I presented a webinar today on this topic for the GACSO members. The main aim of the webinar was to provide an overview of the regulatory landscape on human rights and business. It also covered the key voluntary framework – the UN Guiding Principles on business and human rights (UNGPs). We ran a number of poll questions that were particularly insightful, but more on these in a minute.
The Rana Plaza disaster brought the risk of human rights abuses directly back into the media and public eye, highlighting both the reputational and operational risks that companies face when things go wrong. As most businesses are aware we are operating in a world where global supply chains are becoming, if they aren’t already, the norm. Whilst many brands are publishing human rights policies and supplier codes of conduct, there is still a lack of transparency in supply chains as evidenced by the recent ‘Behind the Brands’ campaign by Oxfam. Investors are beginning to call for more transparent supply chains to help improve risk and opportunity assessment.
I mentioned the role of government as I believe that government’s responsibility is key to achieving change in the way human rights abuses are eventually going to be tackled. Whilst some people might think that the role of government is to ensure a continuous flow of iPads, red wine or beef, its real responsibility is to ensure the rule of law is upheld in its country. Under the UNGPs framework, Government has a key role to protect human rights abuses. They are now also required to develop human rights action plans to ensure the implementation of the ‘protect’ aspect of the UNGPs framework.
The webinar presentation is on slideshare (found here). There are some key legal compliance issues for companies operating in the US, UK and Europe- these relate to laws now requiring mandatory reporting on human rights issues (see our guide on regulatory compliance overview on legislation). There is also still access to tort using negligence as a means of ensuring companies exercise a proper duty of care in carrying out their regulations. The Frank-Dodd Act, the Alien Tort Statute are still operative and there is also disclosure requirement under the Californian Transparency Supply Chain Act for certain companies.
The Government in the UK in the past weeks has announced that it will be including a requirement for companies to disclose how they will tackle the risk of slavery in their supply chains. What the thresholds will be are to be consulted on. There is also no discussion on enforcement.
Whilst the regulation around disclosure on human rights is increasing , there is also the growing trend of companies being held liable for damages to communities where they are operating outside the parent company jurisdiction.
We are seeing more reference to human rights in contracts, JV agreements, codes of conduct and tenders.
Despite all of these regulatory frameworks, when attendees were asked if the companies they represented had identified potential human rights related risks
only 38% said yes. If that is representative of companies across the board, that means almost 60% of companies are not aware of compliance with human rights issues.
The UNGPs are, however, seen as a game changer for business and human rights issues. Unanimously endorsed by the UN Human Rights Council, they set out a ‘protect’, ‘respect’ and ‘remedy’ framework. There are clear principles for business to adopt to ensure that they are respecting human rights. The UNGPs, although they do not create any new legal obligations are the universal benchmark for companies. More importantly to companies is that the principles are making their way into ‘hard law’ like contracts and codes of conducts.
So how can the UNGPs assist with what is expected of companies? They set a framework of what it means to meet the obligation to respect human rights, such as the requirement to have a human rights policy and conduct due diligence to ensure that procedures enforce the policy. Again in our poll questions only 40% of companies represented had a human rights policy. Of the 40% only 50% of these had processes in place that substantiate the policy statement. Given the fact the protecting a company from liability will depend on the extent of robust processes and in the case of reporting, justifying what has been said, there is a long way to go to get to the place Professor John Ruggie envisaged. That is, responsible business behaviour in the context of human rights.
It was unsurprising that 25% of the respondents said they had not developed a due diligence assessment to ensure that it can meets its commitments and 75% were simply ‘not sure’.
Clearly, a lot of work needs to be done. Particularly seeing as legal obligations are on the rise in this area. There has recently been a lot of talk about Switzerland looking to potentially make human rights due diligence mandatory. The implications of such developments across legal systems would be significant for companies.
So what should business be doing? As a starter get human rights on the board agenda. Top management buy in is key. After that, it’s about finding the right resources and tools (are you aware of the human trafficking risk assessment tool developed by Finance Against Trafficking – ChainChecker?).
In summation, business need to:
- Understand where the business operates
- Who it works with
- How to do this responsibly