Key trends from the world’s largest annual gathering on business and human rights

By Rachel Weller

Key trends from the world’s largest annual gathering on business and human rights

Human rights is fast becoming a priority for businesses, investors and regulators. While the landscape feels complex, there is increasing clarity about what corporate responsibility to respect human rights means, and how this should be achieved. What questions should you be asking about your organisation’s resilience to cope with human rights risks? Rachel Weller, who leads our work on human rights, outlines four key takeouts from the recent UN Forum on Business and Human Rights, the world’s largest annual gathering on business and human rights.

How effectively can your organisation hear directly from people on the ground about the risks they face before they escalate?

Workers and communities tend to be best placed to monitor and uphold their rights and to alert businesses to potential scandals before they occur. For businesses and investors, this means establishing and strengthening channels through which to hear about, and address concerns– so that potential violations and scandals can be prevented and put right – before they attract media headlines and litigation. Leading businesses and investors recognise that engaging with rightsholders – people and communities potentially impacted by human rights violations – is an asset not a burden to their organisation, and are embracing new approaches such as worker-driven social responsibility, which involves workers monitoring their own working conditions, rather than third-parties. These strategies have been proven to improve outcomes for workers and for businesses, including mitigating disruption to operations and securing the social license to operate. Conversely, evidence continues to demonstrate that  social audits are not effective in protecting people in global supply chains from labour exploitation, despite the millions of pounds spent on them each year. As a recent Human Rights Watch report documents, social audits are less effective at detecting serious violations such as forced labour, discrimination and harassment, and that some suppliers and auditors are adept at hiding abuses.

As policymakers finalise the details of human rights due diligence legislation, labour rights groups are advocating that businesses should not be able to outsource their responsibility – or liability for due diligence to third parties such as auditors or certification bodies. While these tools may play a role, they are not sufficient on their own.

Leading businesses and investors recognise that engaging with rightsholders – people and communities potentially impacted by human rights violations – is an asset not a burden to their organisation.

How prepared is your organisation to respond to and remedy abuses?

Access to remedy – the third, and until recently, neglected pillar of the UN Guiding Principles on Business & Human Rights (UNGPs) is receiving more attention. Business must obviously work to prevent the risk of human rights violations; but when they do occur – and awareness is growing as to just how pervasive these violations are in global supply chains – there is an urgent and pressing requirement to make the situation right for those people who suffer. The private sector increasingly cannot escape scrutiny or avoid accountability for human rights abuses that they have caused or contributed to. This includes the growing prevalence of value chain litigation; most recently Tesco is the subject of a landmark lawsuit in the UK from garment workers in Thai factories over exploitative conditions.

Leading businesses are taking a proactive approach to not only prevent harm to people, but developing critical response processes so that they are ready to respond when evidence comes to light that harm has occurred. Leading investors are using their leverage to promote companies’ preparedness for and provision of remedy and are adopting investment-level grievance mechanisms. This is especially relevant for investors that have greater influence over strategy and potential to cause and contribute to harms, such as private equity and venture capital investors.

The era of mandatory and legally-binding measures on human rights has arrived – how prepared is your organisation?

With widespread recognition that voluntary measures have failed to protect people and planet from harm, the authoritative global standard, the UN Guiding Principles on Business & Human Rights (UNGPs) is being codified into laws worldwide. Momentum is also building on an internationally legally binding instrument to regulate the activities of transnational corporations. The treaty, which has been in development since 2014, seeks to impose obligations on states to take steps to ensure businesses respect human rights, and enable victims’ access to justice and effective remedy.

Using the UNGPs as their compass, businesses are advised to start adopting a human-rights approach now rather than wait for the exact details of the regulation to emerge. This requires fundamental changes, including the integration of human rights into corporate strategy and significant upskilling across functions, from procurement to product development, to legal teams as well as boards and senior management.

Pressure on and from investors is heating up – is your organisation prepared?

While ESG investing is mainstream, most investors are not yet adopting a human rights-based approach. However this is set to change; there is increasing scrutiny of the finance sector’s role in protecting human rights, including as a means to protect and enhance value, and to align with the demands of beneficiaries and clients. The UN Working Group on Business and Human Rights is turning its attention to the finance sector this year, and the UN Principles for Responsible Investment has pledged to put human rights on par with climate change as a strategic priority and has recently launched a new stewardship initiative to take action on human rights and social issues. The EU taxonomy, meanwhile, requires investments to meet ‘minimum safeguards’ on human and labour rights to be marketed as sustainable – this means having procedures to align with the UNGPs and other labour and human rights standards. As a result, we expect to see more action from financial institutions and in turn those they invest in to align with human rights standards.

Leading investors are implementing the UNGPs– committing to respect human rights, understanding the greatest risks posed to people in their portfolios and taking action to prevent and remedy negative impacts – from engaging with portfolio companies’ boards, proxy voting as well as policy advocacy to shape systemic change.

Sancroft can help you understand what the growing focus on human rights means for your organisation and to develop an action plan to strengthen your management of human rights risks and opportunities– in a way that brings value to your organisation. Please contact Rachel Weller.