Business and Human Rights - an inharmonious relationship
What is often overlooked is that businesses can accrue many benefits from respecting human rights. Firstly, compliance with human rights regulations boosts a firm’s productivity and profitability. Research from the University of Warwick from 2015 showed that happiness made workers 12% more productive. Companies that observe the right to non- discrimination and promote diversity within the workplace also thrive. A McKinsey study from 2017 found that firms with a significant number of women on their executive teams were 21% more likely to outperform on profitability.
Secondly, respect for human rights enhances the brand value and trust of a company. Transparent reporting about a company’s actions in the human rights field helps promote trust among customers, regulators, investors, and other relevant stakeholders. A company with a good human rights record will attract both customers and employees to the firm and stave off negative media attention. It therefore makes good commercial sense for business to embrace human rights.
A third* main benefit to businesses from respecting human rights is that they are avoiding regulatory risks. A vast number of countries now have regulations in place which make it mandatory for businesses to provide proof of their commitment to supporting human rights. Failing to abide by these regulations may mean that a business is exposing itself to regulatory risks and damaging lawsuits.
The main body of law regulating the human rights obligations of businesses is the UN Guiding Principles on Business and Human Rights 2011. This document explains that states and businesses have a responsibility to respect human rights. This responsibility is imposed on all business enterprises, regardless of their size, sector, operational context, ownership, and structure.
There are three main obligations imposed by the Guiding Principles on businesses. These are:
A policy commitment to meet the responsibility to respect human rights.
A human rights due diligence process to identify, prevent, mitigate, and account for
how businesses address their impacts on human rights.
Processes to enable the remediation of any adverse human rights impacts that
businesses cause or to which they contribute.
The Corporate Human Rights Benchmark (CHRB) has been monitoring the extent to which leading companies have been complying with the UN Guiding Principles. Since 2017, the CHRB has assessed some of the world’s largest listed companies. In its 2020 report, the CHRB assessed the human rights practices of 230 leading global companies across five sectors – agricultural products, apparel, extractives, ICT manufacturing and automotive manufacturing. The CHRB measures a company’s policies, processes, practices and how well they respond to serious allegations. Every company is given an overall score out of 26 for how well they’ve performed across the following indicators: governance and policy commitments, embedding respect and human rights due diligence, remedies and grievance mechanisms.
The results of the 2020 report were damning. While the report found that some progress had been made on previous years, only a minority of companies had demonstrated a willingness and commitment to take human rights seriously. The automotive sector was the worst performing out of all the sectors, having an average score of 12%. Two thirds of companies in the automotive industry scored 0 across all the human rights due diligence indicators. In general, there was a disconnect from commitments and processes to impacts on the ground. While a number of companies met the fundamental requirements of policy commitments and human rights due diligence as set out in the UN Guiding Principles, there was a discrepancy between these commitments and processes and actual practices on the ground.
This poses the question of what can be done to resolve the issue of business apathy towards human rights.
One part of the answer revolves around companies taking a more proactive approach. The mismatch between commitments and processes on the one hand and actual practices on the ground on the other hand, can be solved by companies setting up sustainability committees, tasked with overseeing the implementation of the company’s human rights commitments. The Harvard Business Review indicated in 2014 that no more than 10% of US public company boards had a stand-alone corporate responsibility or sustainability committee. Adopting robust sustainability committees would help ensure that well-meaning policy commitments issued from the higher echelons of a business can be turned into tangible, effective human rights practices across the business and its supply chain.
Governments can also take a more hands-on approach to prod companies in the right direction. The vast majority of companies assessed by the CHRB in 2020 did not commit to respect the International Labour Organisation (ILO) core labour standards. These standards protect workers’ rights in the areas of freedom from forced labour, freedom from child labour, freedom from discrimination and freedom to associate and collectively bargain. In the ICT manufacturing sector, only 14% of firms had commitments to the ILO core labour standards. Other sectors did not fare much better. In the extractives, apparel, and agricultural products sectors, 42%, 45% and 50% of companies respectively had such commitments in place. Governments could step in to tighten enforcement of the ILO core labour standards. Afterall, 124 of the ILO’s 178 member states, including the UK, have ratified all 8 of the ILO’s fundamental human rights conventions, meaning that the core labour standards are legally binding in those 124 states that have ratified the conventions. As well as boosting the ‘stick’ approach, governments can take a more ‘carrot’ approach by making it clear that only companies with good human rights practices will receive subsidies.
Ultimately, everybody wins if human rights are respected. Workers will be able to lead healthier, happier lives. Companies will see their productivity and profitability shoot up and governments will reap the rewards of a more prosperous economy. Until now, most businesses the world over have held the view that greater protection of workers’ rights will lead to stagnation. However, the truth is that greater respect for human rights will increase, rather than inhibit, economic growth.
*Source FairChange: 7 ways respecting human rights adds value to your business and society