Incorporating human rights into your strategies helps you create value for society while it also benefits your business. Consumers in developed and emerging markets are increasingly losing trust in companies that don’t address worker’s conditions or child labor in their supply chains. Governments are introducing regulations about business and human rights. Still, many large and small companies ask themselves: how do human rights relate to my day-to-day operations? And, do they really add value to my business?
Below, we’ll give you 7 reasons why supporting human rights is the right thing to do. We also point out some essential tools that will help your company take action.
This is a blog post in the FairChange series Social Impact: Strategies for Success,about 5 key areas of opportunity to upscale the value you create for society – and for business.
When we raise the issue of human rights in our work with companies, these two words evoke all sorts of reactions. Often, business leaders think that respecting human rights is the responsibility of the government, not theirs. Others approach human rights solely as a legal compliance risk. Managers responsible for corporate social responsibility or community relations frequently mention that they are committed to supporting human rights among social stakeholders but find it hard to “sell” the issue to other areas of their company.
In some cases, especially when organizations are operating in regions wracked by armed conflict, the words human rights even scare them. They automatically associate the term with accusations of complicity in rights abuses committed around them during wartime.
But in reality, companies should not shy away from actively supporting human rights. It’s not only part of being good corporate neighbors – It’s also good for business.
In this article we’ll give 7 compelling reasons why:
- Addressing human rights helps mitigate global risks
- Businesses thrive in an environment where civic rights are respected
- Promoting workers’ rights increases productivity and profitability
- Respect for human rights improves relations with local civil society
- A good human rights record enhances brand value and trust
- Respecting human rights reduces regulatory risks
- Human rights are key to responsible supply chain management
Do you prefer to read and keep this post as a downloadable file, updated with new information and completed with extra bonus tips? Get the eBook on the advantages of human rights promotion for business and society here!
Before we dive into why respecting human rights creates value for your business, let’s be clear about what exactly we’re talking about. What are human rights? And how do they relate to the private sector?
What are human rights and how do they involve your company?
Human rights are a set of universally agreed-upon moral guidelines that originate in the Universal Declaration on Human Rights adopted by the international community in 1948. They represent the minimum conditions we all need to live in freedom, equality, and peace, and with an adequate standard of living.
Human rights are everyone’s rights. Therefore, as individuals and as members of business organizations, we have a responsibility to prevent negative impacts on the rights of others, just as others should respect our rights. As a company, supporting the rights of workers, suppliers, and local communities is, in the first place, a matter of being a good employer and a good corporate neighbor. Evidence shows that it is also good business.
In 2011 the United Nations issued the Guiding Principles on Business and Human Rights. They are the main voluntary international standard on this issue and have been adopted by governments and companies across the globe. Whether you’re a large or a small company, the UN Guiding Principles help your organization prevent and address the risk of adverse human rights impacts in your operations or your supply chain.
Supporting human rights: the role of large corporations and SMEs
Protecting the human rights of everyone has traditionally been a government task, and it still is. However, more and more stakeholders – such as civil society, governments, consumers, and investors – think that companies should actively support the rights of workers, suppliers, and neighboring communities.
Awareness is also growing among global corporate leaders that integrating human rights into their strategies and practices is not only good for society but also for business. The Economist Intelligence Unit (EIU) found that 83% of 853 senior corporate executives surveyed in 2015 agreed that business is an important player in the respect for human rights.
If you’re a small or medium-sized company you have a significant role to play as well. SMEs tend to be firmly rooted in local societies, which puts them in a privileged position to promote rights related to work, social security, adequate standards of living, and development. Actively supporting these human rights is a way to promote the wellbeing and dignity of the most vulnerable groups, to which small businesses often have easier access than large corporations. Conversely, if they don’t respect human rights, they directly feel the adverse impacts on workers or suppliers and their families, and the negative consequences for their operations.
Of course, there are challenges. We often hear small business leaders say they don’t have sufficient time, money, or people available to adopt human rights policies. However, incorporating human rights doesn’t have to be costly and it opens significant business opportunities for smaller players too, as we will see below.
If you are a large company, you can help smaller businesses seize these opportunities by promoting good human rights performance through responsible management of your local or global supply chain.
Human rights and the Sustainable Development Goals
Supporting human rights is key if your company wants to promote just and inclusive sustainable growth in its operating areas and society. It’s no coincidence that human rights underpin the UN Agenda 2030 and its 17 Sustainable Development Goals (SDGs), aimed at achieving a healthy natural environment and socio-economic well-being for all by 2030.
As John Ruggie, author of the Guiding Principles on business and human rights points out, embedding respect for human rights throughout your business operations and business relationships is intrinsically linked to meeting the ambitions of the SDG agenda.
Read more about the Sustainable Development Goals in our blog post “10 Business opportunities of supporting the Sustainable Development Goals”
7 ways respecting human rights creates value for society and your business
So, how exactly does human rights uptake benefit your company? Below we’ll detail 7 ways in which respect for human rights helps your company create value for society and business.
1. Addressing human rights helps mitigate global risks
Human rights underpin many global risks that affect companies. By respecting the rights of people and communities in its operating areas, your business can help mitigate these threats.
According to the World Economic Forum’s Global risks report 2019, biodiversity loss and ecosystem collapse ranks number 6 in the top 10 of main risks in terms of negative impact. Failure to take action to mitigate and adapt to climate change is considered the number 2 global risk. The human impacts of these environmental risks are immense. In 2018, the World Bank projected that without concrete climate and development action, in three regions alone —Sub-Saharan Africa, South Asia, and Latin America— over 143 million people could be forced to migrate to escape the impacts of climate change.
The negative consequences of environmental risks seriously disrupt existing social and economic systems and pose major threats to the human rights of people across the globe. Especially in developing markets, fundamental rights such as the rights to life, health, food, water, and sanitation are increasingly at stake.
In this context, the call for businesses to take on their responsibility grows. Your company can contribute through responsible environmental management with a special focus on preventing negative impacts on the human rights of the inhabitants in its area of influence.
Threats to the fundamental human right to privacy also score high in the global ranking in an increasingly digitalized environment. Loss of privacy to companies is a short-term risk expected to rise by 63%, according to experts from different sectors of society that were surveyed for the WEF Global risks report.
In terms of impact on the global economy and the business sector, conflict and violence are the number one threat, as is shown by a Business and Sustainable Development Commission (BSDC) report. The Global Peace Index 2019 calculated that for 2018, the economic cost of violence for the global economy amounted to 14.1 trillion US dollars. This is equivalent to 11.2% of the world’s Gross Domestic Product (GDP), or 1,853 dollars per person.
Your company can take different actions to address this global threat. For example, by promoting the uptake of the human rights to life and security by contracted security forces and other business partners when operating in at-risk environments, or assuring that your supply chain is conflict-free if you’re sourcing from regions plagued by war.
2. Businesses thrive in an environment where civic rights are respected
Countries with a higher degree of respect for the rights of their citizens experience higher economic growth rates and higher levels of human development. This, in turn, favors sustainable business, according to data collected by the World Economic Forum 2019.
So, protecting rights defenders and not hindering them when they speak up to protect people and the planet is an issue that directly concerns companies. As of July 2019, the Business, civic freedoms & human rights defenders portal reports 1,740 attacks on defenders working on business-related human rights abuses since 2015. According to an OECD Fact sheet (2019), Companies are sometimes complicit or remain silent when threats or attacks are perpetrated.
To address this challenge, a group of major brands including Unilever, Adidas, Primark ABN AMRO, and Anglo American, issued a call for protecting human rights defenders and civic freedoms. The business alliance recognizes that protecting rights defenders is not the sole responsibility of governments and states that they “will work to find effective ways a business can positively contribute to situations where civic freedoms and human rights defenders are under threat”. The brands underscore that when human rights defenders are under attack, so is a sustainable and profitable business.
3. Promoting workers’ rights increases productivity and profitability
Several fundamental human rights are related to the inclusion, non-discrimination, and well-being of workers. Respecting worker’s rights is a driver of value-based business and it also makes commercial sense.
A 2018 meta-analysis of independent studies across 49 industries in 73 countries finds a strong positive correlation between employee wellbeing, productivity and firm performance. In 2015, the University of Warwick demonstrated that happiness made workers around 12% more productive, while global index provider FTSE Russell calculated that the “Fortune 100 Best Companies to Work For” clearly outperform the market. These companies returned 11.66% annually from 1998 through the end of 2016, nearly 5% more than the returns of equivalent companies that were not on the list.
Companies that actively promote the right to non-discrimination and strive for a diverse workplace, also prosper. According to a McKinsey study (2017), data from countries across the globe shows that firms with a significant number of women on their executive teams were 21% more likely to outperform on profitability. Companies with ethnic and cultural diversity on executive teams were 33% more likely to have industry-leading profitability.
In spite of this compelling evidence, a lot more needs to be done to make the promotion of worker’s rights a reality across industries and countries. The 2019 Global rights index of the International Trade Union Confederation (ITUC) finds that worker’s rights are not protected in most parts of the world. Workers claiming their rights experienced violence in 52 countries, and in ten countries trade unionists were killed. These and other incidents happen when governments refuse to implement legislation to enforce workers’ rights or when companies avoid national rules and legislation.
Fortunately, there are many private sector initiatives and multi-stakeholder alliances that can help your company promote worker’s rights. The Women’s Empowerment Principles Gender Gap Analysis Tool (“WEP GAT Tool”), offers a free and comprehensive assessment of your organization’s performance related to equality of women in the workplace. Do you want to address the right of freedom from child labor? Then the Children’s Rights and Business Principles (CRBP) are useful starting points. These principles guide you on actions to support children’s and young people’s rights in the workplace, the market, and local communities.
4. Respect for human rights improves relations with local civil society
An Economist Intelligence Unit (EIU) study (2015) finds that 27% of companies have started to include human rights in the conversation with external stakeholders. Respecting the human rights of people who live in your operating environment is key to building a transparent dialogue and preventing disputes that affect both your company and your neighboring communities.
Taking steps to prevent the potential adverse impacts of business activities on human rights – such as production processes that affect the natural environment and put local water supplies or agricultural production at risk, or commercial activities that disrupt traditional ways of life of indigenous people – reduces negative consequences for your neighbors. It also enhances your social license to operate.
In a 2018 interview, John Ruggie reminds us how the Guiding Principles on business and human rights have changed the landscape of company-community relations. He notes that today even in the most isolated communities – from mining areas in the Andes to lumber operations in Asia – local people make their voices heard because they’re aware they have rights that companies should respect.
Incorporating human indicators in your risk assessments helps prevent negative impacts. This is the first step of the so-called due diligence process that underpins sound human rights management. Local populations must be actively involved in the assessment. They can identify human rights risks that your organization’s security area would not have detected alone, while the participation process itself can spur constructive dialogue. This, in turn, reduces the risk of future frictions.
Investing in an ongoing dialogue with local civil society also saves costs. A study by Queensland University and Harvard Kennedy School demonstrates that conflict with local communities can incur costs of 20 million USD per week. The greatest costs are related to the lost value of future projects, expansion plans, or lost sales. Most often overlooked by companies are the indirect costs resulting from staff time that is diverted to manage conflicts.
5. A good human rights record enhances brand value and trust
In the last decade, widely publicized incidents have shown the price paid by some major companies for human rights incidents in their operations or supply chains. United Airlines, for example, saw its share price plunging after a passenger was removed from a flight with unmeasured force – which implies abuse of the right to not be subjected to torture or cruel, inhuman or degrading treatment. Nearly 1 billion USD of the company’s value was erased.
A failure to support human rights and provide an adequate response when harm is done can cause public outrage and mobilize activist organizations against your company. The tragedy of the collapsed Rana Plaza factory building in Bangladesh (2013) resulted in the widely publicized death and life-changing injuries of thousands of garment workers. It brought to light how global brands that sourced from the factory had failed to address minimum labor rights, including safe working conditions. The brands had to contribute most of the 30 million USD paid to the victims.
The importance of respecting human rights for brand value is illustrated by new business rankings focused on this subject. The Corporate Human Rights Benchmark, for instance, assesses the human rights policies, processes, and practices of 101 leading global companies. Another example is Ranking digital rights which ranks the world’s most powerful internet, mobile, and telecommunications companies according to their human rights commitments and policies.
Transparent reporting about your company’s actions in the field of human rights is key to promoting trust among customers, regulators, investors, and other relevant stakeholders. This means not only highlighting positive impacts but also being honest about adverse human rights impacts and detailing actions to address these challenges.
Several initiatives help your company in this effort. The most widely used framework for sustainability reporting, the GRI standards, includes guidelines for reporting on specific human rights that are relevant for local and international businesses. The UN Guiding Principles Reporting Framework guides companies on how to inform stakeholders about their implementation of the Guiding Principles in their strategies and practices.
6. Respecting human rights reduces regulatory risks
Depending on the size of your company and the country or countries where you operate, incorporating respect for human rights may be mandatory. More and more governments and multilateral bodies are issuing regulations that require proof of businesses’ commitment to supporting human rights.
The Business and Human Rights Resource Centre lists over 15 current government regulations on human rights reporting and due diligence that are binding for companies. Among them is the European Union’s Non-financial Reporting Directive, which came into effect in 2018. It demands information from large companies and financial corporations about their impacts on the environment and society, including human rights.
So, if your company is based in one of the countries that have introduced regulations around business and human rights, not complying with human rights due diligence and reporting requirements can lead to regulatory risks. If you are exporting to countries that have such regulations in place or if you are intending to do so, you’ll also want to align your business practices with these national requirements.
The Guiding Principles on business and human rights have been an important driver behind national policies. As of June 2019, 22 countries have designed National Action Plans on business and human rights, mainly in Europe, and two in Latin America (Colombia and Chile), and one in Africa (Kenya). Twenty-four other countries are in the process of developing such policies. These National Action Plans aren’t binding but include measures and provisions whose incorporation is highly recommendable if your company wants to upscale its support for human rights.
Some governments and human rights defense groups, however, think that as a voluntary framework the Guiding Principles are not enough. In 2015, a UN intergovernmental working group was installed to coordinate negotiations on an international legally binding instrument. Since then, governments, NGOs, and private sector representatives discuss measures to regulate the human rights obligations of transnational corporations and other business entities. A first draft of the instrument was published in October 2018, and a revised version of the draft is currently under discussion.
These examples illustrate a growing trend to move away from voluntary and soft law initiatives, and to enhance legal accountability for companies involved in human rights incidents. Incorporating human rights into your activities today helps your company reduce regulatory risks in the medium term.
7. Human rights are key to responsible supply chain management
Global supply chains have become a mainstream way to source primary materials and other goods and services. They usually involve corporations from industrialized countries with a large and complex network of contractors and subcontractors in developing markets. However, the number of emerging market multinationals with international supply chains is quickly growing. While creating employment, income, and driving local socio-economic development, these global supply chains also come with significant human rights risks.
After the Rana Plaza disaster, international companies signed the Bangladesh Accord, a first-of-its-kind, legally binding agreement between brands and trade unions to work towards a safe and healthy garment and textile industry in the country. It’s a sign of the rapid evolution of binding regulations, soft law, and voluntary agreements around human rights in business supply chains. Independent research group Corporate Accountability Research lists over 30 of these initiatives across countries and sectors.
Your company can turn to a high number of private sector initiatives and multi-stakeholder alliances for resources and partnership opportunities. The Global Business Coalition Against Human Trafficking helps you address modern slavery and related human rights violations, which are one of the main burdens affecting international supply chains today. The coalition has launched an interactive map for business that helps you find initiatives and organizations engaging with the private sector to combat modern slavery, human trafficking, forced labor, and child labor.
Of special concern are industries that source materials from regions affected by conflict and violence, such as IT and telecommunications. Commonly known as “conflict minerals” – referring to tin, tungsten, tantalum, gold, and others – the extraction, trade, and transformation of these commodities involve huge human rights risks for workers. Directly and indirectly, sourcing companies can be involved in these human rights abuses and in financing local armed conflicts. Enhanced human rights due diligence is key to prevent this from happening.
As an OECD paper (2017) points out, sustainable supply chain management that includes thorough due diligence processes is also good business. Preventing and mitigating the identified risks reduces your company’s exposure to remediation costs and promotes trust in your brand. It can improve financial analysts’ recommendations resulting in a decreased cost of capital.
Are you a domestic company based in a developing economy? In that case, promoting respect for worker’s rights and other human rights among your local suppliers should also be a priority. Governments in several emerging countries have introduced regulations and guidelines for good human rights conduct from businesses. Mani and Gunasekaran (2018) demonstrate that a growing interest in social sustainability by emerging market companies leads them to promote responsible human rights conduct among their local suppliers. This also benefits their organization, as the lead time, quality, and reliability of products increase and their operational performance improves.
Your next steps to promote people’s wellbeing through your business practices
Embedding human rights into your practices is one of the critical areas of doing business with a positive social impact. You’ll find complementary strategies in the other eBooks of this series: Social Impact: Strategies for Success. These will give you more detailed information on other opportunities you can seize to create a better world.
Visit the free resource page on the FairChange Academy Learning Platform. Here you’ll also have access to other resources to help you put your social commitment into practice.
Sources
- Universal Declaration on Human Rights
- UN Guiding Principles for Business and Human Rights
- The Economist: “The road from principles to practice”
- UN Sustainable Development Goals (SDGs)
- “Making Globalization Work for All: Achieving the Sustainable Development Goals Through Business Respect for Human Rights”, by Professor John Ruggie
- World Economic Forum’s Global Risks Report 2019
- WorldBank Open Knowledge Report: “Groundswell: Preparing for Internal Climate Migration”
- Business and Sustainable Development Commission: Better Business Better World
- Global Peace Index 2019
- World Economic Forum: “Why businesses are nothing without strong human rights”
- OECD Fact Sheet: The role of the OECD National Contact Points in protecting human rights defenders
- Business and Human Rights Resource Centre: “The role of the OECD National Contact Points in protecting human rights defenders”
- Business and Human Rights Resource Centre: “Supporting Civic Freedoms, Human Rights Defenders, and the Rule of Law”
- The London School of Economics and Political Science: “Happy employees and their impact on firm performance”
- University of Warwick Publication: “Happiness and Productivity”
- Fortune: “100 Best Companies to Work For Are Beating the Market”
- Mackensy Study: “Delivering through diversity”
- 2019 Global rights index of the International Trade Union Confederation (ITUC)
- Women’s Empowerment Principles Gender Gap Analysis Tool
- Children’s Rights and Business Principles
- **John Ruggie interview 2018
- Queensland University and Harvard Kennedy School study
- The Guardian: “United Airlines CEO offers softer apology after stock nosedives”
- The Guardian: “After two years, the Rana Plaza fund finally reaches its $30m target”
- Corporate Human Rights Benchmark Website
- Ranking Digital Rights Website
- GRI’s Resource Center
- UN Guiding Principles Reporting Framework
- Business and Human Rights Resource Centre: “Examples of government regulations on human rights reporting & due diligence for companies”
- European Union’s Non-financial Reporting Directive
- Guidance on National Action Plans on Business and Human Rights
- Business and Human Rights Resource Centre: “Binding Treaty”
- Bangladesh Accord Website
- Corporate Accountability Research Website
- Global Business Coalition Against Human Trafficking Website
- Modern Slavery Map Website
- European Commission: “Conflict Minerals: The regulation explained”
- OECD and ILO Paper: “Promoting Sustainable Global Supply Chains: International Standars, due Diligence and Grievance Mechanisms”
- Article: “Four forces of supply chain social sustainability adoption in emerging economies”, by Mani and Gunasekaran (2018)
