2018 has been a big year for business and human rights. We have seen the topic continue to rise up the agenda with:
- the first due diligence plans being published in line with new French Duty of Vigilance law and the recent passing of the Australian Modern Slavery Bill in November;
- the 8th UN Forum on Business and Human Rights with a record number of private sector attendees;
- the UN Working Group on Business and Human Rights issued a report to the General Assembly on human rights due diligence, with recommendations to governments, companies and investors, and;
- the recent 70th Anniversary of the UN Universal Declaration of Human Rights reminding us of the great progress since it came into effect as well as the role that global business has in tackling the challenges that remain.
But with new legislative requirements, volatile political and economic outlooks that increase vulnerability to human rights abuses and ever-growing supply chains, how can businesses safeguard human rights? Here are some of our reflections:
Partnership is the new leadership
Human rights issues are complex and often run deep into the supply chain. Moreover, companies should be mindful that, in some cases, they are operating in contexts where the term ‘business and human rights’ has little or no currency. For meaningful change to happen, solutions need to be broad-based and collaborative. This means working across sectors, geographies and stakeholder groups.
Collaborating in this way can help to share lessons learned, develop common standards, share the cost of solutions and increase leverage that a company may not have on its own (for example with suppliers). Adopting a partnership approach can also help to align with wider frameworks and guidelines such as the UN’s Sustainable Development Goals, which have seen unprecedented public and private sector collaboration to achieve scale. However, a key consideration for any partnership approach should be to include local organisations and networks wherever possible to ensure that global standards and frameworks are contextualised.
Government legislation can be a powerful catalyst for change
The French Duty of Vigilance law puts the UN Guiding Principles on Business and Human Rights (UNGPs) into practice, requiring large French companies to implement a plan to prevent human rights violations. Although only a year old, it has been praised as the most developed legislation of its kind. However, concerns remain that many companies have still not grasped the concept of salience and continue to develop plans through the lens of risk to the business rather than risk to people.
There is a general call for further legislation that translates human rights principles into law, to push companies into action and create a more level playing field for business. Building on this is an increasing expectation for governments to apply due diligence practices to public procurement as well as to the private sector. Australia’s Modern Slavery Act allows for this, with the government applying the same rules that they are asking business to follow to themselves, as well as going a step further than the UK by hosting a central registry for statements.
Global frameworks and guidance need to align to help business adhere to best practice
There are several international standards to promote corporate respect for human rights, but there is need for greater alignment between them. Specifically, we need coherence on essential elements of human rights due diligence. There are some efforts to co-ordinate, for example working group efforts to create better alignment between the OECD Guidelines for multinational enterprises and UNGPs. However, there is still a lack of clarity for business.
One of the biggest issues is the imbalance of guidance, with many initiatives saying do no harm but few addressing how to put this into practice. The result is often an excess of policies lacking harmony, raising the question of how to speed up the process from abstract to impact.
The 2018 release of the OECD Due Diligence Guidance for Responsible Business Conduct is a step forward, helping to clarify practical steps for businesses to implement human rights due diligence and scale up responsible business practice. As these processes are ongoing, it is important for them to be monitored regularly as human rights risks change over time. Better alignment of due diligence best practice and clarity on how to implement processes will make it easier for companies to recognise and fulfil their responsibility to respect human rights.
It is time to turn policy into action
Human rights due diligence, audits and supporting policies are essential for companies to effectively identify and assess risk. However, these need to be translated into action on the ground. This means using data to drive change in management systems and processes, supplier capability building and partnership approaches. Companies should also measure the effectiveness of their actions and be transparent in their reporting. Doing this gives investors, consumers and civil society the assurance that there is not a disconnect between policy commitment and operational activity.
Companies are beginning to understand the limitations of policies addressing human rights issues in the supply chain. For example, during the UN Forum on Business and Human Rights, Nestlé highlighted how they had learned from audit results and external benchmarks such as the Corporate Human Rights Benchmark (CHRB) and partnered with relevant local organisations to give workers a voice at the local level. Another example of putting policy into practice is through supplier capability building to ensure policy requirements are understood and owned throughout the supply chain. Iberdrola, a multinational electric utility company, has developed awareness-raising videos to explain sustainability concepts and requirements to suppliers beyond tier one. They have also undertaken an independent gap analysis of subsidiaries to highlight where they are falling short of company policy and identify corrective actions.
By taking this sort of action and learning from feedback, companies can begin to tackle root causes, improve operations and demonstrate real commitment to external stakeholders.
Investors are interested – and have the power to do more
Investors have had an increasingly important role in driving responsible business in recent years, and this trend looks set to continue. Moreover, research shows the clear link between responsible business behaviour and strong financial performance. For instance a Bank of America study that found “Investors who held stocks with above average environmental and social scores would have avoided investing in 90% of companies with post 2008 bankruptcies” was quoted at this year’s UN Forum on Business and Human Rights. In keeping with these findings, sustainability assessments are increasingly becoming part of investors’ financial assessments of companies.
Investors undoubtedly have a great deal of leverage, but they cannot act alone. In order to realise their full potential for influencing change, investors need to connect with other stakeholders such as governments and trade unions. Furthermore, enterprise associations and stock exchanges have a crucial role to play in providing a space where investors meet markets. With increasing information available to investors on social issues through benchmarks and indices, there is a far greater understanding of the risks and the need to push companies to act on human rights.
Small businesses have a big role
Although the UNGPs are applicable to all companies, most companies implementing human rights due diligence have been larger companies with more resources. However, there is growing recognition of the importance of the role of SMEs in this context, as they form the backbone of local economies around the world. For example, in developed economies SMEs account for 41% of employment.
A common challenge in supporting SMEs is the disconnect between large headquarters, subsidiaries and suppliers. This is not helped by the assumption that the language of human rights is easily translatable, and that practices are easy to implement. For responsible business to be applicable to the masses, existing frameworks on human rights due diligence should be adjusted to be more applicable and straightforward for smaller companies and local networks to implement.
With the UK government’s Independent Review of the 2015 Modern Slavery Act due to be completed in March, the unknown socio-economic implications of Brexit and the introduction of reporting requirements under new legislation -2019 is set to be an important year for business to address responsibility around respecting human rights. Sancroft can help business in the following ways:
- Undertake a mapping and gap analysis exercise against international legislative requirements and standards
- Carry out a comprehensive human rights risk assessment at the business, country or commodity-level.
- Develop a holistic human rights programme through activities such as human rights due diligence and policy formulation.
- Support the development of credible reporting and associated activities in response to legislative requirements.