Human rights issues in supply chains and across wider business value chains are complex and frequently occur beyond the visibility of investee companies, sometimes despite the best intentions of companies to manage them. This results in a number of risks to investors.
Because human rights issues are often systemic in nature, adopting diversification as the sole means to mitigate those risks is unlikely to lead to a significant reduction in risk. Rather, because of the typically systemic nature of the risks, investors can play a key role through encouraging companies to identify, disclose, and mitigate human rights risks, and ensuring companies are not unduly punished for identifying and reporting on incidents.
While this toolkit provides ideas for engagement on modern slavery issues, this third edition maintains the same scope as previous editions and continues to assess human rights issues in the context of supply chains and broader value chains of businesses.
This toolkit is designed to explore ideas for better practices that can lead to better outcomes both from an investor and human rights perspective.
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Toolkit contributors
- Måns Carlsson OAM (Co-Lead of the toolkit), Head of ESG and Co-Portfolio Manager (Active Sustainable Equity Fund) at Ausbil Investment Management Limited, and Chair of RIAA’s Human Rights Working Group
- Timothy Stamp (Co-Lead of the toolkit), Principal, Sustainable Investment at Mercer Australia
- Rachel Alembakis (Lead Editor), Stewardship Manager at U Ethical Investors
- Emily Dafter, Sustainable Investments Human Rights Subject Matter Expert at Australian Retirement Trust
- Antonia Parkes, Senior Director, ESG & Stewardship – Workforce Integration at Australian Super
- Caroline Paterson, Senior Manager Responsible Investment at Colonial First State
- Ines Ivankovic, ESG Analyst at UniSuper
- Kate Turner, Global Head of Responsible Investment at First Sentier Investors
- Andrea Masselos, Responsible Investment Analyst at First Sentier InvestorsÂ
- Sue Walker, Senior Manager Responsible Investment at Harbour Asset Management
- Alexandre Safran, Investment ESG Analyst at Alvarium PathfinderÂ
- Els Termaat, ESG Expert at Loftus PeakÂ
- Conlan Mackenzie, Responsible Investment Analyst at RestÂ
- Gabriel Le,ESG Analyst at Challenger LimitedÂ
- Morgan Ellis, Head of ESG at Resolution CapitalÂ
- Janelle Morrison, ESG Analyst at Ausbil Investment ManagementÂ
- Ayesha Azeem, Senior ESG Investment Analyst at Maple-Brown AbbottÂ
- Nga Pham,Senior Research Fellow at Monash Centre for Financial StudiesÂ
External Reviewers
- Australian Anti-Slavery Commission: Laura McManus, Director, Strategy and Business Engagement, Anti-Slavery Commissioners Office
- UN Principles of Responsible Investment: Remi Fernandez, Head of Human Rights, Social & Governance Issues
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Toolkit sections
Identifying the issues
- Sanctions lists as a starting point
- Social audits as part of a wider suite of approaches to identify the issues
- The importance of trustworthy grievance mechanisms
- Using forensic technology and certifications to improve value chain traceability and visibility
- Transparency to enable risk identification and risk mapping beyond tier 1
- Making use of existing data and collaboration with peers / industry
- Taking a wider human rights lens and a wider value chain perspective
Preventative actions
- Evidencing that risk assessment leads to tangible follow-up actions
- Understanding how buying behaviours can impact supplier conditions
- Human rights due diligence (HRDD) – mandatory or voluntary
- Participation and / or collaboration on policy advocacy
- Consolidating value chains to get better visibility and leverage
- Collaborating with other stakeholders
- Capacity building in the value chain
Remediation
- Remediation by preventative actions collaboration with external parties
- Remediation through external expertise (once issues have been identified)
Interconnectedness
- Living wages
- Freedom of association
- Circular economy
- Gender inequality
- Armed conflict
- Climate and just transition
“As investors, businesses, governments and consumers, we all share responsibility for challenging harmful practices and creating conditions where rights are respected throughout global commerce.” - Australian Anti-Slavery Commissioner Chris Evans
Summary
This toolkit is designed to help investors engage constructively with companies to encourage good practice, thereby supporting investors to better manage and influence a reduction in investment-related human rights risks in value chains. This is the third edition of the toolkit, which was first produced in 2018 and updated in 2021. This toolkit does not focus on any one specific issue and does not seek to outline all the various human rights issues that companies are facing in their operations, supply chains and broader value chains. Further, it does not seek to outline in detail the international conventions and laws on the subject, nor does it seek to make any ethical judgements.Neither does this toolkit serve as prescriptive guidance on what investors should and should not do. Rather, this toolkit focuses on points of practical engagement for asset owners and asset managers who wish to engage with companies, based on good practice and with a business rationale.
How to use the toolkit
Each section of the toolkit includes a brief description of the issue, including why it is relevant from an investor lens. Each section also includes a discussion on what the authors believe represent good practice, followed by known examples of such practices by companies. Those examples can be combined with suggested questions or used in their own right to encourage other companies to improve their practices, which will reduce risk.
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