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METHODOLOGY
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METHODOLOGY
A. DEFINITION OF KEY TERMS AND CONCEPTS
1. Labor Standards and Human Rights
This research narrowly defines the labor standards and human rights that are in scope for assessing a company’s performance on socially responsible operations as economic, social and cultural rights applicable to workers of a company’s extended supply chain and the communities in which the company operates production facilities or sources raw materials. These include labor rights recognized by the International Labour Organization (ILO) International Labour Standards, International Covenant on Economic, Social and Cultural Rights (ICESCR), national and regional laws, and other relevant human rights instruments. While recognizing a business’s responsibility toward a broader group of stakeholders, this research does not include a company’s responsibility to the environment, consumers and communities that are not directly associated with the company’s operations.
Please refer to Appendix A for the detailed list of in-scope indicator criteria.
2. Assessment Methodologies
Assessment methodologies are frameworks and guidelines that are available for a company or its stakeholders to report and evaluate the company’s social performance on ensuring labor standards and human rights. De Felice, in his review of business and human rights indicators, divided the assessment methodologies into six categories based on the purpose and target stakeholders of each standard (de Felice, 2015).17 Building on this previous study, we further collapsed the standards into four categories based on the general purpose of each category of assessment methodologies:
• Management Guidelines – We define management guidelines as a group of international and regional regulations and mandates that outline what companies should do to fulfill their responsibility to respect labor standards and human rights. Examples of management guidelines include the OECD
Guidelines for Multinational Enterprises, ILO MNE
Declaration and IFC Sustainability Framework. • Reporting Frameworks – Reporting frameworks are tools companies use to showcase how well they are fulfilling the responsibilities imposed in the management guidelines. The most commonly used examples of this assessment methodology include GRI Standards, SASB
Standards and NASDAQ ESG Reporting Guide. • Compliance Standards – Compliance standards are most commonly developed and used by thirdparty organizations to validate the claims companies make on their social compliance. Through different methods, including on-site audits and document reviews, these organizations may certify, assure, attest or accredit a company’s social compliance in accordance with the methodology they employ.
Examples of this type of assessment methodology are SA8000, FLA Principles of Fair Labor & Responsible
Sourcing/Production and ICMM Assurance Procedure. • ESG Ratings – Using the data provided by companies, third-party organizations and other sources, such as media reports, ESG ratings rate the companies’ performance on socially responsible operations and often rank them for comparison. Examples include
Corporate Human Rights Benchmark (CHRB) and Refinitiv/S-Network ESG Best Practices Ratings.
Please see the References section at the end of the report for links to each of the assessment methodologies included in the research.
17 de Felice, D. (2015). Business and Human Rights Indicators to Measure the Corporate Responsibility to Respect: Challenges and Opportunities. Human Rights
Quarterly 37(2), 511-555. doi:10.1353/hrq.2015.0031.
B. SAMPLING AND DATA COLLECTION METHODS
1. Selection of Assessment Methodologies
The aim of this research is to build a comprehensive database of indicators that currently available assessment methodologies use to evaluate companies’ performance on socially responsible operations. But, due to resource limitations, priority is given to certain assessment methodologies in collecting and analyzing data.
Criteria for prioritization include:
• Non-industry-specific or applicable to multiple industries • Cross-referenced in other assessment methodologies and corporate reports • References in major media sources and keyword search queries such as “sustainability reporting,”
“ESG index” and “human rights standards” • Assessment criteria and indicator details are publicly available Based on the priorities above, we selected 19 assessment methodologies for initial review. Please refer to Appendix B for the list of selected methodologies.
For each assessment methodology, we collected the following background information on its publication and issuing organization:
• Year first published • Year last revised
• Revision frequency/period • Issuing organization name • Issuing organization type (private, nonprofit, multi-stakeholder, intergovernmental) • Stakeholder representation
For each assessment methodology reviewed, we determined the types of stakeholder representation by inspecting the current and past positions held by the members of groups responsible for developing the methodology, such as the board of directors, standards committee and members council. Stakeholders without decision-making authority, such as observers and advisory members, were excluded from this analysis. • Evidence type
Self-report: The assessment methodology relies on self-reported data from the company.
Documentation review: The assessment methodology evaluates the availability and content of documentation issued by the company.
On-site inspection: The assessment methodology requires on-site verification by a third-party auditor.
3. Assessment Indicators
For each assessment methodology, the set of indicators that is relevant to the above-defined labor standards and human rights is extracted from the issuing organization’s documentation on assessment methodology. We also recorded the original categorization of the indicators and reference code assigned by the issuing organization, when applicable.
C. CATEGORIZATION OF INDICATOR DATA
1. Indicator Criteria 2. Indicator Analysis
Upon review of the documentation and categorization of indicators by each assessment methodology, we developed a list of 29 indicator criteria and assigned each indicator to one of the identified criteria.
Then, we grouped the criteria into the following four categories:
• Management Practice – Indicators associated with the processes companies can use to manage supply chain human rights risks, including commitment to human rights, governance and accountability, management systems, supplier management, reporting and transparency measures. • Worker Rights – Indicators topically associated with the rights of workers in the supply chain, including freedom of association, forced and child labor, employment discrimination, wages and hours of work, recruitment practices, and worker health, safety and well-being. • Community Rights – Indicators topically associated with the rights of affected communities in the supply chain, including land and Indigenous rights, security arrangements, conflict areas and community development. • Business Ethics – Indicators topically associated with business ethics, including anti-corruption, regulation compliance and corporate citizenship. We then further classified the indicators under worker rights, community rights and business ethics as topic-based indicators, because they target a specific area of labor standards and human rights. We classified those under management practice as process-based indicators, because they focus more on how a company manages its human rights risks, regardless of what those risks are.
Please refer to Appendix A for a detailed description of each criterion.
In addition to the assessment criteria, we developed the following attributes to analyze each indicator’s characteristics:
• Industry - Whether the indicator is designed specifically for a certain industry. This attribute includes an option for “non-industry-specific” records. • Supply Chain Coverage - Whether the indicator specifies coverage of the company’s supplier in its measurement • Supply Chain Tier Depth - If the indicator covers the company’s suppliers, the lower limit of supplier tier depth the indicator applies to • Indicator Type - The type of information the indicator measures, categorized as below:
Input: The amount or level of resources allocated for social responsibility
Activity: Actions taken by the company or its suppliers in relation to social responsibility, including assessments, training and stakeholder engagement
Output: Immediate results of the company or its suppliers’ input or activity
Outcome: Realized impact on the labor standards and human rights of workers and affected communities in the supply chain. Please refer to
Appendix C for examples of each indicator type. • Variable Type - How the indicator is measured, categorized as below:
Binary: Yes/no, satisfactory/unsatisfactory
Categorical: Choose from available options
Continuous: Measurement of a continuous variable, such as rating or percentage
Descriptive: Description of the actions taken or outcomes observed
