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What is KnowTheChain?
What is KnowTheChain?
KnowTheChain is a resource for companies and investors to understand and address forced labor risks within their global supply chains. Through benchmarking current corporate practices and providing practical resources that enable companies to operate more transparently and responsibly, KnowTheChain drives corporate action while also informing investor decisions. KnowTheChain is committed to helping companies make an impact in their efforts to address forced labor.
What are the KnowTheChain Benchmarks?
To drive awareness and corporate action on the issue of forced labor in supply chains, KnowTheChain is assessing corporate policies and practices across three sectors where forced labor is particularly acute: information & communications technology (ICT), food & beverage, and apparel & footwear. The benchmarks are a measurement of companies’ disclosures on their policies and practices to mitigate the risk of forced labor and human trafficking in their supply chains.
Who is behind KnowTheChain, and how are the different partners involved?
KnowTheChain is a collaborative partnership between the Business & Human Rights Resource Centre, Humanity United, Sustainalytics, and Verité. Each partner organization has significant expertise in addressing forced labor worldwide.
KnowTheChain is a project of Humanity United, a foundation dedicated to bringing new approaches to global problems that have long been considered intractable. HU builds, leads, and supports efforts to change the systems that contribute to problems like human trafficking, mass atrocities, and violent conflict. Humanity United is closely involved in the project management and communication efforts of the benchmarks. The Business & Human Rights Resource Centre, a non-profit that tracks the human rights policy and performance of over 7,000 global companies, contributes to strategy development, company, investor and stakeholder engagement, methodology development, company selection, disclosure research and analysis, and the overall project management of KnowtheChain.
Sustainalytics is the largest independent provider of sustainability research and analysis to investors. Sustainalytics supports the development of the KnowTheChain methodology as well as the company selection process.
Verité provides guidance to KnowTheChain’s strategy and outputs, and develops resources for companies with concrete steps on how to address forced labor in their supply chains. Although Verité provides input on the KTC benchmark methodology, they are not responsible for conducting research on companies or ranking them.
Why do you benchmark companies?
KnowTheChain believes benchmarking can drive awareness and continued corporate action on the issue of forced labor in supply chains. Benchmarking helps clarify what companies with comparable risks and supply chains are doing to appropriately address forced labor in their supply chains. By distinguishing between leaders and laggards, benchmarks can help reward those companies taking action and incentivize others to follow their leadership. Benchmarks also help to identify the leading practices that companies are currently using to address possible issues in their supply chains. Existing benchmarks such as the Access to Medicine Index for the pharmaceutical sector, Oxfam’s Behind the Brands ranking of global food companies, and Ranking Digital Rights for information and communications technology companies, have demonstrated how this approach can drive tangible improvements in companies’ policies and practices.
About The Benchmarks
How did you select the sectors and companies?
Companies were selected using two primary criteria: exposure to forced labor risk and market cap.
The information & communications technology, food & beverage, and apparel & footwear sectors have been identified as having particularly high exposure to forced labor risks. Companies in those sectors are sourcing many products and commodities from countries where labor regulation is poor and/or not enforced. Each of these sectors has been identified by the U.S. Department of Labor as having goods or inputs produced using forced labor. Likewise, Verité’s Forced Labor Commodity Atlas implicates raw materials in the supply chains of all three sectors. Furthermore, companies in these three sectors tend to compete for low prices of consumer products, which often leads to pressure on suppliers and subcontracting. Lastly, migrant workers are very common in the supply chain of these sectors, a group which is particularly vulnerable to forced labor and trafficking.
KnowTheChain chose to benchmark the largest global companies, as these companies have a large workforce in their supply chains, as well as significant leverage. We further chose companies which have their own branded products, given companies tend to have a greater ability to influence working conditions in those supply chains, as compared to third-party products.
Can companies decline to participate in the benchmark?
No. The benchmark is intended to be an objective tool for companies and investors. As such, companies cannot opt-out of or opt-in to the benchmark. However, we will be creating a self-assessment tool, which can be used by any company wishing to gain a better understanding of their progress and gaps with regards to addressing forced labor in their supply chains.
Who created the methodology and how do you review it?
The methodology was created by the KnowTheChain partners, Business & Human Rights Resource Centre, Humanity United, Verité, and Sustainalytics, by bringing together their extensive experience on addressing forced labor as well as by building on existing resources from other stakeholders.
The methodology is reviewed before every benchmark publication to include learnings from the previous benchmarks, as well as feedback from other stakeholders. The methodology revision includes sector-specific consultations with relevant actors from civil society, investors, and business.
What information is used in creating company evaluations?
The benchmarks are based on information that is made publicly available by the companies assessed in each benchmark. Beginning in 2018, our benchmarks will also include forced labor allegations reported by credible third parties, as well as companies’ responses to these allegations. To reduce the burden of reporting, companies will receive some credit for participating in credible industry- and multi-stakeholder initiatives, insofar these undertake due diligence on their members.
Stakeholders interested in additional third-party information on each of the benchmarked companies are invited to visit the website of KnowTheChain partner, Business & Human Rights Resource Centre, which tracks global news and reports on corporate human rights policies and practices.
KnowTheChain will continue to strive to improve its methods of evaluating companies, especially with regards to companies’ on-the-ground impact and practices, and with regards to integrating third-party information.
How do you collect the information that you use?
KnowTheChain is reviewing companies’ public websites to identify relevant information. In addition, each benchmarked company is invited to disclose additional information on their policies and practices to address forced labor risks in their supply chains.
KnowTheChain undertakes research in several languages to identify forced labor allegations that meet our threshold. We also invite relevant stakeholders to submit allegations, which we will also review against our threshold.
How do you engage companies in the research process?
KnowTheChain provides each benchmarked company several engagement opportunities ahead of the benchmark publication. Ahead of starting the research process we invite companies to point us towards relevant existing disclosure, and to tell us about their participation in relevant industry or multi-stakeholder initiatives, which may count towards the benchmark score. Following the initial research period, we share the initial findings with companies, and invite them to review the findings and provide additional disclosure where relevant. Likewise, we will share forced labor allegations with the benchmarked companies and invite them to disclose a response, as well as details of remedy provided. Lastly, we will also share the final benchmark report ahead of publication with all companies included.
Throughout the year, KnowTheChain offers webinars, which may be held in collaboration with relevant industry or multi-stakeholder initiatives, to provide an introduction to the benchmark process and its methodology, or to discuss the findings.
How frequently will the benchmarks be updated?
To provide companies the opportunity to make meaningful changes to both disclosure and practices, we update the KnowTheChain benchmarks every two years. The project partners will continue to review the optimal frequency at which the benchmarks will be updated.
Does the benchmark methodology take into account recent and emerging regulatory disclosure requirements (e.g., UK Modern Slavery Act and California’s Transparency in Supply Chain Act)?
Any information that a company makes publicly available will be taken into consideration when evaluating the disclosure of companies’ efforts to address forced labor in their supply chains.
In 2018, KnowTheChain will evaluate whether eligible companies comply with the UK Modern Slavery Act and California’s Transparency in Supply Chain Act. As not all regulations apply to all companies that are benchmarked, KnowTheChain will not count this information towards the benchmark score.
Further, the elements evaluated are intended to help companies understand what type of practices generally demonstrate best practices and compliance with supply chain transparency laws. In fact, those regulations were considered in the creation of the methodology for the benchmark.
Are you looking only at the first tier of the supply chains of these companies, or also looking at the raw material level?
Forced labor often happens at the raw material level, which is why our benchmarks evaluate what actions companies are taking beyond the first tier of their supply chains. This may include collaborative solutions or working with first-tier suppliers to address issues in lower tiers. That said, indicators specifically focusing on the raw material level are limited. The benchmark focuses more strongly on companies’ action regarding their first-tier suppliers, as this is where companies have most leverage, and as clear expectations towards these suppliers enables them to cascade those expectations down to their own suppliers. KnowTheChain will continue to evaluate ways to strengthen its focus on corporate action below the first tier, including at the raw material level.
How does this research differ from other benchmarks and disclosure initiatives covering the same sectors?
There are a number of different benchmarks and disclosure initiatives which cover the same sectors. However, each of those benchmarks focuses on different or broader types of impacts companies are having through their products, services, and business relationships.
ICT sector : Ranking Digital Rights is an initiative that measures ICT companies’ commitments and disclosed policies affecting users’ freedom of expression and privacy. Given the different focus of this initiative and the different risk exposures of companies in the ICT sector, there are currently only two companies which are covered by both benchmarks.
Food & Beverage : Oxfam’s Behind the Brands Index focuses on the ten largest food and beverage companies globally, analyzing their agricultural sourcing policies, which also looks at respecting workers’ rights in the supply chain more broadly. The Access to Nutrition Index covers many of the same companies, but focuses on a different aspect: companies’ nutrition-related commitments, practices, and performance.
Apparel & footwear sector: The Fashion Transparency Index ranks 100 of the biggest global fashion and apparel brands and retailers according to how much information they disclose about their suppliers, supply chain policies and practices, and social and environmental impact. It covers some of the same companies as KnowTheChain, but looks at broader working conditions as one of several issues, such as living wages, gender equality, fair trade, and environmental sustainability.
Multi-sector : The Corporate Human Rights Benchmark (CHRB) provides a comparative snapshot of the human rights performance of large global companies. It measures company policies, systems, processes, practices and responses to human rights risks and impacts. It looks at forced labor as a key risk for some industries, but does not focus on this exclusively. CHRB currently focuses on companies in the agricultural products, apparel, and extractive industries. The UN Guiding Principles Reporting Framework provides guidance for companies to report on how they respect human rights. The UN Guiding Principles Reporting Database currently includes analysis of human rights reporting against this framework for over 90 companies from eight sectors. The Workforce Disclosure Initiative gathers data on the workforces in operations and supply chain of companies across sectors.
For more information on the relationship between KnowTheChain, the Corporate Human Rights Benchmark, and the Workforce Disclosure Initiative, please click here.
How does a company’s participation in relevant key industry initiatives, such as the Electronic Industry Citizenship Coalition, impact the evaluation?
KnowTheChain encourages companies’ participation in multi-stakeholder or industry initiatives focused on forced labor and human trafficking, and hence gives some credit for participation in relevant initiatives. Further, where a company participates in an initiative that undertakes stringent due diligence on its members, it may automatically receive some credit for adopting the standards required by the relevant initiative. Benchmarked companies receive details on how participation in relevant initiatives counts towards their benchmark score.
Which industries will you be focusing on going forward?
In 2016, KnowTheChain benchmarked companies from the information & communications technology, food & beverage, and apparel & footwear industries, and will publish a second iteration of benchmarks in these three sectors in 2018. KnowTheChain will continue to consider additional industry benchmarks.
About The Benchmarks
Can companies be compared across benchmarks?
Since addressing forced labor in supply chains requires similar processes across sectors, the methodology is largely the same across each benchmark.
However, when comparing companies, KnowTheChain focuses primarily on comparing those in the same sector, as progress on a specific issue (or lack thereof) is often linked to industry-specific risks, allegations, or incidents, as well as industry-specific standards and initiatives. That said, companies are encouraged to learn from leading practices across sectors.
Can companies be compared against each other given differences in size, business model, sourcing regions, etc?
KnowTheChain compares companies against peers in the same sector to ensure comparability and relevance for companies. In 2018, KnowTheChain will benchmark a larger number of companies in each sector, which will enable us to capture a larger number of companies in different sub-sectors, thus ensuring even greater comparability.
The KnowTheChain methodology allows for flexibility in reporting to account for different business models. For example, companies may be required to report examples of practices in different tiers of the supply chain (i.e., leaving flexibility in how supply chain tiers are defined, and in which tiers action should be taken).
KnowTheChain does not evaluate companies’ sourcing decisions. Some companies source from many higher-risk countries, while other companies source predominantly from lower-risk countries. KnowTheChain believes it is important to recognize that poor working conditions and forced labor occur everywhere in the world, including in developed countries Therefore, KnowTheChain requires all companies to provide evidence of how they assess and address those risks in supply chain operations around the world.
Where there are significant differences in companies’ sizes, we aim to acknowledge this in the qualitative analysis. However, KnowTheChain focuses on the largest global companies, all of which can be a powerful force in changing the conditions under which people work in their global supply chains.
How can companies use the benchmarks?
The benchmarks provide a gap analysis for individual companies. They enable companies to understand where they stand compared to their peers, to get recognition for adopting notable or even leading practices, and to learn what specific steps they could take next.
The benchmarks are further intended to help companies identify the leading practices both within and outside their industry. Even companies that are not a part of the benchmarks can benefit from learning about the practices being implemented by others within their sector.
Lastly, the benchmarks help companies to understand where they can have a significant impact on reducing their risk of forced labor, which includes areas such as recruitment practices, worker empowerment, and purchasing practices. KnowTheChain has also developed additional resources to help companies understand in more detail what steps can be taken to address forced labor in their supply chains.
How can investors use the benchmark?
The KnowTheChain benchmarks can help investors understand the degree to which companies in their portfolio are exposed to the risk of forced labor and human trafficking in their supply chains.
The benchmarks can further help investors identify which companies in their portfolio are taking appropriate steps to address these risks. Going forward, KnowTheChain will also capture companies’ responses to allegations, commitments, as well as compliance with regulatory reporting requirements, thus enabling investors to obtain a greater understanding of where a company currently stands, and where it is heading.
Lastly, the benchmarks highlight key areas in which investors can engage with companies on this issue, which include recruitment practices, worker empowerment, and purchasing practices. The benchmarks further provide company-specific recommendations for engaging companies that are covered by the benchmark.
While an investor should consider additional elements when evaluating a possible investment and company engagement strategy, these benchmarks can help inform this decision-making process and identify specific entry points for engagement, as well as possible risks to the investor’s own reputation.
How can civil society use the benchmark?
Civil society organizations can use the benchmarks in their advocacy and communications efforts. The benchmarks can help civil society understand how they engage with companies on this issue in order to drive meaningful impact. For example, civil society can encourage stronger practices from specific companies, highlight strong practices, or call for improvements from any of the benchmarked companies or sectors.