New Investor Guidance Spotlights Importance of Commercial Contracts to Support Improved Human/Worker Rights Performance
CONTACT:
Susana McDermott
Director of Communications
Interfaith Center on Corporate Responsibility (ICCR)
201-417-9060 (mobile)
smcdermott@iccr.org
NEW YORK, NY, TUESDAY, APRIL 23, 2024 - The Investor Guidance on Responsible Contracting released today by the Interfaith Center on Corporate Responsibility (ICCR) and the Responsible Contracting Project (RCP) explains the critical role played by commercial contracts in supporting more robust human rights and environmental due diligence (HREDD) processes.
More than ever, investors are actively seeking to understand and mitigate the risks related to a company’s human rights and environmental (HRE) performance to make sound investment and divestment decisions. This new guidance provides investors with multiple tools to engage their portfolio companies on the principles of responsible contracting to improve both HRE and financial performance and to achieve better alignment with evolving legal requirements.
This Investor Guidance recommends that investors engage with their portfolio companies to ensure that they are using their supply contracts to support effective HREDD processes. Shifting the entire responsibility for upholding HRE standards down the supply chain is not effective for managing human rights risks. In fact, risk-shifting can actually aggravate human rights risks.
For contracts to support the HREDD process, companies should move away from the traditional one-sided, strict compliance model of contracting towards a shared responsibility model that is due diligence-aligned, dynamic, responsive, cooperation-based, and supported by responsible purchasing practices.
“Faith- and values-based investors, including ICCR members, see a commitment to positive HRE performance as a key metric in their investment decisions,” said Chavi Keeney Nana, Director of Equitable Global Supply Chains at ICCR. “The shared responsibility approach at the heart of responsible contracting is the best way to ensure that companies are investing across their supply chains in policies and, more importantly, practices that safeguard the lives and livelihoods of workers and the health of the environment. We hope this Guidance will serve as a resource for investors to push companies to draft into contractual language the commitments they make in their sustainability reports."
Said Sarah Dadush, Director of the Responsible Contracting Project, “Commercial contracts are frequently overlooked as tools for effecting change in global supply chains, and yet they are powerful legal instruments that companies can use to implement human rights and environmental policies and standards across their supply chains, even in the absence of national law. But not all contracts are created equal. Some foster commercial relationships that are extractive, deceptive, and unreliable, while others foster collaboration, trust, transparency, and resilience. This Guidance equips investors to steer their portfolio companies in the direction of the latter.”
Included in this Investor Guidance are conceptual and practical tools for carrying out engagements related to contracting such as questions for investors to ask their portfolio companies concerning their contracts, template corporate engagement letters and shareholder resolutions, and responses to anticipated pushback investors may receive from companies during corporate dialogues.
The guidance draws on RCP’s core principles of responsible contracting and the RCP Toolkit–which outlines a shared responsibility model between buyers and suppliers for upholding HREDD processes–as well as decades of engagements by ICCR and its members to push companies to develop equitable global supply chains that do not rely on forced labor and to remediate the harms caused by forced labor when it occurs. The responsible contracting principles discussed in the Guidance will help companies align their contracts with the United Nations Guiding Principles for Business and Human Rights (UNGPs), the Organisation for Economic Cooperation and Development’s (OECD) Guidelines for Multinational Enterprises on Responsible Business Conduct, and the Due Diligence Guidance for Responsible Business Conduct, and other sector-specific OECD guidance to serve as effective components of HREDD processes and a robust risk-management regime.
About the Interfaith Center on Corporate Responsibility (ICCR)
The Interfaith Center on Corporate Responsibility (ICCR) is a broad coalition of more than 300 institutional investors collectively representing over $4 trillion in invested capital. ICCR members, a cross-section of faith-based investors, asset managers, pension funds, foundations, and other long-term institutional investors, have over 50 years of experience engaging with companies on environmental, social, and governance (“ESG”) issues that are critical to long-term value creation. ICCR members engage hundreds of corporations annually to foster greater corporate accountability. Visit our website www.iccr.org and follow us on Twitter/X (@iccronline), LinkedIn, and Facebook.
About the Responsible Contracting Project
The Responsible Contracting Project (RCP) works to improve human rights in global supply chains by developing and disseminating practical tools to implement human rights and environmental due diligence (HREDD) in commercial contracts. Our international team of legal and business and human rights experts collaborates with companies, investors, and public and private standard setters to achieve uptake and implementation of the core RCP Principles, which operationalize the shared responsibility approach to HREDD enshrined in the UN Guiding Principles on Business and Human Rights, the OECD Guidelines for Multinational Enterprises, and the OECD Due Diligence Guidance for Responsible Business Conduct. Visit our website.
