, a building inspector may verify that fire exits align with fire safety codes.

Monitoring – The ongoing tracking of the situation on-the-ground in relation to specific risks and the measurement and tracking of indicators of success. Indicators may be direct or indirect. Monitoring generally provides a more comprehensive picture of the situation at the site-level than a one-time assessment. For example, a factory may track the number of hours worked by workers in its sewing and finishing departments during peak periods.

Validation – Determination of whether the actions taken to prevent impacts are indeed effective in preventing impacts. Verification and monitoring data feed into validation. For example, an enterprise may seek to validate that its current training of employees is preventing sexual harassment in the longer term.

4.1 Verify, monitor and validate progress on due diligence and its effectiveness in the enterprise’s own operations

To the extent possible and reasonable, the enterprise should seek assurances that the actions that it has taken or is taking are preventing and mitigating harm in its own operations.

The enterprise should:

• Verify internally that the enterprise has carried out the actions to which it has committed (for example, under the corrective action plan) within the agreed-upon time period.
• Monitor qualitative and/or quantitative indicators to track progress against goals.
• Indicators may be direct (e.g. the percentage migrant workers whose passports are confiscated; water consumed; number of hours worked) or indirect (e.g. the percentage of migrant workers who understand their rights).
• While outputs, such as number of people trained, may be the simplest indicator to monitor, enterprises are likewise encouraged to monitor: knowledge levels of workers (e.g. human resources manager knows how to calculate wages), attitude (e.g. worker’s feel that grievance mechanisms are legitimate and accessible), conditions of the workplace (e.g. availability of drinking water) and implementation of systems (e.g. policy, prequalification of suppliers) in order to get a more complete picture of whether harms are being prevented.
• The enterprise is also encouraged to monitor red flags that may indicate a higher-risk of impact (e.g. changes in orders during peak season).
• Workers should play an integral role in monitoring progress against goals. This is particularly true for human rights and labour impacts, but is also relevant for environmental impacts and integrity risks in many cases.
• Draw on all known information, including data from ongoing monitoring, internal periodic assessments, issues raised through grievance mechanisms, etc., to validate that the steps taken by the enterprise are preventing and mitigating impacts.

The enterprise may conduct all of the above internally. However, the enterprise is encouraged to seek external support in validating that impacts have been prevented when:

• the impact may cause severe harm if not adequately prevented, (e.g. handling and disposal of hazardous chemicals, fire safety, electrical safety, building integrity, etc.)
• prevention measures require technical expertise that is not available in-house. (…)

4.2 Verify, monitor and validate progress on due diligence and its effectiveness in the enterprise’s supply chain

Enterprises should monitor and assess their own progress as well as that of their suppliers. Enterprises should also assess whether the actions they have taken are effective in preventing or mitigating harm.

Auditing-fatigue is a challenge in the garment and footwear sector. At the same time, some form of validation is necessary to give the enterprise confidence that it is preventing harms in its supply chain. Enterprises should therefore seek to balance between assessing suppliers and supporting ongoing monitoring. Enterprises can hold to the general principle that the more severe the impact, the greater the level of assurance the enterprise will need that impacts have been or are being prevented. The following includes high-level guidance on the level of assurance to be applied – verification, monitoring or validation – in various contexts.

• The timing of verification, monitoring or validation should correspond to the severity and nature of the harm. Enterprises should also consider the length of time necessary to implement corrective action plans.
• As above (5.1), where international or domestic standards exist on how to prevent or mitigate harm, verification that such standards are being followed is sufficient to assume that harm has also been prevented.
• Whenever possible, the enterprise should monitor indicators – either direct or indirect – over time to validate that impacts have been or are being prevented. Where the risk of harm affects more than one sector within a particular region, the enterprise is encouraged to coordinate and collaborate across sectors to harmonise indicators tracked. The sharing of data will provide those operating in the region with a more complete picture and therefore enable the enterprise to better target its prevention measures.
• Workers or their representatives should feed into ongoing monitoring. This is particularly relevant for labour and human rights impacts but is also relevant for environmental and integrity risks.
• If through monitoring, the enterprise determines that impacts are not being addressed, the enterprise is encouraged to verify that the actions were taken in the first place.
• As above (5.1), the enterprise is encouraged to engage external experts to verify that corrective action measures were pursued or to validate that harms have been prevented when:
• the impact may cause severe harm if not adequately prevented, (e.g. handling and disposal of hazardous chemicals, fire safety, electrical safety, building integrity, etc.)
• prevention measures require technical expertise that is not available in-house
• If the enterprise relies on mid-stream suppliers operating at choke points to conduct due diligence on risks of severe harm upstream, the enterprise is encouraged to conduct an audit of the mid-stream suppliers due diligence practices against this Guidance. Enterprises are encouraged to collaborate at a sector level on the auditing control points. (…)

Shift & Mazaras LLP, UN Guiding Principles Reporting Framework^[11]

Tracking Performance

Overarching Question: How does the company know if its efforts to address each salient human rights issue are effective in practice?

Supporting Question: C5.1 What specific examples from the reporting period illustrate whether each salient issue is being managed effectively?

Objective

To explain how the reporting company understands if it is successful in reducing risks to human rights in relation to each salient issue, such that it can continuously improve in its efforts to meet its responsibility to respect human rights.

Supporting Guidance

[The] implementation of the corporate responsibility to respect human rights takes time and resources, and the human rights challenges faced by most companies evolve over time, with changes in the company’s operations, operating contexts and business relationships. This Framework explicitly recognizes the ongoing nature of implementation, and enables companies to explain their progress along a path, over time.

This section of the Framework therefore focuses on the company’s processes and indicators for tracking its performance. Particularly relevant are methods of tracking that go beyond identifying whether certain actions have been taken by the company, and assess their effectiveness in preventing and mitigating potential impacts, or in enabling remedy if actual impacts occur. Information about how the company tracks its own progress is particularly important for demonstrating that it is consistently seeking and appraising improvements in its human rights performance.

Relevant Information

Relevant information for the company’s answer could include:

• Particular processes through which the company assesses its success in addressing each salient issue (e.g., internal review processes, internal audit, supplier audits, surveys of employees or other workers, surveys of external stakeholders, other processes for affected stakeholders to provide feedback, including stakeholder engagement processes and grievance mechanisms, databases that track outcomes when actual impacts or complaints arise);
• Any plans to develop further processes for assessing the company’s success in addressing each salient issue;
• Particular qualitative and/or quantitative indicators used to assess how effectively each salient issue is being managed (e.g., indicators developed by the reporting company or by a relevant industry association, multi-stakeholder initiative or in a more general reporting framework);
• Any challenges in assessing the effectiveness of the company’s processes to address a salient human rights issue (e.g., due to limited visibility into a supply chain, difficulties in confirming cause and effect; difficulties in gaining qualitative information that would help interpret quantitative data such as a reduction in complaints received). (…)

[5.1 What specific examples from the reporting period illustrate whether each salient issue is being managed effectively?]

Supporting Guidance

(…) The focus here is on examples of the results achieved from the company’s efforts to address those impacts. In other words, the response should convey ways in which the reporting company’s efforts to reduce the likelihood or severity of impacts on human rights, through its human rights due diligence, have had the desired effect.

It is naturally difficult to demonstrate that an impact would have occurred were it not for the company’s efforts. Moreover, the absence of an impact does not, on its own, show that it is being well managed, as the result may be due to luck or other factors. It may be easier to provide evidence of a reduction in the frequency or severity of an impact linked to the company’s activities or business relationships, and to demonstrate correlations to the company’s own efforts to achieve that outcome.

For example, audits of suppliers may indicate that the occurrence of child labour or the use of contract workers who lack benefits or unionization rights has significantly reduced, with a reasonable basis to believe that capacitybuilding or other work by the company has contributed to that fact. Statistical data may show a reduction in employee injuries, or fact-finding work by respected experts or by the company jointly with local communities may show reduced impacts on health and livelihoods from water extraction or pollution. Again, it will be important to show that there is a credible connection to the company’s own efforts to manage those risks.

The expectation of this question is not that the reporting company should, or could, claim direct cause and effect between its own efforts to manage each salient issue and a particular outcome. In some instances, cause and effect will be credible. In many others, it will never be possible to prove such a direct relationship, and improvements may initially be uncertain. Reporting that includes such information, while recognizing that it is tentative or limited to a correlation, has its own value in demonstrating how the company is tracking and thoughtfully analysing results.

There may also be instances in which the approaches on which the company was relying to manage a salient issue have not worked in practice, or have not yet revealed positive results. In other words, the trend has been a negative one, despite the company’s efforts or due to developments beyond its control. For example, where democratic freedoms are curtailed or violent conflict increases in a particular operating environment, this may also lead to increased human rights impacts in connection with the company’s own operations. (…)

Corporate Human Rights Benchmark, Agriculture, Apparel and Extractives^[12]

B.2. Human rights due diligence

B.2.4 Tracking: Monitoring and evaluating the effectiveness of actions to respond to human rights risks and impacts

The Company tracks and evaluates the effectiveness of actions taken in response to its human rights risks and impacts and describes how it uses that information to improve processes and systems on an ongoing basis.

Score 1 – The Company describes the system(s) for tracking the actions taken in response to human rights risks and impacts assessed and for evaluating whether the actions have been effective or have missed key issues or not produced the desired results OR provides an example of the lessons learned while tracking the effectiveness of its actions on at least one of its salient human rights issues as a result of the due diligence process.

Score 2 – The Company meets both of the requirements under Score 1.

Corporate Human Rights Benchmark, Key Findings^[13]

Results by Measurement Theme

Tracking (B.2.4): The Coca-Cola Company (AG), Mondelez International (AG), Unilever (AG), Anglo American (EX), BHP Billiton (EX), and Royal Dutch Shell (EX) earned the only 2’s for this indicator. Each clearly indicates their systems for actions taken in response to their human rights risks, but also provides examples of lessons learned for the due diligence process through tracking effectiveness. (…)

            The Corporate Human Rights Benchmark was launched in 2013 as a multi-stakeholder initiative drawing on investor, business and human rights and benchmarking expertise from 8 organisations: APG Asset Management (APG), Aviva Investors, Business and Human Rights Resource Centre, Calvert Research and Management, The EIRIS Foundation, Institute for Human Rights and Business (IHRB), Nordea Wealth Management and VBDO.

Unilever, Human Rights Progress Report^[14]

Tracking

The ability to track and monitor issues is a vital part of measuring progress in remediation and addressing grievances. This is an area where we see different speeds of progress – described for each of our salient issues.

Within our own operations we track reported issues through code breaches, grievances reporting and engagement with worker representatives, supported by regular training and monitoring.

To assist tracking in our extended supply chain, in 2017 we created an Integrated Social Sustainability Dashboard giving the number of non-conformances for each fundamental principle of the RSP, broken down by cluster, category and portfolio. We use this dashboard to capture information on salient issue hotspots, allowing us to prioritise, build guidance, produce webinars, and support regions and portfolios where the need is greatest. Dashboard results are shared with all procurement Vice Presidents, Directors and Managers.

Our Procurement function monitors compliance levels and prioritises where intervention is needed, working with suppliers to ensure effective remediation. We track and verify that corrective action plans have been implemented within the agreed timelines: this requires confirmation from the auditor that the action has effectively addressed the relevant non-conformance. For the most serious Key Incidents, we have a more active, direct participation in agreeing the corrective actions with the supplier and following up on these.

Apple, Supplier Responsibility Report^[15]

Working Hours Falsification

Our Working Hours policy is based on International Labour Organization and Responsible Business Alliance (RBA) standards that limit working hours to no more than 60 hours a week. Also, suppliers can offer overtime only on a voluntary basis and factories must give employees one full day of rest for every six days worked.

We launched a Working Hours Program in 2011 to better manage working hours across our vast supply base. In 2012, the weekly working hours of more than 1 million supplier employees were monitored. Since then, coverage of employees monitored in the program has expanded year over year and, in 2017, the working hours of 1.3 million people were tracked on a weekly basis.

If falsification of employee working hours is discovered, the violation is escalated to the supplier CEO and the supplier is placed on immediate probation. The supplier’s ethics policy and management systems are then thoroughly reviewed to identify the root causes and systemically correct them. The supplier is required to undergo regular audits to ensure the reviewed policy is implemented to prevent future violations. In addition, the supplier must revise all records to reflect an accurate accounting of hours worked by their employees. In 2017, we uncovered 38 cases of falsification of working hours data. In all cases, suppliers were placed on immediate probation. Our suppliers’ compliance for overall working hours for the year was 94 percent.

Glencore, Sustainability Report^[16]

Product stewardship

Our goal is to provide competitively-priced commodities that meet our customers’ needs and contribute to global society, while addressing any associated health, societal and environmental risks.

We work with stakeholders, including civil society, governments and our customers, to promote responsible commodity sourcing. (…) We continue to face growing scrutiny into the potential human health and environmental impacts of the products we sell.

We are developing a Group monitoring system to track emerging regulations, and determine the degree of risk or impact they are likely to have on our different commodity departments. This will help us to better understand and engage with the growing interest from our stakeholders.

We have developed a product stewardship scorecard to help communicate awareness of this discipline’s varied and far-reaching nature, combining disparate fields such as regulation and science. The scorecard covers any new regulatory or product-related development that may affect our business or the markets we work in. We use it to track and rank new developments by priority and potential impact, as well as communicate their significance to senior management. We classify each issue by both commodity department and region. High priority issues are allocated follow-up actions to mitigate or reduce the risk to ensure that our business and our sustainability activities run smoothly.

The Board HSEC committee and our senior management team will oversee the results of this system to ensure that any emerging regulatory risks are factored into business considerations.

BHP, Sustainability Report^[17]

Our Sustainability Framework

Dams and tailings management

A risk review was conducted of all significant dams across our operated assets and the assets of our NOJVs in FY2016, which confirmed the dams to be stable.

Tailings dams require continuous monitoring and maintenance, so our focus has shifted to risk identification, governance and monitoring programs. We have identified opportunities for improvements to dam governance and risk management at our operated assets and at NOJVs. These are detailed in our Annual Report 2017, available online at bhp.com.

BHP has used the lessons from the dam risk review to contribute to a broader tailings storage review by the International Council on Mining and Metals (ICMM). That review has resulted in the ICMM releasing a Tailings Position Statement, including a governance framework and benchmarks, which we intend to adopt.

Our focus for FY2018 will be on:

• the implementation of a stewardship program;
• progressing monitoring and early warning technologies and emergency response preparedness;
• further development of BHP’s dams and tailings controls and standards.

Rio Tinto, Why Human Rights Matter^[18]

Monitoring and evaluation are essential learning processes for integrating human rights considerations into our CSP work. They allow us to see both the successes and shortcomings of our work so that we can adjust and improve.

Checklist

• Does your operation have indicators for tracking performance against key human rights risks that have been identified, including indicators for gender?
• Are these indicators underpinned by credible data, and are they updated regularly?
• Do the indicators align with the Millennium Development Goals where appropriate?
• Does monitoring of the human rights performance of your operation take place in a planned way and on a regular basis?
• Is responsibility for monitoring and reporting clearly and appropriately allocated?
• Do human rights monitoring and evaluation processes at your operation involve communities wherever possible including, in particular, vulnerable and ‘at risk’ groups?
• Do monitoring and evaluation processes at your operation include requirements for reporting back to communities on findings?
• Do management systems include procedures for highlighting and responding to any emerging human rights issues, including serious allegations, regardless of whether or not they are well-founded?
• Are changes and adjustments made to programmes and activities based on the results of monitoring?
• Does the monitoring and evaluation framework use information from your operation’s complaints, disputes and grievance processes?

Distinguishing ‘monitoring’ from ‘evaluation’

• Monitoring is the ongoing measurement of change (positive or negative) against defined indicators.
• Evaluationis the systematic assessment of the effectiveness of management strategies and programmes. Evaluations can focus either on process (how well has the initiative been implemented?) or outcomes (have the desired impacts been achieved?).

World Bank, Participatory Water Monitoring^[19]

Participatory Monitoring is a collaborative process of collecting and analyzing data, and communicating the results, in an attempt to identify and solve problems together. It includes a variety of people in all stages of the monitoring process, and incorporates methods and indicators meaningful to the stakeholders concerned. Traditionally, companies and agencies initiate and undertake monitoring. Participatory monitoring requires changing the dynamic so that a wider range of stakeholders assume responsibility for these tasks and learn and benefit from the results. Participatory monitoring is not only scientific, but also social, political, and cultural. It requires openness, a willingness to listen to different points of view, a recognition of the knowledge and role of different participants, and the ability to give credit where credit is due. (…)

Participatory Water Monitoring uses a participatory approach to monitor water. In the process, it not only generates credible data and information but also builds trust and helps resolve or avoid conflict surrounding perceived or actual impacts. (…)

Monitoring can give people the information they need to understand positive and negative impacts. Several challenges often arise, however, in implementation. Most monitoring efforts are top-down, with the public receiving information that has been collected, analyzed, and reported by experts chosen by the project sponsor or company and presented in a way that they may not understand. In some instances, the information may not even address the real concerns of the community; rather it may be strictly oriented toward a company’s interests in compliance with regulations and legal commitments. Communities sometimes become aware of monitoring results so late in the project cycle that they may have lost trust in the company before they receive the results.

In general, people want to participate in decisions that matter to them. Thus the social demand for participatory approaches is often great. In many instances, companies have spent large amounts of money on monitoring programs that may have a high degree of technical credibility, yet that may have no mechanism to generate public trust in the resulting data. In these cases, one of the principal purposes of monitoring is lost.

When implemented early in the project cycle, participatory monitoring can address these challenges by including community members in defining the questions and developing the monitoring design. Furthermore, participatory monitoring and the inherent collaboration required to design and implement a process can strengthen social capital by creating relationships, trust, and understanding (…).

Water monitoring also requires considerable technical capacity and local knowledge. Water resource impact evaluation is a multidisciplinary field that encompasses the basic sciences (chemistry, physics, and biology), engineering, management, and law. In addition, the daily observations and experience of those local people who manage water in the field (including the hydrology of the area and how water is used) can be as important as observations from specialists when developing a thorough understanding of local conditions. The technical nature of assessing impacts to water presents challenges, opportunities for, and, in some cases, limitations to participatory approaches. (…)

ICMM, A Practical Guide to Catchment-Based Water Management^[20]

Case study: Participatory water quality monitoring in the Athabasca Basin, Canada

The Athabasca Working Group (AWG) is a partnership established to implement an impact management agreement between local communities and uranium mining companies with operations in northern Saskatchewan, Canada. The AWG has a key role in addressing local concerns about potential environmental impacts of mining on the environment, including water quality, and ensures that the uranium mining industry maintains a positive working relationship with the local residents. The AWG comprises representatives from each of the seven communities within a 200km radius of the uranium mine sites and the two uranium mining companies (namely Areva and Cameco Corporation). The AWG programs are funded by the mining companies.

The AWG has established a community-based environmental monitoring program that assesses many parameters important to local residents, with a focus on local water quality and compares it to both reference locations and water quality guidelines. One of the most important elements of the program is that local residents take part in the sample collections each year, and it is independent of government and industry environmental monitoring. The program enables community members to collect their own environmental samples at the locations that are of most concern to them, which encourages data acceptance and promotes environmental protection, ensuring that water quality standards are maintained.

Quarterly meetings are held where AWG community representatives meet with personnel from the companies to review reports, discuss current community concerns and update the communities on exploration and mining activities and projects in the area. The AWG is part of a larger context of northern community relations undertaken by the uranium mining industry in northern Saskatchewan.

Shift & IHRB, Oil and Gas Sector Guide on the UN Guiding Principles^[21]

Building a Systematic Approach to Tracking

Balancing quantitative and qualitative indicators

Good quantitative indicators can be useful in conveying concisely how well a company is managing human rights risks. They may be particularly helpful in O&G [oil & gas] companies, where so many staff have scientific/engineering backgrounds and may be most comfortable with numerical data. Just as O&G companies report safety incidents involving on-site employees and contractors and track the number of days since the last incident occurred, they could do the same for incidents affecting local communities. However, qualitative indicators will often be essential in helping an O&G company interpret quantitative data on human rights performance. For example, a relatively low number of complaints raised through a company grievance mechanism may reflect a reduction in incidents, or a lack of trust in the mechanism. Feedback from potential users of the mechanism will be essential to understand which interpretation is correct.

Balancing outcome-focused and process-focused indicators

Many indicators will look at incidents or impacts that have already occurred. These will certainly be relevant to tracking performance. However, process indicators are also important in interpreting data. For example, an indicator that shows community agreement to resettlement plans is better understood when reviewed against an indicator for stakeholder consultation processes. A community’s “agreement” will be understood differently – on the one hand where processes allow staff to sign agreements with self-identified leaders who claim to speak for communities; and on the other hand where processes require open, informed and inclusive discussions with communities, together with their leaders.

Designing tracking systems to encourage company-wide engagement

Tracking systems can be a tool that encourages other departments to engage actively in responding to impacts. For example:

• A tracking system may provide data that shows cause and effect between increased demands by procurement and code breaches by suppliers, or between certain activities of construction staff and complaints from communities. This evidence can help engage the relevant departments in addressing problems and avoiding their recurrence;
• A tracking system might require that a function or department be given responsibility for investigating an impact, create automatic deadlines for a response or update, and elevate the issue to senior management if deadlines are missed. This can help stimulate active engagement from those concerned.

Systematising tracking in this way can emphasise the relevance of human rights issues for the whole company. It can encourage staff to think preventatively and not just in terms of responding when issues arise.

Example: Empowering Communities to Evaluate Company Performance

One extractive company is using a “Community Scorecard” to achieve a more effective means of listening to and engaging with affected communities. At regular community forums, the company provides updates on its activities, followed by questions and answers with communities. The company then provides performance metrics, based on verifiable data, across five areas the community has rated as a priority: environmental performance, local hiring, safety, transparency and leaving a positive legacy for the community.

During the sessions, communities rate the company’s performance across the five priority areas: ‘exceed expectations’, ‘meet expectations’, ‘below expectations’, or ‘need more information’. The Scorecard uses wireless remote push button technology that allows the company to capture feedback in real time and display it for attendees. They then discuss the feedback they are seeing, and the communities offer ideas on how the company can improve. The results are aggregated and shared publicly, including every six months in local newspapers.

The company holds enough forums to ensure a sample size that reflects the ideas and opinions of the broader communities. Community feedback indicates that members see the voting system as giving them ‘voice’, particularly for people who are normally quiet in public settings on public issues. The company sees these efforts as helping it become the project developer of choice, and adding value to its options for growth.

Background (Cambodia)

Robertson, Pioneering a New Approach^[22]

Monitoring is almost always at the core of any attempt to improve working conditions because it is important to first know what conditions are before they can be improved. Growing skepticism about the idea that self-monitoring and voluntary compliance are sufficient for improvements in working conditions has been fueled, however, by the BFC [Better Factories Cambodia] experience showing that a combination of features is necessary for a successful attempt to improve conditions. Monitoring alone suffers from either insufficient incentives or competing incentives if buyers do not change their behavior in response to audits.

            A proliferation of third-party monitoring programs seems to have been one of the responses to this rising skepticism, but the heterogeneity of these approaches seems to have created a web of competing standards–for example different codes might have different height specifications for fire extinguishers. Factories now often complain about “monitoring fatigue” because they have to meet many slightly different standards and this fatigue can distract factories from deeper issues in order to focus on meeting the terms of specific codes on inspection day.

            In the sense that BFC started with monitoring, BFC is similar to other auditing programs. Each BFC factory receives a visit approximately every eight months. Unlike some programs, BFC’s audits are unannounced. BFC audits are also different from some other programs because auditors work in teams of at least two people who rarely assess the same factory twice. The audit instrument contains over 200 questions that cover a wide range of conditions and standards. The results of the visits are compared to national law and international standards. Employing local assessors kept assessment costs relatively low. BFC was also able to mobilize the majority of its funding from user fees, which help demonstrate evidence of efficiency and sustainability.

            One additional benefit of the tripartite approach was to reduce “monitoring fatigue.” The program encourages buyers to rely on BFC audits and the fact that the assessments had tripartite support meant that the assessments were widely accepted, which reduced the need for the buyers’ own monitoring programs.

Better Factories Cambodia, The Business Benefits^[23]

The first programme of its kind, BFC marked the first time in which the ILO became involved in direct monitoring of factory compliance with labour standards and public reporting of factory conditions. In factories that have chosen to receive BFC’s tailored advisory services, BFC has successfully supported improvements in working conditions and social dialogue through worker-management committees and training, pioneering a unique approach to drive change that has inspired the establishment of the Better Work programme in seven other countries.

The development of the Cambodian apparel industry and BFC’s monitoring of factory compliance with labour standards have led to important benefits for the Cambodian economy, including the creation of jobs. Under the US-Cambodia textile agreement, BFC’s monitoring and transparent reporting has led to quantifiable increases in the quota bonuses due to improved compliance. Since the mid-2000s to date, the risk mitigation that the good labour practices and monitoring provided to buyers has led to their increased sourcing from Cambodia.

Instruments (Cambodia)

Law on Environmental Protection and Natural Resource Management^[24]

Chapter VI: Monitoring, Record Keeping and Inspections

Article 14: The Ministry of Environment shall collaborate with concerned ministries to require the owners or responsible persons of factories, pollutions sources, industrial sites or sites of natural resource development activity:

• Install or use monitoring equipment
• Provide sample
• Prepare or maintain and submit for review and record and reports.

Article 15: In order to carry out its responsibilities and in its responsibilities on Natural Protection Areas, the Ministry of Environment, in collaboration with concerned ministries, may enter and conduct inspection in an area, premise, building, on or in a means of transportation or any place etc., in cases when the Ministry of Environment finds that the source is causing harm to environmental quality.

            The Ministry of Environment, whenever they find that there has been a criminal violation the inspectors shall immediately report the competent institution so that action can be taken under the law.

Cambodian Labour Law^[25] 

Article 179: All employers must keep a register of children aged less than eighteen years old, whom they employ, indicating their date of birth. This register must be submitted to the Labor Inspector for visa, observation and warning.

Sub-Decree on Solid Waste Management^[26]

Chapter 4 Monitoring and inspection of hazardous waste management

Article 23. The Ministry of Environment shall take sample of the hazardous waste at every point enumerated in the article 22 of this sub-decree. 

 The owner or person responsible for the site mentioned in the paragraph one of article 23 of this sub-decree shall collaborate and facilitate the environmental official who come to take the waste sample so that they can carry out their technical task.(…)

Article 25. In the case of finding out that there are an illegal disposal or dumping of the hazardous waste without a permit from the competent institution, the Ministry of Environment in collaboration with concerned ministries, shall conduct the inspection at the places in complying with procedures as follows:

a- To present his / her identity card and mission letter while entering into the premise or any site of point source of pollution for conducting inspection and taking sample;

b- To make, at the site of inspection, the primary record and report of the inspection or sample taking with the presence of witness if necessary;

c- To inquire and require the owner or responsible person of the place to provide them with information and other relevant documents for taking statement or report and for evidence;

d- To collect and detain evidence of the offence.

Article 26. In case if there are complaint or report that there is storage or disposal of the hazardous waste which causes danger to animal or human health or public property or contaminate the environment, the Ministry of Environment shall make urgent inspection and  inform concerned ministries and local authority.

National Environment Strategy and Action Plan^[27]

2.9.3 Top Priority Issues. The RGC has taken several measures to manage and reduce environmental and natural resources pressure and loss, particularly, the designation of a wide network of protected area system and biodiversity conservation corridors, institutional reform and vigorous law enforcement against the passiveness and unsustainable management of the economic land concessions and illegal logging and wood smuggling. More concerted and well-resourced continuous efforts are necessarily required to effectively manage the drivers and impact on the natural capital, especially by addressing limited financial resources and capacities, poor awareness of the value, and vulnerability of the natural capital critical for the country’s sustainable development. (…)

            In some cases, the lead ministries or institutions for cross-cutting strategies are often seen relatively “weaker” in terms of budget allocation and capacity for ensuring consistent implementation, followup, monitoring and evaluation compliance and enforcement, and the coordination and monitoring.  The interplay and coordination among concerned stakeholders during problem and priority identification, formulation, implementation and monitoring, and evaluation need to be further strengthened. 

Association of Banks in Cambodia, Cambodian Sustainable Finance Principles^[28]

Banks/MFIs assess and manage environmental (and social) risk and issues through an Environmental and Social Management System (ESMS), customised according to their specific business activities, operations, client base, the types of products and services they provide. (…)

            The E&S Procedures define the parameters for identifying, assessing, categorising, mitigating, monitoring and reporting on the E&S risks associated with its Business Activities.

• E&S Risk Assessment of Clients and Transactions (…)
• E&S Risk Categorisation: (…)
• E&S Risk Mitigating: (…)
• E&S Risk Monitoring & Internal Reporting: E&S risk can be monitored as part of the regular credit risk management cycle, and the monitoring efforts should be commensurate with the E&S risks associated with the borrower/transaction. The bank/MFI needs to monitor whether clients comply with the E&S requirements (e.g. with the requirements stated in the loans and in the E&S corrective action plans) throughout the duration of the loans, and ensure appropriate internal reporting of E&S risk. (…)

H&M, Supplier List^[29]

For many years, we have worked hard to build strong, long-term relations with our suppliers, based on mutual trust and transparency. This allows us to disclose the names, locations as well as some additional information of their factories without major concerns about the ongoing competition on the best available production capacity in our industry.

On the contrary, our experience shows that this step incentivises our suppliers for increasingly taking ownership over their sustainability and that it recognises the progress they make. The supplier map includes all our suppliers and their manufacturing and processing factories that account for 100% of all our own products that we sell.

Additionally, it includes the names and locations of the 300 most important mills that provide our suppliers with fabrics and yarns, including spinning, tanneries and fabric dyeing and printing. These account for 67 % of the product volume for H&M Group. By 2021 we aim to disclose 100% of the fabric dyeing and printing locations involved in making our products.

We have signed the Transparency Pledge and included details about product type and number of workers at each factory. We update the public supplier monthly. When business need occur, we onboard new suppliers or factories and occasionally we responsibly phase them out. Such changes will be reflected in the forthcoming update of the supplier list.

FLA, Assessment for Reaccreditation^[30]

In Indonesia, Vietnam, Cambodia, and China, adidas suppliers have registered with a service provider, who provide reports to factory management that come through a SMS or app-based service. These reports also identify trends in grievances, which allow for factory management to address rumors that may be spreading throughout the workforce in a more direct and efficient manner. While adidas’ telephone hotline is still available to all workers, this SMS grievance service allows for suppliers to own their confidential reporting channel, address grievances, review trends on grievances, and keep adidas informed.

FLA reviewed adidas’ data on the SMS Worker Hotline from 2016: over 28,000 workers were covered by the SMS Worker Hotline in Cambodia, Indonesia, Vietnam, and China, and over 23,000 grievances were submitted through this hotline. The service provider is also able to track how many workers register in the system, download the application, and how the grievance is submitted (either through SMS or application).

AFWA, Gender Based Violence in the H&M Garment Supply Chain^[31]

Before entering into a working relationship with a supplier, H&M claims to conduct a ‘minimum requirement assessment’. After this initial assessment, however, H&M reports that further monitoring takes place through supplier self-assessment. H&M proports to require suppliers to self-assess their sustainability performance annually. Self-reports are then scored by H&M, using a Sustainability Index score from zero-100 that reflects both H&M criteria and the Higg Index—an assessment mechanism that aims to assist brands in measuring environmental impacts of their supply chain (…).

            H&M’s CSR measures may look good on paper, but as detailed in Chapters 4 and 5 of this report, they are far from sufficient to address workplace harassment, violence, and violations of decent work standards. Moreover, research shows CSR alone is an insufficient approach because it does not address power imbalances and fear of retaliation among workers who are critical to monitoring and reporting incidents of gender based violence and ultimately transforming workplace practices and culture.

Fast Retailing, Monitoring and Evaluation of Production Partner Factories^[32]

Grievance Mechanisms in Partner Factories

Fast Retailing asks partner factories to establish their own mechanism to address employees’ grievances as part of proper business management following FLA’s standards. The requirements for grievance mechanisms stipulated in Fast Retailing’s Supplier Guidebook include:

• at least one confidential, anonymous grievance channel;
• written procedures and processes to address grievances aligned with local laws, including a non-retaliation policy;
• a tracking system to ensure grievances are addressed; and
• training for workers, supervisors and managers including orientation for new workers and subsequent annual training for all workers on grievance policies and procedures.

We have improved our audit process to assess functionality of factories’ grievance mechanisms. For example, in 2018, our audit checklist was expanded to include additional questions on penalties and retaliation and how management logs and tracks grievances and resolutions.

            An assessment tool including a worker survey and scoring system to evaluate the performance of grievance mechanisms using these eight criteria, has been developed, tested and reviewed with the support of the Fair Labor Association. In 2020, we aim at assessing our key sewing factories and fabric manufacturers using this tool.

Case 4 (Cambodia)

In 2019, a worker representative organization contacted us regarding potential breach of freedom of association in one of our partner factories. We facilitated a dialogue among worker representatives and factory management with the support of an external mediator so both parties could reach an agreement. Another negotiation was set up by the Provincial Department of Labour and Vocational Training. Since no agreement could be reached, this case was sent to the Arbitration Council. We communicated clearly that Fast Retailing would support the Arbitration Council decision and would expect factory management to follow it. The factory agreed to comply with the Arbitration Council decision.

ECCJ, A Human Rights Review of the EU Non-Financial Reporting Directive^[33]

[According to H&M] “At H&M group, we firmly believe that everyone connected to our business should be treated in a fair and equal way. [This] means making sure our values and respect for human rights are upheld and promoted within our own company and across our supply chain.…All our policies and standards are based on international equivalents and well-recognised initiatives, such as ILO Conventions or the UN Guiding Principles on Business and Human Rights. …Our human rights due diligence is conducted systematically as an integral part of all relevant assessment processes.”

            In contrast to H&M’s strong policy commitment, its 2017 reporting fails to provide material evidence of effective assessment and management of its salient issues. Firstly, H&M relies heavily on self-reporting mechanisms such as the Sustainable Impact Partnership Programme for measuring social and environmental performance. Yet, suppliers are unlikely to report human rights violations perpetrated within their own factories. Indeed, interviews of 62 workers in ‘gold’ and ‘platinum’ H&M suppliers in Bulgaria, Turkey, India, and Cambodia during 2018, found that none of the workers earned a living wage, freedom of association violations occurred, and overtime hours exceeded the legal maximum.

            Secondly, despite identifying 10 salient human rights issues, H&M only outlines five key performance indicators (KPIs) that fail to report on progress in a meaningful way. For example, wage levels rather than the KPI of number of factories using the ‘Fair Wage Method’ would indicate progress towards increasing real take home pay. Similarly, reporting the number of independent and freely formed trade unions or collective bargaining agreements reached would better indicate progress towards freedom of association compared to the KPI of democratic election of worker representatives to worker committees.  (…)

            Thirdly, H&M’s progress on its salient issues is difficult to assess as the reporting fails to disclose the outcomes of its human rights impacts in a material manner. The brand only provides an aggregated figure of the number of investigated and closed incidents during 2017 without detailing the specific human rights issues concerned, if appropriate remedial action was taken, or whether the nature of the issue was incorporated in its human rights due diligence processes going forward. It is also unclear whether these figures include unresolved cases from previous years.

            Similarly, it is difficult to track H&M’s progress against its living wage ambition, as the brand has deviated from its original target without explanation. In 2013, H&M aimed for 850,000 textile workers to earn a living wage by 2018, while the 2017 report refers only to the number of suppliers using the ‘Fair Wage Method’. This shifting target makes it impossible to track progress. However, H&M does publicly disclose its suppliers, covering 98.5% of its garment production and 60% of its fabric production, which helps to trace human rights abuses and impacts within the supply chain.

Australian NCP, Final Statement: ANZ Group and Phnom Penh Sugar Co.^[34]

2. The Specific Instance alleged non-observance by ANZ of certain parts of the General Policies Chapter and Human Rights Chapter of the OECD Guidelines for Multinational Enterprises (OECD Guidelines) in relation to ANZ’s involvement with the developer of a sugar plantation and refinery project in Cambodia. The project is alleged to have forcibly displaced the families and dispossessed them of their land and productive resources. ANZ Royal is a joint venture of ANZ Group and the Royal Group of Companies (based in Cambodia), with ANZ Group holding a 55 per cent interest in ANZ Royal. ANZ is linked to the project as it provided partial financing in 2011 to the developer of the project, Phnom Penh Sugar (PPS) for the refinery construction.

6.In concluding this case, the AusNCP recommends that ANZ: (…)

• further strengthens the application of its due diligence arrangements (including reviewing its screening and monitoring systems) to ensure they are adequate to manage the risks associated with its lending activities – especially in relation to its business with clients in some developing countries where legal and governance frameworks are less developed than in Australia
• establishes a grievance resolution mechanism (including publication of outcomes) to support the effective operation of its corporate standards in relation to human rights – and as a way of demonstrating that its actions are consistent with community expectations around the accountability of multinational enterprises in this area.

BFC, Transparency Database Report^[35]

Better Factories Cambodia (BFC)’s public reporting initiative discloses factory compliance on key legal requirements. This report summarises the following: Critical Issues, Low Compliance Factories and Strike information. BFC has been reporting on these issues and releasing the information publicly since 2014. With the release of cycle 11, the Transparency Database has accumulated information gathered from 1,580 assessment reports covering 579 garment factories that possess an export license in Cambodia since 2014. (…)

Types of public disclosure

• Critical Issues: BFC measures all factories with two or more assessments against 21 critical issues.
• Low Compliance: Factories with three or more BFC assessments are measured against 52 legal requirements. Factories with the lowest compliance levels – those falling two standard deviations below the mean for compliance – are subject for this second level of public disclosure.
• Union Compliance: BFC findings regarding union compliance with strike requirements are published. (…)

Verschuren, Preventing Human Right Violations in the Global Garment Industry^[36]

1.3 The Cambodian Garment Industry – Development and current conditions

What is very interesting to note about the Cambodian garment industry is that in the agreement signed with the US was a clause by which they were conditioned to meet decent labour standards in its factories. Hereby began the later on renamed as ‘Better Factories’ programme, which was enforced by appointing ILO inspectors to monitor the conditions in the factories on a surprise basis. The main aim of this programme is to monitor and slowly improve the conditions of the garment factories in Cambodia, as to have a sweat-shop-free industry in which workers are not exploited or face bad working conditions. In the monitoring process, not only does the ILO intervene, but the Cambodian government, trade unions and workers organizations also play a role. Dialogues are maintained and solutions for the most urging problems are found through a tripartite structure led by the ILO. At the end of the day however, it is the task of the ILO to monitor the conditions in the factories as to maintain an impartial source. Although the programme has been in place for many years and definitely has achieved betterment in conditions in many factories, it faces many structural problems that do not allow it to function well.

            First of all we find that factory owners, in order to evade monitoring, sub-contract other factories that produce at lower wages and in many times deplorable working conditions. Given that these factories are not in the public record, and the brands many times do not know about them either, they are out of the loop and therefore not monitored. Secondly we find that the reports made by the monitors are not for public record, but are only sent to the owners of the factories inspected, whom then have the choice to maintain the records private. This lack of transparency allows the factory owners to disregard the reports and continue work as they had before, facing only very small sanctions, if any. Thirdly, we find that in the cases in which the reports are bought by the brands (as also for them they are not available for free), these many times do not do sufficient to try and change the conditions mentioned in the reports. Many times when brands do decide to act, they do this in a way that is only detrimental to the workers, for example by pulling out of the factory given the bad conditions, instead of trying to pressure the factories into bettering the conditions. These are only some of the obstacles faced with the better factories program, and need to be tackled if any significant changes want to be brought to the industry. (…)

1. The Cambodia Better Factories Program

The Cambodian Better Factories Program, as already explained in the section on the Cambodian Garment Industry, is a program set up by the US with the help of the ILO to monitor the working conditions in exporting garment factories throughout the country. The program covers all the garment factories that are registered with The Garments Manufacturer Association In Cambodia (GMAC) and the Registry of Commerce (RoC) as exporting factories. Hence, the program covers all the factories that produce from global buyers. The monitoring of the factories is done by the ILO through announced and unannounced visits, during which they look at the degree of respect by the factory for the freedom of association, the conditions under which the trade unions are operating; how their members are treated, how much space they have but it remains strictly private to other parties. Apart from this report, a general report on the industry as such is made. This report is public. The Better Factories program has achieved several positive things for the Cambodian garment industry. First of all, given that the ILO is the monitor, this grants the program an independent stance, not influenced by the corruption that might otherwise take place in the monitoring process. Secondly, though the interviewing process of employees and factory managers the monitors can get a sense of the state of some affairs that are not perceivable for the naked eye, this includes things such as sexual harassment issues and restrictions placed on the trade unions. This however, depends on how much the workers are willing to talk in a free way. The Better Factories program organizes trainings and capacity building workshops to allow for the creation of better social dialogue between the parties. On the other side, there can also be found many limitations on the program, which include the following:

Questions

1. What are the challenges faced by global brands in the monitoring of performance of their local suppliers?
2. What tools do global brands use to monitor and track performance of their local suppliers?
3. What recommendations would you give to improve current BFC’s practice in their monitoring work?
4. What are the roles and responsibilities of the government in monitoring and tracking business’ compliance of human rights in Cambodia?
5. Why is it important for multinational corporations to monitor and track performance of their suppliers as part of their due diligence and implementation of their codes of conduct?

Further Readings

• Damiano de Felice, ‘Business and Human Rights Indicators to Measure the Corporate Responsibility to Respect: Challenges and Opportunities’, Human Rights Quarterly, 37:2 (2015) https://muse.jhu.edu/article/581683/pdf.
• Ken McPhail & John Ferguson, ‘The Past, the Present and the Future of Accounting for Human Rights’, Accounting, Auditing & Accountability Journal, 29:4 (2016) www.emeraldinsight.com/doi/full/10.1108/AAAJ-03-2016-2441.
• Philipp Pattberg & Oscar Widerberg, Transnational Multi-Stakeholder Partnerships for Sustainable Development: Building Blocks for Success (2014) www.researchgate.net/publication/264833767_Transnational_multi-stakeholder_partnerships_for_sustainable_development_Building_blocks_for_success.
• Shift & Mazars, UNGP Reporting Framework Guidance II: Assurance of Human Rights Performance and Reporting (2016) www.ungpreporting.org/wp-content/uploads/UNGPRF_AssuranceGuidance.pdf.
• Total, Human Rights Briefing Paper Update (2018) www.sustainable-performance.total.com/sites/shared/sustainable/files/atoms/files/total_-_human_rights_briefing_paper_update_april_2018.pdf.
• Better Factories Cambodia, Strategic Vision 2019-2022 – Partnerships to shape a future of compliance (2019) https://betterwork.org/wp-content/uploads/2019/04/BFC-Strategic-Vision-2019-22.pdf.
• International Labor Organization (ILO), Kingdom of Cambodia Decent Work Country Programme 2019-2023 (March 2019), https://www.ilo.org/wcmsp5/groups/public/—ed_mas/—program/documents/genericdocument/wcms_711728.pdf.
• Chikako Oka, Accounting for the Gaps in Labour Standard Compliance: The Role of Reputation-Conscious Buyers in the Cambodian Garment Industry, European Journal of Development Research (2010) https://www.researchgate.net/publication/46526331_Accounting_for_the_Gaps_in_Labour_Standard_Compliance_The_Role_of_Reputation-Conscious_Buyers_in_the_Cambodian_Garment_Industry.
• Better Factories Cambodia, Compliance Assessment Tool for Footwear Factory (2020) https://betterwork.org/wp-content/uploads/2020/08/Cambodia-Assessment-Questions-Footwear-10-AUG-20.pdf.
• Raymond Robertson, Lights On: Transparency and Compliance, Better Factories Cambodia 29^th Discussion Paper (2019) https://betterwork.org/wp-content/uploads/2020/01/Discussion-Paper-29_Jan2019.pdf
• Anna Salmivaara, ‘New Governance of Labour Rights: The Perspective of Cambodian Garment Workers’ Struggles’, Globalizations (2018) https://www.tandfonline.com/doi/full/10.1080/14747731.2017.1394069.
• Anil Yilmaz Vartardis, The Implementation of the UNGPs on Business and Human Rights for SMEs: Challenges and Opportunities (2019) http://repository.essex.ac.uk/27040/1/1807387_Dissertation.pdf.
• Business and Human Rights Resource Center (BHRRC), Cambodia: 1,000 garment workers strike over unpaid wages & benefits at factories producing for intl. brands; Includes company responses (2020) https://www.business-humanrights.org/en/latest-news/cambodia-1000-garment-workers-strike-over-unpaid-wages-benefits-at-factories-producing-for-intl-brands-includes-company-responses/.
• Human Rights Watch, Follow the Thread: The Need For Supply Chain Transparency in the Garment and Footwear Industry (2017) https://www.hrw.org/report/2017/04/20/follow-thread/need-supply-chain-transparency-garment-and-footwear-industry.

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^[1] UN Office of the High Commissioner of Human Rights, The Corporate Responsibility to Respect Human Rights – An Interpretive Guide (2011) http://www.ohchr.org/Documents/Issues/Business/RtRInterpretativeGuide.pdf.

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