Since 1994, the United Nations General Assembly has observed International Day of the World’s Indigenous Peoples on August 9th. This year’s event is especially notable, as it marks the Tenth Anniversary of the adoption of the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP). The UNDRIP, “establishes a universal framework of minimum standards for the survival, dignity, well-being and rights of the world’s indigenous peoples."1 The enactment of the UNDRIP has been a critical step towards the recognition and legitimization of indigenous rights within global communities.
While the Declaration has served indigenous rights activists as a pillar of substantiation and legitimacy, progress has been slow. The UN has acknowledged that, “despite the achievements, there continues to be a gap between the formal recognition of indigenous peoples and the implementation of policies on the ground.”2
Today there are estimated to be 370 million indigenous persons worldwide, speaking roughly 7,000 different languages and dialects.3 Indigenous communities continue to face a range of threats, including systemic marginalization, deforestation and land grabs, driven by urbanization, fossil fuel exploration and distribution on sacred lands, among others.
At Domini, our work is grounded in the promotion of universal human dignity and ecological sustainability, which are crucial to preserving indigenous cultures and ways of life. The Impact Investment Standards we developed and employ explicitly include indigenous peoples, noting that:
“Confrontations between large faceless corporations and often small and relatively defenseless communities can be avoided if companies show initial and ongoing sensitivities to the cultures of those around them. The value of the diversity that these groups bring is incalculable and its loss is irretrievable. Responsible corporations can help preserve unique cultural riches in our world that are all too easily destroyed in a rush to short-term profit.
We evaluate such controversies with care both because we respect the rights of indigenous peoples to preserve their cultures and because the effect of confrontations between companies and indigenous peoples can be harmful to corporate reputations.”
We have also raised these issues with corporations. Most recently, in 2017, Domini signed the Investor Statement on Banks Financing the Dakota Access Pipeline, in support of the Standing Rock Sioux Tribe. The Dakota Access Pipeline protests were a significant event for indigenous peoples worldwide, highlighting the discrepancies between having autonomous rights on paper, and actually being able to exercise them. One key issue at the center of this controversy is the willingness, and ability, of banks to implement the international standard of free, prior and informed consent from affected communities.
The importance of recognizing indigenous rights extends far beyond a single day on the calendar. Our commitment to the pursuit of universal human dignity demands that we pay attention to the concerns of indigenous communities every day.
Visit http://www.un.org/en/events/indigenousday/ to learn more about the UN International Day of the World’s Indigenous Peoples.
1. United Nations Human Rights Office of the High Commissioner. Declaration on the rights of indigenous peoples. http://www.ohchr.org/EN/Issues/IPeoples/Pages/Declaration.aspx
2. United Nations. International Day of the World’s Indigenous Peoples 9 August. http://www.un.org/en/events/indigenousday/
The modern fight for LGBT civil rights in the United States began in earnest 48 years ago this week, just a few blocks away from Domini’s office in downtown Manhattan, where the Stonewall uprising sparked an enduring flame that burns more brightly today than ever. The brave individuals at Stonewall, who decided they were no longer going to silently endure discrimination and intimidation, inspired generations of LGBT people and allies to come together as a community to defend their dignity and fight for equality. In honor of those events and the movement they catalyzed, June is widely recognized and celebrated as LGBT Pride Month.
In the nearly fifty years since Stonewall—and over the past decade especially—the U.S. has come a very long way in advancing LGBT rights, including expanding federal hate crime protections to include sexual orientation and gender identity, prohibiting discrimination in health care under the Affordable Care Act, repealing “Don’t Ask, Don’t Tell,” and legalizing same-sex marriage nationwide. Similar progress is being made around the world. Just last month, Taiwan’s top court passed a ruling that clears the way for it to become the first country in Asia to legalize same-sex marriage.
Despite these important victories, discrimination persists in many places, and much of the LGBT community still faces extreme violence and persecution. More than 70 countries still criminalize homosexuality, and in a number of those it can still be punishable by death. Every day, there are reports of widespread human rights violations. In the Russian republic of Chechnya, human rights groups are reporting that authorities have set up prisons where gay men are being detained, tortured, and executed in what is being called a “gay purge.” These atrocities remind us how much work we still have to do, but they also serve to strengthen our resolve to continue fighting for equality everywhere.
Last year, just days after the tragic Orlando nightclub shooting that targeted the LGBT community and claimed 49 lives, President Obama designated the site of the Stonewall riots the first national monument honoring the LGBT equality movement:
“I believe our national parks should reflect the full story of our country, the richness and diversity and uniquely American spirit that has always defined us. That we are stronger together. That out of many, we are one.”
Today, for the LGBT community and its allies in America and around the world, the Stonewall National Monument stands as a proud symbol of the progress that has been made, and as an inspiration to continue marching forward and opposing discrimination everywhere it exists. Domini has always strived to promote universal human dignity, and we are proud to count ourselves as an ally.
Read more about how companies and investors are helping to promote and defend LGBT civil rights: Defending Equality: Champions for LGBT Rights
For over sixty years Burma (Myanmar) was a military dictatorship, cut off from international engagement and suffering through the recurring violence and systematic abuses by the government force. 2011 and 2015 saw historic democratic elections that brought long-imprisoned democratic leader Aung San Suu Kyi to the Burmese parliament and a lifting of the long-standing U.S. government sanctions. Although this move towards democratization has helped to bring much needed foreign investment for growth in the country, Burma continues to struggle with serious challenges including:
- Persecution of ethnic and religious minorities such as Rohingya Muslim communities
- Weak rule of law, including a weak judicial system
- The continued imprisonment of political prisoners
- The potential financing of notorious human-rights violators
We believe that responsible investors can play an important role in Burma’s progress towards democracy and prosperity by shifting from a strategy of avoidance and divestment to one of careful scrutiny and engagement. Because of this, Domini has long urged any companies operating in Burma to conduct human rights risk assessment regarding their activities in Burma and report publicly of their efforts to prevent and mitigate any negative human rights impacts while enhancing positive impacts.
Domini has released an issue paper on Human Rights and Democratic Reform in Burma which outlines the factors we consider when evaluating the eligibility of companies for our portfolios that operate in Burma. We hope that it will help to illustrate how Domini addresses these key challenges, as well as provide guidance to other investors and corporations.
Originally Appeared in Domini Funds' 2016 Semi-Annual Report
It has been said many times that a company’s workforce is its most valuable asset. In our opinion, there is a positive and a negative aspect to that statement. Employees do indeed provide tremendous value to their employers, making substantial investments of time and energy, and even their health and safety. But employees are not simply “assets” on a balance sheet. When Starbucks announced a pay raise for its employees, Chairman and CEO Howard Schultz used the word “partners,” and said that "trust, after all, must be earned one human connection at a time.” “Partner” is much closer to the mark.
Whether you are the CEO of a retailer with thousands of employees that meet your consumers face to face, or of a business with no consumer-facing employees at all, all successful companies must take the welfare of their employees seriously.
In this essay, we provide brief accounts of how some companies are responding to certain key challenges in the very broad area of “employee relations,” including the gender pay gap, minimum wage reform and union relations.
Domini’s Impact Investment Standards are organized around the key stakeholder groups that corporations depend upon to operate and generate profits, with a focus on the key themes that we believe best capture the strength of each of these relationships. Our standards help to identify companies run by managers capable enough to operate profitably while taking into consideration multiple stakeholders and the environment.
Among these stakeholder groups, employees are perhaps the most critical. We believe that corporations that treat their employees well should, in the long run, attain high levels of employee loyalty, high levels of productivity, and low levels of turnover – all potentially substantial contributors to profitability.
We are therefore looking for companies that invest in the health and development of their employees, focusing on the following key themes:
• Fair and Just Compensation and Benefit Programs
• Commitments to Diversity in the Workplace
• Empowerment and Investments in Training
• Solidarity with Unionized Workforce
• Continuous Improvement in Health and Safety
The companies discussed below currently meet our standards for investment, unless otherwise noted. This essay touches on a handful of key employee relations issues. We do not address health and safety or treatment of workers in corporate supply chains, for example, two areas that are consistently important to our investment decision-making, nor do we address corporate programs to meet the needs of the disabled, such as Microsoft’s innovative efforts to employ individuals with autism, or companies like Eiffage, a French construction company, where employees own 28% of the firm’s shares. In this area, every company has a story to tell. We hope you find these interesting and informative.
Equal Pay for Equal Work
The tech industry has faced persistent criticism over a lack of diversity and, in particular, a lack of opportunities for women. According to a recent study by Hired Inc. of 3,000 employers and 15,000 applicants, there is a 7% salary gap between male and female software engineers at major corporations.
In 2016, in response to shareholder proposals from our colleagues at Arjuna Capital, Apple, Intel, Microsoft and Amazon revealed that they pay their male and female employees equally. Facebook and Alphabet Inc. (Google) also announced they pay equally, but have yet to release data. What wasn’t included in these disclosures was information on how often women are promoted or if there are biases that may prevent women from being hired or moved into senior roles.
Google began a study of its employee practices after it found that its male engineers were promoted at far higher rates than female employees. Although anyone was invited to apply for a promotion, the company found that women were less likely to do so. The company found two academic studies that indicated that 1) girls don’t raise their hands as often as boys when answering math problems, even though they have a higher rate of accuracy when they do; and 2) women don't offer up their ideas as often as men in business meetings, even though observers say their thoughts are often better than the many offered by their male colleagues. When one of the heads of engineering sent an email to his staff describing the two studies and reminding them it was time to apply for promotions, the application rate for women soared. In 2013, the company started a series of diversity training workshops designed to help employees recognize unconscious bias and, as of September 2014, more than half of Google's employees had attended.
In 2013, Salesforce CEO Marc Benioff started a program called the Women’s Surge. The goal was to achieve 100% equality for men and women in pay and promotion, and to make sure that at least a third of all participants at all meetings were women. Benioff asked managers across the company to identify their top executives, who would then receive additional leadership training. In divisions where mostly men were nominated, Benioff told the managers to come back with a more diverse list. When Benioff found that many women at Salesforce were paid less than their male counterparts, the company began raising the salaries of underpaid women. In 2015, Salesforce spent about $3 million to bring the salaries of female employees up to the level of their male counterparts.
Minimum Wage Reform
Until the early 1980s, an annual minimum wage income in the United States, after adjusting for inflation, was above the poverty line for a family of two. Today, the federal minimum wage of $7.25 per hour, working 40 hours per week, 52 weeks per year, yields an annual income of only $15,080, below the federal poverty line for a family of two. This reality has sparked the "Fight for 15" movement, which has mobilized tens of thousands of workers in hundreds of cities across the country attracting widespread attention from the public, the media, legislators and companies.
A sustainable minimum wage can support economic growth and reduce income inequality, a key risk to our economy. In 2014, more than 600 leading economists, including seven Nobel Prize winners and eight former presidents of the American Economic Association, said the United States should raise the minimum wage and index it. They argued that increases in the minimum wage have had little or no negative effect on the employment of minimum wage workers and that some research suggests that a minimum wage increase could have a stimulative effect on the economy as low wage workers spend their additional earnings, raising demand and job growth.
Costco, which employs approximately 205,000 individuals, is notable for its commitment to fair wages and benefits. It pays its retail employees approximately $20 per hour (not including overtime), compared to the national average of $11. Eighty-eight percent of employees reportedly have company-sponsored health insurance and pay premiums that amount to less than 10% of the overall cost of their plans. According to press reports, Costco has consistently resisted Wall Street pressure to conform its pay practices to lower industry standards.
Costco’s CEO, Craig Jelinek, wrote a public letter to Congress in 2013, urging it to increase the minimum wage: “We know it’s a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty.” In 2016, Costco announced that it would raise wages for new and current entry-level workers to $13 an hour, up from $11.50. Costco has annual worker turnover of approximately 10%, considerably better than the retail sector’s 60% average. Other CEOs have been vocal about the need to increase the federal minimum wage, including James Gorman, CEO of Morgan Stanley, and Ron Shaich, the CEO of Panera Bread Company.
A number of companies, including Gap, Bed Bath and Beyond and Starbucks have responded to this debate by announcing wage increases.
We’d like to see more companies publicly state their views on this critical issue. Working with other investors, we developed a new proposal asking companies to adopt and publish principles for minimum wage reform. We submitted our proposal to Best Buy and Staples, and had constructive conversations with management at both companies. Our discussions with Best Buy led to a withdrawal of the proposal when we were informed that the company’s board of directors was overseeing a process already underway to further develop the company’s position on wage levels within the company to ensure its employees have sustainable careers and the company continues to attract the best talent.
Operating Globally, Thinking Locally
As global investors, we must ground our evaluation of employee relations in local realities. It makes little sense, for example, to reward a company for offering a benefit that is legally required in its local market. It is also important for American companies that operate globally to be flexible and adapt their programs to local needs.
Starbucks, which employs more than 191,000 people in 68 countries, has used regional surveys and focus groups designed to identify its workers’ greatest challenges. In the United States, this process identified health coverage, which the company has offered to full and part-time employees since 1988.
Starbucks also identified college tuition as a key challenge in the United States, and responded with a unique benefit -- it would pay for employees to get a four-year college degree online at Arizona State University. Any employee that works twenty hours or more a week and has the grades and test scores to gain admission to Arizona State is eligible for the program. The program was announced in 2014 and, to date, more than 6,000 employees have enrolled. The company hopes to have at least 25,000 employees graduate by 2025.
In Britain and China, housing costs were identified as the greatest challenges. In 2015, Starbucks began providing monthly housing allowances to full-time employees in China and interest-free loans to help its employees in the United Kingdom afford a rental deposit, a program it developed with Shelter, a housing charity. Starbucks will lend a maximum of one month's wages to employees who have been with the company for over a year, which the employee pays off over 12 months.
We are particularly interested in employee benefits that exceed local requirements. Fujifilm, of Japan, is notable for benefits that help its employees establish a healthier work-life balance, particularly parents. The company prohibits overtime working hours until a child starts elementary school at the age of six, exceeding legal standards by three years, and allows a six hour working day until a child starts third grade at the age of nine, exceeding the legal standard by six years. Fujifilm also offers three years of parental leave, exceeding the legal requirement of one year. The company also provides specialized benefits for elder care. The company began these programs in 2014 for a core business reason – they believed they needed a diverse workforce to create products that would appeal to consumers in a changing world.
In South Africa, we are particularly interested in companies’ efforts to promote people of color, and to address the HIV/AIDS epidemic. Tiger Brands, a packaged goods company, was founded in 1920 and is headquartered in Bryanston, South Africa. Four people of color and two women serve on the company's ten-member board of directors, and three women, including one woman of color and two men of color, serve on the company's eleven-member executive management team.
In 2014, Tiger Brands invested almost R8 million ($592,000) in on-site clinic services. These include occupational health support, as well as limited primary healthcare, and is free to all permanent and temporary employees on site. One of the company’s clinics is also open to the community. The company also offers HIV/AIDS support for employees. In 2015, 331 employees were voluntarily counseled and tested and 95% of employees who tested positive enrolled in the program.
A Brave New World
The modern workplace is changing. Although the fear that machines would replace workers has been present since the early days of the Industrial Revolution, those 19th century workers could not have anticipated the use of computers to manage the human work week.
A 2014 New York Times article highlighted a growing practice among retailers to utilize automated scheduling software, which can produce erratic schedules for employees. Such companies might provide notice of hours only a day or two in advance, dismiss employees mid-shift because the computer says sales are slow, or schedule employees for very late nights followed by very early mornings. After the story was published, Starbucks, the focus of the article, announced that it would change its scheduling practices and New York’s Attorney General sent letters to thirteen retailers asking for information regarding their scheduling policies.
Some employers, like Target, post employee schedules ten days before the start of a work week, and don’t use the on-call approach. Costco gives part-time workers at least a week's notice about their schedules, and JCPenney also has a policy against on-call scheduling. Gap phased out on-call scheduling in September 2015 and L Brands, the parent company of Victoria’s Secret, also recently ended the practice.
We live in an interconnected world, where simple management decisions can have significant effects. Corporate policies regarding something as simple as scheduling worker shifts can become public controversies that can damage trust in a brand. Other employee policies can have direct impacts on public health.
In July 2015, Chipotle announced that it would offer hourly workers paid sick leave, paid vacation and tuition reimbursement, benefits that were previously only available to salaried workers. These policies are both admirable and uncommon among restaurant chains. They also make good sense for Chipotle’s consumers, who are put at risk when sick people come to work because they cannot afford to stay home. Only five months after announcing these new benefits, however, more than 140 Boston College students picked up norovirus from a sick worker who wasn’t sent home. In 2015, almost 500 people fell ill after eating at Chipotle restaurants due to E. coli and norovirus outbreaks. In the wake of this crisis, which battered the company’s stock price, the company took action to enforce its sick leave policy and to add new programs to extend sick leave when circumstances warrant.
The right to form or join a union of one’s choice and to bargain collectively for the terms of one’s employment are among the core conventions of the International Labor Organization and are recognized as fundamental human rights. Healthy and vital unions play a crucial role in addressing the imbalances in power that often arise between corporate management and workers in their struggle for fair working conditions.
Union relations can be contentious, but strikes can be a sign of a healthy union. These issues can therefore be difficult to evaluate, and rarely lead us to exclude a company from our portfolios, unless we see a pattern of unethical or illegal behavior.
In some cases, however, a lack of unionization can be a decisive factor for us. Take, for example, two similarly situated companies – United Parcel Service and FedEx. Historically, we have approved UPS for our portfolios, and excluded FedEx. At UPS, approximately 60% of employees are represented by the Teamsters. With the exception of its pilots, however, the vast majority of FedEx employees are not affiliated with a union, and FedEx has lobbied aggressively to stave off unionization. FedEx drivers are independent contractors and can start at $30,000-35,000 a year with no overtime, no retirement plan, no health-care benefits and only one week of vacation per year. By contrast, a full-time unionized UPS driver starts at a base of $39,000 a year, with regular raises up to $52,000. Overtime pay brings the total to more than $80,000 a year for the majority of drivers, along with a full benefits package.
In many ways, the FedEx approach is the precursor for many “sharing economy” companies like Uber and AirBnB. FedEx’s model has been challenged in a number of court cases over the years, and the company has responded by reorganizing aspects of its business to avoid unionization by its drivers.
Whole Foods has long resisted any attempts at unionization, despite the fact that employees of grocery chains, like Kroger, are generally represented by the United Food and Commercial Workers Union. John Mackey, the company’s co-CEO and co-founder, says the company isn’t “so much anti-union as beyond unions.” While Mackey’s sometimes aggressive anti-union rhetoric is a concern, we take comfort in the fact that Whole Foods takes employee benefits seriously and has, in some cases, responded to unionization efforts by increasing benefits. Whole Foods employees pay between $0 and $20 per paycheck for health insurance, depending on company tenure. Employees are also allocated up to $1,800 a year for personal wellness accounts to be spent at their discretion. The company rewards teams for coming in under budget and distributes a monthly surplus that averages about 6% of total wages. As a further commitment to solidarity with its workforce, the company caps its executive salaries at no more than nineteen times the average worker’s pay.
In the United States, with a few exceptions, like Macy’s, it is uncommon to see unionized employees at retail chains. American retail workers are more likely to belong to a union if they work for companies based in Europe. In August 2016, for example, employees at eight Zara locations in New York chose to join the Retail, Wholesale and Department Store Union. Zara is owned by Inditex of Spain, one of the world’s largest retailers. The company offered no resistance and agreed to recognize the union, stating that “this is a normal consequence of our commitment regarding the rights of freedom of association worldwide.” Similarly, there have been unionized employees at H&M (Hennes & Mauritz, Sweden) locations in the U.S. since the 2000s.
Of course, unions are not always respected at the American workplaces of European companies. In 2007, we co-filed a shareholder proposal with FirstGroup, a transportation company based in Scotland, to address allegations of anti-union activity at First Student, the company’s U.S. school bus subsidiary. The proposal was submitted along with the International Brotherhood of Teamsters, the Service Employees International Union, and more than 140 FirstGroup employees. Domini’s participation was critical in allowing the unions to meet the onerous British filing requirements. We then attended a meeting in London with FirstGroup’s CEO and chairman to discuss our concerns. FirstGroup hired an independent monitor to oversee its U.S. operations and ensure it was meeting its obligations to respect its workers’ rights, a program that is being held out as a potential model for other companies. Although we cannot claim sole credit for this important development, we have been told that investor involvement (including a large group of European pension funds) was a turning point in the engagement.
Domini asks SEC for Better Employee Relations Disclosure
The Securities and Exchange Commission requires publicly traded corporations to disclose the number of people they employ, but that is only the bare beginning of what we’d like to know. In 2016, The SEC recently requested public comments on its disclosure rules and asked whether companies should be required to disclose more information about their employee base. We submitted a lengthy letter, including the following requests for employee information:
- Employee turnover rate, including significant layoffs
- Breakdown between domestic and foreign employees
- Breakdown of full-time, part-time, seasonal and sub-contracted employees
- Diversity information, including gender pay ratio data
- Percentage of employees represented by a union. For companies with significant union representation, provide a narrative discussion of its process for engagement with the union, noting any significant disputes.
- Benefits and incentive structures available to all full-time employees
- Company goals regarding diversity, employee training and retention, and efforts to implement these goals
- Significant pending legal proceedings, or regulatory investigations, including fines or judgments awarded, relating to employee management.
Investors are well-advised to pay attention to how the companies they invest in treat their employees. By doing so, they can gain fresh insights into the quality of corporate management teams and identify those companies that are best positioned to compete in a rapidly changing marketplace. More importantly, however, by raising these questions with corporate managers, investors send the message that employees matter. When large companies take this seriously, and invest in their employees, they can create lasting value with ripple effects throughout our globally connected economies.
We are global investors, seeking to apply our standards consistently across markets. For certain markets that present unique sustainability challenges, however, we have developed specialized standards to guide our ESG research and review process. This paper outlines the factors we consider when evaluating the eligibility of companies for our portfolios that operate in Burma (Myanmar). We hope that it will help to illustrate how Domini addresses these key challenges, as well as provide guidance to other investors and corporations.
While the democratic transition in Burma (Myanmar) is widely welcomed and foreign investments are critically needed, challenges remain. The country remains a high risk environment for business operations due to weak human rights protections, weak environmental regulations and weak institutional governance.
Domini’s policy is to assess each company’s involvement in Burma, on a case-by-case basis. In this analysis, we consider ten severe categories of human rights violations and governance concerns, paying particular attention to certain high risk sectors and business activities. We also evaluate positive actions companies are taking in Burma to advance democratic reform and improve lives.
For many years, Domini’s policy was to exclude from our mutual fund portfolios any companies with significant involvement in Burma, a country run by a military regime that held its democratically elected leader under house arrest. By avoiding investment in companies doing business in Burma, and encouraging companies to leave, we sought to highlight the critical importance of democracy to both human rights and long-term investment returns, avoid a variety of human rights risks, and apply leverage to an unjust regime.
We were proactive in addressing these concerns as well. For example, our research on Toyota Motor uncovered previously unknown connections between a key trading affiliate and the Burmese military regime. Although we have consistently excluded the company from our funds, we helped to lead a three-year engagement by responsible investors, culminating in the company’s announcement in 2010 that its trading affiliate had divested itself from the joint venture.
In 2011, following a historic election that brought long-imprisoned democratic leader Aung San Suu Kyi to the Burmese parliament, the U.S. government began the process of lifting long-standing economic sanctions, and corporations announced that they would soon resume business there.
The U.S. State Department developed a set of reporting requirements to ensure that companies doing business in Burma disclose sufficient information to allow the U.S. government to evaluate their impact on human rights and democratic reform. In 2012, Domini participated in an in-person meeting with National Security Council (NSC) directors to share our concerns, including: the continued imprisonment of political prisoners; weak rule of law, including a weak judicial system; continuing violence against ethnic minorities; and the potential financing of notorious human-rights violators. We then worked independently and with other members of the EIRIS Conflict Risk Network to develop and submit concrete recommendations1 to inform that reporting process. Although the State Department adopted at least two of our recommendations, our most important concerns regarding public transparency in several key areas were not addressed. Leading companies, however, chose to issue public reports, which served as a basis for engagement with responsible investors and a framework for accountability.
In October 2016, as a final step in the process of lifting sanctions, the US government announced that it would no longer require US firms operating in Burma to report on their human rights risk assessments, a decision that faced strong objections from various human rights organizations due to an array of ongoing serious human rights violations, as reported by the US State Department.2
Challenges Facing the Democratic Transition
As investors evaluate corporate activity in Burma, it is important to understand that, despite important steps towards democracy, very serious challenges remain. All corporate activity in Burma should be evaluated against the backdrop of the following ongoing human rights violations:
These violations are compounded by a number of governance concerns, including:
Despite what appears to be a green light from the U.S. State Department, these concerns will continue to present material legal, operational and reputational risks to businesses operating in Burma including the ongoing potential for:
• Violations of the U.S. Foreign Corrupt Practices Act
• Violations of the regulations prohibiting the importation of goods made with child or forced labor
• Consumer boycotts
• Complicity in severe human rights violations.
The potential failure of democratic reform in Burma represents even greater risks to its citizens and the region, risks that also carry economic import.
Based on these observations, it is important to consider any business operations in Burma with enhanced due diligence. At the same time, it is also true that foreign investment is a key to economic development for the country, providing access to essential products and services, and needed improvements to the country’s infrastructure.
We believe that responsible investors can play an important role in Burma’s progress towards democracy and prosperity by shifting from a strategy of avoidance and divestment to one of careful scrutiny and engagement.
For Domini, this means that we will devote particular scrutiny to a select group of high risk sectors and business operations. In recognition of the difficulty in addressing these problems, and the critical need for foreign investment, we will also seek to incorporate into our analysis positive actions companies are taking to advance democracy and human rights in Burma.
High Risk Sectors/Areas of Business
We consider the following sectors highest risk, requiring the closest scrutiny:
Energy, particularly fossil fuel exploration and production operations,6 including oil-field service providers and wholesale trading companies where a government stake or ownership is required in the projects. Investors should pay particularly close attention to operations where joint ventures with government entities are required, as the risk of corruption is particularly high.7
Infrastructure Projects raise the possibility of corruption, land grabs, forced migration or displacement, and labor rights concerns. Companies should undertake careful and transparent environmental and societal impact assessments before undertaking such projects, and be prepared to discuss these assessments with investors.
Agricultural projects raise risks of child labor, land grabs, and forced migration or displacement. Again, companies should undertake careful and transparent environmental and societal impact assessments prior to investment and on an ongoing basis. 8
Information and Communications Technology (ICT). While this sector provides critical services needed to advance both democracy and economic development, companies and investors should pay careful attention to risks of government censorship and surveillance, including requirements in government contracts to customize services to enable censorship and surveillance.9 Domini encourages companies to comply with guidelines developed by the Global Network Initiative to address these risks.10
Materials & Wholesale Trading. Investors should pay particular attention to timber, minerals and gems such as ruby and sapphire, for potential environmental and human rights violations. 11
Key Factors to Consider when Evaluating Business Involvement
Each of the high-risk industries present important opportunities for the people of Burma and, therefore, for investors. Without proper attention to the concerns noted above, however, these opportunities can be transformed into long-term, intransigent risks. Careful and responsible judgment is called for, and can make an important difference. Domini recommends the following four key factors to consider when evaluating corporate operations in Burma:
Positive Efforts to Promote Democratic Transition and Improve Lives
Foreign investment is necessary, but not sufficient, to further advance democratic reform in Burma and to improve the lives of the Burmese people. A company’s proactive efforts to address the challenges discussed above can be just as important as the products and services it provides. In particular, we encourage companies to engage in the following:
- Participate in, or support, institutional capacity building, through active involvement in multi-stakeholder collaborations. In particular, reforms are needed to strengthen Burma’s legal systems, including independence of the judiciary, environmental protection, and labor rights, including legal protections for labor unions.
- Provide education or vocational training to employees and local communities.
- Provide access to products and services to disadvantaged communities.
- Promote international human rights standards for its supply chain and other partners in Burma.
- Mitigation and Remediation. According to the UN Guiding Principles on Business and Human Rights, companies have an obligation to mitigate and remediate potentially adverse human rights impacts and to monitor progress in key areas of concern.
Companies seeking to do business in Burma face an array of difficult human rights, environmental and governance challenges. As investors, Domini encourages companies to engage in robust human rights impact assessments prior to entry and, if they do choose to enter, to continue to engage and report on how they are addressing these ongoing challenges. Investors with an understanding of these issues can help to advance democratic reforms while mitigating risk to their portfolios.
Peace and prosperity for the people of Burma is in the best long-term interests of investors and corporations. This can only be achieved by a functioning democracy supported by a fair economic system.
We hope that this description of our evaluation process will help to communicate our expectations to corporations while assisting other responsible investors seeking broad-based wealth creation for society as well as their clients.
1 Domini’s letter to the State Department regarding Reporting Requirements on Responsible Investment in Burma (Oct. 3, 2012), available at: http://www.reginfo.gov/public/do/DownloadDocument?objectID=38146500; EIRIS CRN letter re: same (Oct. 4, 2012), available at: https://business-humanrights.org/sites/default/files/media/burma_reporting_requirements_-_investor_comment_4_oct_2012.pdf Domini is represented on the EIRIS CRN advisory board.
2 U.S. Department of State 2015 Country Report on Human Rights Practices in Burma (April 13, 2016), available at http://www.state.gov/j/drl/rls/hrrpt/2015/eap/252751.htm
3 Attention has focused on the Rohingya population in Rakhine State (formerly known as Arakan state), near the Bangladeshi border, with recurring reports of rape, massacres, torture and extrajudicial executions. See, e.g, Burma: Satellite Images Show Fire-Damaged Villages (Human Rights Watch, Oct. 31, 2016), available at: https://www.hrw.org/news/2016/10/31/burma-satellite-images-show-fire-damaged-villages; Dispatches: Burma’s Rohingya Muslims in Desperate Straits (Human Rights Watch, April 26, 2016), available at: https://www.hrw.org/news/2016/04/26/dispatches-burmas-rohingya-muslims-desperate-straits; Myanmar: Kofi Annan to head Commission on Rakhine state (Amnesty International, Aug. 24, 2016), available at: https://www.amnesty.org/en/latest/news/2016/08/kofi-annan-to-head-commission-on-rakhine-state/. Abuses and violence against Karen and Kachin groups has also been reported. See, e.g.,The Farmer Becomes the Criminal: Human Rights and Land Confiscation in Karen State (Human Rights Watch, Nov. 3, 2016), available at: https://www.hrw.org/report/2016/11/03/farmer-becomes-criminal/human-rights-and-land-confiscation-karen-state. See also, Indigenous Peoples’ Rights and Business in Myanmar (Myanmar Centre for Responsible Business, Feb. 8, 2016), available at: http://www.myanmar-responsiblebusiness.org/publications/indigenous-peoples-rights-and-business-in-myanmar.html
4 The Farmer Becomes the Criminal: Human Rights and Land Confiscation in Karen State (Human Rights Watch, Nov. 3, 2016), available at: https://www.hrw.org/report/2016/11/03/farmer-becomes-criminal/human-rights-and-land-confiscation-karen-state
5 See, generally, Human Rights Watch: https://www.hrw.org/asia/burma.
6 Review Domini’s policy on fossil fuel exploration and production at http://domini.com/responsible-investing/key-issues/our-position-fossil-fuel-owners-and-producers
7 See Myanmar Oil & Gas Sector-Wide Impact Assessment (SWIA) (Myanmar Centre for Responsible Business), available at: http://www.myanmar-responsiblebusiness.org/swia/oil-and-gas.html
8 Burma: Farmers Targets of Land Grabs (Human Rights Watch, Nov. 3, 2016), available at: https://www.hrw.org/news/2016/11/03/burma-farmers-targets-land-grabs
9 See, Sector-Wide Impact Assessment of Myanmar’s ICT Sector (Myanmar Centre for Responsible Business), available at: http://www.myanmar-responsiblebusiness.org/swia/ict.html
10 http://globalnetworkinitiative.org/ Domini is a founder, and is represented on the Board, of the Global Network Initiative.
11 See, Myanmar Mining Sector-Wide Impact Assessment (SWIA)(Myanmar Centre for Responsible Business), available at: http://www.myanmar-responsiblebusiness.org/swia/mining.html; See, also, Burma’s Gem Trade and Human Rights Abuses (Human Rights Watch, July 29, 2008), available at: https://www.hrw.org/news/2008/07/29/burmas-gem-trade-and-human-rights-abuses.
12 From Red to Green Flags - Respecting Human Rights in High-Risk Countries (Institute for Human Rights and Business, (April 27, 2011) available at: https://www.ihrb.org/focus-areas/commodities/report-from-red-to-green-flags; Business and Human Rights Guide for Companies in Burma (Myanmar Centre for Responsible Business, April 7, 2015), available at: http://www.myanmar-responsiblebusiness.org/news/business-and-human-rights-guide.html
14 http://www.ungpreporting.org/ Domini is represented on the Eminent Persons Group that has advised on the development of the framework.
In a tightly interconnected world, investors can no longer afford to ignore the social and environmental costs of business as usual. For decades, responsible investors have joined with civil society organizations, corporations and public institutions to address working conditions in global supply chains and, although problems persist, we’ve made significant headway.
Twenty years ago, companies argued that they carried no responsibility for working conditions in factories they did not own. We no longer hear that argument. While it is true that these human rights abuses occur at factories and fields owned by third-parties, global companies can exercise significant influence. According to the United Nations’ Guiding Principles on Business and Human Rights, adopted in 2011, global businesses are obligated to identify these problems and do what they can to address them.
Around the world, approximately 150 million people leave their countries each year in search of economic opportunities elsewhere, often passing through the hands of unscrupulous recruiters with every incentive to take advantage of their vulnerable situation. Many workers find themselves working months on the job simply to pay off exorbitant recruitment fees. In other words, they are working for no pay at all. This is known as ‘bonded labor’ – a form of forced labor where a person is working to pay off a debt. It is considered the most common, and least known, form of modern slavery.
The International Labor Organization estimates that almost 21 million people are trapped in conditions of forced labor, generating over $150 billion for other parties. More than 75% of these workers work within the private sector, particularly in industries such as agriculture, construction and manufacturing.
Migrant workers are among the most vulnerable members of the global workforce and are subject to multiple forms of abuse across industries.
While attention has been paid to conditions in the factory or on the farm, less attention has been paid to the path migrant workers take to get to the workplace, and the unique risks they face. Today, that is changing.
What Can Investors Do?
Our experience teaches us that investors can have significant influence over corporate practices.
Domini has worked closely with the Interfaith Center on Corporate Responsibility (ICCR), a coalition of faith-based and socially responsible investors, since our inception. ICCR has launched a “No Fees Initiative” to address unethical recruitment practices, based on three pillars:
1. No Fees: Workers should not be obligated to pay for their job and should be immediately reimbursed for any fees charged. If a worker is indebted to her recruiter, she can effectively work months without pay. She may even feel honor-bound to repay these unjust debts. According to a 2014 US Department of Labor-funded study, “92 percent of the migrant workers in Malaysia’s electronics industry had paid recruitment fees and…92% of that group had paid fees that exceeded legal or industry standards.”
2. Workers should be provided with contracts in their own language: If a worker’s contract is written in another language, he can’t agree to the terms of his employment, and he can’t understand his legal rights.
3. No passport retention: If a worker cannot retain her passport or other identify documents, then she is unable to go home.
These are the most common factors that hold these workers in debt bondage, often without their awareness.
According to Know the Chain, a project led by Humanity United that ranks companies in the apparel, tech and food and beverage sectors on their responses to forced labor issues, corporate awareness of unethical recruitment practices is very low. For example, in the tech sector, out of twenty companies reviewed, “only four of the companies demonstrate awareness of the risks of forced labor that can arise from the use of recruitment agencies.” Know the Chain awarded the industry an average of 20 points out of 100 on recruitment issues.
Investors have important opportunities to raise awareness of the problem, set expectations and engage with companies to eradicate these practices.
The Corporate Response
Many of us first learned about the extreme conditions migrant workers can face after a series of articles broke in the Guardian and the Associated Press in 2014 and 2015, uncovering slavery in the Thai shrimp supply chain. Our research department spotted the issue early, leading to decisions to continue excluding Thai Union and Charoen Pokphand (CP) Foods, two Thai companies at the heart of the controversy, from the Domini Funds. We made those decisions before these stories broke.
Often, we are unable to obtain reliable information about labor issues from the companies themselves. In the absence of corporate reporting, we must rely on what we know about these industries and the regions where they operate. Reliable NGOs can be an invaluable source of information. In this case, a report published by Finnwatch in 2013 highlighted problems identified by interviewed workers including accusations of low wages, child labor, a large migrant workforce, and unpaid compensation and leave. The report stated that about half of Thai Union Manufacturing’s (TUM) employees were Thai citizens and the rest were migrant workers from Myanmar and Cambodia. Finnwatch reported that violations of migrants’ rights are common in Thailand. The NGO also reported the company’s denial of these allegations.
Under the spotlight of public attention, conditions are changing. Large consumer-facing brands like Costco and (William) Morrisons (United Kingdom) are taking action as part of the Shrimp Sustainable Supply Chain Task Force, a multi-stakeholder alliance which aims to tackle forced labor and human trafficking in Thailand’s seafood supply chain. The ability to track workers far out at sea is one critical piece of the problem they are trying to solve. CP Foods and Thai Union are also engaged, and working to improve their practices.
Unfortunately, the flawed recruitment system that produced those horrifying conditions also serves a wide range of industries. And in those industries as well, several long-term Domini Funds holdings have taken leadership.
HP Inc. reports that it was the first IT company to develop its own foreign migrant worker standard, a standard that addresses each of the three pillars of ICCR’s initiative. But the company took a step further that gets much closer to the root of the problem: HP is the first company in its industry to require direct employment of foreign migrant workers in its supply chain. Its policy, and the audit tools it has developed to enforce them, were developed in collaboration with Verité, a well-respected international nonprofit that promotes safe, fair, and legal working conditions, with particular expertise in combatting forced labor in supply chains.
When a person works in a factory, but is employed by the labor agency that recruited them, they are at far greater risk of exploitation. According to Verité, “HP’s standard requiring direct hiring will remove a key obstacle to ethical treatment of migrant workers. The standard sets a new bar and will likely result in substantial financial benefit to foreign migrant workers in HP’s supply chain, and we hope other companies will adopt similar policies.” We agree, and are raising this issue with other companies. Direct employment may be the solution to this problem, but we will need to overcome objections from factory owners and others that argue that it is too expensive or burdensome for small suppliers to adopt.
Companies realize that they need to work collaboratively to find solutions to these endemic problems. Leading companies in the electronics industry have turned to the Electronics Industry Citizenship Coalition (EICC). EICC members share a common code of conduct for their supply chains and a common factory audit process. Thanks to the leadership of companies like HP, the EICC code of conduct now addresses unethical recruitment practices.
Another important collaborative effort cuts across industries. The Coca-Cola Company, HP Inc., Hewlett Packard Enterprise, IKEA and Unilever launched the Leadership Group for Responsible Recruitment, focused on promoting ethical recruitment and combating the exploitation of migrant workers in global supply chains across industries. Walmart and Marks & Spencer (M&S) have joined the initiative, which is supported by the Institute for Human Rights and Business, ICCR, the International Organization for Migration and Verité. The Leadership Group is working to champion the “Employer Pays Principle”, which states that no worker should pay for a job – those costs should be borne by the employer.
Case Study: Turning Words into Deeds
In many instances, Domini has acted as a catalyst for change, helping to set a company on a new course that may produce substantial benefits in the future. Apple is a case in point.
In 2004, when we first reached out to Apple, the company was silent about working conditions in its supply chain, and did not have a policy to protect the rights of these workers. We changed that. After months of dialogue with Domini, Apple adopted a strong code of conduct, committing it to uphold core labor rights in its global supply chain.
Only words on paper. But when a corporation adopts a policy, it works to implement it. That code provided the foundation upon which to build a labor standards program. The company soon began public reporting, to ensure a degree of public accountability. Public reporting is needed to ensure effective implementation of these kinds of policies, and to educate others about the kinds of problems that are found, the tactics that work and those that don’t. It is also a necessary mechanism for building trust with investors, consumers and other stakeholders, a valuable asset for any global brand. Our engagement also provided the foundation for a dialogue we have maintained with the company ever since.
Today, Apple is far more transparent about problems in its supply chain, and actively works to address them. Visit www.apple.com and click on “Supplier Responsibility” to read the story of Rechel Ragas, a factory worker recruited from the Philippines to Taiwan in search of higher wages. Apple reports that “to secure a factory position there, Rechel had to use a job broker agency that charged her more money than she made in an entire year working in her home country.” When Apple uncovered these fees – fees that were legal, but violated Apple’s policies – it ensured that she received full reimbursement. As a result, she was able to return home six months earlier than she had planned. Apple is the only company we are aware of that discloses the amount of recruitment fees it has reimbursed to workers: $25.6 million since 2008, including $4.7 million in 2015.
The company has not solved all of the problems it has found in its supply chain. We don’t demand perfection – not because we don’t want to see it, but because we don’t expect to find it. We do expect companies to acknowledge these challenges and demonstrate how they are meeting them.
Apple has come a long way since 2004 and, although we would never claim that our efforts were responsible for all of this hard work, we believe we have had an impact.
We applaud the EICC’s efforts to address unethical recruitment issues, but still believe the industry should be doing more. On behalf of a group of institutional investors affiliated with ICCR, we wrote to IBM and Motorola Solutions with a series of questions about how they ensure that workers in their supply chains are free of these abuses. We also signed letters to Broadcom, Canon, Cisco, EMC, Hitachi, Johnson Controls, Medtronic, Microsoft, Qualcomm, Texas Instruments and Xerox.
We followed our letter to Motorola with a shareholder proposal on the topic, which prompted a constructive conversation with the company. Motorola Solutions has policies in place to address these issues, and as an EICC member, has adopted a “no fees” commitment. The company tells us that it is actively working through the EICC to develop more effective responses to these unethical recruitment practices. We recognize these efforts, but believe that investors have insufficient information to gauge how well the company is addressing these serious risks to workers. Our proposal seeks to rectify that by requesting an annual report disclosing the company’s efforts to ensure that its global supply chain is free of forced or bonded labor, including any efforts to reimburse workers for recruitment fees that were paid in violation of company policies. We look forward to continuing our dialogue with the company.
Out of twenty apparel companies, Know the Chain found only seven that were aware of the risks of exploitation to migrant workers. They found only two companies that encouraged the direct hiring of workers in their supply chain.
Adidas (Germany) received the top ranking in Know the Chain’s 2016 survey, and the top score for worker recruitment practices. Know the Chain praised Adidas’ “strong awareness” of the risks facing migrant workers and listed a number of leading practices. Of particular importance, if an agency is involved in the recruitment process, Adidas requires that workers sign contracts directly with the factory, not with the recruitment firm. The company requires suppliers to disclose the recruitment firms it uses, and to monitor all recruiters. The Adidas Group publishes a list of names and addresses for its primary factories, subcontractors and licensees, a practice adopted by many leading companies in the apparel and electronics sectors.
We recently met with Gap to discuss its approach to these issues, including the possibility of adopting a direct employment policy, and wrote to Ralph Lauren, Michael Kors (where we ultimately submitted a shareholder proposal), Nike, L Brands (Victoria’s Secret, Bath & Body Works) and Coach.
Ralph Lauren reports that it is working towards a “recruitment fee–free” environment for all workers. The company reported to Know the Chain that an audit had uncovered that a group of new Bangladeshi workers had recently started work in one of its supplier facilities in Jordan, and had paid recruitment fees. The factory is now fully reimbursing the 33 workers affected over a period of 3 months.
These kinds of reports should help to illustrate a basic point – these problems are out there to be found and addressed. No company’s supply chain is immune. Our letter prompted a constructive conversation with the company, which we look forward to continuing. We appreciate the company’s recognition of the plight of migrant workers and are encouraging clearer commitments and more transparent reporting.
Another long-term Domini holding that has taken leadership on these issues is Unilever (Netherlands, United Kingdom). The company ranks first on Know the Chain’s benchmark for the food and beverage sector, because of its commitment to traceability. The company’s commitment to eradicating modern slavery and human trafficking is impressive given that it reportedly has 76,000 suppliers. Unilever is working to reduce the number of recruiters used by factories. It reports that it uses very limited numbers of recruiters in North America, Europe and South America, but larger numbers in Asia and Africa.
Consider how you might handle the daily struggles these migrant workers take on, day after day. They are working far from home for people that speak another language. They may not be in the job they thought they bargained for. Those in the fishing industry may never have seen the sea before. Many find that their paycheck is considerably less than expected, but they have no option but to keep working -- they have family back home depending on them.
We invest in companies that can make a significant difference in the lives of migrant workers. That means that we can make a significant difference, as long as we refuse to turn a blind eye, and we persist in raising these concerns and pressing each company that recognizes the issue to do more.
Today the Supreme Court was scheduled to hear what would have been a landmark trial for LGBT rights, until a national policy reversal resulted in the case being sent back to the lower court. The case is that of Gavin Grimm, a 17-year-old student from Virginia who was barred from using the boys’ restroom at his high school because he is transgender. Rather than accept this injustice, however, Gavin chose to fight, and in the process, he has become a national hero for transgender rights. The American Civil Liberties Union filed a suit against the school board on Gavin’s behalf, arguing that the policy, which segregates transgender students by forcing them to use “alternative private” restrooms, is discriminatory and unconstitutional.
Beneath the surface, this case is about much more than just bathroom rights. It is about ensuring that all students in our public schools are treated fairly and given the same opportunities. It is about standing together as a nation and saying that we will not condone discrimination of any kind. It is about reaffirming the resolution that all Americans—gay, straight, bisexual, transgender, or other—deserve to be treated with dignity and respect. It is about equality.
Last year our country took an important step in this direction under the Obama administration when the Department of Justice and the Department of Education issued clarifying guidance on Title IX of the Education Amendments of 1972. This new guidance instructed public schools to treat transgender and gender non-conforming students consistent with their gender identity, rather than with the sex on their birth certificate. Unfortunately, that guidance has now been rescinded, leaving trans kids in our public schools exposed to bullying and harassment. In light of this policy reversal, the Supreme Court sent Gavin’s case back down to the Fourth Circuit Court of Appeals to be reconsidered, wiping out its previous ruling in Gavin’s favor.
Despite this (hopefully temporary) setback for transgender rights, there has been a tremendous outpouring of support for Gavin’s case from individuals and institutions across the country, including educators, faith leaders, medical professionals, and business leaders. Numerous amicus briefs were submitted to the Supreme Court supporting Gavin’s argument, including one signed by more than 50 of the largest and most well-known companies in the U.S. The brief reads:
“Amici support and defend public policies that protect civil rights and foster acceptance and equal treatment for all of their employees, their customers, and the families of both. Many amici employ and/or serve transgender people, and all amici are concerned about the stigmatizing and degrading effects of the policy adopted by the Gloucester County School Board… The Policy, and the policies and statutes of other government entities that would be permitted if the Policy is sustained, adversely affects amici’s businesses, employees, and customers, and undermines amici’s ability to build and maintain the diverse and inclusive workplaces that are essential to the success of their companies.”
It has been shown that support from prominent companies can make a difference when it comes to civil rights causes. Over the past decade, a number of companies have emerged as leading champions for LGBT rights. Business leaders know that homophobia and transphobia have no place in forward-looking organizations. That is why 91% of Fortune 500 companies now prohibit discrimination based on sexual orientation, and 67% have extended health and insurance benefits to all LGBT families. Many did so after prompting by socially responsible investors, including Domini, and LGBT activists. While it is simply the right thing to do, studies suggest that it can also be good for business.
According to research from the Williams Institute, LGBT-supportive policies and workplace climates can affect organizational outcomes by leading to greater job commitment, improved workplace relationships, increased job satisfaction, improved health outcomes among LGBT employees, and increased productivity and creativity among LGBT employees. Other positive potential organizational outcomes may include lower health insurance costs, lower legal costs, greater access to new customers, more business from customers who want to do business with socially responsible companies, and more effective recruiting of employees who want to work for an employer that values diversity.
Despite the obvious benefits and the significant progress that continues to be made by the business community in protecting and promoting LGBT rights, the law has not caught up with the times. Both at the national level and in many states, legal protections for LGBT people are still lacking. In many places people can still be fired or denied employment because of their sexual orientation or gender identity. Sixteen U.S. states do not provide ANY legal protection for LGBT employees, while a number of others provide protection only in public service. Some states provide protection on the basis of sexual orientation, but not on the basis of gender identity, leaving out a particularly vulnerable portion of the LGBT population.
Meanwhile, the past few years have seen a concerning rise in anti-LGBT bills introduced in state legislatures around the country, including numerous “religious freedom bills”. These controversial bills, which seek to provide businesses the legal right to deny services to LGBT individuals on the basis of religious beliefs, have been met with widespread criticism and boycotts from opponents who argue that religion is not an excuse for discrimination.
When lawmakers and politicians stand behind senseless policies that enable harassment and discrimination in our public schools, while simultaneously backing bills seeking to make it legal for businesses to openly discriminate, they are failing to uphold our nation’s founding principle of equality, leaving the rest of us with an even greater responsibility to help defend it. Businesses in particular, which employ and serve LGBT people, have a responsibility to use their voices to help change these discriminatory policies. When companies speak, lawmakers listen. Last year, for example, the governor of Georgia vetoed a religious freedom bill after a number of major companies threatened to pull business out of the state.
Companies also have the opportunity to set examples within their own organizations for how tolerant, open-minded cultures should act. One simple step is to ensure that their non-discrimination policies cover both sexual orientation and gender identity. While the former is widely covered today, fewer companies have added protections for transgender and gender non-conforming employees. This is something every company can and should do. Companies should also make efforts to promote diversity education and inclusion programs among employees to create an environment where everybody feels safe and welcome.
As investors, we have a role to play too. Domini has consistently voted in favor of shareholder proposals advancing LGBT rights. In the past, we also filed a number of our own resolutions that successfully convinced several companies to adopt policies prohibiting discrimination on the basis of sexual orientation. In 2015, we signed an amicus brief to the Supreme Court in the case that established the right of same-sex couples to marry. More recently, we signed investor letters, backed by trillions in assets, opposing anti-transgender bathroom bills in North Carolina and Texas. We also signed letters supporting twelve companies with operations in Singapore that sponsored Pink Dot Sg, an annual celebration in support of the country’s LGBT community. Singapore’s government, which is notorious for its anti-LGBT policies, warned the companies against sponsoring the pride event, but these letters encouraged them to stay the course.
It is encouraging that major companies are increasingly stepping up support for LGBT causes, from sponsoring pride rallies in Singapore to fighting against anti-trans bathroom laws here at home. LGBT rights are human rights. People like Gavin Grimm are not looking for special treatment; they just want to be shown the respect and dignity that everybody deserves, and to be able to live their lives without fear of harassment or discrimination. Companies have both the ability and the responsibility to help make that happen, and as investors we will continue to encourage them to do so.
Domini Social Investments announced today that Avon Products (Ticker: AVP) has agreed to review and revise its palm oil purchasing policies to address impacts on deforestation and human rights, in response to a shareholder proposal filed by the Domini Social Equity Fund (Ticker: DSEFX). The proposal was co-filed by the Appleseed Fund, in collaboration with Ceres.
“We were very pleased to withdraw our proposal in response to these new commitments from Avon,” said Adam Kanzer, Managing Director and Director of Corporate Engagement at Domini. “As investors, we are seeking to invest in good companies and make them better. Our proposal has helped to spur an internal dialogue about the impact of Avon’s palm oil purchases, encouraging the company to set the bar higher.”
Over the past several years, Domini has been encouraging companies in its Fund portfolios to adopt appropriate policies and procedures to address the impact of its commodity purchases on forests and human rights, including palm oil. According to WWF, “Large areas of tropical forests and other ecosystems with high conservation values have been cleared to make room for vast monoculture oil palm plantations – destroying critical habitat for many endangered species, including rhinos, elephants and tigers. In some cases, the expansion of plantations has led to the eviction of forest-dwelling peoples.”
Avon is a member of the Roundtable on Sustainable Palm Oil (RSPO), and has previously committed to purchase GreenPalm certificates equivalent to 100% of its palm oil supply. These certificates are used to finance sustainable palm oil production, but cannot guarantee that Avon’s actual palm oil purchases are produced sustainably.
Most of Avon’s palm oil purchases are in the form of products derived from palm oil (“palm oil derivatives”), further complicating the company’s ability to trace its purchases back to their source. Avon utilizes palm oil derivatives in a wide variety of products. About 60% of the palm oil consumed globally is in the form of derivatives.
In response to Domini’s proposal, Avon has committed to take the following additional steps:
- Avon agrees to establish a cross-functional internal team to assess the Company’s palm oil sourcing and develop a recommendation for implementing a time-bound sustainable sourcing plan.
- Avon will revise its palm oil policy to establish a time-bound plan to purchase certified Mass Balance or segregated sustainable palm/palm kernel oil, with full traceability back to the planation for all direct purchases and the majority of its palm oil derivatives purchases. “Mass Balance” is a term established by the RSPO to denote palm oil supply that contains a mix of certified and uncertified palm oil. “Segregated” refers to 100% certified sustainable palm oil that can be traced to its source.
- Avon commits to provide updates on its website about the development and implementation of these new palm oil commitments.
- Avon commits to a good faith dialogue with Domini and Appleseed on the development, implementation and public reporting of Avon’s new policy commitments, including discussion of time-bound commitments with clear goals, and the inclusion of human rights standards.
In 1970, Milton Friedman wrote a famous essay for the New York Times Magazine, arguing that “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”
For many years, the Friedman point of view prevailed: the job of a corporation is to serve its shareholders. A portion of Friedman’s argument rested on a bit of rhetorical sleight of hand—the notion that a “free market” also means “freedom.” Here is how Friedman put it: “In an ideal free market resting on private property, no individual can coerce any other, all cooperation is voluntary, all parties to such cooperation benefit or they need not participate. There are no values, no ‘social’ responsibilities in any sense other than the shared values and responsibilities of individuals.”
Perhaps that is how an “ideal” free market would function. Forty-five years after Friedman’s essay, however, we still remain very far from that ideal state. Consider these unsettling facts:
- Although illegal, slavery and forced labor persists in many forms around the world. Researchers estimate there may be as many as 36 million people in slavery today—more than at any other time in history.
- According to a two-year study conducted by Verite, forced labor in Malaysian electronics factories is widespread, impacting one in three migrant workers.
- Last spring, the Guardian reported that “large numbers of men bought and sold like animals and held against their will on fishing boats off Thailand” are integral to the production of shrimp sold in leading supermarkets around the world.
- Every year the government of Uzbekistan, one of the world’s largest exporters of cotton, forcibly mobilizes children as young as ten years old to harvest their crops.
Many corporations are now well aware of these facts, and enforce codes of conduct at factories and fields around the world through regular monitoring. Some collaborate with labor unions and human rights groups, and actively seek to find the root causes of these abuses. They are changing the definition of “good business.” But these changes did not come about through the influence of a magical invisible hand of the market. These transformations are largely the result of concerted engagement by investors and civil society organizations repeatedly raising concerns with corporations for decades.
Milton Friedman allowed for profitable socially responsible activities—this is just good business after all, not “social responsibility.” He failed to see, however, how far away we are from his ideal free market, and the critical need to convince companies to act more responsibly, even when it is in their long-term best interests to do so.
In 2010, Domini convinced Nucor to adopt strong policies to address forced labor and slavery in Brazil. Read the case study.
Learn more about Domini's approach to Human Rights
The food choices we make every day have a surprisingly important impact on people and ecosystems around the world. Corporations like Kraft and Pepsi purchase significant quantities of basic commodities like palm oil and soy through complex supply chains that may end in a rainforest in Indonesia or a farm in Brazil. We are making a focused effort to work with these companies to ensure that these purchases are not inadvertently driving human rights violations and destruction of critical ecosystems.
The shareholder proposal is an effective tool for encouraging corporate management to come to the table to discuss our concerns. In January, Mondelez International updated its website to explain how it is addressing deforestation in its supply chain—a direct response to Domini’s shareholder proposal. We are currently in a focused dialogue on these policies, encouraging the company to provide more robust data to its investors.
Our proposal on deforestation also brought PepsiCo to the table. We are currently discussing the impact of the company’s palm oil, soy, paper and sugar purchases on forests around the world. We hope to convince the company to adopt an over-arching forestry policy, backed by clear public reporting, in order to allow Pepsi’s customers and investors to evaluate its progress.
Our forestry proposal at Kraft Foods Group will go to a vote in May.