As demands for better human rights reporting grow fast, help is at hand
Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct and a member of the Eminent Persons Group that has overseen the development of the UNGP Reporting Framework (@nieuwenkamp_csr); and Caroline Rees, President of Shift, the leading centre of expertise on the UN Guiding Principles, which co-facilitated the development of the UNGP Reporting Framework together with Mazars.
When the OECD Guidelines for Multinational Enterprises were revised in 2011, one of the most important changes was the addition of a new chapter on human rights. Over the four years since that chapter was introduced, ever more companies have begun the journey of conducting human rights due diligence: the process of assessing and addressing their human rights impacts, and tracking and communicating how well they do so. And ever more initiatives have developed or refined sector-specific tools to support these efforts: from the Equator Principles for banks to the Voluntary Principles on Security and Human Rights, to the Roundtable on Sustainable Palm Oil.
Now we see another and important trend emerging: as time passes, and the guidance becomes more sophisticated, there are fast rising expectations among investors, governments and civil society that companies provide evidence of what they are doing to put the Guiding Principles into practice. Yet companies’ reporting on their human rights performance remains at best the poor cousin of other non-financial or ‘sustainability’ reporting.
Many reports still focus on philanthropic projects divorced from the human rights issues associated with the company’s core business, or on community volunteering and other commendable but discretionary activities. Where there is relevant information on supply chain audits or community consultation, it is often unclear how these processes inform core business decisions.
Meanwhile those who write reports are frustrated, and understandably so. It’s unclear who actually reads the reports they produce. And the prospect of more demands from more sources leads inevitably to groans at the prospect of chasing down more data for the sake of data.
It doesn’t need to be that way. The UN Guiding Principles Reporting Framework, launched in February, takes a different approach to what human rights reporting could and should be. Two features stand out in particular.
First, the UNGP Reporting Framework asks companies to focus their human rights disclosure on their salient human rights issues: those human rights at risk of the most severe impacts through the company’s activities and business relationships as defined by how grave they are, how widespread, and how hard to remedy. This is not a new idea – in fact, identifying salient human rights issues is simply the first step of human rights due diligence as required under the OECD Guidelines and the UN Guiding Principles on Business and Human Rights.
Importantly, this process starts from the perspective of risk to human rights, not risk to the business. But for any company, an understanding of its salient human rights issues is also indispensable to business success over time.
We don’t have to search long in our newspapers these days to find evidence of how severe impacts on people bring significant risk also to the businesses involved. We can read of literally scores of extractive, construction and other projects delayed or disrupted when communities protest their displacement from land and their loss of livelihoods. Research shows the many kinds of costs companies incur from the conflict that so often ensues.
We see brand company reputations suffer when their products are made by people who die in Bangladeshi factory fires and building collapses or by forced labourers in the Thai fishing industry. With research showing that over one-third of the market capitalization of large listed companies in the UK lies in their reputations, these are hits they cannot afford to carry.
Indeed, research shows that under the complaints system provided through the OECD’s own National Contact Points (NCPs), the largest category of complaints today relates to human rights and typically an alleged failure to conduct human rights due diligence. Most recently a case was brought to the NCP system against FIFA for failing to engage in due diligence concerning human rights for migrant construction workers in Qatar. While non-binding, the NCP mechanism has brought about real results through its mediation procedures. For example recently in two separate cases respectively involving Formula One and Karl Rieker (a German apparel retailer), NCP mediation processes resulted in the companies’ agreement to strengthen their environmental, social and governance (ESG) due diligence systems. In another case, the government of Canada barred future financial support through commercial diplomacy to a mining company which refused to participate in the NCP mediation process and which was alleged to have contributed to adverse human rights and environment impacts through its activities.
In short, the evidence is strong and growing that where risks to human rights are greatest, they converge strongly with risk to business. So for any company, knowing and addressing its salient human rights issues just makes good sense.
Second, the Reporting Framework provides a set of questions for companies to answer: questions such as, ‘How does the company demonstrate the importance it attaches to the implementation of its human rights commitment?’ and ‘How does the company integrate its findings about each salient human rights issues into its decision-making processes and practices?’.
In other words, the Framework does not impose indicators or metrics from outside the company, but offers a set of meaningful questions that any company can answer in some way. Most importantly, these are questions to which any company needs to have answers internally, even if they are not reporting externally. It is in finding those answers that they will understand whether human rights risks are being managed effectively.
So the Reporting Framework is much more than a tool for reporting – it can be seen and used also as a tool for improved human rights due diligence. It translates the human rights chapter of the OECD Guidelines, and the UN Guiding Principles on Business and Human Rights that it mirrors, into simple questions in everyday language. The Reporting Framework’s Annex also helps companies recognize and understand the array of internationally-recognized human rights that need to be addressed through their due diligence, and the kinds of ways in which impacts can occur.
As a result, using the UN Guiding Principles Reporting Framework is not an additional reporting burden on companies. It’s a means of doing better business that meets both OECD and UN standards with regard to human rights.
The UNGP Reporting Framework was launched on 24 February, and is already being used and promoted by a wide range of companies, NGOs and investors, including through a statement of support from over 80 investor groups representing $4.26 trillion in assets under management. For more on the Reporting Framework see www.UNGPreporting.org.