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10 Dec 2020

Fiona Reynolds, CEO, Principles for Responsible Investment

Collaborating for a just recovery

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COVID-19 first struck the world as health crisis, but rapidly snowballed into a much deeper and wider socioeconomic crisis. Within a short space of time, the pandemic systematically exposed and, in many cases, exacerbated the vulnerabilities and inequalities in our global financial system.

The fallout of the crisis disproportionately affected the most vulnerable social groups, often as a result of their precarious work situations. Millions of people (for example workers in the ‘gig economy’) on zero-hour contracts have limited or no access to sick leave, health insurance or unemployment benefits. Many found themselves unemployed overnight without notice, severance or access to a governmental social safety net.

The pandemic has clearly demonstrated that businesses which do not behave responsibly and respect human rights in accordance with the UN Guiding Principles on Business and Human Rights (UNGPs) face significant risks. They fail to protect workers as well as other stakeholders and affected people (or rightsholders), such as local communities.

The widespread lack of engagement on social issues which existed before the pandemic underscores the need for businesses and investors to meaningfully engage on human rights and due diligence at all times. It’s simply not sufficient to only engage on these issues in search of quick fixes or in response to crises and shocks in a reactive capacity, and often once it’s already too late.

The recently released Corporate Human Rights Benchmark provides additional weight to this issue. Though the results indicate there has been some progress on previous years with regard to companies meeting the fundamental expectations of the UNGPs, it also highlights significant challenges. Firstly, it reveals that despite some progress, there are still only a minority of companies actually demonstrating commitment to take human rights seriously. And secondly, it shows a substantial disconnect between businesses’ commitment and actual delivery of results. At PRI we see this echoed in our own work—a growing number of companies have human rights policies and processes in place, yet little progress is being made with regard to how they measure and track the effectiveness of these processes in practice.

Profit simply can’t come above people and planet at any cost – and if we’ve learnt anything from the COVID-19 crisis it is that these three p’s are intrinsically interconnected. A healthy economy which generates profits simply isn’t possible without healthy people and a healthy planet underpinning it.

So, what can we do now?

As we work to build back better, we must ensure people—and therefore human rights—are at the heart of our plans. Only then can we realise a recovery which is sustainable and equitable. We can deliver this just recovery though a variety of actions driven by governments, businesses and investors all working in collaboration.

  • For governments, this means providing adequate signals by mandating human rights due diligence, including modern slavery and human trafficking reporting, across the globe. Many businesses have been badly hit by the pandemic and subsequent lockdowns. With billions of dollars in stimulus being rolled out and earmarked for bailouts, loans and other incentives we must ensure that these are not unconditional. In addition to conditionalities around the environment, we must make sure government aid is also conditioned upon respect for human rights, including labour rights.
  • For businesses, this starts with an explicit commitment to respect human rights. But it must be more than just a nod to change—commitments must be followed by a strong set of policies and processes to implement them. Not only that, but they must be underpinned by mechanisms to ensure they are fulfilling the purpose for which they were designed.
  • We expect companies to track the effectiveness of these processes by meaningfully engaging with their stakeholders. This means providing channels for workers in their direct operations and in their supply chains to feedback any grievances or complaints through secured channels. Being able to capture this feedback from their stakeholders will ensure companies' actions will be better informed and this feedback loop will enable them to adjust processes to make sure they are fit for purpose.
  • And finally, for investors, it is important to engage with governments and have open conversations with investee companies. This will help them understand how COVID-19 has impacted businesses and the kind of plans they have put in place to ensure their employees and workers in their supply chains are protected. It's also crucial to understand the lessons that companies have learnt from the pandemic and how they will incorporate these into their processes going forward—how they will work to ensure their workforce is future-proofed for these types of shocks.

To support investor action on and respect for human rights, PRI has recently launched a multi-year programme helping to transition our signatory base to full respect for the UNGPs within five years.

The pandemic has brought social issues to the fore in a way we’ve never seen before, and underscored the fact that respect for human rights is not only a ‘nice to have’ or the ‘right thing to do’, but is a material consideration for investors, businesses, governments and society. To truly build back better, all these global actors must come together to deliver a just and sustainable recovery.