Main Page >14 Red Flags > ​​Alignment with International Standards > Red Flag 1

1. No Explicit Commitment to International Human Rights Standards or Covers Some but Not All Salient Human Rights

  • What this means 
  • Why investors should care
  • What to look for 
  • Checklist
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Initiatives that do not explicitly reference the Universal Declaration of Human Rights (UDHR), the International Labour Organization’s (ILO) Core Conventions, the UN Guiding Principles on Business and Human Rights (UNGPs), or the OECD Guidelines for Multinational Enterprises (MNE) on Responsible Business Conduct (OECD Guidelines) are unlikely to prevent and mitigate all relevant human rights risks. When initiatives do not reference international human rights or labor standards, it can be a red flag.
 
A fundamental principle of international human rights law, as enshrined in the UDHR is indivisibility - meaning that human rights are interdependent and that the enjoyment of one right depends on the fulfillment of other rights. Therefore, all human rights enumerated in the UDHR are part of a comprehensive framework that supports human dignity, equality, and well-being. 

UNGP 24 recognizes the need for enterprises to prioritize the most severe actual or potential risks, a principle that also applies to audits. When an initiative refers to human rights but does not cover the most salient issues associated with a raw material, sector, product, or high-risk location, it may not be fit for purpose. Below, the initiative’s standard may be lower than legal requirements. Therefore, investors should be aware that companies sometimes point to their involvement in social auditing schemes as evidence of HRDD on issues that the standards are not designed to address. For example, a brand may tout a certification or clean audit as evidence of due diligence within its manufacturing supply chain despite the fact that the auditing standard does not require the payment of a living wage or time-bound requirements of the buyer to pay prices that would enable it. Initiatives may also fail to account for sourcing from high-risk or conflict-affected regions such as Xinjiang, China, Russia, or Myanmar. Schemes that take a broad-scope approach to human rights and can demonstrate that they account for the most salient rights are addressed are more reliable indicators of good practice than those that do not. 

Merely stating a commitment to international human rights norms is not sufficient. A commitment needs to be embedded in the schemes’ standards, assurances, and codes of conduct. When the scheme centers rights holders in its design and implementation - as is the case for worker- and community-driven initiatives - it is a strong indicator of embedded commitment to international standards (see Red Flag 1). For this reason, an initiative that does not present with Red Flag 2 – i.e., it does meaningfully involve workers in the standards and scheme design - may also be considered not to have Red Flag 1 even when the standard does not make an explicit commitment to respecting international norms, as is the case with Milk with Dignity).
Initiatives that do not have a policy commitment to abide by international business and human rights standards or do not adequately account for the salient human rights risks of the sector they are establishing standards for may not be capable of improving working conditions and/or respecting human rights in the communities and regions in which they operate.
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Some social labeling schemes lend companies the appearance of good practice when in fact they don’t address salient issues in the product or industry they are green lighting. One of the earliest social initiatives, the Kimberley Process Certification Scheme, was established in 2003 to certify diamonds as conflict free. Global Witness raised questions, about the independence and effectiveness of the scheme,[1] while Human Rights Watch noted that the Kimberley Process does not provide assurances against child labor and a host of other human rights abuses.[2]
 
Many large seafood companies have joined the Marine Stewardship Council (MSC) which certifies and labels sustainable seafood products. Despite the widespread and well-documented presence of modern slavery within this sector, MSC is not designed to address labor issues. According to an investigation of modern slavery in the seafood sector conducted in the fall of 2023 by The Outlaw Ocean Project, several instances of social audits failed to identify state-imposed forced labor of the Uyghur population in seafood processing facilities in China supplying US firms. All ten seafood processors that The Outlaw Ocean Project linked to Uyghur forced labor were certified by MSC and four were certified by the Aquaculture Stewardship Council (ASC), a separate certification. Following the investigation’s findings, MSC admitted that its reliance on social audits has “significant limitations,”[3] and ASC announced plans to “phase out program operations and cease investment in China” (at that time, ASC had 289 certified companies in the country).[4]
 
Initiatives also need to be prepared to conduct saliency assessments with sufficient frequency for volatile high-risk environments and act upon findings. Growing allegations of forced labor in Xinjiang, China compelled the Fair Labor Association (FLA) to issue an advisory in April 2019 cautioning its adhering entities to conduct additional due diligence. In January 2020 the guidance was updated, advising that effective due diligence was no longer possible in Xinjiang due to the restrictions and control imposed by the Chinese government.[5] The FLA recommended that companies should presume that raw materials, semi-finished, or finished goods from Xinjiang were likely produced with forced labor, and accordingly adjust their sourcing practices. The Better Cotton Initiative (BCI), a separate initiative from the FLA, also issued a statement in January 2020 but its statement indicated that it did not have “evidence of forced labour on farms within BCI programmes”[6] and continued its program in Xinjiang. Under pressure, three months later BCI convened a Task Force on Forced Labour and Decent Work to assess “the system’s effectiveness in identifying, preventing, mitigating, and remediating forced labour risks.”[7] In its Final Report and Recommendations, the BCI Task Force found:
In comparison to environmental issues such as soil health and pesticides, decent work (the umbrella under which issues of ‘forced labour’ would be identified) has received a comparatively lower degree of focus and investment across the BCI programme and Better Cotton Standard System (BCSS).[8]
In October 2020, BCI decided to end all of its activities in the region, yet its actions lagged that of other initiatives by nearly 10 months.[9]
 
→ Demonstrates: Legal risk, reputational risk, direct financial loss
[1] “Global Witness Leaves Kimberley Process, Calls for Diamond Trade to Be Held Accountable,” Global Witness, December 2, 2011, https://www.globalwitness.org/en/archive/global-witness-leaves-kimberley-process-calls-diamond-trade-be-held-accountable/.
[2] “Human Rights Watch Statement on the Kimberley Process,” Human Rights Watch, June 6, 2016, https://www.hrw.org/news/2016/06/06/human-rights-watch-statement-kimberley-process.
[3] “China: The Superpower of Seafood,” Outlaw Ocean Project, October 9, 2023, https://www.theoutlawocean.com/investigations/china-the-superpower-of-seafood/findings/.
[4] Neil Ramsden, “Aquaculture Stewardship Council to cease operations in China,” Undercurrent News, March 27, 2024, https://www.undercurrentnews.com/2024/03/27/aquaculture-stewardship-council-to-cease-operations-in-china/.
[5] “Forced labor risk in Xinjiang, China,” Fair Labor Association, Jan 9, 2020, https://www.fairlabor.org/forced-labor-risk-in-xinjiang-china/. The FLA issued a subsequent advisory in December 2020.
[6] Simon Glover, “BCI stays in Xinjiang despite labour fears,” Ecotextile News, January 23, 2020, https://www.ecotextile.com/2020012325572/materials-production-news/bci-to-stay-in-xinjiang-despite-forced-labour-fears.html.
[7] Better Cotton Initiative, BCI Task Force on Forced Labour and Decent Work: Final Report and Recommendations (October 2020), https://bettercotton.org/wp-content/uploads/2020/10/BCI-Task-Force-on-Forced-Labour-and-Decent-Work_Final-Report_Oct-20.pdf.
[8] Ibid.
[9] “China’s ‘Untenable Operating Environment’ for Business in Xinjiang,” Human Rights Watch, October 25, 2020, https://www.hrw.org/news/2020/10/25/chinas-untenable-operating-environment-business-xinjiang.
 As a first step, investors can look on the homepage of the website and in the code of conduct and standards documents of the initiative for an explicit reference to international human rights and labor standards. 
➔  According to ISEAL’s principles for credible sustainability schemes:
A credible sustainability system has a clear purpose to drive positive social, environmental, and economic impacts and to eliminate or remediate negative impacts. It defines and clearly communicates its scope, its specific sustainability objectives, and its strategies for achieving these objectives (its theory of change).[1]
Next, investors can check whether the initiative clearly indicates the topics within scope, and whether the salient issues related to that product or sector are covered. In their engagement with portfolio companies, investors can ask the company if it confirmed the scheme covered the company’s identified salient risks and whether the company itself has conducted its own saliency assessment [2].
[1] ISEAL Alliance, ISEAL Credibility Principles - Version 2 (June 2021), https://www.isealalliance.org/sites/default/files/resource/2021-06/ISEAL-Credibility-Principles-V2-2021_EN_ISEAL_June-21.pdf.
[2] The idea of “salient” human rights, which an entity must determine based on factors of scope, scale irremediability, and likelihood, was introduced by the Office of the High Commissioner for Human Rights in its Interpretative Guide to the UNGPs, United Nations Human Rights Office of the High Commissioner, The Corporate Responsibility to Respect Human Rights: An Interpretive Guide (2012), https://www.ohchr.org/sites/default/files/Documents/Issues/Business/RtRInterpretativeGuide.pdf.
Does the certification reference either  the UN Guiding Principles on Business and Human Rights (UNGPs) or the OECD Guidelines for Multinational Enterprises (MNE) on Responsible Business Conduct? 
❐  Yes 
❐  No
❐  Partially

Does the scheme indicate that it conducts a saliency assessment or requires member companies to conduct saliency assessments to determine and prioritize the most severe impacts associated with the sector, product (including raw material components), or high-risk location?
❐  Yes 
❐  No
❐  Partially
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