PIMCO Headquarters, 650 Newport Center Dr, Newport Beach, California, United States of America
Symposium – ESG 2.0 and the Sustainable Development Goals
Multinational enterprises, development and decent work: the approach of the MNE Declaration
International labour standards and corporate social responsibility
Businesses should support and respect the protection of internationally proclaimed human rights.
What does it mean?
This Principle sets out the UN Global Compact’s overarching expectation of business on human rights, namely, to respect and support human rights. Respecting human rights means a business should use due diligence to avoid infringing human rights (“do no harm”) and should address adverse human rights impacts with which they are involved. In addition, beyond respecting human rights, business is encouraged to take action to support human rights. This means seeing the opportunity to take voluntary action to make a positive contribution towards the protection and fulfillment of human rights whether through core business,strategic social investment/philanthropy, public policy engagement/advocacy, and/or partnerships and other collective action. Action to support human rights should be a complement to and not a substitute for action to respect human rights. Special attention should be paid to the rights of vulnerable groups, including women, children, people with disabilities, indigenous peoples, migrant workers, older persons etc.
Why should companies care?
Respect for human rights is the right thing to do, but it is also a business issue. Not respecting human rights poses a number of risks and costs for business including putting the company’s social license to operate at risk, reputational damage, consumer boycotts, exposure to legal liability and adverse government action, adverse action by investors and business partners, reduced productivity and morale of employees.
While governments have the primary duty to protect, respect and fulfill human rights, other organizations and individuals have important complementary roles to play in respecting and supporting human rights. All businesses everywhere, regardless of size or sector and whether or not they are participants in the UN Global Compact, have the baseline responsibility to respect human rights. This has been recognized by the UN Guiding Principles on Business and Human Rights (Download Guiding Principles on Business and Human Rights: Implementing the United Nations "Protect, Respect and Remedy” Framework.) A joint note by the Global Compact and the Office of the High Commissioner for Human Rights (OHCHR) on the relationship between the Guiding Principles and the commitments undertaken by Global Compact signatories, explains that the “Guiding Principles provide further conceptual and operational clarity for the two human rights principles championed by the Global Compact”.
Respecting and supporting human rights also strengthens a business’ relationships with its stakeholders. For example, workers who are treated with dignity and respect are more likely to be productive and remain loyal to an employer. New recruits increasingly consider the social, environmental and governance record of companies when making their choice of employer. Human rights and inclusive business models can also be a source of innovation for new products or services, access to new markets, help strengthen the social license to operate and to make the business a valued member of the community and society.
What can companies do?
Respecting Human Rights
Business has the potential to impact — positively and negatively — virtually all human rights. Accordingly, business should consider their potential impact on all rights. However, some actual or potential impacts will require special consideration, for example, where the actual or potential impacts are very serious and/or there is a strong connection between the company and the abuse.
For the content of human rights, at a minimum, companies should look to the International Bill of Human Rights and the core International Labour Organization (ILO) Conventions. The publication Human Rights Translated elaborates the main internationally proclaimed human rights from a business perspective and offers practical examples of how companies have infringed on human rights as well as examples of how businesses have supported the enjoyment of the rights. Although some rights will be more relevant than others in particular circumstances, situations change, so broader periodic reassessment is necessary.
Business must comply with all applicable laws and respect internationally recognized human rights, wherever they operate. In the rare situation that national law directly conflicts with international standards, companies should seek ways to honour the principles of internationally recognized human rights. Please click here for our good practice note entitled “Meeting the Responsibility to Respect in Situations of Conflicting Legal Requirements”.
Importantly, the corporate responsibility to respect exists independently of States’ human rights duties. Among other things, this means that businesses have a responsibility to respect human rights whether they are operating in an area of weak governance or in a more stable context. In areas where there is weak governance, the risks of infringing human rights may be greater because of the context. For information on how to use conflict sensitive business practices in such contexts, see Guidance on Responsible Business in Conflict-Affected & High-Risk Areas: A Resource for Companies & Investors.
Determining the scope of their responsibility
Companies should consider three sets of factors in determining the scope of their responsibility to respect human rights or, in other words, the risk of potential negative impacts on human rights in connection with the conduct of their business:
- The first is to consider the country and local context in which it is operating for any human rights challenges that context might pose. Information about these is available from NGOs, Government, international trade unions and international organizations. There are also services that seek to bring such context specific risks together in formats more easily digested for business, for example, Danish Institute Country Risk assessments and Maplecroft Maps of Human Rights risks. These and other guidance material can be accessed from our library. Pay particular attention to the context in countries where laws are widely known to fall short of international standards and where enforcement may be inadequate.
- The second set of factors involves considering whether the company is causing or contributing to adverse human rights impacts through their own activities within that context — for example, in their capacity as producers, service providers, employers and neighbours ("activities" is understood to include both actions and omissions).
- Companies should then address those impacts by adjusting their policies and practices to prevent the infringement from occurring. An illustrative list of activities with direct impact might include the production process itself; the products or services the company provides; labour and employment practices; the provision of security for personnel and assets; and the company’s lobbying or other political activities.
- The third set of factors is an analysis of the company’s relationships with Government, business partners, suppliers and other non-State actors to consider whether they might pose a risk for the company in terms of implicating it in human rights abuse. Look particularly at the provision or contracting of goods, services and even non-business activities, such as lending equipment or vehicles. Consider the track records of those entities your company deals with to assess whether the company might contribute to or be associated with abuse caused by those entities. The responsibility to respect human rights also includes the Global Compact commitment to avoid complicity, that is, being involved in human rights abuse that another company, government, individual, group etc. is causing.
Companies should adopt a statement of policy as a public commitment to fulfill their responsibility to respect human rights, approved by their board or equivalent. It can be a stand-alone statement or integrated into a broader corporate sustainability policy or code of conduct. Broad inspirational language may be used to describe respect for human rights, but more detailed guidance in specific functional areas is necessary to give those commitments practical meaning. The policy should stipulate the
company’s human rights expectations of personnel, business partners and those directly linked to the organization’s operations, products or services. As such, it should be communicated to these parties, as well as be publically available.
The policy should be informed by internal/external human rights expertise. Developing a human rights policy can also be an important opportunity for stakeholder engagement on the topic of human rights, which can be almost as important as the policy that results from the process. View sample Human Rights policies. Once prepared, the policy should be reflected in operational policies and procedures in order to embed it throughout the business functions. Download: A Guide for Business: How to Develop a Human Rights Policy.
Human rights due diligence
In order to ensure and demonstrate (i.e. to know and show) that a company is meeting its responsibility to respect human rights it should undertake due diligence. Human rights due diligence is the ongoing process taken to identify, prevent and mitigate and account for negative human rights impacts which the company may cause or contribute to through its own activities or which may be directly linked to the company’s products, operations or services by a business relationship. Human rights due
diligence will vary in complexity with the size of the business, the risk of human rights impacts, and the nature and context of the business operations. The process should draw on internal and/or independent external human rights expertise and involve appropriate and meaningful consultation with potentially affected stakeholders. Tools and guidance materials are very helpful in this process. Comparable processes are typically already embedded in companies to assess and manage financial and related risks. Explore our library.
Some particularly important elements of a comprehensive management approach to human rights include:
- Assessing human rights impacts: Many corporate human rights issues arise because companies do not consider the potential implications of their activities and relationships within their operating context. Companies should take proactive, ongoing steps to understand how existing and proposed activities may cause or contribute to human rights impacts, as well has how the company’s operations may be directly linked to such impacts. The scale of the review will depend on the industry, company size and national and local context and should be commensurate with the risk of severe human rights impacts. The process should draw on internal or external expertise and involve meaningful consultation with stakeholders, as appropriate. Based on the information uncovered, companies should refine their plans to address and avoid potential negative human rights impacts on an ongoing basis
- Integration of human rights policies throughout a company: The integration of human rights policies throughout a company may be the biggest challenge in respecting human rights. If awareness of human rights issues and their importance is not fully integrated across relevant internal functions and processes, inconsistent or contradictory actions can result. For example, product developers may not consider human rights implications; sales or procurement teams may not know the risks of entering into relationships with certain parties; budgets may not be properly allocated; and company lobbying may contradict commitments to human rights. Leadership from the top is essential to embed respect for human rights throughout a company, including by assigning responsibility for addressing impacts to the appropriate level and function within the business and developing an oversight process. It is important to train personnel to ensure consistency, as well as foster their capacity to respond appropriately when unforeseen situations arise
- Taking action: The appropriate action for a company to take will vary depending on whether (a) the company has caused or contributed to an impact, or (b) it is directly linked to that impact through its business relationships. In the case of (a), the company should cease or prevent the impact. In the case of (b) it should utilize available leverage to prevent or mitigate the impact
- Tracking performance: Monitoring and auditing processes permit a company to track ongoing developments. The procedures may vary across sectors and even among company departments, but regular reviews of human rights impact and performance are crucial. Tracking generates information needed to create appropriate incentives and disincentives for employees, ensure continuous improvement and to make necessary adjustments in priorities and approaches. Tracking should draw on feedback from both internal and external stakeholders. Confidential means to report non-compliance, such as hotlines, can be a useful source of feedback
- Communicating/reporting on performance: Reporting is a driver for change, externally as well as internally: It fulfils companies’ obligations to account for how they address human rights impacts; shapes stakeholders’ perceptions of a company and helps to build trust; and is increasingly acknowledged as a stimulus for internal development with a positive impact on business decisions and outcomes. Communications should be of a form and frequency that reflects the company’s human rights impacts, be accessible to the intended audience and provide enough information for stakeholders to evaluate the adequacy of the company’s response to impacts. Global Compact participants are required to communicate their progress on an annual basis. The Global Compact has developed a Human Rights Supplement to Communication on Progress Guidance to give practical guidance to businesses of all sizes wherever they are located on how to improve reporting on their implementation efforts, especially within the context of their annual Communication on Progress
- Remediation: A company should have in place or participate in remediation processes. This allows the company to address adverse human rights impacts that it has caused or contributed to. Effective company-level grievance mechanisms ensure that employees, contractors, local communities and others can raise their concerns and have them be considered. This can help companies to identify risks of negative impacts and avoid escalation of disputes
Supporting Human Rights
In practice, respect and support for human rights are often closely interlinked in terms of the management steps that are taken to enable and ensure respect and support for human rights. For example, corporate policies on human rights often make positive commitments to support human rights, especially rights that may be strategically relevant to their business. Analyses of context, activities and relationships are likely to yield opportunities to promote human rights as well as possible risks of infringing rights. And companies often include in their reports information about the positive contribution they are making to human rights.
Supporting human rights involves making a positive contribution to human rights, to promote or advance human rights. Socially responsible organizations will typically have a broader capability and often desire to support the promotion of human rights within their sphere of influence especially in ways that link strategically to their core business activities. The business case for supporting human rights can be as strong as the business case for respecting human rights. Likewise, stakeholder expectations often extend to the belief that organizations can and should make a positive contribution to the realization of human rights where they are in a position to do so.
There are at least four ways business can support or promote human rights:
- Through their core business activities in support of UN goals and issues
- Strategic social investment and philanthropy
- Advocacy and public policy engagement
- Partnership and collective action
These are elaborated in the Blueprint for Corporate Sustainability Leadership, which was adopted by the Global Compact participants at the Leaders Summit in June 2010. It makes clear that to be a corporate leaders on sustainability, business must not just avoid negative impacts, along with all other actors, but also make a positive contribution to society and do its part especially in ways relevant to its business in helping to overcome the most acute and chronic challenges.
Here are some examples of how companies are supporting and respecting human rights through their daily activities:
In the workplace:
- by providing safe and healthy working conditions,
- by guaranteeing freedom of association,
- by ensuring non-discrimination in personnel practices,
- by ensuring that they do not use directly or indirectly forced labour or child labour,
- by providing access to basic health, education and housing for the workers and their families, if these are not provided elsewhere,
- by having an affirmative action programme to hire victims of domestic violence, and
- by making reasonable accommodations for all employees' religious observance and practices
In the community:
- by preventing the forcible displacement of individuals, groups or communities,
- by working to protect the economic livelihood of local communities,
- by contributing to the public debate. Companies interact with all levels of government in the countries where they operate. They therefore have the right and responsibility to express their views on matters that affect their operations, employees, customers and the communities of which they are a part,
- through differential pricing or small product packages create new markets that also enable the poor to gain access to goods and services that they otherwise could not afford
- by fostering opportunities for girls to be educated to empower them and also helps a company to have a broader and more skilled pool of workers in the future, and
- perhaps most importantly, a successful business which provides decent work, produces quality goods or services that improve lives, especially for the poor or other vulnerable groups, is an important contribution to sustainable development, including human rights.
- If companies use security services to protect their operations, they must ensure that existing international guidelines and standards for the use of force are respected
Fostering Respect for Human Rights
The topic of human rights can sometimes be challenging for a company to talk about with its managers and employees and/or those outside the company. However, promoting understanding about what human rights are, their relevance to business and what, in practical terms, business can do to address human rights issues can help to make action to respect human rights easier.
Some businesses find that looking at opportunities to support human rights as well as the risks of infringing human rights helps to motivate managers and staff to address risks too. Another approach some businesses find helpful is to start by looking at what the business is already doing to respect and support human rights, such as by having good human resources policies and practices, implementing policies on non discrimination and promoting diversity in the workforce, respecting the
privacy of customers and workers, undertaking efforts to make essential products more accessible to the poor and implementing effective occupational health and safety policies and practices. This helps to demystify human rights by showing that respecting human rights does not require starting from the very beginning. Nor does it need a whole new management system. Human rights can be integrated into existing business processes and procedures. Some companies find it helpful to look for the right entry point and language to discuss risks and opportunities with managers and staff. Sometimes it might be easier to begin the discussion by talking about familiar concepts like respect, dignity, fairness and equality, and specific scenarios with which managers and employees may be confronted. Companies investing in emerging economies may find it useful to discuss challenges to implementing Principles 1 and 2 in the Global Compact’s Human Rights and Business Dilemmas Forum.