Why food companies need to step up on human rights in global supply chains

Why food companies need to step up on human rights in global supply chains

ShutterstockAdam Jan Figel
A little Ugandan boy holding a hoe.

One needn’t look far to see the risks companies run by failing to fully attend to human rights risks in their supply chains. The world’s largest meat company, JBS, lost access to key buyers after it was investigated for using forced labor practices. WH Group, owner of Smithfield Foods, ranked in the bottom of a new benchmarking of major food and beverage companies on forced labor. Monster Beverage also received a failing score and is facing continued shareholder pressure as a result.

The lesson from these examples is that global food and beverage companies, with their vast and complex supply chains, need to dive head-first into discovering, disclosing and remedying human rights abuses. With millions of people still working in forced-labor conditions globally, food companies need to verify they are not part of the problem.

Beyond merely issuing human rights policies, companies also need to establish effective mechanisms to monitor their extended supply chains and hear directly from workers to help end forced labor, mitigate human rights risks and ensure equitable workplaces for all. Similarly, investors need to be aware of the various financial risks associated with lax human rights due diligence.

A new report, Engage the Chain: Investor Primer on Grievance Mechanisms, released this month by Ceres, arms investors with the business case for more transparent communication channels between food companies and workers in their supply chain. It also outlines how companies can strengthen human rights compliance systems in high-risk commodity supply chains.

Costly litigation, negative publicity and adverse market impacts are just a few material risks that food companies face by failing to identify and address human rights issues across the value chain, from their direct operations all the way through to the local farms and communities where their products are grown.

International pressure has been steadily building to eliminate forced labor and exploitative working conditions in the food and agriculture sector, which employs 1.3 billion people worldwide. Organizations such as the Interfaith Center for Corporate Responsibility have led investor action and awareness on these issues for decades, pushing companies to make stronger commitments and create more comprehensive management systems. Still, the International Labor Organization (PDF) estimates that 2.2 million people worked in forced labor situations globally in 2016 in agriculture, forestry and fisheries.

Shareholders speak

Investors are placing ever-growing pressure on the sector to improve. This year, investors filed more than two dozen shareholder resolutions with food companies on human rights, including with McDonald’s, Hershey and Dean Foods. Investors are also pushing to strengthen forest and human rights protections in palm oil and beef supply chains. As part of these efforts, 90 investors recently signed a letter calling on the sustainable palm oil certification group, RSPO, to adopt stronger standards to protect palm oil plantation workers and prevent deforestation.

According to Turning Point, the most recent Ceres assessment of corporate progress on critical sustainability issues, more than three-quarters of the 21 food companies assessed have formal human rights policies, compared to less than half in Ceres’ 2014 assessment. However, most of the companies still lack comprehensive management systems to ensure those policies are being implemented.

A key component of a fully integrated management system is effective grievance mechanisms that all individuals, workers, communities and civil society groups in a supply chain can use to report abuses and remedy issues without fear of retaliation. By putting these mechanisms in place, companies can identify negative human right risks and communicate with workers to remedy them in an efficient, proactive manner.

Companies that fail to integrate grievance mechanisms into their compliance systems create serious reputational and litigation risks if human rights abuses become public knowledge or are mishandled. Ensuring that workers are educated on their rights and know how to report abuses through unbiased, usable channels protects companies and their license to operate in communities, while also amplifying the worker voice.

Wilmar International, a major palm oil plantation company in Asia, has firsthand experience on the risks of not proactively managing human rights risks. After a number of targeted campaigns of its labor rights and land practices a half-dozen years ago, the company faced significant litigation, reputational and market costs. Since then, Wilmar has made improvements, particularly in establishing a comprehensive grievance program including disclosure of progress on addressing complaints. This covers all suspected environmental and human rights-related breaches and concerns in its direct operations and its supply chain.

Despite positive action by leading companies and ongoing pressure from investors, there is more room for improvement to ensure our capital markets support fairer, safer and more equitable workplaces. With the expectations of investors and civil society increasing, the time has come for all food companies to shine a light on and address human rights abuses in global supply chains.