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A grievance is an allegation, issue, or problem that a person or group of people report to a financial institution that concerns their treatment or experience (actual or perceived). Similar terms include ‘complaint’ or ‘concern.’
A grievance mechanism is defined in the UNGPs as a process through which grievances concerning business-related human rights abuse can be raised and an effective remedy can be sought. In practice, it is a formalised process through which the institution deals with a grievance or complaint. It includes the procedures and systems for receiving complaints of any sort and facilitating their resolution. Resolution may include steps to enable complainants to seek remedy.
Grievance mechanisms for FIs
A grievance mechanism can help financial institutions (FIs) ensure that remedy is provided to individuals or communities that have experienced adverse human rights impacts (see section on ‘Remedy’). An effective grievance mechanism can also help FIs identify and mitigate emerging human rights issues early before they escalate into a significant (and potentially costly) risk, contributing to risk mitigation efforts (see relevant section in ‘Taking Action‘). When implemented correctly, a grievance mechanism can also support ongoing monitoring and reporting efforts (see section on ‘Monitoring’).
In practice, FIs should consider providing access to an effective Grievance Mechanism for these categories of rights holders:
- Its own workforce and the workforces of third parties (e.g. suppliers, contractors)
- Customers (e.g. consumer banking customers)
- Individuals or groups (including workers and communities) connected to an FI’s financing (e.g. project affected communities and workforces)
Effectively achieving this goal will vary from case to case. In some cases, it may be advantageous to establish one or more specialised grievance mechanisms that are designed for use by specific pre-defined groups, while other mechanisms may be open to a broader range of stakeholders, including the public at large. They may also be administrated by FIs alone or in collaboration with other relevant stakeholders, and may also be provided through a mutually acceptable external expert or body.
Additionally, in the financing context, FIs will be responsible for ensuring that mechanisms at the client level are in place, and that the client’s grievance mechanism aligns with human rights standards and good international practice.
Effectiveness of grievance mechanisms
The UNGPs includes criteria for evaluating the effectiveness of grievance mechanisms. These criteria provide a useful guide for evaluating the effectiveness of an FI’s own grievance mechanism, as well as that of its clients.
The following overview of criteria is adapted from Equator Principles Association, Assessing effective grievance mechanisms design: diagnostic questions (Tool GM1) and UN Human Rights, Accountability and Remedy Project: Meeting the UNGPs’ Effectiveness Criteria:
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Legitimate
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- Engagement – engage with stakeholders whom the grievance mechanisms is intended serve for input into the mechanism’s design It is crucial to consider stakeholders perspectives to build trust in the mechanism
- Independence and objectivity – minimise the risk of undue influence from any actor
- Tailor – to the level and nature of risk. Different risk profiles may require different grievance mechanism designs and considerations (e.g. more severe risks may require a more systematic and formal procedure, independent oversight, etc.)
- Resource and support – the mechanism has sufficient resource to operate effectively and is visibly supported by senior leadership (e.g. in internal / external communications)
- Remedy – the grievance mechanism is designed and equipped to provide or enable remedy (see also section on ‘Remedy’)
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Accessible
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- Barriers – grievances can be submitted through a variety of different channels / access points and mechanism is available in all relevant languages and with consideration for other factors such as literacy, costs, and physical location
- Vulnerable stakeholders – consider additional measures to ensure accessibility for individuals that are particularly vulnerable (e.g. migrant workers, women, young workers)
- Non-reprisal – there is a formal commitment to non-retaliation and safeguards to protect complainants (e.g. anonymity)
- Awareness – there are proactive measures to raise awareness about of grievance mechanism among relevant stakeholders
- Complementary – the mechanism does not impede or require complainants to waive the exercise of any other human rights
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Predictable
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- Clear procedures – including defined steps, rules, responsibilities, monitoring procedures
- Clear expectations – about the process and potential outcomes
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Equitable
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- Information – complaints are able to access and comment relevant information (e.g. about a company’s activities) that is related to their grievance
- Escalation – there is a clear escalation procedure that can be activated by any party, including the complainant
- Provide (or direct affected stakeholders to external sources of) advisory, technical, and financial support
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Transparent
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- Eligibility – clearly define types of grievances covered by the mechanism and eligibility criteria for submissions (e.g. timeframe, linkage to investment activities)
- Process – complainants receive acknowledgement of receipt of grievance and regular updates on status of complaint
- Performance – use and outcomes of the GM are regularly and publicly reported, with adequate protections to safeguard confidential information
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Rights compatible
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- Protecting rights and ensuring that outcomes and remedies accord with internationally recognized human rights
- Remedies should be adequate, effective, prompt, culturally appropriate, and gender-sensitive
- Consult affected stakeholders about the type of remedy and the manner in which it should be delivered
- Different types of remedy (e.g. both financial and non-financial) should be considered
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Continuous improvement
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- GM performance is regularly reviewed and processes updated to improve effectiveness where needed, including through stakeholder engagement
- The GM is a source of continuous learning and can identifying patterns or issues that can inform policies, procedures or practices in order to prevent future harm
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Based on engagement and dialogue
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- Engagement – the development and performance of mechanisms should benefit from consultation with stakeholders for whom the mechanism is intended
- Dialogue – dialogue should be a key means of grievance resolution
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Review, assess, and engage with clients’ / investees’ grievance mechanisms.
FIs play a key role in enabling access to remedy for individuals affected by the activities of their clients or invested companies. Ensuring that clients / investees have robust grievance management systems is therefore crucial. To ensure that grievances are effectively resolved by clients / investees, FIs can monitor how complaints are managed and resolved, set expectations, provide guidance on good practice, and ensure accountability. This might entail:
- FIs using / building their leverage to help investees develop adequate GMs, including technical support where relevant
- Playing a role in the provision of remedy (see section on ‘Remedy‘).
Monitoring effectiveness of grievance mechanisms
Institutions should monitor the effectiveness of grievance mechanisms, including both internal mechanisms as well as the mechanisms of clients or investees. Monitoring, whether internal or investee mechanisms, can be supported by indicators, examples of which are provided below (adapted from Equator Principles Associations, Assessing effective grievance mechanisms design: diagnostic questions, tool GM2).
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Example indicators |
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Number of grievances
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- Number of grievances received during the reporting period disaggregated by type of affected stakeholder and human rights issue
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Training
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- Trainings on raising grievances and grievance management, including grievance handling (to management and employees) and training themes (e.g. escalation, dispute resolution, non-retaliation)
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Process
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- Existence of grievance mechanism gap analysis against the effectiveness criteria
- Existence of public information on the existence of the grievance mechanism.
- Status of grievances – e.g. resolution rate (by issue type, demographics) and / or number of grievances accepted, rejected and on what grounds, pending, escalated, etc.
- Number, type and format of stakeholder engage to design the mechanism
- Number of claims for lack of independence, conflict of interest or undue influence
- Time to review and/or resolve (by issue type)
- Number of human rights experts playing a key role in the mechanism
- Stakeholders’ perception on process, accessibility, timelines, predictibility etc.
- Number and type of policies to remove access barriers
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Outcomes
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- Types of outcomes (by issue type, complainant characteristics)
- Number of completed cases
- Number of cases where the opinion / insights of affected stakeholders was considered to decide on the complaint / type of remedy
- Number and type of follow-up activities
- Types of remedy provided (financial and not financial)
- Changes to institutional / company policies or practices as a result of grievances
- Percentage of stakeholders who feel channels for raising grievances are accessible, fair and worth using (e.g. through anonymous survey)
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Case studies and further reading
Case study: remedial contact points
Mitsubishi UFJ Financial Group joined the Japan Centre for Engagement and Remedy on Business and Human Rights (JaCER) in 2023 to establish remedy contact points. These contact points can be accessed by employees, customers and other stakeholders (e.g. communities, neighbourhood residents) seeking a response to human rights-related issues and other matters.
Case study: ANZ grievance mechanism for adverse human rights impacts associated with institutional and corporate lending clients
In 2021, Australia’s ANZ Bank adopted a Human Rights Grievance Mechanism to evaluate complaints of adverse human rights impacts associated with its institutional or corporate lending customers. Key features of the mechanism include:
- Accessibility: The grievance mechanism is designed to be easily accessible to all stakeholders, including employees, customers, suppliers, and communities impacted by ANZ’s operations. Complaints can be submitted through various channels, such as in-person, online, or via telephone.
- Transparency and fairness: ANZ ensures a transparent process where grievances are acknowledged, investigated, and resolved fairly. Complainants are informed about the status and outcome of their complaints.
- Timely resolution: The bank commits to addressing grievances promptly, with specific timelines for different stages of the grievance process. This includes acknowledgment, investigation, and resolution.
- Confidentiality and protection: The mechanism guarantees confidentiality for complainants and protects them from retaliation. ANZ provides a safe environment for individuals to raise concerns without fear of adverse consequences.
- Remediation and continuous improvement: When grievances are found to be valid, ANZ takes appropriate remedial actions to address the issues. The bank also uses insights from grievances to improve its human rights practices and policies continuously.
- Governance and accountability: The grievance mechanism is overseen by a dedicated team that ensures compliance with internal policies and international human rights standards. Regular reviews and audits are conducted to maintain the effectiveness of the mechanism.