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Foregrounding a ‘Risks & Rights’ Framework: Going Beyond ESG for the Just Transition Era

Foregrounding a ‘Risks & Rights’ Framework: Going Beyond ESG for the Just Transition Era

Sustainability or ESG is either the end or the means to an end. ESG needs to be viewed as a web of risks with each node as varied gradients. ESG is about risk related to investor value capture. Sustainability is normative and fuzzy.

The ends need to be defined, as sustainability can be an opening into restoration, rejuvenation, and resilience.

Climate resilience is a real goal, and everything converges around it. To think about resilience, the couple of conceptual anchors need to be foregrounded which are of risk and rights.

Risk is the key notion being tackled when ESG is utilised as a lens, as a tool to arrest value erosion for the investor community. But the larger canvas about climate action is planetary risk. We reside in a hyper risk society where ambient risks shape life itself from accidents to pandemics changing the entire playbook and vocabulary for thinking. Risks as a lens are foregrounded in our assessments towards monetary value capture.

Natural capital is slowly making its way into the balance sheet in the aftermath of the Biodiversity COP15 in Montreal.  Biodiversity is a risk for the asset manager. The front page of pink papers called it in India, where risk for whom? Is it for the palm oil producer in Malaysia and the end user the FMCG manufacturer who are both listed on the public bourses or the stateless labour in Sabah who are caught in literal no man’s land?

The key aspect to counterbalance the power imbalances for the communities under the scalpel of global corporate power. The recent swathe of soft and hard power legislations in Berlin and Brussels have brought Business & Human Rights lens into the mainstream jostling for space with carbon, which has hogged the limelight for attention. Carbon is not equal to E (environment) in the ESG Trifecta although the media discourse might be tilted in that direction. The registers need to expand and thinking needs to be interdisciplinary and integrated at the same time. Easier said than done as single-issue specialists are rife in the ESG sphere. There is an acute need for tri sector athletes who can cut across silos and problem solve with depth and agility. 

The new Human Rights Due Diligence mandates shift of the gaze to the body of labour preferably in a gendered fashion. The attention towards Climate Risk is survival level critical, and the ‘Loss & Damage’ Fund agreed by the COP in Sharm El Sheikh is a symbolic breakthrough. Translating commitments to hard cash is a different challenge altogether. One practical approach towards restoring agency to the communities is to recognise human rights and deploy a rights-based approach in securing redressal for the ‘margin of the margins’ through litigation and activism. How are migrant workers in South-East Asian global value chains supposed to challenge suppliers to global brands apart from the notion of transnational torts which empower them access to modern slavery litigation in the UK. A group of workers from Thailand have challenged a major brand in the UK courts. Similar precedents are emerging such as the Shell case in Nigeria among others.

The risk centric dispensation emerging in the ESG era is about trust and transparency where a data deluge often bears the tendencies of going overboard with the numbers. Audits lead to data trails however a data fraud culture in supply chains has been the counter impact as studies by non-profits such as Transparentum and Human Rights Watch. 

The United States Department of Labour has commissioned long term grants to civil society actors in Malaysia to better grasp the texture, nuances, and fine print of labour dynamics in the garments and the rubber sectors.

How do we operationalise rights in a risk based ESG discourse?

One important concrete measure is interconnected to organization-wide governance, which is an effective grievance redressal mechanism which is accessible, safe, and culturally contextual.

ESG reporting in India started in 2009 with the Ministry of Corporate Affairs (MCA) issuing the Voluntary Guidelines on Corporate Social Responsibility as the first step towards mainstreaming the concept of business responsibility. Since then, the reporting landscape has come a long way with the introduction of Business Responsibility Reporting (BRR), Corporate Social Responsibility (CSR), IR, National Guidelines on Responsible Business Conduct (NGRBC) and now Business Responsibility and Sustainability Report (BRSR) (introduced through a SEBI circular dated 10 May 2021).

In the Indian variant of ESG Reporting mandated by the regulator, SEBI for the top thousand publicly listed companies on the National Stock Exchange. The reporting instrument is called the Business Responsibility and Sustainability Reporting Report (BRSR) which is an omnibus of 112 indicators where more than half are pertaining to social, labour, human rights, and governance issues.

The BRSR Report lays emphasis on the Grievance Redressal Mechanism where the social and governance are joined at the hip. Companies who have voluntarily disclosed the BRSR in the past year are only about 180 out of a 1000, which makes for a rather poor reading. Companies need to disclose the number of consumer and sexual harassment complaints in the BRSR and whether they have been addressed or not. These are significant developments as this is publicly available data open to interpretation by the rating agencies.

The theatrics of compliance often supersede the need and scope for impact. The data deluge in ESG is creating the audit treadmill culture. For example, which is seen in pharma where an EHS Manager once quipped to me that we prepare and participate in more audits than we have the actual time to implement the work to demonstrate the performance delta in audits.

Companies are creating positions for sustainability and ESG reporting professionals as a standalone job. The data however is not necessarily assured by a third-party auditor, which adds a layer of credibility for the investor community.

Does the disclosure ‘add up’ in the spirit of additionality to risk mitigation? It is certainly a trigger towards doing the right actions towards the responsible capitalism paradigm. The International Sustainability Standards Board is moving towards the interoperability of the alphabet soup of standards at play.

Business & Human Rights will soon receive the requisite attention along with carbon and biodiversity, and the common denominator are people and communities who will chart the course of the emissions transition through often unquantifiable lived experiences.

Manishankar Prasad

Manishankar is a writer and researcher on the Gulf based in Singapore.

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