Mitigating Organizational Human Rights Risks

Addressing Human Rights within an organization is increasingly becoming a prerequisite for doing business, as ESG, Sustainability and Impact issues gain traction worldwide. In the context of the EU taxonomy (within a broader onslaught of regulatory initiatives internationally), Ksapa organized a webinar on Mitigating Organizations’ Human Rights Risks. Moderated by Julie Muraco, Director, of Ksapa’s New York office, the event gathered Karin Ryan, Senior Policy Advisor on Human Rights and Special Representative on Women and Girls (Carter Center), Vincent Siegerink, economist and political analyst at the Center for Well-Being, Inclusion, Sustainability and Equal Opportunity (WISE Center), OECD and Farid Baddache, CEO of Ksapa . This is especially relevant and timely in light of the recent EU Directive on Corporate Sustainability Due Diligence.

Approaching Human Rights

Historical Landmarks

The International Bill of Rights, in essence stands for the notion that every person, irrespective of their nationality, sex, race, religion or other status, has a right to be treated with dignity. These rights are generally enshrined in law, to protect and promote basic rights and fundamental freedoms.

The Universal Declaration of Human Rights was developed in 1948, in direct response to the crimes tied to World War II. The Universal Declaration is codified in international law through two treaties, namely the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights. This is a reflection of an ideological battle at the time around what Human Rights ought to be. Activists have since emphasised the need to approach the considerations they contain not as separate categories, but as interdependent and mutually-reinforcing.

Human Rights in the Modern Economy

The former President of the United States, Jimmy Carter, believed that these rights ought to be pursued in tandem to ensure that “extreme capitalism” does not lead to disparities. “Extreme capitalism” can be considered capitalism that exacerbates inequalities significantly, at risk to foster social disorder. Any such discrepancies were indeed seen as a potential violation of the fundamental rights of people, such as the right to housing, to sanitation and water, and to fair wages – to name but a few. He believed that they were all basic rights and are not merely a by-product of a healthy economy.  He signed both the treaties during his time at the White House.

The neoliberal economic model gained prevalence in the 1980s and pushed the idea that economic growth and increase in GDP would bring more people out of poverty and into the economy. Conversely, European countries such as Portugal and Spain were resisting austerity measures by the International Monetary Fund and focused on investment in the social sector.

Mainstreaming Business and Human Rights

In today’s society, Human Rights are not just a State issue, they are also key in the private sector. Businesses can positively, negatively, indirectly or directly impact stakeholders including their employees, suppliers, contract workers, clients/customers, and communities around their operations, and their basic rights.

With that in mind, the International Bill of Human Rights and International Labor Organization conventions serve as basic reference points for businesses to identify their specific Human Rights priorities, including operational impact,  and the obligations a company may have in mitigating or addressing the corresponding risks.

It is therefore essential for top level management to realise that mitigating their organizations’ Human Rights risks is not merely about charity or humanitarianism offering a band-aid solution; but needs to be much deeper.

A 2-Step Line of Questioning for Business to Address Human Rights

Karin Ryan (Carter Centre) stresses how crucial it is for businesses to frame their activities and the impact of their activities through a Human Rights lens. For example, consider the issue of wage discrepancies: does my organization respect the basic right to a living wage? Much in the same spirit, data on maternal mortality rates underlines unequal access to quality healthcare – even across OECD countries. This is not merely an issue of social justice, but a fundamental human right. The question is then for businesses and investors to adequately tackle these structural issues.

The first step is indeed to prepare to have difficult, sensitive conversations. The Carter Centre for instance stands at the forefront of the debate on ending institutional racism or coming to terms with the role of the Church in slavery. Its teams actively engage both governments and private sector to identify relevant mitigative measures.

The second step lies in zeroing on the industrial sectors in which an organization operates, where its investments are, and the specific rightsholders they affect. Businesses indeed need to move away from merely focusing on shareholder returns to take a wider lens and go deeper to understand the impact they have on a much broader set of stakeholders. They are then in a better position to set long-term objectives in their risk management and impact strategies.

Consequences of Rapidly-Evolving Regulations on Corporates

Looking back on client engagements in the mining industry in the 1990s, Farid Baddache underlined the lack of a formal regulatory framework to incentivise companies to comprehensively tackle major Human Rights issues. That said, what significantly contributed to end Apartheid in South Africa, was a good number of investors deciding to boycott South Africa on the basis of Human Rights Violations. Mining companies were then required to change their approach and support reform – regulatory framework notwithstanding.

In 2011, the Guiding Principles on Business and Human Rights were endorsed by the UN Human Rights Council. This framework clearly sets out the duties of States and the responsibilities of companies to ensure that businesses operate with respect for Human Rights. With increasing pressure from civil society, companies are not only expected to better understand their Human Rights risks across their value chains, but also proactively mitigate them. A third key consideration lies in publicly disclosing their risk mitigation strategies in relation to rightsholders ranging from employees to contractors, suppliers, users and local communities.

Zeroing on the Human Rights Impact of European Directives

Until recently, this process was largely driven by companies and leadership owing to pressure from civil society. We are now entering an entirely different landscape with the EU taxonomy.

EU Regulatory frameworks, such as the Sustainable Finance Disclosure Regulation (2019) and the green taxonomy (2021), incentivize companies to demonstrate their capacity to understand Human Rights risks and how they plan to mitigate them to attract investors.  This is complemented by the Corporate Sustainability Reporting Directive (2021), which mandates companies with more than 250 employees to report on a number of extra-financial indicators from fiscal year 2023.. The EU Directive on Corporate Sustainability Due Diligence is expected to make cross-value chain Human Rights due diligence a legal requirement, to be transposed at the country level as well.

Meanwhile, companies are also voluntarily choosing to take on a social justice and environmental lens to demonstrate their positive impact. This could constitute a paradigm shift from a risk-averse approach with companies focused on minimising negative impact and risks, implementing new, more constructive approaches that will also seek to maximize positive impact and engage stakeholders more thoroughly and effectively.

Measuring the impact of companies

Though governments and companies now recognize the importance of Human Rights across their value chain, they still see this as costly from a strictly business perspective.

With that in mind, the WISE centre, OECD, generates new data and approaches to improve people’s well-being and reduce inequalities, and better understand the impact of policies and business actions on people. Their team has in fact been aggregating data to clarify the business case for embedding Human Rights in corporate policies from the get-go. For example, consider the costs of investing in healthcare for companies and societies versus coping with the potential consequences of poor healthcare systems – such as absenteeism and low productivity.

Actionable Frameworks from the OECD

More recently, the WISE centre has also been looking at how companies can measure their non-financial impact, while recognizing that different players have different objectives. For example, their ABC framework helps streamline tools, approaches and standards, wherein A stands for ‘Acting to reduce harm’, B for ‘Benefitting stakeholders’, and C for ‘Contributing to solutions’. Vincent Siegerink indicated that while there is an existing body of tools, resources and standards that allow companies and investors to understand their social performance and how they can improve to reduce harm, it is essential they make much bolder progress and improve metrics on Benefitting stakeholders.

Another useful framework is the OECD Wellbeing framework, a multidimensional progress framework that governments use to understand the outcomes that matter to people. In addition, the WISE centre is considering how this framework could be helpful for businesses, by looking at 4 broad categories of corporate social impact:

  1. Contributed resources
  2. Employee wellbeing
  3. Product impact
  4. Stakeholder wellbeing across the supply chain

Conclusion: Way Forward

It is increasingly clear that inequality threatens enterprise value. Firstly, businesses generally operate in a predictable environment, and geopolitical and societal tensions resulting from inequalities pose a threat to this sense of predictability and certainty. Secondly, investing in Human Rights and enabling a greater standard of living translates to higher productivity levels, better health outcomes, employee loyalty and increased purchasing power of consumers to name a few.

As a result, investing in Human Rights and human capital is really a source of competitive advantage and business attractiveness to employees, investors and civil society. But how can a company do this? It is crucial for the top-management to lead with purpose and drive change around wellbeing measures and metrics for social performance.

Ksapa is a strategic global platform designed with these very questions in mind. Our network of 300+ practitioners across the globe work with business and investors to design frameworks, policies and collaborative initiatives on the ground to bring risk mitigation solutions at scale. Get in touch to discuss the best way for your organization to address growing socio-environmental pressures and regulations, ultimately driving real-world impact throughout your value chain.

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Paavani works at Ksapa as a Sustainability Analyst and Communications Coordinator. She ensures the smooth running of the communication plan, develops content, and is actively involved in various consulting projects.

Currently pursuing her Masters at Sciences Po Paris, she specializes in CSR, Sustainability, and Social Innovation. Passionate about sustainable development and inclusive growth, she has previously worked with a consulting firm for social enterprises and the Government of India's think tank, NITI Aayog.

With a keen interest in responsible business particularly in the context of emerging markets, Paavani aspires to work towards helping build more resilient and inclusive business models and advancing responsible management practices.

She is fluent in English and Telugu.

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