Investor Primer on Grievance Mechanisms

A major component of corporate human rights due diligence is effective grievance mechanisms. According to the United Nations Guiding Principles on Business and Human Rights (Guiding Principles), a grievance mechanism is a formal, legal or non-legal complaint process that can be used by individuals, workers, communities and/or civil society organizations that are being negatively affected by certain business activities and operations.

In an increasingly globalized marketplace, work has become informal and precarious in nature. This leaves workers in global food supply chains vulnerable to adverse human rights impacts, such as poor working conditions, displacement, forced labor and other exploitative practices. Companies are increasingly realizing that human rights risks may be hidden in their extended supply chains, leaving them open to various financial, reputation, regulatory, operational and legal risks without the proper human rights due diligence mechanisms in place.

A major component of corporate human rights due diligence is effective grievance mechanisms. According to the United Nations Guiding Principles on Business and Human Rights (Guiding Principles), a grievance mechanism is a formal, legal or non-legal complaint process that can be used by individuals, workers, communities and/or civil society organizations that are being negatively affected by certain business activities and operations. This process supports the identification of negative human rights risks as a part of any company‚Äôs ongoing human rights due diligence and allows companies to prevent and remedy any adverse salient human rights issues. This in turn drives positive outcomes for society and protects and creates value for business and its investors.   

Failing to establish and integrate these mechanisms can lead to reputation damage if grievances become public knowledge and/or are mishandled. These salient human rights risks can translate to material risks beyond reputation risk; depending on the severity of human rights violations, undetected worker grievances can pose regulatory, market and litigation risk to companies, their executives, their boards and their investors. This short brief will examine:

1) the importance of non-judicial corporate grievance mechanisms in food supply chains,

2) the risks of failing to establish them and the opportunities associated with having them and

3) how investors can ensure that companies are properly managing their human rights due diligence in high-risk commodity supply chains.