Woolworths facing shareholder resolution asking for human rights supply chain disclosure

Woolworths is facing a shareholder resolution asking the company to provide annual disclosure to shareholders on potential and actual human rights impacts in the company’s supply chain.

The Australasian Centre for Corporate Responsibility (ACCR) has filed the resolution in on behalf of shareholders. ACCR recently commissioned research firm CAER to assess Australian listed companies against the Corporate Human Rights Benchmark (CHRB), and in the research, which will be released in the near future, Woolworths scored under 20%.

In its explanatory material to the resolution, ACCR said “Woolworths complex and extensive agricultural supply chains expose them to significant risks: recently we’ve seen reports of extreme labour exploitation on Australian farms, not to mention the slave-like conditions people work in, in other parts of the globe, to produce products which end up on this companies’ shelves.”

“The methodology only measures disclosures around processes for human rights risk management,” said Brynn O’Brien, executive director, ACCR. “It measures board level commitment, all the way through to the human rights due diligence, engagement with external stakeholders including trade unions, etc. Woolworths and Wesfarmers scored poorly in the report – they weren’t assessed as apparel companies, but on their agriculture supply chain. There is internal asymmetry relating to different lines. Extractive companies do the best, apparels are in the middle and agriculture do poorly.”

ACCR filed a shareholder resolution to amend the WOW constitution, and a second resolution to be an advisory action to ask the company to consider reporting annually on the due diligence process for “identifying, analysing and addressing potential and actual adverse human rights impacts (HRDD Assessment).” The resolution recommends framing the assessment using the principles in the UN Guiding Principles on Business and Human Rights: the International Bill of Human and the principles concerning fundamental rights in the eight ILO core conventions as set out in the Declaration on Fundamental Principles and Rights at Work.

The Sustainability Report sent Woolworths’ media office an email and contacted them by telephone, but was not able to speak with Woolworths before publication.

ACCR co-filed the resolutions with representatives of the National Union of Workers, O’Brien said. ACCR attempted to file a resolution with Wesfarmers AGM, but the resolution was rejected, she said.

“For each, we worked with the union to recruit shareholders and in relation to WES, we got knocked back on the basis that we didn’t have enough qualified shareholders,” she said.

ACCR began this process of engaging with both Wesfarmers and Woolworths in August, O’Brien said.

“We did brief engagements, given that our research was done, and we started engaging in August, which are quite short engagement periods,” she said. “It was clear to us, in conversations with the trade unions and investors that engagements [around this issue] had been going on for some time. There is a concern in the broader investment universe over human rights in the supply chain.

In the initial engagement, [Wesfarmers and Woolworths] said they might be able to disclose more than they are, because they are doing more than they are disclosing. We felt confident that this wasn’t an issue coming out of nowhere for either business.”

Wesfarmers and Woolworths do provide disclosure in their apparels business. World Baptist Aid Australia rated Wesfarmers’ Kmart division as a B in its 2017 Ethical Fashion report, on a scale of A – F. Gershon Nimbalker, advocacy manager at Baptist World Aid Australia said that Woolworths’ apparel-related disclosure of human rights practices and performances lags Wesfarmers, but noted that their systems are “average.”

Nimbalker noted that disclosure and management of human rights and labour rights issues is increasingly becoming a priority for affected companies.

“The more I talk to institutional investors, they’re looking at listed companies, there is greater recognition that governance issues such as sustainability and ethics have correlation to performance, whether it’s direct causation or not, there’s strong correlation,” he said. “The reasons we’re seeing that correlation is due to causal factors around reputational risk, and also the strength of the capacity of the company to think in a forward, strategic outlook. Increasingly, the listed companies that are performing quite well are taking more voluntary steps to address the issues.”

The fact that Wesfarmers and Woolworths provide disclosure around management of human rights risks in their apparel businesses, while not providing similar levels of disclosure around agricultural risks points to an “asymmetry”, O’Brien said.

“When you assess companies, it does show how piecemeal and reactive the field of human rights is,” she said. “The Ruggie Principles – UN Guiding Principles on Business and Human Rights – began in 2011. There is sector-specific stuff and different reporting and different codes. To me, that’s really the most important thing about the process. Demonstrating that this asymmetry exists and it’s impossible to see that asymmetry exists as good governance. If you’re doing it across one supply chain, why not do it across the others?”

It is very difficult to collect enough votes to force a change to a company’s constitution, but ACCR hopes that Woolworths will agree to increase disclosure without a majority vote, O’Brien said.

“The most successful resolutions are those that are withdrawn,” she said. “If the company were to come out with substantial new commitments along the lines of what we’ve outlined, we would withdraw the resolution, we would view that as a successful outcome.

“Even if the constitutional resolution doesn’t come up, the substantial resolution – resolution 2 acts as a poll, that’s important feedback for the board. I think that resolutions can catalyse a lot of change in a short period of time.”