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RED FLAG 13
Governance & Accountability
No Process to Suspend or Withhold Membership or Certification until Corrective Action Plans are Adopted and Implemented
Reputational risk
Legal risk
What this means
Why investors should care
What to look for
ISEAL’s Credibility Principle on “Reliability” states that a successful sustainability system “ensures assessments of users’ sustainability performance are competent and accurate, and that these assessments support any claims it allows users to make.”1 Reliable MSIs have in place mechanisms to hold their members accountable when significant deviations from the standard are identified and they have a track record of following the procedures they establish. In such cases of deviations, the initiative should suspend members’ certification, or withhold granting it, and encourage or work with companies to adopt and fully implement corrective action plans as a condition for regaining or being granted membership or certification.
In cases where operations have a history of violations or unremediated harms to workers or communities, initiatives should require legacy issues to be addressed as a condition for membership or certification.
Footnotes
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.
In 1995, human rights organization Transformasi untuk Keadilan Indonesia (TuK Indonesia), accused palm company PT Mitra Austral Sejahtera (PT MAS) of gaining access to land that belonged to the Dayak Indigenous Peoples to cultivate palms without FPIC. Following years of Dayak efforts to regain their cultivation rights, in 2007, Sime Darby, a Malaysian trading company and RSPO member, acquired MAS. In 2018, TuK Indonesia filed a complaint against RSPO with the Swiss National Contact Point citing RSPO’s failure to address the community’s complaints despite meeting with the company “over 25 times.”1 An analysis of the complaint by ECCHR and its partners states that “studies have shown that instances of non-compliance with RSPO requirements bore practically no consequences, and that complaint procedures were inefficient and certification bodies were not suspended.”2 In 2017, RSPO updated its Complaints and Appeals Procedures.
In another case, the Rainforest Action Network (RAN), Organisasi Penguatan dan Pengembangan Usaha-usaha Kerakyatan (Oppuk), and the International Labor Rights Forum (ILRF) found multiple labor rights violations within London Sumatra Indonesia Tbk (PT Lonsum), an RSPO-certified plantation in North Sumatra, Indonesia and a subsidiary of Indonesian food company, Indofood. The NGOs filed a complaint in 2016 against Indofood to RSPO. Over two years into the process when the dispute was still unresolved, the NGOs requested the RSPO panel to suspend Indofood’s certification “until transparent actions are taken to resolve the violations outlined herein.”3 Ultimately, two years after the complaint was lodged, in November 2018, the RSPO complaints panel decided “with immediate effect to suspend the certificate of Begerpang Palm Oil Mill and its supply bases. The lifting of the suspension of the certification is conditional on PT Lonsum fulfilling the Complaints Panel’s directive above on implementation of the corrective actions.”4
More recently, the Aluminum Stewardship Initiative (ASI)’s approach to auditing was criticized in a public letter for ignoring legacy harms at Compagnie des Bauxites de Guinée’s (CBG) mining operations at Sangarédi, Guinea, including economic displacement, destruction of agricultural land, and water pollution.5
→ Demonstrates: Reputational risk, legal risk
Footnotes
1 OECD Watch, TuK Indonesia vs. Roundtable on Sustainable Palm Oil (RSPO) (January 23, 2018), https://www.oecdwatch.org/complaint/tuk-indonesia-vs-roundtable-on-sustainable-palm-oil-rspo/.
2 Claudia Müller-Hoff, Human rights fitness of the auditing and certification industry? A cross-sectoral analysis of current challenges and possible responses (ECCHR, Brot für die Welt, and MISEREOR, 2021), 17, https://www.ecchr.eu/en/publication/human-rights-fitness-audits/.
3 RAN, OPPUK, and ILRF, email to the RSPO Complaints Panel Members, November 2, 2018, 2, https://www.ran.org/wp-content/uploads/2018/06/RAN__OPPUK___ILRF%27s_Complaint_Submission_to_RSPO.pdf.
4 “Complaint’s Panel’s Decision on PT PP London Sumatra Indonesia Tbk,” November 2, 2018, https://ap45.salesforce.com/sfc/p/#90000000YoJi/a/90000000PYaf/6mJ.T1HSMNHdkSdhiOT8z3ldAHk8eJ6fHGUeIpz9jB0.
5 Inclusive Development International, CECIDE, and ADREMGUI, Our Response to the Aluminum Stewardship Initiative’s Provisional Certification of Compagnie des Bauxites de Guinée (January 30, 2024), https://www.inclusivedevelopment.net/wp-content/uploads/2024/01/Response-to-ASI-CBG-Audit_Final_EN.docx.pdf.
Initiatives should require that participating companies and suppliers maintain effective systems to detect harms, such as robust grievance mechanisms, and to act on findings by remediating harms and preventing their reoccurrence. Initiatives differ on whether a supplier will be dropped when infractions are found, although the practice of “cutting and running” — immediately terminating a business relationship — is not generally considered good practice.1
Initiatives that are legally binding can better hold participating companies accountable when they fail to adhere to the standards. Investors can look to see if the initiative has a legally binding provision to ensure that when violations are found, companies will be required to remediate and prevent future violations.
➔ A key feature of the Fair Food Program is the presence of enforceable contracts with participating buyers (brand/retailers) who sign agreements committing to buy tomatoes only from compliant growers and to pay the Fair Food Premium that is passed through to workers. The Fair Food Program’s website highlights that “Participating Buyers are required to suspend purchases from growers who have failed to comply with its Code of Conduct.”2 Suspension is just the “starting point for a conversation” about improvements.3
➔ As part of the International Accord for Health and Safety in the Textile and Garment Industry, companies are expected to work with suppliers to bring it in compliance with the initiative’s standards so that workers at the supplier do not endure further harm through layoffs.
When initiatives are not legally binding, investors should ensure that they not only have processes in place to decertify members who do not meet their requirements, but that they follow those processes when necessary.
➔ In 2021, The Forest Stewardship Council (FSC) severed ties with Korindo Group, a conglomerate involved in the production of wood chips, paper, palm oil, and various other products, due to allegations of deforestation and human rights violations. Despite efforts to monitor and enforce compliance, the FSC terminated Korindo’s certification when progress and adherence to certification requirements fell short.
➔ The Initiative for Responsible Mining Assurance (IRMA) requires that at operations where FPIC was not obtained and where unremediated impacts are ongoing, the company must develop a mutually agreed remedy process before being awarded IRMA recognition, in the form of an Achievement Level.
Footnotes
1 See UN Guiding Principle 19 on the responsibility to remediate adverse impacts, https://www.ohchr.org/sites/default/files/documents/publications/guidingprinciplesbusinesshr_en.pdf.
2 “Fair Food Program: The Power of Prevention,” Fair Food Program, https://fairfoodprogram.org/.
3 Antonella Angelini and Shauna Curphey, “The Overlooked Advantages of the Independent Monitoring and Complaint Investigation System in the Worker-driven Social Responsibility Model in US Agriculture,” Business and Human Rights Journal 7, no. 3 (October 12, 2022): 497, https://doi.org/10.1017/bhj.2022.25.
Checklist for Red Flag 13
Does the scheme have a clearly defined process to hold members accountable when significant deviations from the standard are identified, including revoking certification compliance when appropriate?
Are there public complaints levied against the scheme for not following the procedures for suspending and withholding certification?
Ready to assess an initiative?
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