Want to build lasting trust with your stakeholders? Try transparency 2.0

The information expectation

How did we survive before the Internet and smartphones? Access to reams of instantaneous information, verified or not, has become a basic expectation, influencing all forms of personal and organizational decision-making. But simply having access doesn’t guarantee the quality or relevance of that data to support informed decision-making.

Transparency is one of today’s most critical drivers of business success. Customers, investors, regulators and employees make decisions about where to shop, invest, investigate, and work based on how much they know about and trust an organization. So, how can we better manage transparency in a landscape where nearly everything is public?

Companies are disclosing more than ever on environmental and social governance. Currently, around 92% of the world's biggest 250 companies produce annual sustainability reports, and we regularly speak to companies that feel confident in their current levels of transparency because they are reporting on their social and environmental impacts. But, it’s become clear that we’ve missed the boat with sustainability reporting.

Reports such as this one by World Vision, and this one by the NGO Solidaridad, using public disclosure as a way to assess how companies are addressing human rights risks in their supply chains, reveal that we have a long way to go when it comes to transparency – both in what information companies share, and how they communicate.

Selective transparency (let’s call it transparency 1.0) has failed. Consider the case of Volkswagen; just days after a self-congratulatory announcement regarding its performance in the Dow Jones Sustainability Index (DJSI) for its code of conduct, compliance, climate strategy and life cycle assessment, the company was accused of using devices to cheat regulations regarding emissions standards on vehicles.

Transparency builds trust

We know that transparency has a direct impact on trust. According to SAI Global's inaugural Consumer Trust Index, 83% of consumers rate transparency and ethical behaviour as the greatest trust builders. The bad news is that we trust less than ever. The latest Edelman Trust barometer reveals that for the first time since tracking began, public trust in business, government, NGOs and the media has declined across the board.

Business leaders understand this link between transparency and trust and are taking action. Recently, Campbell’s announced it was leaving the Grocery Manufacturers Association at the end of 2017 citing conflicts around views on consumer transparency. Campbell’s was striving for more transparency on GMO labeling and other public policy issues impacting consumer trust.

Now, knowing that being transparent is not an option and seeing how selective transparency has failed, why not start sharing better information, differently? Think of it as the Transparency 2.0 advantage; it’s all about people and context.

Three key tools for effective transparency

At INLE, when we work with clients looking to improve their transparency and build trust, we focus on the integration of three core tools: traditional disclosure, storytelling, and engagement.

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Where to begin

Before launching in, a company first needs to understand how transparent it actually is, and where there may be gaps.

Fortunately, The Canadian Centre for Food Integrity and its American counterpart will soon be offering an assessment tool to help companies understand current levels of transparency and identify weaker spots. Their research on public trust in the food and agriculture system is informing widespread growth in an industry currently working hard to improve its transparency.

With this in mind, a company can then develop a transparency plan by integrating the following three tools, reflecting both your business goals and your stakeholders’ interests and expectations.

1) Traditional disclosure

While we can agree that sharing data on ESG performance helps improve internal processes and takes stock of that performance, there remains a disconnect between why companies report and what stakeholders need to make informed decisions and build trust.

If your organization is not already participating in some form of traditional disclosure, gathering accurate and material baseline data that can be compared internally and with peers year on year, is a start. The most important aspect of this process is a materiality review to identify the key issues, impacts and concerns your company and your stakeholders share in relation to the company’s activities.

But data alone is meaningless if not placed in context. Once you’ve identified your material issues, established a baseline, and set targets, decide what data needs to be communicated, to which stakeholders, and most importantly, why. We know that the audience for sustainability reports are largely shareholders, investors and peers, so consider integrating your sustainability data into your annual corporate reports and then place the data in context for other stakeholders through engagement and storytelling.

2) Storytelling

As organizations collect, track and report data on social and environmental issues we are left with more technical and increasingly complex information to communicate. While being transparent about the specific data points is important, what makes it more meaningful is placing the data in context, focusing on the bigger picture and sharing it in a way that resonates with those you are trying to reach.

Good storytelling demands that we place people and communities at the centre, not business, and focus on the lived experience: the people involved, the choices they made, and why they made them. Would you rather read about how many dollars a company spent on community investment projects? Or hear the story of a community organizer who was able to improve access to healthy food for her entire neighborhood? It’s the underlying human truth in a story that resonates, not the key performance indicators.

To learn more, The Embedding Project offers this resource for organizations seeking to understand what storytelling looks like in practice and reflect on what that means for your organization. Companies like Patagonia have produced videos telling various pieces of their social and environmental responsibility stories, a format that better reaches audiences who get their information from social media, rather than traditional formats.

3) Engagement

The most effective way to elevate transparency efforts is through consistent, meaningful, two-way engagement with your stakeholders. It also happens to be the most resource intensive, so begin by assessing the level of engagement most appropriate and realistic for your organization’s specific needs and the needs of your various stakeholders.

We often assume everyone wants to be engaged on all information all of the time; this is false. Some people simply want access to specific information that impacts them, while others want to provide feedback and understand how their input has been considered on a more consistent and regular basis.

The International Association of Public Participation (IAP2) presents a useful framework for choosing a level of engagement, depending on your goal. Once the desired level has been determined, then choose appropriate platforms for the stakeholder. Digital channels, such as Twitter, have opened up new ways for companies to communicate directly with stakeholders, and stakeholders with one another. 

Some food companies have used web platforms to enable two-way engagement such as McDonald’s Our Food, Your Questions website, where consumers can review answers to other questions or post their own, which the company commits to respond to directly, and Campbell’s What’s In My Food? site where consumers can search by product to see ingredient lists, understand why Campbell’s makes certain choices about how to source ingredients, and how products are labelled.

Transparency 2.0 – not a public relations exercise

It is worth noting that while today’s consumer is looking to align with companies with which they share values, they are also savvy consumers of media and are quick to see through attempts at “purpose-washing” through marketing campaigns.

Transparency efforts approached as a public relations or marketing campaign may be effective in the short term but will ultimately alienate the very people you are trying to reach. As in relationships between individuals, trust builds through authenticity and meaningful, two-way conversations over time.

Motivations matter. Make sure you understand what is driving your transparency efforts to ensure alignment with organizational values and goals. Ultimately, it is about relationships and those built on a foundation of trust and transparency are going to be more successful in the long-term.

In the words of Thomas King, “The truth about stories is, that’s all we are.”

Could your business be profiting from slavery?

Globalization shapes the world as we know it today. Whether by the transfer of capital, goods, people, or ideas, our lives are impacted by its forces. It has made fresh shrimp available to people in the middle of the prairies, put cheap and fast fashion at our fingertips, and made smartphones, hearing aids and pacemakers possible through access to precious metals and minerals from around the world.

In the drive for competitiveness in a globalized economy, keeping prices low has led to a reliance on the availability of cheap or temporary labour around the world. Combined with increasingly long and complex supply chains and the shortcomings of audits in uncovering abuses; the exploitation of forced, abusive, or child labour has become one of the most important and complex challenges of our time.

Slavery in all its forms is globally condemned; however, the Global Slavery Index estimates that more than 45 million people around the world are in some form of slavery. UNICEF reports that the Convention on the Rights of the Child is the “most rapidly and widely ratified international human rights treaty in history,” yet an estimated 150 million children worldwide are engaged in child labour.

Slavery is a threat to globalization

We spoke with Phil Bloomer, Executive Director of the Business and Human Rights Resource Centre, who sees forced labour as one of the most vital contemporary issues requiring a coordinated international policy response. “There are countries starting to develop more nationalist and protectionist models because they are fearful of the competition that they face from countries that are using forced labour,” he explains, “Modern slavery is a serious threat to the success of a global economy.” 

Governments are working to tackle this issue with various mandatory reporting and due diligence policies. The UK Modern Slavery Act, passed in 2015, set the standard and similar legislation is now being explored in Australia. The Netherlands recently adopted a Child Labour Law, and the US closed a loophole in its Trade Facilitation and Trade Enforcement Act to prohibit the import of any goods connected to the use of forced labour. This emerging patchwork of international policy has prompted the call for an international anti-slavery agreement.

Canadian leadership

We pride ourselves as Canadians on our longstanding international commitment to human rights. The reality is that Canadian businesses are not immune to the challenges of international supply chains and risky operating environments abroad. A report by World Vision Canada estimates that “more than $34 billion in Canadian products each year may have child or forced labour in their supply chains,” and reveals that 52% of Canadian companies reviewed are not providing any public reporting on what they are doing to combat the problem.

The Canadian government recently made the decision to ratify the International Labour Organization (ILO) Minimum Age Convention, sending a message on its stance against child labour and exploitation. Although there are currently no mandatory non-financial reporting requirements in Canada, some believe that it is only a matter of time.

The bottom line

If your leadership and procurement managers are not frequently talking about forced and child labour in your supply chain, and if you don’t have a clear picture of every point along your supply chain, you should be concerned. Here’s why:

Cost

  • As international human rights norms and standards harden, Canadian courts have demonstrated a willingness to hear cases alleging human rights abuses in other jurisdictions, including claims of forced labour abroad.
  • A report by the Supply Chain Management Association suggests that implementing an ethical/sustainable supply chain can result in a cost reduction of 9-16%.
  • Another study in India revealed that the combined environmental and social costs of Fairtrade cotton farming are five times lower than that of conventional farming.

Risk management

  • There is a link between human rights risk and political risk; excluding considerations such as forced labour provides an incomplete picture to investors who want to fully understand the risk landscape and know what companies are doing to address them.

Customer demand

  • Research shows that most consumers are willing to make sacrifices to ensure the products they purchase are socially and environmentally responsible
  • Because customers care where their products come from, being able to demonstrate traceability in a supply chain can add as much as 5-25% to the price point of certain products

We see the impact of customer demand starting to play out in the Canadian mining sector. Ben Chalmers, Vice President- Sustainable Development for the Mining Association of Canada (MAC) highlights the example of the Electronics Industry Citizenship Coalition and its code of conduct, which includes reference to addressing forced and child labour in the industrial supply chain.

 “Given the motivations of important customers such as Apple, we are beginning to explore how our Toward Sustainable Mining (TSM) initiative might be used to demonstrate responsible sourcing of minerals and metals beginning at the mine site.  This could include looking at how to incorporate key human rights issues such as child labour and forced labour in TSM.”

All responsible businesses strive to contribute to positive social outcomes through their business or social investments. Tackling the challenge of modern slavery can seem overwhelming and complex. Taking a rights-based approach can provide a useful framework for advancing this important work.

Make a commitment – put human rights first

It may seem like a no-brainer in this case, but simply prioritizing respect for human rights in your business will raise the awareness of your employees and suppliers, promote innovation and drive performance. Set bold targets: chocolatier Barry Callebeaut has set the goal of zero child labour in its supply chain by 2025. As the saying goes, what gets measured gets done.

Improve engagement through transparency

Effective communication and transparent disclosure are some of the building blocks of strong relationships and improved social performance. Mandatory non-financial disclosure is quickly becoming the norm and Canadian companies have room to improve. If your company is not ready to produce a sustainability or human rights report, a first step could be to release a statement on the steps your company is taking to tackle modern slavery.

Know your risks – build capacity

Risk and impact assessments help companies better understand their material and salient issues, and identify where they may be causing or contributing to labour rights abuses. Being able to ‘see’ the entire supply chain is helpful to identify where those risks exist. One solution being explored is Blockchain technology, currently being tested by BHP Billiton and Walmart, among others, to track the path of materials in parts of their supply chain.

Canadian companies need to step up

Given Canada’s reputation for advocating for human rights, Mr. Bloomer suggests that the Canadian government has an opportunity to step out as a leader in ending modern slavery by acting as a broker in the global conversation. In terms of our own policy framework, he suggests, “Canada could combine the mandatory transparency regulations from the UK and due diligence from the US to send a strong message of leadership.”

However, the government is only one stakeholder in this important work. Canadian businesses will play a critical role in determining the national response to the international threat posed by forced and child labour.

Be the person in your company to start the conversation by asking “what are we doing to combat modern slavery?”

Supply chain audits falling short? Try this approach.

Many will remember the scandals of the 1990s, when brands such as Nike and Kathy Lee Gifford’s clothing line were linked to ‘sweat shop’ labour in factories where their products were made. Some suggest that these cases marked the beginning of corporate social responsibility in the consumer products industry, as we know it today.

However, flash forward twenty years as the consequences of the Rana Plaza tragedy continue to play out in Bangladesh, new investigations continue to uncover child labour in major clothing brand supply chains, and human rights and environmental violations are being exposed in other industries with alarming frequency.

The International Labour Organization (ILO) estimates that 21 million people worldwide are the victims of forced labour, 90% of whom are exploited in the private economy by individuals or enterprises. They estimate that profits generated through forced labour exploitation total a staggering US $150 billion per year.

Supplier auditing has become the standard tool for uncovering and addressing these abuses. Yet, despite thousands of audits conducted year over year, it seems improvement has been slow. In fact, one of the factories in Rana Plaza had passed an audit just before the building’s collapse. So why aren’t audits uncovering abuses like child labour, unsafe working conditions, and modern day slavery?

A 2016 report released by the Sheffield Political Economy Research Institute (SPERI) highlights some of the reasons supplier audits have failed to achieve the improvements in social performance that consumers are demanding. The authors highlight the ways in which the potential of audits to uncover serious human rights issues has been undermined, from deception by suppliers and failure of brands to scrutinize supplier subcontracting, to misusing audits as weak diagnostic tools and checklists, and the risky trend towards industry self-regulation.

Significantly, the report suggests that in an effort to demonstrate corporate social responsibility and ethical business practices, NGOs and businesses have worked together to create a patchwork of voluntary standards – monitored through audits – which serve to neutralize poor business performance, effectively undermining the role of States in corporate governance.

Despite the shortcomings of many of the existing practices in supplier auditing, there can still be tangible benefits to implementing a robust and thorough audit framework, provided it is applied with a different end in mind.

Here’s how taking a rights-based approach to supply chain audit can strengthen findings and encourage real and positive changes.

1. Put human rights first

In a survey conducted for the United Nations Global Compact last year, three-quarters of companies indicated that avoiding reputational risk was a key driver in ensuring sustainability in their supply chains. The emphasis on reputation management can mean companies tend to focus on those areas where they believe they are succeeding.

A recent landmark case in the Philippines linking the effects of climate change to human rights violations highlighted the connection between rights and the environment; however, as the SPERI report highlights, audits typically treat environmental concerns as separate from social concerns. This means a company can shine a light on achievement in environmental performance, while ignoring the persistent use of child labour in another part of its supply chain.

A human rights-based approach to supplier audits involves considering risk to people as the primary focus, and risk to the company as an important and inter-related component. We have previously illustrated how implementing a human rights program can complement existing risk management and responsible sourcing programs to illuminate risk blind spots.

The United Nations Guiding Principles on Business and Human Rights (UNGPs) lay out a standard framework for ensuring business respect for human rights: from setting a strong policy commitment, to ensuring mechanisms are in place to identify and respond to rights violations. The Shift Project has written a useful guide to help companies respect human rights through global supply chains by implementing the UNGPs to identify, prioritize, manage and align risks across the organization and address impacts with effective grievance mechanisms.

2. Change the dynamic – engage positively

Audits are typically punitive in nature, with suppliers being scored, ranked, and sometimes dropped if they are unable to improve in certain areas. The SPERI report suggests that this has resulted in well-known and widespread deception, quoting Nike admitting, “…monitoring does not bring about sustainable change. Often, it only reinforces a pattern of hiding problems.” Resources are often spread thin, making it difficult for auditors to uncover deception despite suspicions that workers have been coached, records falsified, or underage workers told to take the day off.

Some have suggested that companies approach audits more like journalists, showing up unannounced in unexpected places, and digging deep to expose violations. In fact, this serves to reinforce the dynamic that puts the ‘power-to-police’ in the hands of the big brands and does nothing to address underlying issues that lead suppliers to deceive in the first place.

Instead, engaging actively with suppliers to identify shared goals and solutions, encourage transparency to surface potential violations, and reward strong performance, is more likely to achieve positive outcomes.

For example, Hewlett-Packard (HP) has been recognized for their supplier engagement, having worked proactively with suppliers to improve water management practices through enhanced transparency and goal setting. They have also built a supplier rating system focused on eliminating the use of forced labour in their supply chain by rewarding strong performers with the possibility of more business when they achieve higher ratings.

3. Build capacity – of your team and your suppliers

Prior to launching their new supplier rating system, HP worked for several years training suppliers across 15 countries on its code of conduct and worked closely with NGO Verité to improve their own understanding of the risks in their supply chain.

Sometimes poor supplier performance is the result of low awareness or understanding of the issue and how it impacts the buyer. Companies engage with suppliers on a variety of issues from quality to materials cost, which presents an opportunity for education on related or intersecting issues.

Mars has collaborated with the government of Côte d’Ivoire and other industry players on their Vision of Change program, which provides training for farmers on agricultural practices, access to tools and fertilizers. The program simultaneously raises awareness about child and forced labour and the role of education in building a better future.

Internally, a company that appears more interested in completing the audit than in analyzing the findings might actually be the outcome of inadequate resources or low levels of internal competence. Building the capacity of internal auditors, board members and supply chain professionals will strengthen what may be the weakest link and support targeted and integrated solutions to performance issues.

Improving supplier performance is a team effort

Audits are, and will remain, an important part of managing supply chain risk. It’s how companies approach them that will make the difference.

A new report by Vigeo-Eiris assessed over 3000 companies in 35 countries on their human rights programs. It concluded that strong performers are those that have a good appreciation and understanding of where human rights risks exist in their supply chain well before conducting any audits. They cooperate with stakeholders, talk about the issues, monitor and publish performance, and are transparent about challenges they encounter and how they solve them.

Taking a rights-based approach – one that is rooted in the UNGPs and other international human rights standards, emphasizing participation as both a means and a goal, and building the capacity of all stakeholders to be part of the solution – is what will make the difference in tackling the serious social and environmental issues that are preventing all of us from reaching our potential.

It's time for business to 'lean in' on gender equality

March 8 marks International Women’s Day and is an excellent opportunity for business to take stock of its progress on promoting gender equality.

It is widely acknowledged that in many parts of the world there are significant gaps in women and girls' access to education, employment, and representation in government.

While government and civil society continue to play a role in promoting gender equality, increasingly, companies are stepping up and recognizing that women’s empowerment is also a key driver of good business performance.

In countries like Canada, where there is a strong legal framework for women’s equality, it might seem less obvious where progress can be made. Here are some figures to demonstrate why asking women to ‘lean in’ to close the gender gap hasn’t achieved the gains we’ve been looking for.

Here in North America, we know that women are underrepresented in leadership roles:

  • Women make up 46% of the North American labour force
  • Women are 35% of MBA graduates
  • 5.2% of Fortune 500 company CEOs are female
  • Corporate boards in Canada are 10% female
  • 17% of female lawyers are equity partners

There are a variety of factors contributing to women’s under-representation at the corporate decision making table, including corporate structures and leadership models that favour putting career above work-life balance, or making decisions and taking risks that do not align with personal values.

These challenges affect women and men, however women are particularly impacted by factors such as dual career-family pressures, lack of opportunities in male-dominated industries, and gender discrimination and stereotyping that continues in the workplace.

One need only read the personal account of an engineer at a well-known US company who recently shared her story publicly, to be reminded that while women have come a long way, there is still room for (significant) improvement.

Diversity means better business performance

Earlier this week the world’s third-largest asset manager installed a statue of a young girl confidently staring down the iconic charging bull statue on Wall Street, all part of a campaign to improve board diversity and company performance by having greater gender parity on corporate boards.

Your board is your highest level of oversight and decision-making. Having different perspectives, experiences and knowledge represented at the table boosts decision quality. It just makes sense to have a board composition that reflects that of your employee and customer base. Not doing so leaves your leadership vulnerable to blind spots.

There have been countless studies (here’s another) confirming that companies with greater board diversity outperform their peers.

Investors recognize this and assess gender equality as a driver of corporate performance. This is reflected in the various indexes, standards and rules around disclosure and gender diversity in the workplace.

Agree but not sure what to do about it?

Here’s the kicker – the challenge is finding the systemic barriers within your organization that may be keeping women out of those leadership positions without intending to. But the good news is that there are easy ways to start making changes.

1- Make a commitment

Successful efforts start with intention. Deciding to make a change and to do things differently is the first step in making real impacts.

Join the United Nations Global Compact and sign up for the Women’s Empowerment Principles (WEPs), a collaboration between the Global Compact and UN Women. These seven principles offer guidance to businesses on how to empower women in the workplace, marketplace and community, from establishing strong policies to building supply chain practices.

Commit to taking action on Goal #5 of the Sustainable Development Goals (SDGs). The World Economic Forum has recognized the important role of the private sector in achieving gender equality, along with the 16 other goals. Check out this guide for companies to align their strategies with the SDGs.

Based on their commitment to the WEPs and aligned with the SDGs, Accor Hotels has set ambitious targets for reaching gender parity in management and equal pay, as well as sensitizing and motivating male employees to understand and promote gender diversity.

2- Understand your baseline

We have all heard the adage, “what gets measured gets done,” and without knowing where we are at today it will be difficult to measure progress toward achieving the SDGs.

Start by taking stock of where you are today. How many women hold management positions in your organization? Senior leadership positions? How many women-owned businesses are part of your supplier network? How much of your community investment dollars go to supporting organizations and initiatives that empower women?

In addition to capturing data on gender representation in their business, understanding that the majority of the workforce in the fashion industry are women, H&M conducts gender research into its value chain using such tools as the Gender Action Learning System.

Ensuring your data can be desegregated according to gender is a first step in understanding where the barriers and opportunities lie in your organization. One CEO shared her experience of championing diversity for years, but then taking a look at the numbers and seeing a lower percentage of female board members than expected.

Ask the hard questions of your employees, to find out both how hiring managers select candidates and how employees feel about workplace culture. When INLE conducts gender assessments, we too often hear hiring managers say, “We hire based on merit; only the best person for the job.” Implicit bias causes people to hire candidates that look and act like them.

3- Be truly inclusive (include men)

Gender equality isn’t a women’s issue. It impacts all of us.

Issues that affect women in the workplace also impact men, such as flexible working schedules, maternity and paternity leave, and accessible childcare. We all want to spend more time with our families and because many of us are in households where both parents work, these are important aspects of our working lives.

Global initiatives such as UN Women’s HeForShe campaign recognize this and highlight the important role that men have to play in creating a gender equal world.

A group of business leaders in Australia launched an initiative called Male Champions of Change with the aim of increasing the number of women in leadership positions in business. Using their influence and access, they work to elevate gender equality as an issue of economic and social significance.

Will you #BeBoldForChange?

This year’s International Women’s Day theme is focused on taking action to forge a better, more inclusive, gender equal world. For a list of activities, events, and resources on gender equality visit the IWD website.

What is your business doing to empower women?

Bringing human rights into focus

Why should you care about human rights in your business?
It’s simple: because your stakeholders do.

In 2011, the United Nations Guiding Principles on Business and Human Rights (the UNGPs) were unanimously endorsed by the UN Human Rights Council. The UNGPs outline the state duty to protect and corporate responsibility to respect human rights and have been quickly adopted as the international standard for defining business’ role in society.

Since that time, a number of high profile events around the world have linked human rights and business impacts. From climate change, to supply chains and labour rights, to the rights of Indigenous Peoples here in Canada and abroad, increasingly people are using the language of rights to talk about corporate responsibility.

Here are some common questions we, at INLE Social Performance, are asked by our clients and peers regarding business and human rights:

 

Q: Our business already has a strong social responsibility program. Why switch the focus to human rights?

A: Corporate social responsibility (CSR) has become an integral part of how business operates; it is now the baseline expectation that businesses ‘do no harm’ and there is a growing movement to reward companies that ‘do good’ as part of their social impact management.

Customers, shareholders and communities are watching your business’ performance and making decisions about which products to buy and where to invest. Strong social performance is key to earning and maintaining a social license to operate.

There is a tendency for CSR programs to be segregated from how a business makes decisions and to invest in social programs and initiatives that may be strategically separate from business goals. By leveraging human rights as a framework to understand and address risks to your business as well as your business impacts, you are effectively reframing the scope of your CSR program, making it easier to identify the links between social investment and risk management to advance your business priorities.

Think of it as moving from sustainability 1.0 to sustainability 2.0 – this doesn’t mean you need to start from scratch and create new policies, systems and processes; it’s about a shift in perspective and thinking. All businesses are moving in this direction of greater sustainability integration and it’s a matter of deciding when your business is going to make that shift and where you want to be performing among your peers.

Example in action: In a 2012 guide on human rights in the mining industry, the International Council on Mining & Metals (ICMM) highlights how the Cerrejón Mine – a joint venture between Anglo American, BHP Billiton and Xstrata – used a human rights framework to enhance its social performance by addressing impacts and improving community engagement practices. Through a series of Human Rights Impact Assessments (HRIAs) and stakeholder engagement, the mine has been able to identify risks and impacts as a result of its operations and build a more comprehensive social impact program.

 

Q: We have a well-established risk management and issue identification system in place. How would incorporating human rights make a difference?

A: Traditional methods of risk assessment look to identify and prioritize material risks to the business, with little consideration of the impacts of business activities on stakeholders. A rights-based approach introduces the concept of salience, which considers actual and potential risk to stakeholders as a result of your business activities. It may seem like a subtle shift, but putting the focus on people rather than on your business can help illuminate blind spots, allowing you to significantly reduce risk your company had not previously identified, making it good for people and good for business.

Example in action: Nestlé has begun complementing their company risk assessment with salient rights assessments. In their 2015 sustainability report, they explain how the shift in emphasis from risk to the company (materiality) to risk to rights holders (salience) has not significantly changed the outcomes associated with the risk assessment and mitigation process; rather it has served to highlight additional risks that they had previously been unaware of and allow for more focused strategic planning.

 

Q: We have a responsible sourcing policy and strong supplier code of conduct in place, isn’t that enough?

A: Having policies in place outlining the responsibility of the company and its suppliers to respect human rights is an important part of ensuring safe and fair working conditions, avoiding the use of child labour, advancing gender equity and managing other key risks. Many companies conduct supplier audits and have strong working relationships with their primary suppliers.

A report by Human Rights Watch highlighted the issue of human rights abuses in Cambodian subcontractor factories providing goods to larger suppliers that are, in turn, selling to large global retailers. The primary suppliers are expected to follow the practices outlined in supplier code of conduct policies and are subject to regular audits; however, retailers are frequently not aware of the subcontracting agreements or are not actively monitoring second tier suppliers. Several large retailers have faced consumer backlash over these abuses, regardless of the strength of their policy positions.

The reality is that supply chains are often large and complex, and depending on the industry, your business may have thousands of suppliers when considering direct and indirect relationships. Human rights approaches encourage systems thinking, helping to advance understanding of the impacts that your business can have beyond your immediate supplier relationships.

Policy commitments are a first step in aligning with international standards such as the UNGPs and provide high-level guidance for an organization and its suppliers on how to ensure alignment with company values. This commitment must be complemented by tangible efforts to operationalize those values through actions such as: executive decision making; training at all levels and across departments; and systems and practices that embed policy commitment. Ultimately, it is these actions that a company’s overall performance will be judged upon.

Example in action: Beginning in 2017, Walmart has launched a pilot program using blockchain technology to support increased transparency, traceability and real-time data tracking in its supply chain. The pilot will focus on produce initially, as the company looks to find ways to ensure field workers, farmers and others have the technology available to enter data into the chain. Ultimately, the goal is to enhance food safety for consumers.

One resource for businesses looking to better understand and address forced labour risks within their supply chains is Know the Chain, which provides learning tools, up-to-date industry benchmarking, and practical tools and guidance.

 

Q: We operate in Canada (or another stable Western democracy) where the government protects human rights through various legislative and regulatory instruments. Why would we need to focus on human rights specifically?

A: The UNGPs have become the global standard for companies and are shaping the way that stakeholders (including investors and shareholders) evaluate business performance. A UN working group is currently exploring how to move the UN Guiding Principles from ‘soft’ to ‘hard’ law and we have seen legislation such as the French corporate duty of care law, the UK Modern Slavery Act and the EU Directive on Non-Financial Disclosure come into effect in Europe, with other regions set to follow.

Human rights NGOs are shining a spotlight on corporate human rights due diligence efforts at home as much as abroad, through initiatives such as the Corporate Human Rights Benchmark that are encouraging business to demonstrate greater transparency and disclosure. Reporting on human rights is gaining traction with many leading companies creating integrated or stand-alone human rights reports based on the UN Guiding Principles Reporting Framework.

With so many watching, it is essential to know what is happening across your business’ value chain, because if you don’t know your business’ story, then someone else might tell it for you. Integrating human rights considerations throughout your organization strengthens your risk management and improves capacity for accurate and timely disclosure.

Example in action: In the financial sector, Toronto-Dominion Bank has a responsible procurement policy that speaks specifically to human rights, diversity and environmental management, as well as making a commitment to respect human rights through diversity and inclusion in human resource management. The company has been recognized for its efforts in sustainability, environmental performance and diversity and inclusion in Canada as well as the United States.

 

Q: Human rights are legally protected. In starting to use human rights language, is there greater exposure to legal risk?

A: The UNGPs and other voluntary corporate performance standards outline the responsibility of companies to respect human rights. Legal experts explain that, “In the near term, mandatory corporate human rights reporting is more likely than more human rights litigation.  Few companies face material litigation risk stemming from human rights abuses…On the contrary, widespread adoption of the UN Framework and Guiding Principles by governments and companies is likely to reduce overall litigation risk while increasing the likelihood of required human rights reporting by companies.  Effective due diligence reduces legal risk by identifying human rights issues before they trigger litigation, countering claims of intent or negligence, and protecting against shareholders suits for misrepresentation.”[1]

The International Bar Association has recognized the significance of human rights frameworks and in their Practical Guide on Business and Human Rights for Business Lawyers, recommended that: “Familiarity with the UN [Guiding Principles] presents significant opportunities for all lawyers who advise business, both for internal and external counsel.”

Ultimately, in order to effectively manage risk and accurately address issues, decision-makers must understand where their businesses are connected to human rights impacts. Those impacts must always be understood in context and the UNGPs provide a shared language with which to talk about those impacts.

Example in action: Leading global companies have recognized the movement toward greater transparency around human rights and have made human rights reporting part of their external disclosure programs. The UN Guiding Principles Reporting Framework provides human rights reporting guidance and early adopters include brands such as: Unilever, Ericsson, H&M, Nestlé, Newmont and ABN-Amro.

 

Bringing human rights into focus

Our understanding of the role of business in society has evolved so rapidly in recent years that the lines between the responsibilities of governments and business have blurred. This has simultaneously exposed companies to new risks but also created new opportunities to advance shared goals. Business leaders need the best information possible when making decisions to ensure the social and environmental sustainability of their organizations, while supporting continued economic returns.

Incorporating respect for human rights into existing policies, practices and culture brings the human environment into focus and allows for contextualized strategy and decision-making, effective risk management and opportunity realization. INLE Social Performance works with organizations to seamlessly integrate human rights and other social considerations into existing strategy, systems, and activitis, accelerating social performance and making it a better way to do business.

 

[1] Anthony Ewing (aewing@law.columbia.edu) teaches Business and Human Rights at Columbia Law School and advises companies on corporate responsibility as a Partner at Logos Consulting Group in New York. An earlier version of this article appeared on Ethicalcorp.com. https://business-humanrights.org/en/what-executives-need-to-know-and-do-about-human-rights-anthony-ewing-columbia-law-school-logos-consulting-group#c70669