Sister Anne Victory, the Director of Education at the Ohio based nonprofit, Collaborative to End Human Trafficking. She spent 32 years as a clinician, educator and administrator in nursing and served as Director of Staff Education and Vice President of Mission, Community Health Partners (now named Mercy Health) in Lorain, Ohio. As an advocate for awareness and action, Sister Anne has given a wide variety of presentations on human trafficking, including a discussion on modern human trafficking during her insightful and sobering 2015 TEDx talk.
Sally Sears, former Vice President of Ethics and Compliance, Tyson Foods. In her role at Tyson Foods, Sally had overall responsibility for the firm’s ethics and compliance program. In her two decades of private practice, she focused on commercial litigation and government investigations and was introduced to issues concerning human trafficking during her tenure at Jenner & Block in connection with that firm’s pro bono work on behalf of human trafficking victims.
Dave Yawman, Executive Vice President and General Counsel, PepsiCo, Inc. Dave has more than 20 years of experience at PepsiCo, spanning positions across PepsiCo’s business lines and its former bottling group. Most recently, Yawman oversaw global government affairs and public policy and he is part of PepsiCo’s senior management team focused on executing the firm’s “Winning with Purpose” initiatives.
Gloria Alva, Risk and Operations Compliance Analyst, and Manuel Vazquez Torrez, Senior Compliance Manager from Industrias Peñoles, one of Mexico’s leading mining companies. Gloria oversees the company’s raw material supplier due diligence process and the development of the third-party code of conduct. Manuel serves as the company’s Senior Compliance Manager and plays a leading role in its mining sector risk identification and overall ESG oversight from a compliance perspective.
Jonathan Drimmer, Partner, Paul Hastings LLP’s Investigations and White Collar Defense practice. As former DoJ Deputy Director (Criminal Division, Office of Special Investigations), Jonathan is a recognized international expert on anticorruption and business and human rights. Jon has represented companies and individuals in government enforcement proceedings in the US and overseas, in relation to FCPA and bribery claims, human rights issues, and a wide array of other matters.
John Fanning, Vice President of Business Development, Integrity Risk International.
Tara Giunta, Partner and Investigations and White Collar Defense Practice Vice Chair, Paul Hastings LLP.
The innate complexity of today’s supply chains, exacerbated by coronavirus disruptions, creates an ever-steeper hill for businesses to climb when it comes to ESG compliance. How do enterprises become aware of their blind spots, take practical steps to address them, and adhere to tougher standards for human rights due diligence? Paul Hastings LLP and IntegrityRisk recently co-hosted a webinar discussion exploring these pressing issues.
The video recording of the full webinar is available here and summary highlights from the discussion are below.
Diverse Paths to the Same Destination: ESG and Human Rights Awareness and Action
- Sister Anne Victory offered insight into the force multiplier power of local initiatives as she described what began as a local, grassroots program that today connects over 60 organizations in the greater Cleveland area. Her initial interest in the subject, informed and inspired by her background as a nurse, came from the public health perspective. Woven into the safety net created by The Collaborative to End Human Trafficking today is an eclectic mix of educators, attorneys, law enforcement officials, social services providers, and businesses.
- Dave Yawman noted that as a global consumer brands company, PepsiCo has the scope, scale, expertise, and reach that comes with a responsibility for playing a role in making the world better. The company’s former CEO lit the spark in 2006 with a “Performance with Purpose” initiative that evolved into the company’s focus on planet, people, and product. It is under that broad umbrella that the firm’s current work to tackling ESG issues takes place and now includes a board-level committee focused on sustainability and public policy.
- Sally Sears traces her introduction to issues around human trafficking to her time at the Jenner & Block law firm and that Chicago firm’s pro bono work, spearheaded by Martina Vandenberg, to assist human trafficking victims. (Vandenberg went on to create The Human Trafficking Legal Center). Sally noted that Tyson Foods has developed programs and made commitments focusing on ESG and human rights and, echoing Dave and Sister Anne’s observation, noted that it “takes a village” to tackle the issue effectively from multiple directions. For an ESG program to succeed, it takes HR personnel, the ethics and compliance team, staff that’s focused on corporate social responsibility (CSR), and continuous cultivation of key relationships in affected communities.
- Manuel Vazquez Torrez and Gloria Alva, from Mexico-based Industrias Peñoles, noted that the complex supply chain challenges in the mining sector, alongside exploration and other operations in two countries of South America, has led the company to include sustainability management, labor, and community development standards as core elements of its 10-pillar strategy. With headquarters in Mexico and operations in Peru, Chile, the US, and Brazil, the company understands there is an imperative to integrate a commitment to defensible standards of care on many fronts, including labor matters, human rights, health care, and more.
- Jonathan Drimmer‘s intersection with, and acquired expertise on, business and human rights/ESG issue arises from the fact that much of his career in the past 15+ years has been closely aligned with the topic of the webinar. In addition to his work with Tara Giunta in the Paul Hastings White Collar Defense practice, Jonathan is involved with the social consultancy BSR, holds a variety of advisory positions in the human rights space, served as a federal prosecutor, and has longstanding experience in impact litigation. Jonathan noted that that the past five years have seen a rapid rise in ESG-related demands, culminating in a “blizzard of activities” driven by legislative and sanctions actions across the globe..
Tackling the Enormity of the Task – Building Company Culture
- In light of the sheer breadth and scope of the problem for companies to tackle, co-host Tara Giunta asked panelists to comment about how companies get their arms wrapped around the challenges and develop an action plan. Dave emphasized the importance of building a strong infrastructure to enable companies to sort out how to “walk their talk” on the ESG front and embed it in company culture. He described some of the foundational work at PepsiCo taken up by company and board leadership as they sifted through the multitude of potential priorities.
- Sally observed that not all companies are as forward thinking and advanced as PepsiCo, necessitating an initial time investment to educate and acclimatize a firm’s leadership and staff to the imperatives of a robust ESG program.
- Manuel added that it’s important to align a company’s values and stated guidelines with every aspect of its operations and throughout its supply chains. He described the six-step process employed by Industrias Peñoles on this front, which is publicly available on Peñoles’ Annual Sustainability Report (issued in connection with its place on the Mexican Stock Exchange.)
Resource Allocation + Nuts and Bolts
- Jonathan said that metrics for judging performance against agreed-upon standards are essential and added that the evolving ESG reporting space is still catching on to the need to “act like every other part of the business” when it comes to meeting internal stakeholder expectations. He suggested that firms start by looking at what they are already tracking — and to not shy away from starting small.
- Sally shared some practical nuts and bolts steps used at Tyson Foods including: monitoring and assessing calls to its ethics helpline; reviewing and digesting, cross functionally, the results of internal audits; and a social compliance audit program that is performed by independent auditors at all facilities. These audits focus on four pillars (business integrity, human rights, environment, and health and safety
The Education and Acculturation Imperative
- Sister Anne described her organization’s work with companies to raise awareness, educate them about laws, and assist with learning to identify the warning signs of human trafficking. The type of education that The Collaborative to End Human Trafficking provides businesses varies, depending on the nature and needs of the business. Some of the regional companies that the nonprofit has provided targeted assistance and training for include Lincoln Electric, local hotels, Travel America (which has partnered with Truckers Against Trafficking), and health care providers like the Cleveland Clinic.
- Tara emphasized how essential the education component that Sister Anne described was in the business world. She noted that there is a substantial level of effort required when it comes to working with suppliers and vendors who may come from different backgrounds and have different legal, cultural, and regulatory frames of reference. In that vein, she asked the panelists to describe their experience and advice in tackling supply chain challenges.
Supply Chain ESG Hygiene
- Dave replied that whether a company is taking its first step or its millionth step is less important than the knowledge that it’s essential to take a step. The days of wishing the world’s problems away are gone, he said, and ethical expectations have changed dramatically and permanently: “Ultimately companies have to internalize that if they don’t do this, they will be left behind.”
- Dave said that industry norms and enrollment of others in the same sector creates a powerful aggregate pressure that can support meaningful progress on the ESG front. “If you’re not willing to pull the plug on a supplier and fire them for a lack of compliance,” for example, genuine improvement will remain elusive. He said that if a supplier is discovered to be “forcing labor, or using child labor in some market, or their deforestation principles aren’t meeting your expectations, you have to be willing to walk away. That’s putting your money where your mouth is.” He acknowledged that doing the right thing often costs more money, so it’s essential that the principles are baked into a firm’s business ethos, or “you’ll never have the guts to ultimately terminate that supplier unless you have the tailwind of your principles behind you.”
- Gloria added that in the nature of the extractive industry — with its large influx of capital and inherently complex supply chains — makes it vulnerable to corruption, fraud, perceptions of money laundering, and sanctions violations. The main risk comes from third parties, which is one of the reasons that Industrias Peñoles is an eager adherent to the LBMA Responsible Sourcing Program since 2013, which is a specific standard of the mining industry regarding ESG that provides guidelines for the due diligence process. Peñoles refinery is subject to annual audits to review its compliance with the Program.
A Holistic Approach to ESG and Due Diligence
- Gloria spotlighted the holistic nature of this approach, noting that those requirements also demand responsible sourcing and assurances that precious metals bars meet LBMA rules. The “LBMA seal of approval” is globally recognized in the marketplace, assures that gold and silver bars meet international requirements, and offers confidence that the bars were responsibly sourced. In 2019, the LBMA standards were updated, recognizing the importance of having a strong corporate governance and commitment to environmental and sustainability values. Another effort of Peñoles regarding ESG in the supply chain is the development of the Code of Conduct of Third Parties. Dave commented that baking requirements along these lines into contract language with suppliers and vendors also gives firms a straightforward method of terminating troublesome relationships.
- Sally said that Gloria’s description of Peñoles’ holistic approach is very much where other companies are beginning to go. She added that COVID-19 has also surfaced related issues of business continuity risk, which is part of the holistic approach to due diligence.
- Jonathan spent a few moments discussing the integration of due diligence with ESG compliance and called attention to the pre-draft of the EU’s “Corporate Due Diligence Accountability” law. It is, in his assessment, a “transformative responsible business conduct law” which, when enacted, will affect the due diligence requirements of companies, suppliers, and subsidiaries. As presently constituted it mandates strict guidelines on human rights, the environment, governance, tax evasion, illegal campaign contributions, and more. John Fanning noted that a growing number of IntegrityRisk clients were focused on the ESG and human rights component of due diligence.
Adapting to ESG Needs – Synchronizing Efforts
- Sally said that board-level committees are indeed an important step, but at the operational level, steering committees can be invaluable in coordinating action across the enterprise. For example, HR can assist with medical issues, CSR staff can organize outreach, translators can help work inside communities, and so. Bringing all these well-intentioned elements together so that all can agree on priorities and efficiently “swim together,” she emphasized, was an efficient way to impose governance on the process and for all stakeholders to come together to work toward a shared goal.
When a Human Rights Violation is Alleged
- In response to an attendee question on how companies respond when human rights issues are identified, Sally said swift and strong action was mandatory. Specific action depends whether the violation occurred within the company or in the broader community beyond it. In some cases, remedial measures may remain internal, but in some instances a referral to law enforcement is appropriate. Having established outreach into, and a line of clear communication with, your community can also make a difference in learning about what occurred and identifying next steps. Jonathan commented that the nature and severity of the problem dictates the type of response. As a general proposition, consensual engagement with the affected parties is fundamental, but preventive measures are equally important to create conditions to prevent a recurrence.
Nonprofit Support for Private Sector
- In response to an attendee question to Sister Anne about how nonprofits such as hers can best approach working with businesses, she suggested starting with an assessment of the business type and aligning educational and awareness-raising efforts accordingly. She added that identifying others in the community to assist can be helpful because it takes a spectrum of skills, specialties, and sensitivities to address the many facets of human trafficking. Finally, Sister Anne said that facing up to the myriad of interconnected meta-issues that create conditions for human trafficking to thrive — from climate impacting migration patterns to consumer disregard for where and how their goods are sourced — are often-overlooked parts of the broader equation.
- In response to a question from a webinar attendee about what questions to include in audits to elicit useful information, Sally shared examples of basic questions that can detect red flags, such as whether employees were asked to supply identity papers, if they were required to pay anyone to secure employment, or who bankrolled their travel. Questions will depend on applicable requirements where a company is operating.
Embracing ESG and Moving into the New Chapter Ahead
- In concluding remarks, Tara urged viewers to take note of how a focus on ESG can give companies a competitive advantage and simultaneously address the needs and desires of employees, stakeholders, and shareholders. Finally, she noted that with the incoming new administration in the US in January, businesses can expect an increased priority on ESG matters — not only at the SEC, but more broadly with regulatory agencies. Expect a sharper lens on issues such as diversity, inclusion, climate change, and ESG reporting and disclosures. Such momentum is accelerating globally, so compliance and legal professionals are well advised to regard ESG as a business imperative that needs to be embedded into the fabric and culture of an organization.
SELECTED BACKGROUND AND RESOURCES
Collaborative to End Human Trafficking – an Ohio-based nonprofit that educates and advocates for the prevention and abolition of human trafficking while connecting services on behalf of trafficked persons
How a Biden Administration Will Boost ESG and Impact Investing – Barron’s, 9 November 2020
Human Trafficking Legal Center – a Washington DC-based nonprofit that serves as a bridge between trafficking survivors and skilled pro bono legal representation
The Future of Human Rights Due Diligence: Legislation and Regulation for a Level Playing Field – BSR blog, 5 October 2020
Questions and Answers: EU Global Human Rights Sanctions Regime – European Union guidance, 7 December 2020
SELECTED LEGISLATIVE AND REGULATORY/COMPLIANCE GUIDANCE RESOURCES
Abolishing Slavery and its Contemporary Forms (Office of the UN High Commissioner for Human Rights)
California Transparency in Supply Chains Act
EU Conflict Minerals Regulation
EU Global Human Rights Sanctions Regime
European Parliament Corporate Due Diligence and Corporate Accountability
France Corporate Duty of Vigilance Law
Switzerland: Implementation of the European Convention on Human Rights
Trafficking Victims Protection Act
UN Sustainable Development Goals