Universities Can Put Their Economic Clout to Good Use

Michael Morgenstern for The Chronicle

November 17, 2014

In every major movement for greater democracy and the protection of human rights, university students have played a central role. From Tiananmen in China to Tahrir in Egypt, student movements have elevated public discourse on human rights. On some human-rights issues that affect universities themselves, such as in addressing global sweatshop practices, student groups have served as catalysts, prompting colleges and universities to assume a leadership role in our society.

Beyond their essential missions as institutions of higher education that teach and inspire, conduct research and publish scholarship, they also have a responsibility to respect human rights in the ways they operate. When the issue of global labor practices in manufacturing emerged in the 1990s, American colleges and universities led the way in developing practical labor standards and better, affordable ways to monitor and improve the production of their licensed products.

In the midst of football season, it is clear to see the economic benefit that licensing provides to American universities; the market for licensed collegiate merchandise is worth an estimated $4.5-billion a year. And while there has been tremendous progress since the birth of the antisweatshop movement on campuses, in the 1990s, some universities still need to assume greater responsibility for labor rights in their licensing programs.

In addition to continuing to work with monitoring and accountability organizations, such as the Fair Labor Association and the Worker Rights Consortium, universities should screen potential suppliers for their capacity to manage labor-rights challenges in their supply chains. It’s a step that should be taken both before licensing proposals are accepted and at the point of renewal. Some, including the University of Michigan and the University of California at Los Angeles, are doing this, but more need to follow.

Universities also should view their efforts on licensing as part of a broader commitment to include human-rights standards in their purchases of hundreds of billions of dollars of goods and services each year. Many universities have made progress in considering the environmental impact of their purchasing decisions. Now they need to turn their attention as well to the protection of people and their rights at work, and to make those considerations a prominent feature of their procurement practices for goods and services.

The University of California system spends more than $7-billion each year on purchases. It has an extensive and laudable commitment to environmentally preferable purchasing goals. And while the system’s supplier agreements require a certification that foreign-made products will not be produced by forced or prison labor, it does not incorporate any of the other fundamental labor-rights protections codified by the International Labour Organization. Why not?

Yale University, which spends more than $1-billion a year on procurement, stipulates that its purchasing decisions are based on "a mix of social, environmental, and economic considerations." But its procurement guide offers little specific content relating to human rights and labor practices. Stanford University’s guidelines are even narrower, focused almost exclusively on "minimizing harmful effects to the environment." But the human-rights and labor dimensions of purchasing practices are missing.

The investment policies and practices of universities are a third area where universities can and should be doing more. Even in the mainstream investment world, long-term concerns about sustainability are starting to influence behavior. In September, the Rockefeller family announced that its family foundation would divest from fossil fuels. Thus the $860-million legacy of Standard Oil is now committed to investments in clean energy and other sustainable technologies. The Rockefeller foundation and other investors have come to recognize that the long-term health and stability of investments are connected to the long-term health and stability of the societies in which they operate and invest.

To be sure, the obligations of university endowments differ significantly from those of family foundations or state pension funds. The combined endowments of American and Canadian colleges and universities total more than $450-billion. These endowments generate vital resources to support research, education, and scholarships. The generous tradition of philanthropy and financial stewardship within our academic institutions has made the United States the leader in higher education.

Mindful of this important legacy, a number of universities have begun to adopt investment policies that incorporate environmental and social concerns more into their investment policies and practices. Certainly, academic institutions hold a special place in our democracy, and they should not see themselves as political actors. But they are not exempt from responsibility for the impact of their investments when it comes to the environment and human rights.

A number of universities have established advisory committees to examine the impact of their portfolios on social and environmental issues and have adopted statements on responsible investment policies. But too often the debate is purely reactive, focused on those issues that are the subject of student campaigns or wide media attention.

Typically these discussions focus narrowly on divestment in extreme cases as the only tool available to influence the behavior of companies in an endowment’s portfolio. Stanford’s decision this year not to invest in publicly traded companies whose principal business is the mining of coal is noteworthy and has received considerable attention, but there are other options.

Universities need to move from the defensive, fending off divestment campaigns, to a more affirmative approach, examining how they can maximize their investments in companies that adopt longer-term business models that embrace sustainable environmental and human-rights business practices. Simply by making clear that these issues matter to them, universities can stimulate a broader debate within the investment community and in society generally. To advance their thinking on these issues, major universities should come together to develop a better coordinated, more creative and expansive approach to their investments, an approach that will yield solid financial returns while rewarding long-term, sustainable business practices.

In these and other areas, universities have significant economic power and therefore influence. Now is the time for them to take a hard look at their own role in protecting human rights through their everyday decisions as licensors, purchasers, and investors. If they take up these challenges, I am confident they can make an important difference.

Michael Posner is a professor and co-director of the Center for Business and Human Rights at New York University’s Stern School of Business.