Human rights failings from ICT sector ‘red flag’ for investors

KnowTheChain finds most companies in the sector are not conducting adequate due diligence on forced labour

The $110bn information and communications technology (ICT) hardware sector is “failing dismally” in addressing forced labour risks in its supply chains while raking in record revenues, according to KnowTheChain.

The Business & Human Rights Resource Centre project and benchmark creator analysed 60 of the world’s largest ICT companies, benchmarking them and ranking them out of 100 on their disclosure and performance of responsible recruitment and purchasing practices; due diligence measures, including stakeholder engagement; access to remedy; worker voice and remedy outcomes for workers.

It found most companies are not conducting adequate due diligence, with 45% not undertaking human rights risk assessments. Most are not providing appropriate remedy for workers suffering from the worst form of human rights abuse, with only two disclosing the percentage of supply chains covered by collective bargaining agreements and only one company reported working with a union, in collaboration with a supplier and a non-governmental organisation, to resolve a worker grievance.

The KnowTheChain ICT benchmark also found a breach between companies’ policies and practice when it comes to ending forced labour. Although several companies have made human rights commitments, most failed to consider how their purchasing practices were exacerbating forced labour risks within their supply chains. This raises serious concerns about essential due diligence and companies’ readiness for emergent robust regulation and tougher ESG investment demands, it said.

Hewlett Packard Enterprise scored the highest, with 63/100, but on average companies received a median score of just 14/100. At the bottom of the table BOE Technology Group (one of Apple’s suppliers), Hangzhou Hik-Vision Digital Technology and NAURA Technology Group scored 0.

Meanwhile, the largest global global ICT companies have posted a record $4trn in combined annual revenue during 2022, up from about $3trn in 2021.

“Efforts by these companies to protect their supply chain workers from forced labour remain dismal,” said Áine Clarke, head of KnowTheChain and investor strategy at the Business & Human Rights Resource Centre.

See also: – Áine Clarke is a panellist at ESG Clarity’s human rights roundtable

In September last year, the European Commission proposed a ban on goods made using forced labour either being produced in the European Union or being imported into the bloc.

“With regulatory and ESG risks ballooning, companies must urgently ramp up efforts to tackle forced labour risks,” Clarke added.

More scrutiny by investors

As well as companies, investors must also ramp up their efforts as a result of these findings, KnowTheChain said.

In a brief to investors, the project called the results “red flags for investors” and said “these findings warrant increased scrutiny by investors, who have long relied on tech companies as the backbone of their ESG strategies.”

As well as investor interrogation on labour rights risks across supply chains being good practice, with regulatory efforts and development of ESG standards on the rise around the globe, investors have increasing legal obligations to undertake and demonstrate this approach, or face financial penalties, the brief noted.

“The ICT sector is a sector highly exposed to these issues – and should be a significant concern for investors looking to the sector to support the development of technology and infrastructure central to our daily lives,” Vaidehee Sachdev, senior impact analyst, social pillar lead at Aviva Investors, said in the foreword to the brief.

“Companies, and fellow investors, must make use of these data and insights to challenge existing practices, including by focusing on ensuring effective stakeholder dialogue and access to remedy given these remain key gaps in company practices.”

Avatar

Natasha Turner

Natasha is global deputy editor at ESG Clarity, part of the Bonhill Group, and has been a financial journalist for six years. She has been shortlisted for Story of the Year and Investment Journalist of...