Proposal seeking report on Mondelēz human-rights policy attracts support

Almost one third of votes cast at Mondelēz International’s AGM last week backed a shareholder proposal asking the snack-maker’s board to ‘commission an independent third-party report… assessing the effectiveness of the company’s implementation of its human-rights policy for operations in conflict-affected and high-risk areas (CAHRAs), including Russia/Ukraine.’

The resolution, filed by Wespath Funds Trust, seeks information in the report that:

• Analyzes the effectiveness of the policy’s assessment, mitigation and reporting on human-rights risks in CAHRAs, such as Russia and Ukraine
• Assesses whether ‘additional policies, practices and governance measures are needed to mitigate risks.’

The measure was backed by 31.4 percent of votes cast at the meeting. Although not a majority, governance professionals generally regard this level of support as significant. Wespath is a general agency of The United Methodist Church. Mondelēz owns brands such as Oreo, Ritz, Clif Bar, Cadbury Dairy Milk, Milka and Toblerone.

Wespath writes in its filing with the proposal: ‘Mondelēz commits to using the UN Guiding Principles on Business and Human Rights (UNGPs) to prevent and mitigate human rights risks. The UNGPs call on companies to conduct heightened human-rights due diligence (HRDD) in CAHRAs due to widespread human rights abuses and violations of national and international law. Multilateral organizations, EU states and accounting bodies are passing legislation on mandatory HRDD and sustainable investment reporting while also calling on companies to report on material human rights risks.’

Wespath states that Mondelēz’s operations in Russia and Ukraine ‘expose the company to material human-rights risks’, noting that the US and EU have imposed sanctions and export controls on Russia and its state-owned businesses in response to the invasion of Ukraine and associated allegations of war crimes. The Russian government’s ‘partial mobilization’ order threatens to disrupt Mondelēz’s operations and puts its employees and assets at risk, while Mondelēz’s factory in Ukraine was damaged by a Russian military attack last year, according to the proponent.

‘Mondelēz lags industry peers in responding to the heightened risk of operating in Russia… [The company’s] activities [there] may result in brand damage, violations of the company’s [human-rights policy] and the UNGPs and exposure to Russian sanctioned entities, warranting increased disclosure,’ Wespath concludes.

Jake Barnett, managing director for sustainable investment strategies at Wespath, says in a statement: ‘Wespath believes the significant investor support for this resolution demonstrates that a substantial portion of Mondelēz’s shareholders feel human rights risk is a material issue that deserves heightened attention, especially as it relates to the company’s operations in [CAHRAs]. We remain open to further engagement with Mondelēz on management of human-rights risk as it considers how to respond to the strong vote for this resolution.’

Board opposition
The Mondelēz board had urged shareholders to vote against the proposal, writing in the proxy statement: ‘In our annual Snacking Made Right report, we transparently publish progress updates, metrics and robust performance data on our sustainability priorities, including our efforts to enhance social sustainability and our respect for human rights across the whole value chain.

‘We also provide information about this work in our annual [HRDD] & Modern Slavery Report, human rights policy and other reporting, and we already transparently report on our operations in Russia and our humanitarian efforts in Ukraine…. [T]he additional report sought by the proposal would be unproductive and duplicative and would not add to shareholders’ understanding of the company’s ongoing efforts to address the core issue.’

The board argued that Mondelēz:

• Has strong governance practices and board oversight of social sustainability, including human rights, such as a cross-functional international human rights working group
• Undertakes ‘practical, proactive, ongoing [HRDD] to identify, mitigate and reduce the likelihood of potential and actual human-rights impacts within our own operations, and [works] with our business partners across our supply chain to achieve the same’
• Has ‘scaled down our activities in Russia and we have established a $15 mn commitment together with the Mondelēz International Foundation to support Ukraine, Ukrainian citizens and refugees with cash and in-kind contributions’
• Is ‘continuously supporting our colleagues in Ukraine and have invested in repairing and rebuilding our local manufacturing facilities, which have now returned to operations.’

A request for comment from Mondelēz on the vote was not returned immediately.