Navigating expectations on human rights

The United Nation’s reporting framework for business can help companies and investors improve ethical and financial performance

Human rights is a vast area to handle for companies and investors alike and the link to materiality is not always clear.

Corporate-related wrongdoing can include issues as diverse as alleged violations of human rights in relations to hydropower or mining projects; impacts on indigenous people’s rights; and human and labour rights issues in the supply chain of commodities, from cocoa to cotton and palm oil, laptops to tablets and smartphones.

There is a wide variety of corporate responses to human rights – from companies being unwilling to discuss the issue and not disclosing any human rights programmes, to companies proactively disclosing an increasing amount of material on preparedness and performance on various human rights topics. Variations in transparency can depend on many things, such as material risks connected to human rights issues, exposure to responsible investors and other stakeholders, size of the company, national context, company culture, as well as risk exposure.

The consequences for a company with poor human rights policy and programmes are elevated risks, both reputationally and financially – for instance, protests, large legal fines and consumer boycotts, as well as being deselected as a preferred employer or as a business partner or supplier.

So how should a company or investor navigate the field of human rights and what are the tools that can be of aid?

An obligation to protect

There is an underlying and well-known Universal Declaration of Human Rights, adopted by the United Nations (UN) in 1948, and its codes: the International Covenant on Civil and Political Rights (ICCPR) and the International Covenant on Economic, Social and Cultural Rights (ICESCR), together with the principles concerning fundamental rights in the International Labour Organisation’s eight core conventions – as set out in the Declaration on Fundamental Principles and Rights at Work.

Six years ago, the UN Human Rights Council unanimously endorsed the UN

Hanna Roberts

CEO for GES International

Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework (UNGPs), which were developed by the special representative of the UN Secretary General, Professor John Ruggie. The UNGPs addressed the issue in respect to transnational enterprises.1

The UNGPs state that business enterprises have the responsibility to respect human rights wherever they operate and whatever their size or industry.

Some of the core concepts for companies to develop and implement in relation to human rights are on policy, due diligence and remedy.

Corporations should publicly commit to respect human rights and embed this policy in all parts of the organisation. Furthermore, companies should perform due diligence and investigate the most salient human rights risks. For instance, a corporation should assess the scale of the potential impact – how serious is the risk, e.g. are resettlements necessary due to the company’s operations and have those affected been adequately consulted and fairly compensated for their losses? Are migrant workers’ labour rights respected while building a new football stadium? Does the company have an effective monitoring and remediation system in place to ensure child labour is not prevalent in its agricultural supply chain? Will the local government ensure consultation and consent from project-affected indigenous peoples and what can the company do to support and ensure such rights are respected? Companies should also address the scope and number of people who are potentially affected in order to assess how salient and material these risks are.

There will be a need to prioritise the actual or potential violations of human rights. Companies are increasingly asked by investors, consumers, media and non-government organisations (NGOs) to understand and handle these risks and use their leverage to ensure the respect of human rights wherever possible.

Impacts on human rights can often converge with risks to the business as well. Apart from making a positive contribution in society and avoiding harm, there are often strong business cases for human rights – employees and business partners are motivated to work for, or with, a respectful company, legal risks decrease, long-term relationships can be built with communities close to operations, to name a few.

If the situation has already turned bad, then there is a need to address and provide remedy options to those affected. The UNGPs also

provide practical guidance on how remedy can be provided in the form of grievance mechanisms, i.e. appropriate channels where those affected can file claims and have them investigated and, ultimately be compensated through a reliable process. There is a growing number of best practice examples in this particular area that companies can learn from.

Other important features in the area of business and human rights include an understanding of transparency, follow-up and communication. Communication can take a variety of forms, including face-to-face meetings, online dialogues, consultation with affected stakeholders, and formal public reports. Ensuring a consultation process and obtaining consent from indigenous people affected by, for example, a large infrastructure project, is a right that is protected under The Indigenous and Tribal Peoples Convention (ILO 169) and United Nations Declaration on the Rights of Indigenous Peoples. By engaging stakeholders, including local and indigenous people, companies can ensure they comply with international norms and gain what is often referred to as the ‘social licence to operate’. They also mitigate the risk of

Implementing human rights across a company’s activities and business relationships is not an easy task. It takes commitment, resources and time to embed respect for human rights

violating indigenous people’s rights and the related potential consequences, such as protests, road blocks, violence and other security issues.

In order to assist companies navigating how to approach and report on complex human rights issues, the UN Guiding Principles Reporting Framework was developed in 2015 by the Human Rights Reporting and Assurance Frameworks Initiative (RAFI).2 It is backed by an international investor coalition representing more than $5.3trillion assets under management and companies in a number of sectors and countries are already using the framework for public reporting. It is useful for companies, as well as investors and active owners, as it provides a common set of questions to ask and respond to. As an investor advisor, we find it useful to frame dialogues around human rights policy, due diligence (or human rights impact assessments) and disclosure based on the reporting framework.

According to a report by Shift, a nongovernment organisation whose mission it is to put the UN Guiding Principles into practice and who assisted Professor Ruggie in developing the UNGPs, the majority of the 74 companies assessed in 2017, disclosed human rights due diligence on a high abstract level, making it difficult to understand how processes are implemented in practice and whether they are effective or not. 3

In order to further back the public reporting, Shift created the online UNGP Reporting Database in 2016 to support the awareness and sharing of information regarding human rights reporting. 4 The database does not rank or rate companies but can help find examples of leading practice that can inspire other companies.

The recently published Corporate Human Rights Benchmark further helps investors understand the performance of a company in the areas of policy, due diligence, remedies, practices, responses and transparency.5 The benchmark is not only a snapshot in time, but also an opportunity to engage and initiate conversation. In the first benchmark, three sectors known to have significant impacts on human rights were investigated (extractives, apparel and agricultural products).

Implementing human rights across a company’s activities and business relationships is not an easy task. It takes commitment, resources and time to embed respect for human rights. It is important to be patient when dealing with these issues. It can take more than a year for a company to adopt a policy, a further one to two years to ensure that the policy is effectively executed and then some further time before the company feels confident to report publicly on human rights performance.

As investors, it is important to premier the leaders and use their work as examples of best practice for companies embarking on the journey on human rights.

1The UN Guiding Principles on Business and Human Rights. http://www.ohchr.org/Documents/Publications/ GuidingPrinciplesBusinessHR_EN.pdf 2The UN Guiding Principles Reporting Framework. http://www. ungpreporting.org/ 3Human Rights Reporting: Are companies telling investors what they need to know?, SHIFT, May 2017 4The UNGP Reporting Database: http://www.ungpreporting.org/reportingdatabase/ 5Corporate Human Rights Benchmark. https://www. corporatebenchmark.org/

LEADING BY EXAMPLE

Benchmarks were introduced to help companies improve practice