What’s next on John Kerry’s green agenda?

Greetings from Davos, where the sun has been shining on the annual meeting of the World Economic Forum — and the town’s central promenade is strewn with posters proclaiming the thrills of artificial intelligence. It is a change from previous years when sustainability commitments dominated the street, along with the (then) hot technology of blockchain.

But that visual shift does not mean that sustainability has disappeared: it remains a top issue at WEF — and sometimes even overlaps with blockchain. On Monday, I moderated an FT event about using blockchain to promote financial inclusion, particularly among the estimated 108mn people currently displaced in the world. Cynics might sneer about this, given last year’s scandals around digital assets, and I have questions about whether this can be done at speed and scale. However, Denelle Dixon, founder of the Stellar blockchain platform, said the United Nations High Commissioner for Refugees had already transferred $2mn to Ukrainians using this technology — and initiatives were accelerating. Watch this space.

Meanwhile, renewable energy is sparking hot debate, as mounting enthusiasm for the tech collides with a political backlash, epitomised by Donald Trump’s win in the Iowa caucus. Take note of my interview on this with John Kerry, US climate envoy, below. And look out for a Davos wrap on Friday when we will look at artificial intelligence and sustainability. Meanwhile, Patrick offers insight on another hot Davos topic: can apparel ever be truly green? — Gillian Tett

Don’t miss The Davos Daily Show with senior business writer Andrew Hill. Every day, he will be talking to FT journalists and high-level speakers as they provide commentary on the most significant trends from the Forum as well as in-depth analysis, news and anecdotes from the summit’s networking events, parties and dinners.

Kerry as ‘green Kissinger’?

When it recently emerged that John Kerry would shortly leave his role as climate envoy to join the re-election campaign of US President Joe Biden, some wondered if that meant Kerry was abandoning his green fight. Yesterday, Moral Money caught up with Kerry — and he insisted that the answer was “no.” Although he was coy about the details of his next role, he said he would continue to champion green issues “from outside the government . . . from a combination of grass roots and private sector”.

Most crucially, he also stressed he would maintain his close partnership with his Chinese counterpart, former minister Xie Zhenhua. This matters: the tight relationship between Xie and Kerry has been one of the most significant — albeit little-known — ties that has helped to maintain green diplomatic bridges between Beijing and Washington amid strategic tensions.

Kerry said that stemmed from a two-decade-long friendship and shared determination to fight for green issues, irrespective of domestic politics.

Meanwhile, Kerry was keen to reject suggestions that the Inflation Reduction Act, Biden’s landmark green legislation, would be gutted if Donald Trump won the presidential race this year. “Eighty-five per cent of the money from the IRA is going to red states,” Kerry pointed out, noting that Republican state governors thus had a vested interest in maintaining the subsidies. Kerry also insisted that the green momentum among corporations was now unstoppable, despite political backlash. “There is no way that the CEO of GM or Ford, say, is going to suddenly say that because there is a new president, let’s go back to making internal combustion engine cars,” he argued. “All corporate boards know they need to act.”

Maybe so: on Tuesday, the Task Force for Nature-related Financial Disclosures revealed that 320 companies — including more than 100 financial services groups — had signed up to its new reporting framework. This was striking. However, as a debate organised by McKinsey showed, the tension between maintaining growth and “going green” remained very real in politicians’ minds — even if McKinsey thought those two goals should support each other.

And the mood among some WEF participants about a post-Trump world was not quite as upbeat as Kerry might hope. “I am investing in America — but I don’t know I will do this if Trump wins. He is so unpredictable,” one chief executive told me. This debate will run and run. (Gillian Tett)

Corporate human rights concerns come into focus amid strengthening regulations

Late last year, “fast fashion” giant Shein quietly filed for an initial public offering in the US. If the Chinese company completes its public listing this year, it is likely to be one of the biggest IPOs of 2024. Shein is the world’s third-largest “unicorn” company, according to CB Insights. (A unicorn is defined as a private company valued at $1bn or more; Shein was most recently valued at $64bn).

But Shein’s stock market hopes have invited public criticism about human rights in its supply chain. Last year, Congress’s US-China Economic and Security Review Commission published a report about “controversies in Shein’s business practices”, which included allegations of coercive and exploitative labour practices. After news of the company’s IPO aspirations, several Republican attorneys-general called on US stock exchanges to have “zero tolerance” for foreign companies that faced credible allegations of human rights breaches.

Shein said in a statement that it “has a zero-tolerance policy for forced labour”.

“To comply with US law, we require our contract manufacturers to only source cotton from approved regions,” the company said, contradicting the report’s findings.

Though Shein is in the spotlight at the moment, such human rights worries are far from unique in the apparel business. See, for example, a report published last week by KnowTheChain, a non-profit that ranks companies on possible forced labour concerns. The study’s top score, indicating fair transparent labour practices, was awarded to Lululemon, the Vancouver-based “athleisure” brand.

“Lululemon [has] disclosed markedly stronger human rights due diligence efforts to address forced labour risks in its supply chains,” the report said. Its stock market performance “demonstrates that a corporate strategy which embeds human rights due diligence does not have to come at the cost” of investors, the report said.

Lululemon’s shares have surged 49 per cent over the past 12 months — easily beating a 4.6 per cent rise for the S&P Retail Select Industry index.

Other top-performing companies included Puma, Adidas, Hennes & Mauritz and Zara-parent Inditex. (The report only scores public companies so Shein was not included.)

In contrast, 13 of the 65 companies scored had rock-bottom scores of five or less out of 100. Many of these groups were marked down for failing to disclose what measures they took in response to possible rights violations.

Notably for the companies’ shareholders, only about 10 of the companies disclosed even partial information about where they sourced cotton, which is of particular concern given documented cases of Uyghur human rights abuses in cotton production. Cotton suppliers are under increasing scrutiny as new regulations around supply chain transparency start to be introduced.

Germany’s Supply Chain Due Diligence Act went into effect a year ago, and this year it is broadening to include companies with more than 1,000 employees. The law requires companies to take human rights into consideration when working with suppliers. Similar legislation is on the way for the EU as a whole. In 2022, the US Uyghur Forced Labor Prevention Act banned imports from the Xinjiang Uyghur Autonomous Region.

Companies eager to boost their scores should have governance programmes in place to oversee and address human rights issues as they arose, Áine Clarke, project director for the KnowTheChain benchmarks, told me. Ideally, a company’s sustainability committee should report to the board of directors, she added. 

“When companies have board involvement — when it comes from the top down — that is the most effective way to drive change on this internally,” Clarke said.

The issue of board oversight came up last year at TJX, the parent company of TJ Maxx (known outside North America as TK Maxx). TJX faced a shareholder proposal asking the business to disclose more information about its due diligence to prevent forced labour in its supply chain. But this proposal did not pass, with BlackRock and Vanguard among the investors declining to back it.

In the most recent report, KnowTheChain gave TJX a low score of nine. The company was one of a number surveyed that disclosed no relevant supplier or sourcing data. 

A spokesman for the Massachusetts-based company said TJX “believes in the importance of responsible and ethical sourcing in [its] supply chain” and pointed to the company’s social compliance programme. 

Poor scores for human rights records can have implications for shareholders.

In 2020, Standard Life Aberdeen, the UK’s largest listed asset manager, sold almost all of its shares in Boohoo, a big fast-fashion retailer. The stock sale came immediately after a Sunday Times investigation that alleged workers were paid below minimum wage and suffered from poor working conditions.

“It is in investors’ interest to be proactive in engaging with companies on these issues,” Clarke said. “It is in their own interest to be looking at these issues and taking them into account.” (Patrick Temple-West)

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