This report explores investor engagement on labour practices in agricultural supply chains. It draws from the findings of the 2013-2015 Principles for Responsible Investment (PRI) collaborative investor-company engagement with 34 global food and beverage companies. The report provides seven expectations for investors on supply chain reporting and communicates the tools necessary to ensure that food and beverage companies uphold labour rights across their supply chains.

Through the incorporation of the 6 Principles for Responsible Investment, the PRI coordinates investor engagement to encourage further improvements to business transparency in reporting supply chain practices.

The first phase of the PRI’s engagement from 2013-2015 focused on grievance mechanisms, specifically within agricultural supply chain labour practices of 34 participating companies. Consequent findings and improvements are developed in this second phase of investor engagement, aimed at building on the elements of traceability and sourcing and supporting positive supply chain practices for the companies.

In combination with engagement questions, relevant business case studies and resources, this guide provides seven expectations that equip investors with the tools to engage and propel businesses to rectify any infringement of labour rights within their supply chains. These seven expectations include:

• Supplier code of conduct: Reflecting international labour standards is the first step for a company to formulate and communicate its expectations to suppliers, labour brokers and recruiters and provide them a framework for compliance.
• Governance: Board training and oversight are essential to establish processes that enable companies to identify and respond to legislation and ensure relevant departments such as human resources are trained in this area.
• Traceability and risk assessment: Companies should map and assess labour related risks in their supply chains by product and geography.
• Sourcing and supplier relationships: Companies should evaluate their suppliers based on minimum labour compliance criteria and codes of conduct. Companies should also develop long-term relationships with suppliers and support suppliers in preventing labour issues through sustainable cost models and communication.
• Collaboration on systemic issues: Companies should collaborate with external stakeholders such as trade unions, civil society organisation, human rights experts, and sector peers to address systemic issues.
• Monitoring and corrective action: Regular assessment of suppliers’ labour performance and consequent reporting should occur to implement effective corrective action in cases of non-compliance.
• Target setting and disclosure: In each of the expectations, companies should report regularly and publicly on policies and processes as well as on performance against measurable and time-bound targets, through quantitative reporting such as G4 sustainability reporting guidelines, and the UN Guiding Principles Reporting Framework.

Please see the report for more information on each expectation including example engagement questions, company case studies and links to tools and resources.

The importance of improving supply chain labour practices is signified through risks such as supply chain disruptions, legal and regulatory action, and decreased company reputation associated with the mistreatment of human resources. Similarly, opportunities including greater access to trade markets and government contracts, reduced cost of capital, and increased market share and employee motivation provide a solid business case for ethical supply chain practices.

1. Improving supply chain labour standards can help mitigate operational, legal/regulatory and reputational risks, as well as present opportunities to benefit from innovative suppliers, access to more markets and contracts, loyal customers, productive and committed employees and secure supplier relationships.
2. The majority (59%) of all child labour occurs in agriculture, equating to ninety-eight million child workers globally.
3. Companies can unconsciously contribute to human rights violations through their supply chain.
4. Regular audits and reporting on supply chain practices are critical in revealing breaches of human labour and child slavery.
5. The largest improvements seen from collaborative investor engagement with food and beverage companies supply chain labour standards were in governance and certified sourcing out of 34 companies.
6. A 2013 UN Global Compact survey of nearly 2,000 global companies across sectors showed that while a majority of companies have established sustainability expectations for their suppliers, they are not tracking compliance.
7. Transparency and ethically robust supply chain practices enable businesses to charge a premium on products. Bonn University found that customers were willing to pay roughly 30% more for products produced according to Fair Trade Standards.
8. Provides a useful integration of key third-party resources, initiatives and business case studies to engage with, including links to ESG, International Labour Organisation (ILO) standards and references to the UK Modern Slavery Act.
9. Companies should develop long-term supplier relationships, and incentivise good labour performance of suppliers through multi-year contracts or other means. Companies should avoid short notice requirements on suppliers, and implement a cost model that enables its suppliers to pay adequate wages.
10. See Appendix 2 in the report for further resources to support investor engagement with food and beverage companies on supply chain labour standards.