In September 2018, a Taiwanese fishing boat called the Fuh Sheng 11 made international headlines when it was found to have forced 27 men to work 22 hours a day fishing for tuna off the coast of South Africa.

The boat was a sadly familiar example of the issues which plague fishing and many other industries: forced labour, under-payment and dire working conditions for men, women and children around the world. 

According to the International Labour Organization (ILO), an estimated 24.9 million adults were in forced labour in 2016, while around 152 million children aged 5 to 17 were in child labour.

This exposure of just one of ta thousand boats in the Taiwanese fishing industry underscores what stakeholders have known for a long time: companies need to be more proactive on human rights. In a globalized world, news of corporate abuses travel fast, and investors have a crucial role to play in stemming these abuses and their reputational damage.

For many years, investors have pushed companies to improve their practices and transparency on human rights. Due to international pressure, Taiwan worked to overhaul its regulations in 2017 and create safe working conditions and equal pay regulations for migrant fishermen, who often hail from Indonesia.

In the United States, investors filed 31 shareholder resolutions on human rights in 2018, most of them focused on supply chain standards, ethical recruitment, human trafficking, indigenous people, and weapons and the penal system.

Under the leadership of the Interfaith Center on Corporate Responsibility (ICCR), nearly 120 investors representing more than $2 trillion in assets have launched the Investor Alliance for Human Rights (IAHR) - of which Ceres is a partner - creating a platform for investors to engage companies and hold them accountable when they fail to prevent human rights abuse.

Just last week, the IAHR supported the first ever business statement on the need to protect human rights defenders, civic freedoms and the rule of law.  

However, investors are not only creating their own platforms. They’re also looking to regulatory agencies to enforce the rules and demand transparency from these companies. One such opportunity is financial filings to the US Securities and Exchange Commission (SEC), for which the rules mandate disclosure of all material risks.

Investors representing $1.15 trillion in assets wrote to the SEC in 2016 asking for better disclosure of human rights issues in corporate supply chains, climate risks and water risks in these financial filings. And for good reason.

A recent update to a search tool released by Ceres and CookESG Research, which analyses more than 5,000 US and foreign companies, found corporate disclosure on human rights in financial filings provides inadequate information for investors and stakeholders.

The tool captures information (if disclosed) about internationally recognized human rights, such as freedom of association, the right to collective bargaining, non-discrimination, and the elimination of forced and child labour.

The analysis reveals that across all sectors, human rights disclosures in financial filings suffer from underreporting, and do not link the financial implications of human rights risks to a company’s bottom line.

The filings offered scant useful information for investors seeking to compare companies and understand progress year-on-year, which can be an obstacle when looking into the number of human rights victims across industries.

Despite this, the tool reveals some pockets of good disclosure practice in financial filings, including from Nokia, National Grid and Intercontinental Hotels.

However, in most cases human rights disclosures in financial filings are inconsistent and spotty. Investors are looking for ‘decision-useful’ disclosures which can help shed light on company performance, especially when looking at industries dependent on labourers, the people who help make their business viable.

So, how can companies improve it?

1. Provide ‘decision-useful’ disclosures in financial filings

Businesses need to give investors access to management’s views about salient human rights issues. The United Nations Guiding Principles Reporting Framework defines these issues as “the human rights at risk of the most severe negative impact through the company’s activities and business relationships.”

Today, investors have to search multiple reports and web pages to find corporate human rights information, and it’s difficult to tell which issues are most important. Including salient information in financial filings, and providing links to sources of more detailed information, would be an important step towards demonstrating to investors effective management on human rights.

1. 2.             Make information clearer

Companies should act now to make information clearer. By focusing their SEC disclosures on robust discussions of salient human rights issues, businesses can comply with SEC rules while providing investors a better sense of where the greatest risks and opportunities lie.

1. 3.             Be consistent

Companies should also carefully compare their voluntary and SEC reporting on human rights. Both kinds of disclosure should provide consistent messages about the importance of human rights to a company and the actions the company is taking to protect them.

Both companies and investors benefit from strong disclosures on human rights, especially when those disclosures are clear, comparable and consistent. As the tides turn in markets, companies which disclose human rights risks and opportunities increase market efficiency and their own viability.

Thriving markets would not be possible without the dignified and important work of the labourers who deserve to have their working conditions protected and regulated.

Companies and investors build their businesses on the backs of these labourers. When companies provide decent wages and humane working conditions - and are transparent about human rights risks and successes - all global markets can thrive.

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