Companies reporting on children's rights are also more involved in human rights violations

Are companies, which score high on the benchmark, more or less likely to be involved in human rights violations?

The Corporate Sector and Children’s Rights Benchmark assesses how the largest companies in the world are reporting their impact on, and efforts to improve, children’s lives across more than 20 indicators.  It covers a wide range of themes such as child labour, family-friendly policies, products and services as well as environmental and community impact. The benchmark only assesses public information provided by the companies themselves. [1]

We wanted to understand whether companies that receive a high score in the benchmark, and thus are more engaged in children’s rights issues than their peers, were more, or less, involved in human rights violations than those who received a lower score. The underlying question was that if a company reports well on children’s rights, does that also mean the they are also less involved in violations?

We looked at general human rights controversies as well as children’s rights controversies specifically and the correlation analysis showed that there is, in fact, a relationship between a company’s score in the benchmark study, and registered controversies by third parties – see About: Sustainalytics Controversies Research. For more information about the analysis please see the Methodological Note.

The analysis was made on four company performance groups, based on average score in the benchmark: Beginners (score 0-2.5); Improvers (score 2.6-5.0); Achievers (score 5.1-7.5) and; Leaders (score 7.6-10). Scores are out of a possible 10. A company’s benchmark result was then analysed against Sustainalytics Controversies Research.[2]

The results show that companies with a higher average score, i.e. Leaders and Achievers:

  • to a higher degree are involved in controversies overall (Graph 1, see below);
  • represent a higher share of ‘significant’ to ‘severe’ impact controversies (Graph 2, see below);
  • are also, to a higher degree, involved in controversies that relate specifically to children (Graph 3, see below)

 

[1] For more information about the benchmark methodology, which is based on the Children’s Rights and Business Principles, please refer to the full methodology document.

[2] Copyright © 2020 Sustainalytics. All rights reserved.

This section contains information developed by Sustainalytics. Such information and data are proprietary of Sustainalytics and/or its third parties suppliers (Third Party Data) and are provided for informational purposes only. They do not constitute an endorsement of any product or project, nor an investment advice and are not warranted to be complete, timely, accurate or suitable for a particular purpose. Their use is subject to conditions available at https://www.sustainalytics.com/legal-disclaimers

Graph 1: Global Leaders and Achievers are to a higher degree involved in human rights controversies

Graph 1: Southeast Asian Leaders and Achievers are to a higher degree involved in human rights controversies

Graph 2: Global Leaders & Achievers are to a higher degree involved in severe controversies[1]

[1] N.B. that companies with no active controversy rating are not included in these graphs: 88 companies from the global study, and 76 from the Southeast Asia study.

Graph 2: Southeast Asian Leaders & Achievers are to a higher degree involved in severe controversies[1]

[1] N.B. that companies with no active controversy rating are not included in these graphs: 88 companies from the global study, and 76 from the Southeast Asia study.

Graph 3: Global Leaders & Achievers are to a higher degree involved in controversies relating to children

Total number of controversies involving children: 30

Graph 3: Southeast Asian Leaders & Achievers are to a higher degree involved in controversies relating to children

Total number of controversies involving children: 8

Category definitions

Companies in Food, Beverage & Personal Care Sector and Companies headquartered in Europe more likely to be involved in children’s rights controversies

7 out of 9 sectors in the global benchmark have registered children’s rights controversies.[1] [2] The majority of these involve child labour, but incidents around product safety/responsibility also occur. The distribution of these controversies among industries show a majority within the Food, Beverage & Personal Care sector. It is worth noting that this sector includes agricultural products where child labour is a known issue.[3]

When it comes to geographical distribution, companies headquartered in Europe represent the highest share of controversies, with North America and Asia Pacific as runner-ups. Furthermore, Europe with 37% stands out as being overrepresented in relation to its relative size in the benchmark study which is only 23%. (The total number of controversies relating to children’s rights is 30.)

The majority of the European companies with registered children’s rights controversies are in industries that directly service consumers such as apparel, and food producers. These are also industries that are more often in the media spotligt than other industries, especially on the issue of child labour in for example cotton, cocoa, palm oil and manufacturing.

One possible explanation for the overrepresentation by both European and Food, Beverage & Personal Care companies could be a mixture of exposure to a high impact issue such as child labour through their supply chains and, media and NGOs focusing their reporting on issues and countries where there is already a public debate and scrutiny.

 

[1] Please note that in 2020, there was a change in industry/sector classification. Here, the 2019 industries have been translated to the 2020 sectors.

[2] Travel & Leisure and Oil, Gas & Utilities companies have no registered children’s rights controversies in the last three years.

[3] International Labour Office (ILO), Global estimates of child labour: Results and trends, 2012-2016, Geneva, 2017

Graph 4a: Global study – Food, Beverage & Personal Care and Europe with largest share of registered children’s rights’ controversies

Graph 4b: Southeast Asia study – Food, Beverage & Personal Care with largest share of registered severe human rights controversies

Reporting on children’s rights driven by external pressure?

The findings presented here could, at first, seem counterintuitive: companies that report on being engaged in children’s rights in different ways, should be less involved in controversies around issues such as these, right? Not necessarily so, especially as the benchmark captures the companies’ own reporting on children’s rights, rather than their actual impact – which is beyond the scope of a benchmark to assess.

One possible explanation for this correlation could be that the benchmark score, i.e. the degree of reporting on an issue, is an effect of external pressure. Many of the registered controversies go back several years (see About Sustainalytics Controversies Research above). The lag between the reported controversy and the collection of information for the benchmark, points to that companies involved in controversies reported by media or NGOs, themselves address these issues in subsequent reporting as part of a strategy to show that they are working on it and improving.

In other words, when companies are forced by external pressure such as media attention, they give more consideration to issues that are the focus of this debate, and highlight their remediation efforts in their public reporting.

The benchmark is not able to assess whether the increased reporting it captures is a reflection of an improvement in how the company addresses the issue, or if it – in the worst-case scenario – is simply whitewashing without a behavioural change behind it. However, from interviews with companies that have high benchmark scores, we know that they generally act first and then report, rather than the other way around. This can be interpreted as a precaution: if you’re already under scrutiny, trying to gloss it over without addressing the actual issue could result in for example an even bigger media scandal.

The hypothesis is also supported by previous Global Child Forum research which shows that companies that have been identified as leading when it comes to how they have implemented a children’s rights perspective in their operations, have been (at least partly) pushed towards this by being involved in children’s rights abuse scandals exposed by the media and/or experiencing community pressure around especially child labour.[1]

 

[1] See for example,

About: Sustainalytics Controversies Research

Sustainalytics Controversies Research identifies companies involved in incidents and events that may pose a business or reputation risk due to the potential impact on stakeholders, the environment or the company’s operations, based on the most up-to-date information from a wide range of reliable international and local news and NGO sources.

The categorization of controversy events is based on three factors: level of impact; level of risk posed to the company; robustness of company response. Sustainalytics collects this information on an ongoing basis, screening 60,000 media and NGO sources as well as  analyzing company disclosures, publicly available information and by evaluating feedback on action taken from companies themselves.

Once a controversy has been registered, it remains in the Sustainalytics database for three years, and if at that point the issue is deemed to have been resolved, the controversy is deleted from the records (otherwise it stays until considered resolved).

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