Investing in the Future: Embedding Children's Rights into ESG and Sustainable Business Practices
To promote ethical business practices and the well-being of society in the long run, it is imperative to integrate children’s rights into sustainability data in support of responsible investments. When we refer to corporate sustainability efforts, this vulnerable group of young people is often sidelined, which is unfortunate since they comprise one-third of the total population worldwide. Therefore, it makes sense to address and incorporate their rights into the Environmental, Social, and Governance (ESG) structure, which will lead to two positive outcomes: One, it will help protect their interests, and two, it will augment corporate transparency and accountability.
Relevance and Recognition: Children’s Rights in Sustainable Business Practices
Have we ever paused to wonder about the relevance of children’s rights in terms of sustainable business practices? The answer is likely to be negative. Their contribution to the world population aside, it is irrefutable that they interact with businesses in various roles every day, such as consumers, employees’ family members, workers, and community members. In other words, given their uniqueness as stakeholders, it is essential that their rights are safeguarded and executed.
Children’s rights are outlined in the United Nations Convention on the Rights of the Child. The Convention is the most ratified international human rights treaty globally and it comprises four pillars: the right to survival, the right to protection, the right to development, and the right to participation. It is also important to add that children possess certain vulnerabilities and needs as a result of their developing physiology.
While certain business activities may not impact adults, they are likely to affect children and their emotional and physical health. What happens in childhood can have a lifelong impact, preventing or enabling children from reaching their full potential. What is surprising and concerning in equal measure is that while the connection between businesses and human rights has long been recognized, the relationship between children’s rights and businesses has yet to find a place and acceptance by organizations and investors.
Needless to say, investors can make a meaningful contribution in terms of influencing corporate activities related to children’s rights. We will find out how in the paragraphs that follow.
Looking Beyond Child Labor
Whenever the topic of children’s rights from a business perspective comes up, the conversation invariably stops at child labor. While child labor remains a critical issue in many countries and sectors the world over, necessitating more interactions between investors and businesses, it is equally crucial to add that it goes beyond impacting businesses and investors. Let us delve into some other adverse impacts on children that need visibility and action.
Risks Involved in Child Rights and Their Repercussions
It is crucial for businesses and investors to understand the various risks to children’s rights and their associated consequences, to be able to address them in a manner that maximizes the benefits for children.
Workplace: The extent and quality of support provided to parents, especially mothers, at the workplace, is linked to impacts on children. For example, low wages will affect a child due to the lack of facilities necessary to take care of a child’s health, nutrition, and education. Likewise, organizations must take the initiative to make changes to workplace policies around maternity breaks, parental leave, etc., to support parents in their childcare responsibilities.
Children and the Digital Marketplace: The importance of tools and technologies for diverse groups cannot be overstated, and children are no exception. According to UNICEF, one in three internet users is under 18, which indicates that they use the Internet at a fairly tender age.
Today, they rely on and have access to a plethora of digital tools, services, and platforms to enhance their learning, work, and socialize, among several other activities. Besides the opportunities they represent, these tools are also associated with risks that can expose children to technology-facilitated violence and exploitation, sexual content, harmful products and services, and excessive use, not to mention data protection and privacy concerns.
Some more statistics, shared courtesy of UNICEF, state that while more than 95 percent of people in high-income countries are connected to the Internet, the number is an appalling 26 percent in low-income countries. These numbers are critical because access to the Internet in the digital age is linked to the realization of many children’s rights.
Another area likely to pose risks is marketplace activities, comprising advertisements of products and services, which may positively or negatively impact children based on the product being advertised. An advertisement emphasizing the consumption of food items high in HFSS (High in Saturated Fat, Salt, and Sugar) can harm a child’s health, leading to obesity and other equally grave health problems. On the other hand, an advertisement promoting fruits and vegetables may positively impact the targeted group and lead to healthy eating habits.
Interaction with local communities: How organizations communicate with local communities plays a pivotal role in impacting children, directly or indirectly. So, what relevant issues should companies consider that are likely to affect local communities and in turn, children? Some of them are as follows:
Measures to manage waste and pollution: If waste and pollution management measures are subpar, everything from the air to the water and soil will be contaminated, leading to adverse impacts on children’s health and development.
The extraction process of natural resources: Apart from pollution-related impacts, land-surface and socio-economic changes can have significant effects on the local communities, and therefore on the living conditions, health, and safety of children and their families
The behavior of security personnel: Unsupervised and uncontrolled security practices can make children the receiving end of psychological trauma and violence.
Land acquisition management: Inappropriate land acquisition practices can displace families, resulting in instability, potentially affecting livelihoods, as well as hindering children’s access to basic amenities and education.
Land use for business reasons: Excessive commercial use of land results in a lack of space availability for children in terms of living, learning, and playing, thereby hampering their quality of life.
However, perceiving children only as risks and victims is undermining their rights, not to mention their capabilities as active agents forming an integral part of society. On their part, organizations should ensure that children’s rights are respected, not only because it’s ethically right but also because it can give them an edge over others. It’s imperative to ensure that children are protected from commercial exploitation; at the same time, the incorporation of children’s rights into organizational practices in an accountable manner paves the way for impactful engagement and can result in child-positive business opportunities, while cultivating trust with children, families, and communities for the long haul.
Financial benefits aside, organizations focused on children’s rights stand to gain in other areas, such as the following:
Improvement in reputation
Mitigation of operational risks
Enhanced license to operate
Reduced staff turnover and productivity gains
Investor Stewardship: What does it entail?
The process by which institutional investors, such as asset managers, insurers, and pension funds, oversee and manage investments responsibly can be referred to as Investor Stewardship. The intention is to safeguard and improve asset values for the long haul, for beneficiaries. We should also add here that this looks past financial returns and incorporates ESG (Environmental, Social, and Governance) factors.
In other words, the role of investors isn’t restricted to offering capital; they also play the role of active stakeholders who can positively impact company policies and procedures, typically through engagement and voting. To that end, investors take the onus of holding organizations responsible for social impacts that include child rights.
Investors’ Role and Contribution: Investment and Policy Decision-Making
As shared earlier, investors have the potential to influence corporate behavior and implement measures that incorporate children’s rights into their policies and investment decision-making. Let us deep-dive into the steps they can take:
Combine children’s rights considerations with codes of conduct, business principles, family-oriented policies, corporate commitments, and policies. Both investors themselves and their investee companies can explore their existing policies and cross-check to see if they have included child rights considerations, and add anything they find relevant but missing. Investors can play a pivotal role in encouraging portfolio companies to carry out such an assessment, as well as in supporting various legal guidelines backing children’s rights and giving governments the much-needed push to adopt child-positive ESG regulations.
Accept the criticality of children’s rights in responsible investment policy while highlighting particular expectations and explicitly sharing their child rights management methodologies.
Incorporate criteria related to child rights into the corporate risk screening process and during the ESG risk and investee companies’ performance assessment process.
Identify those companies, sectors, and regions that are likely to cause child rights violations. While considering related securities for investment, implement additional due diligence and engage with high-risk actors to improve their approach.
Investors must not invest in organizations whose business models are harmful to children’s rights. They must use due diligence to ensure that they refrain from investing in organizations that violate child rights. Examples could include exploitative advertising or child labor, among others. Here, too, stewardship can act as a useful tool to effect more responsible corporate practices.
Focus on investing in organizations whose products or services give due respect and support to children’s rights.
Use the power of proxy voting to influence board-level decisions that focus on child well-being and community development for the long haul.
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Lack of Child-related ESG Data and Disclosure
One reason why companies find it challenging to analyze the effects of corporate activities on the emotional and physical health of children is that there is generally minimal to no reporting on children’s rights.
Reports highlighting general ESG factors are frequently published by entities; however, those focusing on child rights are hardly seen. Core areas that are overlooked include marketing practices impacting children and community impacts on the health and education of children. Data on child labor is often provided, but it’s not sufficient.
UNICEF’s Role: Incorporating Children’s Rights into Investment Decision-Making
The United Nations Children’s Fund (UNICEF) is aware that the finance industry can play a revolutionary role in enabling the transition to sustainable and responsible business practices for children. To make this a reality, it has directed some of its attention toward incorporating children's rights into investor decision-making processes. For over five years now (i.e.,2019 onwards), UNICEF has shared tools for investors; some more will be shared in the next couple of months.
In addition, ESG processes depend on data concerning child rights due diligence and companies’ performance. So, UNICEF has added another feather to its cap by offering publicly available guidance to organizations on reporting on child rights impacts and supporting the inclusion of core child rights issues in global and national sustainability reporting frameworks.
Courtesy of the EU’s bold step of adopting the European Sustainability Reporting Standards (ESRS) in December 2023, which highlights corporate reporting requirements for an array of ESG issues, UNICEF has crafted guidance briefs on crucial aspects of the reporting process. To what end? To assist ESRS-reporting organizations to openly disclose data on risks, impacts, and opportunities on children’s rights.
Last but not least, to democratize and enhance the visibility of children’s rights data, UNICEF has carried out some benchmarking studies to assess business practice trends on children’s rights.
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While the focus on ESG issues continues to increase, ESG data and disclosures concerning child rights continue to remain in the background due to challenges such as little to no awareness, less regulatory pressure, and complicated supply chains. This is where entities like UNICEF step in and make a significant difference, not to mention ESG assessment tools that make sure that organizations merge children’s rights with their sustainability action plans.
In a word, consolidating child-related ESG reporting will pave the way for corporate accountability, ethical investments, and social impact in the long run. Adopting such a perspective that encompasses the current and coming generations can ultimately help companies and investors to better future-proof their business and contribute to more stable and prosperous societies.
