Human rights compliance programmes in the Consumer Goods, Food & Retail sector

The risk of adverse environmental, social or human rights impacts is one that Consumer Goods, Food & Retail businesses will be familiar with, especially in relation to supply chains.

According to the Sustainability Accounting Standards Board, the financially material sustainability issues arising across the 15 Consumer Goods, Food and Retail-related industries include energy management, water & wastewater management, product quality & safety, labour practices, health & safety, diversity & inclusion, privacy & data security, product design & lifecycle management and selling practices & product labelling. All of these issues have the potential to create adverse human rights impacts.

With an increased prevalence in supply chains, common human rights issues that can arise in the Consumer Goods, Food and Retail sector include, for example:

• Labour exploitation and modern slavery, including use of forced and child labour, abuse of migrant labour, gender discrimination, working hours, freedom of association
• Living wage
• Health, safety and working practices
• Environmental degradation and pollution
• Impacts on use of and access to land and natural resources
• Inadequate engagement with indigenous peoples and affected communitiesv
• Impacts on human rights and environmental defenders

Despite the varied nature of business activities, supply chains and relationships in the Consumer Goods, Food & Retail sector, common examples of factors that can elevate these risks include, for example:

• Short lead times on orders or rapid changes to deadlines
• Short term and insecure contracts
• Paying prices below cost of production
• High proportion of migrant, seasonal, contract or temporary workers in supplier workforces
• Use of recruitment agents and labour brokers
• Late or extended payment terms
• Requiring small-scale farmers to absorb the costs of certification
• Supply chains extending to countries with inadequate labour protection or non-compliance with international labour standards

Historically, drivers for human rights due diligence have included reputation risk and compliance with best practice and “soft-law” standards. However, the global legal landscape is evolving rapidly and human rights due diligence is a regulatory requirement in a growing number of jurisdictions with a focus on identifying, mitigating and reporting on human rights risks in business activities and supply chains. In the Consumer Goods, Food and Retail sector consumer behaviour is also a key driver for more sustainable products, which requires more consideration of the means by which goods and services are produced. Mainstream investors’ expectations are converging around a number of common elements in human rights compliance programmes, namely:

• A policy commitment to respect internationally recognised human rights
• Human rights governance structures
• Human rights due diligence and risk assessment processes
• Disclosure and reporting
• Effective grievance mechanisms

The anti-corruption and business human rights agendas both seek to drive attitudes and behaviours that create a rights-respecting culture of integrity – these fundamental objectives are the same and merit integration where possible, appreciating that this may require something of an expanded focus from risks to the business to risks to people. The business benefits of doing so are many, from ensuring a holistic understanding of both types of risk, to making efficient use of compliance budgets and guarding against due diligence fatigue.

Access a copy of our article here outlining some of the points of alignment between the two agendas.