RESOLVED: Shareholders request the Board of Directors prepare a report, at reasonable cost and omitting proprietary information, on Kroger’s human rights due diligence (HRDD) process to identify, assess, prevent and mitigate actual and potential adverse human rights impacts in its operations and supply chain.   

Supporting Statement:

In line with the HRDD approach outlined by the UN Guiding Principles on Business and Human Rights,[1] we recommend the report include:

• The human rights principles used to frame its risk assessments;
• The human rights impacts of Kroger’s business activities, including company-owned operations and supply chain, and plans to mitigate adverse impacts;
• The types and extent of stakeholder consultation; and
• The company’s plans to track effectiveness of measures to assess, prevent, mitigate, and remedy adverse human rights impacts.

HRDD measures reduce long-term risk to shareholders. Companies that proactively identify and mitigate human rights abuses avoid costly backlash from communities, customers, and government regulators. Indeed, risks exist not only for companies directly producing products connected to human rights violations, but also those selling such products.[2] For supermarkets, this creates an imperative not to cause or contribute to abuses to workers and farmers in their supply chain. COVID deepens this hazard. Companies have endured backlash for failing to ensure protections for workers,[3] and “COVID-19 has put supply chains under unprecedented public scrutiny from a logistical perspective, [which] highlighted another key issue…rapidly gaining traction among governments and regulators worldwide: human rights.” [4] Given Kroger’s business relationships with suppliers operating in high-risk sectors, the company’s current business model exposes investors to significant reputational – and in turn, financial – risk.

Increased public scrutiny on industries reliant upon child and forced labor has likewise magnified the reputational risk: coverage by the NY Times detailed slave labor in Southeast Asia’s shrimp industry;[5] the Wall Street Journal revealed migrant labor abuses in Malaysia’s palm oil sector;[6] and CNN chronicled rampant labor abuse among U.S. tomato producers.[7] When tainted products attach to a brand, the reputational stain follows.[8] Kroger is not immune to these threats. The Department of Labor has identified dozens of food products that appear on Kroger’s shelves produced from child or forced labor, including seafood, tea, palm oil and fresh produce.[9] Responsible companies must strive to identify, remedy and prevent such human rights violations.

Transparency in supply chain sourcing can reduce these risks. Companies like Coca-Cola and Mondelez, and supermarkets Jumbo, Albert Heijn, Lidl, and Tesco have all conducted or committed to HRDD, including by conducting human rights impact assessments on their agricultural commodity sourcing.

Given the low cost of integrating HRDD relative to the significant costs that companies bear when tied to human rights violations, shareholders urge the Board to adopt and disclose these measures as a cost-effective means of reducing exposure to risk and maximizing long-term financial interest. 

[1] https://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf

[2] https://www.fm-magazine.com/issues/2016/dec/human-rights-risks-in-supply-chain.html

[3] https://www.bloomberg.com/news/articles/2020-03-27/food-workers-getting-sick-is-the-latest-threat-to-world-supply;  https://www.bbc.com/news/technology-53079624;

[4] https://www.jdsupra.com/legalnews/supply-chains-under-scrutiny-targeting-65407/

[5] https://www.nytimes.com/2014/06/22/opinion/sunday/thai-seafood-is-contaminated-by-human-trafficking.html

[6] https://www.wsj.com/articles/palm-oil-migrant-workers-tell-of-abuses-on-malaysian-plantations-1437933321

[7] https://www.cnn.com/2017/05/30/world/ciw-fair-food-program-freedom-project/index.html

[8] See, e.g., https://www.bizjournals.com/cincinnati/news/2019/08/16/p-g-faces-criticism-for-buying-palm-oil-allegedly.html; https://nowtoronto.com/news/chocolate-child-labour-slavery-hersheys/; https://www.theguardian.com/environment/2019/oct/05/tesco-m-and-s-supermarkets-likely-to-have-soya-linked-to-deforestation-supply-chains

[9] https://www.dol.gov/sites/dolgov/files/ILAB/ListofGoods.pdf

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