Operationalising Human Rights - How Hard are Companies Trying?

Our commentary on the Trafigura case highlights how a combination of weak governance and business expediency can result in negative impacts on human rights. But what exactly should business do to prevent such situations arising in the first place?

Many leaders are backing "due diligence" as a key part of operationalizing the United Nations framework for business and human rights. The concept of due diligence is familiar to any risk management portfolio in business.

The United Nations Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises (Professor John Ruggie) has proposed a four-step approach to human rights due diligence following the schematic of a business management system - from setting policy, to assessing impact, to monitoring and reporting.

Is this approach working in practice? It is hard to say. Nearly 5,000 companies around the world have committed themselves to respecting human rights as part of their involvement in the UN Global Compact. But how much evidence do we have that these or other companies are actually turning voluntary commitments to respecting human rights into actions through due diligence processes?

Consider one aspect of due diligence – measuring impact. We currently have a ‘let 1,000 flowers bloom’ approach to developing the actual methodologies for carrying out due diligence through human rights impact assessments. These build on progress in environmental and social impact assessment work. Innovation and an element of competition in the development of such tools in the area of human rights are clearly desirable. But so too is an element of quality control.

Earlier this year, a range of businesses, governments, NGOs and those involved in the development of human rights tools met at the United Nations in Geneva to discuss these issues. A number of principles were proposed to help define what might legitimately be called human rights impact assessments. These principles included the following three:

• Companies should be as transparent as possible about their findings (balancing the benefits and constraints of disclosure);

• The assessment should be grounded in a human rights approach – it ensuring the participation of relevant stakeholders involved in the process, with a particular emphasis on the marginalized or vulnerable groups, and ensuring accountability;

• The methodology should be practical and effective from a business perspective.

Whether these are amongst the right principles or not can be debated. What is more difficult to defend is that no such principles are needed. So here is a quick assessment of the current state of play around human rights due diligence to suggest where things stand and where they need to move in the time ahead:

Transparency

Governments have agreed that all corporations have a responsibility to respect human rights. This means more than simply avoiding harm. Companies also need to demonstrate how they have verified that they respect rights throughout their operations. A growing number of companies are themselves committing voluntarily to that responsibility. Yet today there is only one human rights impact assessment undertaken by a company in the public domain (and only the summary). There are good arguments against full disclosure of such assessments including the need to protect the interests of company staff and others involved including affected communities.

But the current lack of transparency goes beyond this. The fact is that law firms and CSR organisations have developed their own methodologies for undertaking impact assessments, and the propriety nature of those methodologies is also a cause for companies not being more transparent about their initiatives. So too is the anxiety that being transparent may make the company or the consultant vulnerable about the shortcomings of the findings or the methodology. Furthermore, there is, at the moment, little or no incentive to disclose human rights performance, let alone anticipated risk or impact.

A small number of companies have started to disclose their methodologies for measuring human rights impact – this step deserves encouragement. Good practices can only be developed if approaches are shared and underpinning principles are discussed widely, allowing for a conversation about methodologies. Yet, most companies do not even take this first step. Rarely will companies allow outside actors to make independent evaluations of whether they understand their own processes of measuring human rights impact or the material nature of the impacts themselves.

As Governments, businesses and other stakeholders begin to coalesce around the Protect/Respect/Remedy framework put forward last year by the UN Special Representative, greater transparency around such assessments should be called for – as is now the case for most Environmental Impact Assessments. Companies themselves should take the opportunity of the 10th Anniversary of the Global Compact in 2010 to share their experiences in this area between themselves and more widely. Governments and Businesses, not CSR consultancies, need to raise the bar here.

A Human Rights Approach

The United Nations and the Governments which sit on the UN Human Rights Council have made clear that all human rights are potentially relevant to business, regardless of business sector, size or location of the operation. Tools to assess potential impacts, such as those developed by the Danish Institute for Human Rights and the Business Leaders Initiative on Human Rights, reinforce the universalism, indivisibility and inter-related nature of human rights, though as has been said, it is hard to know if this is mainstream practice when so many other methodologies are not disclosed.

What is known is that there are still too many atomistic approaches (i.e. I am branded retailer and so I will only focus on labour rights in the supply chain; or I am an oil company and so only security issues are relevant for me) as well as ‘human rights off-setting’ (i.e. bad things are happening which my company is involved in directly or indirectly but rather than tackling these I will make a philanthropic donation to build a school or a hospital to show I am a good corporate citizen). Also missing is a focus on human rights principles to inform a rights-based approach: a parallel to the rights-based approach to development championed by Governments and the United Nations around the turn of the millennia.

The essential point is that human rights are not just a set of specific and isolated issues (such as health, food, housing, non-discrimination etc.) but are about an integrated approach to these and other matters to which all people are entitled simply by virtue of being human. Concretely put, a rights-based approach to improving the management or use of water and a recognition of the right to water (for example) are too different things – the former much more about the approach to a broader range of connected issues and rights, the latter much more specific to access to clean drinking water and adequate sanitation. Both are important, even essential, but there are few companies who explicitly engage with both.

Be practical and effective from a business perspective

The issue of human rights, whether through its language or the norms, does not lend itself easily for business managers. Most executives and managers who have worked in this area will stress the need for concrete steps and specific criteria to enable their colleagues to engage in the process. This, of course, is essential. It is also true, that since 1948, human rights has been a discourse written by states for states, echoed and cajoled by civil society where it exists.

There has been notable progress in this aspect of operationalization. There are now many codes of conduct, assurance and auditing mechanisms, and there is real movement towards developing human rights-based indicators for monitoring and reporting. This progress should not be understated. This work is important in itself: some businesses have shown leadership by exploring and setting standards in an arena where rules were ambiguous, standards not fully understood, when the human rights mechanisms have remained focused on the state and its responsibilities.

The problems arise when we consider the multitude of supply chain codes or the different levels of expertise amongst social auditing firms. There is also a lack of a dialogue between the private sphere and the government regulators and labour inspectors. There is a need for greater consolidation between the interpretation of human rights standards not just between the competing codes but also between regulatory and non-regulatory approaches.

In conclusion, there seems at first inspection to be a need for a rapid scaling up of progress on human rights due diligence. There are too many vested interests for this to occur through market forces alone. More likely, is that renewed state interest in non-financial due diligence (partly as a result of the crisis in the financial sector itself) will in itself extend to the business and human rights debate.

This might expedite progress as regulatory ideas are discussed and business itself wishes to ensure it is ahead of the game. In addition, the issue of transparency is likely to become increasingly dominant, with strong arguments for a presumption towards much greater disclosure of business outputs (e.g. human rights impact assessments or the resolution of grievances) rather than the current pre-disposition towards non-transparency.

Next week the United Nations in Geneva will host the next formal consultation of the UN Special Representative on operationalizing the framework for business and human rights. A good time to take stock.