In its recently updated “Policies & Procedures FAQs,” influential proxy advisor ISS explains how it evaluates “human rights due diligence” shareholder proposals. These proposals ask companies to explain how they assess and mitigate human rights risks. The proponents often press companies to adopt supply chain policies that will influence the practices of their suppliers and vendors.

The FAQs say that ISS is more likely to side with a company if a board committee has express oversight of human rights issues. ISS also encourages companies to disclose how they monitor compliance with their supply chain codes of conduct. Here’s an excerpt:

When assessing a human rights due diligence shareholder proposal, ISS will look at whether the issuer has a human rights policy and has identified a committee responsible for human rights risk oversight with clearly delineated responsibilities such as identifying and assessing actual and potential human rights impact. Depending on the industry and location of the company’s operations, other human rights related conventions or acts may be considered when evaluating the company’s human rights due diligence process.

ISS will also look at the company’s vendor and supplier codes of conduct, the audit processes in place to oversee compliance with these codes, and whether the methodology and results of the audit are disclosed. In addition to audit practices, ISS will look at whether the company has conducted impact assessments and if those are publicly available. ISS will evaluate how the company is integrating the findings into its human right risks approach and how it tracks the effectiveness of these measures. In addition, because human rights due diligence extends responsibility beyond the company, ISS will look at how the company is communicating with all its stakeholders. Finally, when available, ISS will look at the company’s ratings on third-party benchmarking reports, such as the Corporate Human Rights Benchmark (CHRB).

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