Chapter 4: Social factors

Question 1

What are social megatrends?

Answer 1

1. Globalization
2. Automation and Artificial Intelligence
3. Inequality and wealth creation
4. Digital disruption, social media and access to electronic devices
5. Changes to work, leisure and education
6. Changes to individual rights, responsibilities and family structures
7. Changing demographics, including health and longevity
8. Urbanisation
9. Religion

Question 2

Where should investors start when they decide to implement social factors in their investment decisions?

Answer 2

1. Determine which social factors are most controversial or financial material in each sector
2. Assess exposure of companies to these sector-specific factors - depending on business model, location, operations
3. Assess social factors in supply chain

Question 3

What are the OECD guidelines for multinational Enterprises and what issues do they adress?

Answer 3

- Governmental-backed recommendations (voluntary standards and principles) on responsible investment conduct in areas such as
		l Employment and industrial relations
		l Human rights
		l Environment 
		l Information disclosure
		l Combating bribery
		l Consumer interests
		l Science and technology
		l Competition
                I Taxation

Question 4

What are Corporate Human Rights Benchmarks?

Answer 4

• Governance and policy commitments
• Embedding and respecting human rigthts in due diligence
• Remedies and grievances systems
• Performance of companies human rights practices
• Response to serious allegations
• Transparency

Question 5

What are the International Labor Rights?

Answer 5

• Freedom of association and protection of right to organise
• Right to organise and collective bargaining
• Abolition of forced labour
• Minimum age
• Child labour
• Equal renumeration
• Discrimination
• Nothing on living wage

Question 6

What does Free Prior Informed Consent mean in practice?

Answer 6

• Way to establish bottom up partitcipation
  - FREE - No coercion of indigenous people
  
  • PRIOR - Consent is sought sufficiently in advance
    of any activity
  • INFORMED - Satisfactory information on key
    points of the project, including
    § Nature
    § Size
    § Pace
    § Reversibility
    § Scope
    § Reason
    § Duration
    
    • CONSENT - Process in which participation and
      consolations are central pillars

Question 7

What is product liabilty?

Answer 7

• Legal responsibility of business or manufacturer selling defective goods
  l Design flaws
  l Manufacturing defects
  I Failure to warn of possible danger

Question 8

What is consumer protection?

Answer 8

• Refer to laws and other forms of government regulation designed to protect rights of consumers
  l Product safety
  l Distributing consumer-related information
  I Preventing deceptive marketing

Question 9

What are the United Nations Guiding Principles on Business and Human Rights?

Answer 9

• First global for preventing and addressing the risk of human rights linked to business activity
• Three Pillars how states and business should implement the framework
  1. The state’s duty to protect human rights
  2. Corporate responsibility to respect human
  rights
  3. Access to remedy for victims of business
  related abuses

Question 10

What are likely impacts of social factors that should be taken into consideration for company assessment?

Answer 10

• Ratio analysis and financial modelling
  l Health and safety violations can result in
  fines and liabilities
  l Poor human capital management can lead
  to greater operating costs and high turn-
  over
  l Supply chain issues can impact brand
  reputation
  l Protest can lead to local disruptions
  I Poor working condition can lead to poorer
  product safety

Question 11

Why is social materiality assessment important?

Answer 11

Not all countries, sectors and companies are affected equally by the different social megatrends and social factors

Question 12

What are internal social factors?

Answer 12

• Human resources
  
  • Health and safety
  • Human rights
  • Labour rights
  • OECD Guidelines for Multinational Enterprises
  • Corporate Human rights Benchmark
  • UN Guiding Principles on Business and Human
    rights

Question 13

What are external social factors?

Answer 13

• Stakeholder opposition
  
  • Controversial sourcing
  • Free Prior Informed Consent
  • Product liability
  • Consumer protection
  • Social opportunities
    
    • Animal Wellfare
    • Antimicrobal resistance