Human rights and business interests are sometimes conflicting, particularly in situations where companies operate in countries with weak human rights protections or where their operations may have negative impacts on local communities or the environment. Not only. Some companies have a business model based on human rights violation – paradoxically operating in countries where there are strong human rights protections.
Overall, from civil society to the legislation level, there is a growing trend towards greater corporate responsibility and accountability, all over the world, with a focus on preventing human rights abuses, environmental harm, and other negative impacts associated with business activities.
The business side of human rights
Companies have a responsibility to respect human rights, which means avoiding causing or contributing to human rights abusesconstitute and addressing any adverse impacts that they may have on human rights. I am certainly not going to write an entire dissertation on the relevant conducts or cases. Just to offer a starting point, here a couple of examples of what might constitutes a human rights violation:
labour rights violations, such as forced labour or child labour health and safety violations, such as failure to provide adequate protection for workers or exposure to hazardous materials, environmental pollution or degradation that impacts the health and well-being of local communities, discrimination or harassment in the workplace, including sexual harassment or unequal pay for women or minorities
The respect of human rights is becoming a legal requirement in many countries. Beyond the moral or ethical dimension of respecting human rights, business should start conceiving their business models around the compliance of human rights standards as a strategic move for a long-term success and competitive advantage.
Human rights are relevant to business because they can impact a company's reputation, legal liability, and competitive positioning – in this sense, compliance should be regarded as a strategic tool to:
enhance corporate reputation build strong relationships with stakeholders, including employees, customers, communities, and investors
reduce lawsuits, fines, and other penalties
grant a sustainable operation
facilitate long-term sustainable growth
All these while also upholding the fundamental rights and dignity of all individuals. You kill two birds with one stone!
CSR finally put into practice
Corporate Social Responsibility (CSR) is an important concept in the business world, with some good results, such as the actual implementation of sustainability programs or plans to promote diversity, equity and inclusion in workforce. It is also true that sometimes, CSR is regarded much more as a ‘matter of routine’.
Also, the integration of human rights into CSR practices has been less consistent and less comprehensive. Some companies have developed robust human rights policies and practices, and have made significant progress in addressing human rights risks and impacts associated with their operations and supply chains.
However, many companies have struggled to effectively integrate human rights considerations into their CSR strategies, or to address human rights risks beyond the most basic requirements.
Legislations around the globe are finally making significant steps towards a more practical definition of requirements and steps to take, and are holding companies accountable for their human rights and environmental impacts.
On focus: the Belgian Vigilance Act
Also known as the “Law of 21 December 2018 on the Establishment of a Vigilance Obligation for Companies” – the Belgian Vigilance Act applies to companies with an average workforce of at least 100 employees over the last three years and a total balance sheet exceeding €17 million. The law also applies to companies that are part of a group whose parent company meets these criteria.
It requires companies operating in Belgium to implement a ‘vigilance plan’, aiming to ensure that companies respect human rights, social and environmental standards in their operations, both locally and globally. This has also implications for supply chain management. Companies must ensure that their suppliers and subcontractors also comply with the vigilance plan. If a supplier or subcontractor is found to be in breach of the vigilance plan, the company is required to take appropriate measures to prevent or mitigate the risks.
Companies are required to identify and assess the risks of their operations and supply chains on human rights, social and environmental standards. They must also establish measures to prevent or mitigate these risks, monitor their implementation, and establish a reporting mechanism to ensure that they are transparent about their efforts to comply with the vigilance plan.
Failure to comply can result in administrative fines, in addition to reputational damage, which could lead to a loss of customers and investors.
Many countries have already similar legislation in place. Many more are considering or enacting similar laws. This undoubtedly highlights the growing global trend towards corporate accountability and transparency.
Risks for companies
These are many risks that companies face when they fail to implement due diligence measures to prevent or mitigate the impact of their operations on human rights, social, and environmental standards. These risks include legal action, public scrutiny, reputational damage, and loss of customers and investors. Here are a couple of real examples.
Legal action – In 2019, the French multinational oil and gas company, Total SA, was sued by several human rights and environmental organisations for violating the French Duty of Vigilance Law. Allegedly, Total SA had failed to prevent human rights abuses and environmental damage caused by its operations in Uganda, Tanzania, and Papua New Guinea. (The Court dismissed the lawsuit in February 2023).
Boycotting – In 2021, H&M and Nike faced backlash and calls for a boycott after it was revealed that the company had been sourcing cotton from suppliers in the Xinjiang region of China, where the Chinese government has been accused of human rights abuses against the Uyghur Muslim minority, including forced labour in cotton fields.
Public scrutiny – In 2010, Apple faced public scrutiny and criticism after a series of suicides at the Foxconn factory in China, which manufactures Apple products. The suicides were attributed to poor working conditions and low wages at the factory, highlighting the human rights risks associated with global supply chains.
It is essential for companies to take these risks seriously and prioritise responsible business practices to avoid such consequences.
Recognising challenges in complying
Depending on the size and complexity of their operations and supply chains, complying with laws and regulations related to human rights standards can present several challenges for companies.
Implementing due diligence measures to identify and address human rights risks can be operationally challenging, particularly for companies with complex supply chains that span multiple countries and jurisdictions.
Furthermore, due diligence measures can require significant resources, including time, money, and expertise. For smaller companies with limited resources, this can be particularly challenging.
Also, compliance with human rights standards should also require a shift in company culture, particularly if the company has traditionally prioritised profit over social and environmental responsibility. This can be a challenging shift for some companies to make.
As a final point, compliance with human rights standards often requires coordination between different departments within a company, including legal, HR, and sustainability teams. Ensuring that everyone is on the same page and working towards the same goals is probably one of the most challenging aspect, particularly if there are silos or communication breakdowns between departments.
No matter how challenging this is, companies should address these challenges by investing in resources, fostering collaboration and communication between departments, and adopting a culture of responsibility and accountability. This will inevitably ensure a long-term sustainable growth.
The role of the legal department
If you have been reading my articles, you already know that I am a big supporter of the idea of a legal department that is utilised as a strategic one by the business. Also in this occasion, the legal department plays a critical role in enhancing companies’ decision-making, on top of complying with human rights standards. Specifically, the legal department can help the company by:
Advising on the legal implications of the company's activities and supply chain, ensuring that the company is deciding on the best business move, fully in line with relevant laws and regulations (e.g., on labour laws, environmental regulations, and human rights laws that apply to the company's operations and supply chain)
Drafting policies and procedures, working with other departments, to ensure compliance with human rights, social, and environmental standards (e.g., drafting contracts with suppliers that require them to comply with relevant laws and regulations)
Assisting in conducting due diligence on suppliers and subcontractors to identify potential risks and liabilities related to human rights, social, and environmental standards.
Handling legal disputes, representing the company and work to resolve the dispute in a manner that is consistent with the company's values and obligations
By working closely with legal department, the business can better evaluate strategic moves and gain a long-term competitive advantage.
How to put compliance into practice
Companies can ensure compliance with human rights, social, and environmental standards by implementing a comprehensive due diligence process that considers the company's operations and supply chain. Here are some key steps that companies can take to ensure compliance:
Embed human rights, social, and environmental standards into their business operations, including procurement, production, and sales. Based on this, develop a policy commitment to human rights, social, and environmental standards that sets out the company's expectations and obligations company's expectations and obligations
Establishing clear roles and responsibilities for compliance with human rights, social, and environmental standards, including assigning accountability to specific individuals or departments
Provide training and capacity building for employees to ensure that they understand the company's policies and standards and their roles in implementing them.
Conduct a risk assessment to identify potential human rights, social, and environmental risks and impacts associated with their operations and supply chain (e.g., conducting site visits, reviewing supplier contracts, and engaging with stakeholders.)
Implement due diligence measures, based on the risk assessment, to address potential human rights, social, and environmental risks and impacts (e.g., including developing supplier codes of conduct, conducting audits and assessments of suppliers, and providing training and capacity building)
Monitor and report their own operations and supply chain, as well as their suppliers' compliance with the company's policies and standards (e.g., regular reporting on progress towards compliance goals and addressing any identified non-compliance issues)
Bonus tip – Engage with stakeholders, including suppliers, customers, and civil society organisations, to understand their concerns and expectations and to build relationships based on transparency and trust. This also mean communicating your progress towards compliance with human rights, social, and environmental standards, including reporting on identified risks and issues and steps taken to address them.
Into the future of business & human rights
The trend towards greater corporate responsibility and accountability is driven by a variety of factors, including the global warming crises, energy crises, the war, and a general change in the public, demanding for sustainable and ethical products and services.
As the awareness of these issues grows, we will see more and more legislations on human rights, social, and environmental standards. It is likely that more countries will implement laws and regulations aimed at promoting greater corporate responsibility and accountability as governments are increasingly recognising the role that businesses can play in this arena.
Companies that are proactive in addressing these issues will be better positioned to comply with future regulations and to build trust with their stakeholders.
Corporate due diligence laws and legislative proposals in Europe (European Coalition for Corporate Justice – ECCJ, 2022)
Foxconn Suicides https://en.wikipedia.org/wiki/Foxconn_suicides
About the Author
Chiara Lamacchia is a consultant in legal, marketing & legal forecasting, working in corporate strategy for global organisations across different sectors, after an LL.M. from Bocconi University (Milan, Italy) and an MSc in Marketing from Edinburgh Napier University (UK). Chiara is the Founder of lawrketing.com and withoutconsulting.com, promoting the adoption of ground-breaking ways of using the law for innovation and competitive advantage.
Among other things, she authored and published the book "Lawrketing – What Business Never Realised About Law", introducing a new concept, lawrketing, combining law, business, marketing and innovation.
> Connect with Chiara on linkedin.com/in/chiaralamacchia
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