Our Approach
|
The EU Corporate Sustainability Due Diligence Directive (CSDDD) positions multi-stakeholder and industry sustainability initiatives as an element of a company’s due diligence plan and a means of demonstrating compliance with the law. Click here to learn more about the relevance of MSIs to the CSDDD. In January 2022, Rights CoLab - serving as a knowledge partner to the Value Reporting Foundation,[1] - convened its Expert Group of labor rights specialists to recommend how certifications should be addressed within the SASB Standards. Certifications were a key issue for the SASB Standards Board as it updated the raw materials sourcing provision of the Apparel, Accessories & Footwear industry standard.[2] Eventually, the Standards Board approved an indicator that asks companies to report on:
The Expert Group generally agreed with the Standards Board’s decision not to define a set of principles – doing so would be insufficient since the strength of a certification cannot be assessed without also understanding how a given certification operates in practice. It also urged caution in including a list of approved certifications in the standard, as the original version of this and other SASB industry standards had done. The Expert Group reasoned that investors would benefit from additional guidance to be able to judge the information that companies disclose about certifications against the indicator and to support their corporate engagement on this topic.
The idea for this tool was born out of this conversation. To build out an initial concept, Expert Group members brainstormed red flags and shared the resulting matrix with SASB research staff as a potential starting point for guidance that could support the new SASB indicators. [1] The Value Reporting Foundation housed the standards until the organization’s consolidation into the newly formed International Sustainability Standards Board (ISSB) of the IFRS Foundation in 2022. [2] Beginning in January 2020, Rights CoLab worked as a knowledge partner to the SASB research team, assembling a group of labor rights experts – the Expert Group – to support recommendations. This later developed into an MoU (memorandum of understanding) with the Value Reporting Foundation. For more on the work, see “Rights CoLab and Value Reporting Foundation Formalize Partnership by Signing MOU,” Rights CoLab, September 27, 2021, https://rightscolab.org/rights-colab-and-sasb-formalize-partnership-by-signing-mou/. [3] For the full standard, see Sustainability Accounting Standards Board, Apparel, Accessories & Footwear: Sustainability Accounting Standard (2023), 6 and 26, https://www.ifrs.org/issued-standards/sasb-standards/. Building on an initial concept developed with the Expert Group that Rights CoLab convened to support the Value Reporting Foundation's human capital work, we conducted a comprehensive literature review in early 2023 - spanning NGO reports, scholarly articles, and judicial and non-judicial complaints involving certifications - and created the tool prototype. To test it, we co-led a workshop on Equitable Global Supply Chains Fall 2023 ICCR Conference, where we invited investor and civil society participants to take part in a role play using the Red Flags. Based on their feedback, we then revised the prototype to reflect these comments.
From December 2023 to January 2024, we held three additional investor roundtables to gather input on the tool’s use case and ways to enhance its usability for diverse investors: two online small group sessions with a total of 22 European and North American investors, and a hybrid roundtable in Melbourne, hosted by Investors Against Slavery and Trafficking in the Asia Pacific (IAST APAC) with 20 investor members. Throughout the process, we drew from the deep experience of leading scholars and human rights advocates, who generously gave their time to review this tool. We conducted an expert review of the draft, commissioning five human rights in supply chain experts to examine the content and provide comments. As previously mentioned, we also incorporated the documentation of certification risks and opportunities from published articles, reports, and judicial and non-judicial complaints. We offer these key resources as a supplement to the tool (see Further Reading). We also invited the initiatives named in the report to review the tool and to inform us of any updates to their standards or processes that demonstrate their continuous improvement. We took these responses into account and revised the text accordingly. [1] In April 2024, Rights CoLab met with the ISEAL Alliance, a non-profit organization that promotes best practices in social and environmental auditing to “accelerate positive change by improving the impacts of ambitious sustainability systems and their partners.”[2] With members in over one hundred countries, in various sectors, ISEAL is well placed to influence and convene market players to disseminate and define what good practices look like. Throughout this tool, we reference ISEAL’s Credibility Principles, the Assurance Code of Good Practices, and the Impacts Code of Good Practices. During the meeting with ISEAL we discussed how to ensure this tool aligns with ISEAL standards. We also sought alignment with the International Organization for Standardization (ISO), a non-governmental international organization, which convenes experts to standardize various business processes. Particularly, ISO 17053, “Conformity Assessment – Requirements for Bodies Certifying Products, Processes, and Services,” which focuses on sustainability certifications. This tool contains references to key elements of this standard as it relates to the Red Flags.[3] [1] We were unsuccessful in reaching the following initiatives: amfori's Business Social Compliance Initiative, C.A.F.E Practices, Indonesia Sustainable Palm Oil (ISPO), Kimberley Process, and RINA. All other schemes reviewed the report and replied with comments and information about updates to their standards. [2] Our Mission,” ISEAL Alliance, accessed June 7, 2024, https://www.isealalliance.org/about-iseal/our-mission. [3] Since ISO standards are not publicly available, we focused on the key elements of ISO 17065 that are accessible to the public. The case examples in this tool are drawn from publicly available sources. Those in the “Why Investors Should Care” section includes claims implicating a social sustainability initiative in lawsuits or non-judicial grievance mechanisms, such as OECD National Contact Point complaints, as well as widely publicized incidents - reported by NGOs and the media - that occurred despite certification or membership in a sustainability initiative and have imposed costs for companies and investors.
Examples are drawn from certifications schemes as well as other third-party auditing, including industry specific or multi-stakeholder initiatives, which have a standard of conduct required for membership but do not offer certification. A common feature of these initiatives is corporate members' attestation of their human rights and environmental commitments. We cite such initiatives when we think they help to illustrate a Red Flag or a good practice that prevents it. The examples do not constitute a judgement on the scheme or initiative. A hallmark of a credible initiative is a commitment to continuous learning and improvement. If the tool highlights a scheme's weakness as a red flag and the scheme later addresses it - fully or partially - by revising its standards, guidance or procedures, we make note of that progress. Throughout this tool, binding agreements are highlighted as a way to make initiatives more effective – they provide legal accountability, robust grievance mechanisms, and transparent reporting that led to measurable successes in lowering social and environmental risks. To learn more about binding agreements, the Committee on Workers Capital and the Labour Rights Investor Network published comprehensive guidance for investors on this model: Investor Guidance and Expectations: Supply Chain Due Diligence and Binding Agreements. When we put out a tool, while we think we got a lot right, we need investors to use the tool to confirm it. Following the release of this tool as Certifications Red Flags (beta) in July 2024, we hosted interactive learning and feedback session to give investors a chance to test drive it. One consistent request was to demonstrate how the tool should be applied; in response we created a checklist of 20 questions that span the flags. To test the checklist, we invited the initiatives named in the tool to fill out the checklist and verified their responses. We provide those responses in this version as a snapshot of the initiatives at a particular point in time. This process of engagement with the social sustainability initiatives helped to further refine both the checklist and the tool. Because the tool covers a wide range of initiatives we made the decision to change the name of the tool to Red Flags in Sustainability Initiatives. Certifications Red Flags is authored by Joanne Bauer and Silvana Zapata-Ramirez, with contributions from Shauna Curphey. Manuela Corredor Vásquez and Julia Falkow contributed to the research.
Certifications Red Flags is part of the Investor HREDD (Human Rights and Environmental Due Diligence) Precision Tools Project, a collaborative initiative led by Rights CoLab in partnership with The Committee on Workers Capital, EIRIS Foundation, ESG Inteligente, Interfaith Center on Corporate Responsibility/Investor Alliance for Human Rights, Labor Rights Investor Network, Principles for Responsible Investments, Responsible Contracting Project, and Workforce Disclosure Initiative. Special thanks to partners Caroline Boden, Chavi Keeney Nana, Melina Fachin, Jana Hoess, Polly Marsh, Rebecca DeWinter-Schmitt, Rémi Fernandez, Rita Sebestyén, and Sarah Dadush for their input. This tool also greatly benefitted from the expertise of Anna Canning (Worker-Driven Social Responsibility Network), Mark Wielga (NomoGaia), Olivia Windham Stewart (Independent Consultant), and Shawn MacDonald (Verité) who reviewed and provided detailed comments on the draft. The Investor HREDD Precision Tools Project was made possible through the generous support of the Generation Foundation, Global Commons Alliance, a sponsored project of Rockefeller Philanthropy Advisors, and Humanity United.
|
