Active ownership tackles human rights
There is increasing recognition of the role that businesses can and should play to respect human rights.
Why do we engage?
All companies have the potential to impinge on the rights that are inherent to us as human beings.1 There is increasing recognition of the role that businesses can and should play to respect human rights. Businesses involved in human rights controversies could face higher operational and financial risks and could suffer damages to their reputation. Respect for human rights is also an important foundation in building resilient supply chains and forging business stability.
The guiding principles
The global standard for preventing and addressing the risk of human rights abuses is the UN Guiding Principles on Business and Human Rights, unanimously endorsed by the UN Human Rights Council in 2011.2 The Guiding Principles provide operational clarity for the two human rights principles that are championed by the UN Global Compact and help businesses adhere to the OECD’s Guidelines for Multinational Enterprises, as well as national and sub-national laws and regulations related to human rights.
What are a company’s responsibilities?
The Guiding Principles state that companies should respect human rights. This means that they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved. Moreover, the principles are increasingly reflected in national legislation, with financial penalties for noncompliance, forcing companies to establish and disclose processes to eliminate modern slavery from their businesses and supply chains. This responsibility applies across operations and to all business relationships, including those throughout a value chain. We recognize that there are regional differences in human rights practices, which we consider in our engagement and expectations of companies.
Our engagement aims to work with companies to implement the Guiding Principles. This means that businesses should formally commit to respect human rights, carry out effective human rights due diligence and provide access to effective remedy for any victims of human rights abuses. Schroders’ Group Human Rights Statement and Slavery and Human Trafficking Statement set out Schroders’ position for its entities and employees in relation to the respect of human rights and the remedy of any infringements relating to its employees, supply chain, clients and investments.
Where does Schroders focus its engagements?
There are also specific groups on which we focus particular attention for our engagement:
- Workers: It is estimated that on any given day 25 million people are in forced labour,3 including 16 million in the private sector.4 We engage to encourage companies to adhere to relevant global laws and conduct the necessary supply chain human rights risk assessments and effective due diligence to protect and uphold the rights of workers in supply chains. This also includes reporting on workforce metrics across supply chains.5
- Communities: The UN estimates that there are over 370 million indigenous peoples living around the world and in 2017 four people a week were killed worldwide protecting their land from business exploitation.6 We engage to encourage companies to uphold and respect internationally recognized human rights, including land and resource rights, and use the mechanism of free, prior and informed consent (FPIC) to protect the rights of those in the communities in which companies operate.
- Customers and consumers: Companies have an important role to play in driving human rights and sustainable development through access to basic products and services, while also ensuring that products and services do not cause harm and adversely affect human rights. We expect that companies will respect and uphold the rights of consumers and users of their products and services.
Deep dive: how do we engage?
In blue are the six priority human rights actions for our engagement with large and medium companies.7 Where appropriate, we have aligned our engagement expectations with those of the collaborative initiatives we are part of, including the Investor Alliance for Human Rights and the Find It, Fix It, Prevent It campaign.
Find out more about Active Ownership.
1The responsibility of business enterprises to respect human rights refers to internationally recognised human rights – understood, at a minimum, as those expressed in the International Bill of Human Rights and the principles concerning fundamental rights set out in the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work.
2Other UN instruments elaborate further on the rights of indigenous peoples, women, national or ethnic, religious and linguistic minorities, children, persons with disabilities and migrant workers and their families.
5Workers in the direct operations of a company are captured within our human capital management theme.
7There is no standard definition for large and medium companies and significant regional variation in what is considered large, medium or small. We recognize that smaller companies face greater resource and financial constraints than larger companies and therefore may need more time to meet our desired outcomes. When assessing company progress against our expectations, we generally compare the progress of similar-sized peers based in the same region.
The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.