Opinion | The human rights benchmark needs to be modified

 (Photo: Reuters)
(Photo: Reuters)

The intent of CHRB’s rankings’ list is excellent, but it’s hollowed by naïveté

This is about perception management in the domain of business and human rights.

Vale SA, a Brazilian transnational metals and mining giant, is among the world’s largest producers of iron ore and nickel. You may have heard of the 25 January disaster. One of Vale’s iron ore tailings—mining waste—dams collapsed near its Córrego do Feijão mine operations in the state of Minas Gerais, north of Rio de Janeiro. More than 80 people died. Many are missing. The countryside—land, water sources, forests—is devastated.

Vale just got kicked off the 2018 list prepared by Corporate Human Rights Benchmark (CHRB), a notable cross-industry effort. Vale had scored well, leaping by 30% to arrive at the 60-70% band, near the top end of a grading of 101 of the largest publicly-traded companies in the world on various human rights indicators. At present, the list covers agricultural products, extractives and apparels, three sectors that count some of the worst human rights offenders. (Coal India Ltd is in the 20-30% band and Oil and Natural Gas Corp. Ltd in the 0-10% band. More on that shortly).

Governance and policy are given a score out of 10, respect and due diligence have a maximum score of 25, remedy and grievance mechanisms are at 15, performance: practices is at 20, as is performance: responses, and transparency maxes out at 10.

As to Vale: “Most of the improvements in scores were related to high level commitments/systems and better disclosure," noted an explanation from CHRB dated 28 January, “but they were also backed up in part by conversations around a positive change in attitude within the company..."

That’s the problem with CHRB’s list. The intent is excellent, but it’s hollowed by naïveté. While unveiling its 2017 ranking, which graded 98 companies, CHRB urged the list’s laggards to “act decisively" so that they could upgrade themselves with regard to “the moral imperative, business case, and commercial viability of taking action on human rights". CHRB is also fond of phrases such as “race to the top".

“Moral imperative" is twaddle. Phrases such as “race to the top" for companies to remain competitive in the rankings are also disconcerting, especially as it is no secret that races to the top of feel-good rankings are helped along by public relations.

Glib corporate commitment and outreach has saved more than one company. However, it could undermine CHRB’s rankings.

Take Vale. In November 2015, a tailings dam of Samarco Mineração SA in Minas Gerais state collapsed. It killed 19 people, devastated the village of Bento Rodrigues, polluted a river, and displaced several hundred people. Samarco is a joint venture of Vale and BHP Billiton Ltd (now BHP). In June 2018, Reuters reported that “Samarco and parent companies Vale SA and BHP Billiton Ltd have signed a deal with Brazilian authorities that settles a 20 billion reais ($5.30 billion) lawsuit" over the 2015 disaster.

BHP scored in the 60-69% band in CHRB’s 2017 list. In the 2018 list, it’s in the 70-80% band along with another extractives major with an iffy business and human rights application, Rio Tinto Plc.

CHRB’s removal of Vale is hardly going to make amends, which is a shame. Early plans had called for extending its list to 500 companies by mid-2018 and to include finance, engineering, pharmaceuticals, and the information and communication technology sectors. That’s now history. Hiccups with the 2018 list are only going to delay things—perhaps, alas, even jeopardize the project.

The project brings together the Institute for Human Rights and Business, and the Business and Human Rights Resource Centre. These UK-based organizations are joined by Calvert Investments Inc., Aviva Investors, VBDO (The Dutch Association of Investors for Sustainable Development) and Eiris Foundation. The last two focus on advising responsible investment. Stockholm-based Nordea Wealth Management is part of the project. Representatives from these organizations form CHRB’s steering committee, with Steve Waygood, Aviva’s chief responsible investment officer—there’s a mouthful of politically-correct designation—chairing.

There will now have to be much tweaking of methodology and mind.

This column focuses on conflict situations and the convergence of businesses and human rights and runs on Thursdays.

Read Sudeep Chakravarti’s earlier columns at livemint.com/rootcause

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