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As many as eight out of ten peoplethink that companies should beat least partially responsible forreducing human rights abuses1. Thisis but one example of a rising tideof expectations faced by businessfrom a range of stakeholders on theissue of business and human rights.

This paper summarises theseexpectations and, in the context ofgreater public and media scrutiny ofthe impact of business on society,describes evolving good practice onhow the corporate response can bemanaged effectively and efficiently.

The debate on boundaries of corporateresponsibility continues to evolve and ina time of increasing global competitivepressure it is particularly timely torevisit the business case for companiesto take the issue of human rightsseriously.

By acting on human rights, companiescan:1 Safeguard reputation and brand

image.2 Gain competitive advantage.3 Improve recruitment, retention and

staff loyalty.4 Foster greater productivity.5 Secure and maintain a licence to

operate.6 Reduce cost burdens.7 Ensure active stakeholder

engagement.8 Meet investor expectations.

Companies for whom this is a relativelynew area may also find it instructiveto look at the Framework for Action(page 10-11) which provides guidanceon how to manage business and humanrights dilemmas.

IBLF 2005

HUMAN RIGHTS:

IT IS YOUR BUSINESSThe case for corporate engagement

Lucy Amis, Peter Brew and Caroline Ersmarker

More and more companies recognise thatrespect for human rights as enshrined inthe Universal Declaration of Human Rights- is a fundamental and unavoidable part ofbeing a responsible business.

An increasing number of firms have begunto integrate human rights considerationsinto their mainstream business decisionmaking. Although some have been drivenby public scandals, activist campaigns,consumer boycotts or lawsuits over allegedcorporate complicity2 in human rightsabuses, others have acted without anexternal stimulus for other commercialreasons or because they believe it is the

right thing to do.Across diverse industry sectors, leadingcompanies are now putting mechanisms inplace to address their human rights impactsby striving to:

Improve workplace conditions

End racial, religious and genderdiscrimination

Eliminate the worst forms of child

labour3

Avoid forced or compulsory labour

Guarantee freedom of association

Increase access and availability to essentialproducts and services for those living inpoverty

Ensure responsible marketing andproduct testing

Build human rights criteria into securityarrangements

Minimise population displacement forheavy footprint projects

Engage with stakeholders andgovernments to promote human rights.

Momentum for corporate action hasbuilt rapidly over the last five years.Since the launch of the UN GlobalCompact in 2000, over two thousandcompanies have endorsed its Principles,including those on human rights andlabour standards. A range of rights-relatedstandards geared towards business hasalso gained currency. These include theILO Tripartite Declaration of PrinciplesConcerning Multinational Enterprisesand Social Policy, which focuses on labourrights, and the OECD Guidelines forMultinational Enterprises. Meanwhile,a process to develop a series of normson the human rights responsibilities of

business has given rise to the appointmentby the UN Secretary-General of a SpecialRepresentative on the subject of businessand human rights4.

The International Business Leaders Forum(IBLF) has been active in human rightssince it first brought together leadersin business and human rights non-governmental organisations (NGOs) in1997 to address human rights concerns.Since that time, through interaction with

corporate supporters and other companies,as well as civil society and the public sector,IBLF has sought to monitor the differentbusiness approaches to human rights. Ithas also endeavoured to alert members andothers in business to critical trends thatmay demand a corporate response. Thispaper aims to:

Reflect on the nature and impact of thecorporate response to date

Articulate the human rights business case

and the commercial impetus for action Offer practice-based recommendations

on how a company can start to reduceits human rights risk exposure, anddemonstrate a willingness to behaveresponsibly.


2/12HUMAN RIGHTS: IT IS YOUR BUSINESS: The case for corporate engagement

Companies addressing their humanrights challenges and responsibilities forthe first time can learn and draw from avaluable body of corporate experience thatnow exists. In the face of increasing riskexposure and public calls for greater socialresponsibility and transparency, little is tobe gained from delay.

COMPANY ACHIEVEMENTS

TO DATEA growing number of companies nolonger dispute that, while governmentsrightly have the primary responsibility forsafeguarding human rights, companiesalso have an obligation to conduct theirbusiness in accordance with universalhuman rights principles. These businessesaccept that they have obligations not onlyin the workplace, but also throughoutsupply and distribution chains and in thevicinity of company operations.

According to the Business and HumanRights Resource Centre5, nearly 100major global companies across a rangeof industries have adopted explicithuman rights policies. Many referenceor endorse the aspirations of theUniversal Declaration of Human Rights(1948). Effective human rights policiesand internal guidelines are more thanjust public statements of good intent.They signify senior management buy-in and an investment of staff time to

develop the policies and procedures forimplementation, as well as a heightenedawareness of human rights across allmanagement functions, operations andlocations.

A human rights policy gives

a framework within which

you can face problems as

they come along, which they

inevitably do when you are

working internationally.Lesley Roberts, Pentland

Some multinational companies aregoing further and acting collectivelyto increase the impact of their humanrights commitments. They support sectorinitiatives such as the:

Voluntary Principles on Security andHuman Rights for the Extractive Sector(oil, gas and mining)

Ethical Trading Initiative (ETI) (retail)

Fair Labor Association (apparel/footwear)

Kimberley Process DiamondCertification Scheme (diamonds)

Equator Principles (financial services)6.

Others participate in endeavours such asthe Business Leaders Initiative on HumanRights, a cross-sector collaboration thatis road-testing the practical value ofthe much debated draft UN Norms onthe Responsibilities of Transnational

Corporations and Other BusinessEnterprises.

On the ground in their operations indeveloping countries and transitioneconomies, some companies are workingin partnership with local authorities, civilsociety groups, donors and competitorsto minimise the negative human rightsimpacts of their activities.

For example, supply chain management7

- a central part of the human rights debate- is growing more sophisticated. Ratherthan abolishing child labour withoutconsidering the economic consequencesfor families, some firms now sponsorschooling for underage workers and offerskills training for unemployed adult familymembers.

Few of the companies already committedto responsible human rights practiceswould claim to have found a panacea forall the challenges they face, but manydeserve credit for trying, and for beingsufficiently transparent to admit mistakesand work with their detractors to findsolutions.

AREAS FOR IMPROVEMENTDespite advances in the management ofhuman rights across a number of industrysectors, the majority of companies do notappear to be taking appropriate action andadopting current good practice.

The reasons for this are manifoldand undoubtedly include competingmanagerial priorities and a lack offamiliarity with the language of human

rights or its legitimacy in a businesscontext. Others may have anxietiesover where the boundaries now liebetween government and private sectorresponsibility, and worry that if theyconcede any ground to NGOs on humanrights they will be confronted with anever-increasing list of demands; a listthat draws them into territory outsideeither their spheres of direct control andinfluence, or fields of expertise.

While IBLF acknowledges thatsuch concerns exist and welcomesthe appointment of a UN SpecialRepresentative whose mandate createsa valuable space in which to voice anddebate these genuine areas of doubt thefact remains that in the immediate termfar more could be done. It will makebusiness sense and help companies answertheir critics and stem the erosion of publictrust in big business.

Companies worldwide, large and small,are still being found guilty of exploitingor mistreating workers and communitiesin low-wage markets and areas lackinglegal protection.

Newspapers, websites and activistliterature continue to report corporatecomplicity in the sometimes-violentdisplacement of private citizens fromancestral farmlands, fisheries andurban dwellings to make way formineral exploration, oil pipelines orthe construction of resorts and leisurefacilities.


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There are those outside business whoperceive that companies are still largelyunaware of the potentially damaginghuman rights impacts of their activitiesor those of their business partners,suppliers, franchisees or loan recipients,or of the risk that third parties mightmisuse their products or services.

Experience shows that companies can bea force for good and play a positive role

in the protection of human rights. Yet, ofthe more than 2,000 companies that havejoined the UN Global Compact, fewerthan 100 have published a human rightspolicy or appear able to clearly identifytheir human rights risks. The apparentdisconnect between the commitmentsof companies to international initiatives like the UN Global Compact andtheir actual performance in implementingthose commitments, risks underminingconfidence in the business sector. Untilmore companies acknowledge they haveresponsibilities in the area of humanrights, subscribing to even well-regardedvoluntary initiatives may be perceived asself-serving or hypocritical, while failureto go that far may suggest an institutionaldisregard for human rights.

In todays world, stakeholders demand anincreasingly high standard of behaviour.Generous philanthropic programmesand benefit packages for employeesin a companys home country are no

longer enough to demonstrate corporateresponsibility. To be credible, they needto be backed up by responsible businesspractices and rights protection for themost vulnerable company stakeholders,not just those at home.

It has come to IBLFs attention thatfrustration exists in some NGO circlesover the pace of the business responseon human rights. Rightly or wrongly,some firms are thought to be complacent

or to have concluded that the odds ofbecoming the target of consumer boycottsor lawsuits are so remote that inactionon human rights is justified. Whetheror not these perceptions are fair, theyoften carry weight with the wider public,

and it is in a companys interest to avoidunnecessarily alienating the growing poolof stakeholders for whom human rightsare a priority, especially when there are anumber of practical steps companies cantake to manage the issue proactively andpositively.

Such frustrations can be re-enforced whencompanies resisting the developmentof internationally recognised guidelines

on human rights protection havethemselves yet to address the human rightschallenges that confront them daily inbusiness. A company with a track recordof engagement on human rights canreasonably expect a voice at the policytable, whereas the opinions of companieswithout a human rights strategy in placelack the same authority. Any expectationsto the contrary not only play into thehands of business sceptics, but can createfertile ground for calls for further humanrights regulation. The surest way forcompanies to answer their critics is to leadby example.

In IBLFs experience, companies usuallyoffer two reasons for not engagingon human rights. Either they areunconvinced of the business case, or theyare unsure of how and where to begin.Without minimising the complexities thathuman rights entail, this paper attempts toaddress both misgivings.

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The emergence of the internet and global24-hour news coverage has revolutionisedthe environment within which companiesdo business. Firms are obliged to conducttheir operations under constant publicscrutiny and to come to terms with levelsof risk exposure and demands for degreesof transparency that simply did not exist ageneration ago.

While this new climate entails greater

commercial perils in cases wherecompanies are found to be on the wrongside of the law, it also offers previouslyunforeseen opportunities for those that areprepared to take the initiative and provethemselves champions of good practice onhuman rights.

Business is essential to the

development and protection

of human rights for the six

billion people on this globe.

Responsible companies

see human rights issues

as part of their business

environment.Peter Sutherland,Chairman of BP8

SAFEGUARD REPUTATIONAND BRAND IMAGE

In todays international markets, acompanys reputation and the quality ofits human capital have overtaken plant,equipment and property as its mostvaluable assets9. There appears to be adirect correlation between reputationand share price, making firms acutelyvulnerable to scandal and accusations ofwrongdoing. Companies such as Shell,

Nestl and Nike have all experienced thisimpact. Regardless of their veracity, ittakes time for claims to be investigatedand reported on. Campaigners are slowto forgive and allegations of complicityin human rights violations can often behard to fully refute. Even if an allegationis found to be untrue, it can take years torepair the damage caused by the originalclaim.

A companys reputation is a magnet to

attract consumers, investors, employees,suppliers and other business partners.Being hit by a human rights scandalplaces hard-won customer loyalty injeopardy and undermines a companyslicence to operate. A recent study suggeststhat customer boycotts of demonisedcompanies cost around GBP 2.6 billion ayear10.

Surveys11 show that while consumersmay not go out of their way to find out ifproducts are produced in accordance withethical standards, they will be influencedby reports that a company is complicitin human rights abuse. When given thechoice, they will choose the product orservice of a competitor seen to have acleaner reputation and track record.

Not having a stand on

human rights is not an

option it is necessary for

risk management as well as

reputational purposesRolf Magne Larsen, Statoil

Business-to-business relationships arealso affected by concerns surrounding

reputation. Companies and governmentsalike are under growing pressure fromthe media and activists to screen thehuman rights records of their suppliers,subcontractors and business partners. As aresult, many government and commercialcontracts now stipulate strict human rightscriteria. If a company is unable to meetthese criteria, it will lose out on potentiallylucrative business opportunities.

Understanding the business risks ofcompany complicity in human rightsabuses and acting to eliminate orminimise them before they occur is animportant aspect of brand protectionand is increasingly viewed by keystakeholders ranging from customers,employees, suppliers, distributors,investors, government agencies and localcommunities as the mark of a forward-thinking and well-managed business.

GAIN COMPETITIVEADVANTAGE

Given the attention now paid to corporatesocial and environmental performance,companies that have taken a responsibleapproach to human rights relatedissues can increasingly expect to gain acompetitive advantage in the marketplace.

Human rights are an integral part ofthe social and environmental agenda.Companies that take human rightsseriously and build a body of practicalknowledge and experience around thesubject, will be better equipped to enternew markets where similar human rightsdilemmas are prevalent, than thosecompanies confronting human rightsissues for the first time. Their experienceof dealing with human rights issues makesthem attractive partners for customers,suppliers, distributors, potential employeesand governments.

There is also evidence that consumersare being influenced by niche marketingaimed at responsible business practice. In2004, British consumers spent GBP140million on products bearing the Fairtrade12

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THE BUSINESS CASE

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logo, a year-on-year rise of 53 percent.Even mainstream goods produced bycompanies with an ethical track recordare proving to be desirable; the so-calledethical consumption market in the UKis now worth an estimated GBP20 billiona year13. Websites advising consumers onethical decision making are also on the rise.

The benefits of our human

rights programme have so far

been about reputation and

the assurance process. But

they are going to become

more and more about the

business growth agenda and

commercial opportunity as

well, giving us access to new

markets, new suppliers and

in particular, new consumers.

Neil Makin, Cadbury Schweppes14

IMPROVE RECRUITMENTAND STAFF LOYALTY

Competition for high calibre employeesis a challenge in todays business world.Companies need to deploy all strategiesat their disposal to recruit and retain thetalents on which future performance willdepend. Responsible business practices,including transparency and appropriate

policies on human rights, are persuasivemeans of encouraging employees andpotential employees to choose a companyover its rivals.

Companies that are reputed to havesuperior work practices and are committedto human rights have been shown toreceive over 45 percent15 more unsolicitedemployment applications than companiesthat do not. On the other hand, negativereputations are likely to deter applicants. Inthe immediate aftermath of governance andhuman rights scandals, companies oftenreport an upsurge in probing questions onhuman rights during job interviews andfalling numbers of candidates applying forjobs with the company.

The issues of the role of business insustainable development and the businessresponse to social, ethical, environmentaland community challenges, includinghuman rights, have become part of thecurriculum at a growing number ofbusiness schools. Todays students arebeing given the opportunity to study theseissues as never before, and there is reasonto believe that more and more take thesenew management priorities into account

when they come to seek employment.Even when the employment market isdepressed, graduates are reported to thinktwice before joining a company with a badhuman rights reputation16.

Adopting and implementing explicithuman rights policies reinforces acompanys value proposition and sendsa strong and tangible signal internallyand externally about what the companystands for. It can be a proxy for good

overall management. For those employeesworking in unstable and challengingenvironments, clear policies and practiceson human rights provide a valuableframework of support on which to buildmutual confidence and enhance morale.

The most important

benefit of the human rights

policy has been internal

there have been no major

incidents of human rightsviolations connected to the

company and its operations.

Employees are clear about

what the company wants

them to do and not to do.

The community is also more

aware of our relationship with

them.David B. Lowry, Freeport-

McMoRan Copper & Gold17

Many companies now report pressurefrom employees and their representativesto be good corporate citizens. Staff whobelieve their workplace has high ethical

credentials on issues such as human rightsare given the confidence to display theirloyalty and act as enthusiastic ambassadorsfor the business a valuable asset in thedrive for recruitment.

FOSTER GREATERPRODUCTIVITY

Human rights strategies that seek toeliminate racial, religious and gender

discrimination, prevent harassment,guarantee a decent wage and makeprovision for airing grievances havebeen found to yield business benefits,particularly in terms of raising levels ofproductivity.

A study by the Philippine Departmentof Labour and Employment (sponsoredby the United Nations DevelopmentProgramme with technical support fromthe International Labour Organisation)

tested a Work Improvement in SmallEnterprises (WISE) programme. In theexternal evaluation, it found that theintroduction of measures to improveworking conditions led to a rise inproduction capacity of 23 percent inquantity and two percent in quality, whileabsenteeism declined by 4.73 percent18.These figures support a mounting body ofanecdotal evidence shared by companiesfrom diverse business sectors.

Skilled and unskilled workers who

feel valued and are well treated in theworkplace are more likely to developtheir career potential, maximise theircontribution to the companys knowledgeand skill base, and work harder to supportthe companys objectives, targets andprofitability.

By applying human rights guidelinesto operations globally and specificallymeasures on workplace health and safety companies can prevent accidents,

reduce stress-related illness and protectthe business from unnecessary costs anddisruption to productivity. Days lostto sick leave, production bottleneckscaused by staff shortages and productquality problems resulting from employee

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SAFEGUARD REPUTATION

AND BRAND IMAGE1

GAIN COMPETITIVE

ADVANTAGE

2

IMPROVE RECRUITMENT

AND STAFF LOYALTY3FOSTER GREATER

PRODUCTIVITY4

Human rights scandals can tarnish reputations andjeopardise hard-won customer, investor and employeeloyalty.

Consumers and shareholders favour companies with aclean reputation and track record.

Government and commercial contracts often stipulatestrict human rights criteria.

Suppliers, sub-contractors and business partners arescreened on human rights performance.

Companies can protect their brands if they understandthe risks of complicity in human rights abuses, andseek to eliminate or minimise them.

Companies that have built a body of practical humanrights knowledge and experience:

Will be better equipped to enter new markets wherehuman rights challenges exist.

Can make attractive partners for customers, suppliers,distributors, potential employees and governments.

Stand to win potentially lucrative business contracts.

Can take advantage of emerging niche markets forfirms that adopt human rights sensitive businesspractices.

Clear policies and management practices on humanrights can:

Provide a framework of support for employees workingin challenging locations.

Build staff confidence and enhance morale.

Attract high volumes of unsolicited job applications.

Appeal to business students who view good practicein sustainable development as a proxy for good overallmanagement.

Make staff more loyal and eager to serve asambassadors for the business.

Human rights strategies that consistentlyeliminate discrimination, prevent harassment,guarantee a decent wage, improve workplacehealth and safety and provide a mechanism forairing grievances can:

Increase production capacity

Cut absenteeism

Prevent accidents

Reduce stress and sickness- related

production bottlenecks.

Skilled and unskilled workers who feel valuedand well-treated are more likely to work harder,develop their career potential, and maximise theircontribution to the companys knowledge andskill base.

HUMAN RIGHTS:it i

Jan Banning/PANOS


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SECURE AND MAINTAIN

A LICENCE TO OPERATE

5

REDUCE COST

BURDENS6

ENSURE ACTIVE

STAKEHOLDER ENGAGEMENT7

MEET INVESTOR

EXPECTATIONS8

A strong human rights record and zero tolerancetowards bribery and corruption:

Builds confidence among vital stakeholders uponwhom a companys licence to operate and futureperformance may depend.

Appeals to governments who view responsiblebusiness practice as a measure of suitability tooperate in their territory.

Support for corrupt or oppressive governments can:

Negatively impact on a companys internationalreputation and global licence to operate.

Complicate local relations in the event of a change ofregime and democratic reforms.

Clear human rights commitments, inclusive local recruitment and practicesbeneficial to vulnerable groups can help earn the trust of local people,community groups, and local and international NGOs, and thereby:

Set a solid foundation for long-term operational security.

Open doors to valuable commercial intelligence from local stakeholders.

Increase sensitivity to local needs and concerns.

Limit the risks of spurious allegations against the company being believedand circulated.

Minimise the chances that a companys presence will exacerbate existingtensions and destabilise the operating environment.

Responsible business practices, particularlyon human rights, help improve access tofinance, and enable firms to:

Meet new investment conditions set byinternational financial institutions.

Comply with project financing requirementsset by banks party to the Equator Principles.

Build confidence in the minds of theinvestors that view steps to mitigate risk as

an indicator of quality management.

Attract investment from the growing sociallyresponsible investment (SRI) market.

Secure inclusion in sustainable developmentstock market indices.

Embedding human rights into core businesspractices can:

Lead to savings on staff recruitment, sicknessbenefits, insurance premiums and staff timelost to crisis management.

Lessen the incidence of sabotage andkidnappings and enable some companies toscale back security costs.

Mitigate the chances of costly litigation beingbrought against the company, e.g. under theUS Alien Tort Claims Act.

Reduce the risk of having to invest in hasteon costly community projects to win backthe trust of communities affected by allegedcompany complicity in human rights abuses.

yourbusiness



error can all be significantly reduced.Investing in the protection of staff andthe conditions in which they work freesemployees from concerns about personalsafety and creates an environment thatallows them to be both more focused andefficient in their work.

Many companies have

recognised a clear business

case for responsiblebehaviour. To them,

responsible business codes

and practices are not a short-

term cost, but a long-term

investment.Thomas stross, Minister of

Industry and Trade, Sweden19

SECURE AND MAINTAIN ALICENCE TO OPERATE

An increasing number of companiesrecognise the concept of licence tooperate to mean a companys acceptabilitywithin the communities in which it doesbusiness. It is both formal, in terms ofofficial government sanction, and informalin terms of the satisfactory nature ofits goods services and behaviour withinsociety. Business needs the continuingsupport of its stakeholders to enable itto prosper, and the withdrawal of this

licence to operate by any key stakeholdergroup can have serious consequencesfor performance. Governments areincreasingly looking to responsiblebusiness practice as a measure of suitabilityto operate in their territory.

To attain and protect its social licence tooperate, a company needs to maintainthe confidence of government, non-governmental organisations (NGOs),local communities and the general public.

Companies that have been implicated inhuman rights wrongdoing anywhere inthe world find it harder to win the trustand support of these vital constituents,whereas a strong record on human rightsand a zero tolerance position on bribery

and corruption help build confidence.Where a possible human rights violationby a company is being investigated,the existence of clear human rightspolicies and procedures will enhancethat companys opportunity to mount acredible defence.

The long-term risks incurred from anyshort-term business benefits that may bederived from supporting or condoning a

corrupt or oppressive government needto be evaluated carefully. Longer-termdamage to the companys internationallicence to operate and reputation willalmost certainly outweigh any short-termgains. While a local licence to operatebuilt on such foundations can be swiftlyrevoked in the event of a change ofregime.

Sustainable business benefits flow fromsecuring a strong social licence to operate.

In the course of building rapport withstakeholders, most companies willincrease their knowledge of the operatingenvironment, as well as their ability toidentify and prevent potential risks.

REDUCE COST BURDENS

By embedding human rightsconsiderations into the companyscore business activities, savings can bemade on recruitment, costs associated

with absenteeism and interruptions toproduction. To this list can be addedreduced security costs, lower insurancepremiums and less staff time lost to crisismanagement, as well as the avoidanceof litigation costs to fight allegations ofhuman rights wrongdoing.

For many companies human rightslitigation is becoming a reality toocostly to ignore. To date, most humanrights cases against companies have been

prosecuted under the US Alien TortClaims Act (ATCA) and several casesare currently pending across America.Although the US Supreme Court has yetto resolve definitively the legality of theclaims, the legal costs in the interim are

substantial and the price of out-of-courtsettlements - such as that agreed withUnocal over alleged involvement in abusesin Burma - are high.

Suits for extraterritorial20 human rightsviolations are not restricted to the USA.Cases have been brought in the UK e.g. Cape Plc was forced to settle overclaims for asbestosis compensation amongblack South African workers - and others

have been pursued in Belgium, Canada,and Australia21. Meanwhile, the issue ofcorporate complicity in wider humanrights violations referred to in the UNGlobal Compact second principle onhuman rights22 - promises to commandthe attention of corporate lawyers for yearsto come. As the rules and conventions onforeign liability and complicity are beingplayed out, there are already financialimperatives for paying heed to rights-related issues. Home Depot Inc. and

Texaco

23

are just two of the companiesthat have had to pay in excess of US$100million to settle sexual and racialdiscrimination claims in domestic courts24.

Legal expense aside, the security costs toprotect staff and facilities for companiesactive in conflict zones or areas at risk ofinstability can be enormous, and at timesprohibitive. While corporate strategies onhuman rights policies do not remove theneed for security precautions, establishinggood practice on human rights and

adhering to international guidelinesgoverning security arrangements have beenshown to lessen the incidence of sabotageand kidnappings. This has enabled somecompanies to scale back their securityprovisions.

Winning back trust following litigationor high profile human rights expossinvolves heavy costs, and companies whosereputations have been tarnished often findthey need to invest in social projects if

they are to rebuild local confidence. Thereare examples of companies that spendtens of million of dollars to build the trustof reportedly affected communities25.Companies can avoid these costs if theyhave the policies and practices in place

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to recognise human rights challenges andmanage them proactively.

ENSURE ACTIVESTAKEHOLDERENGAGEMENT

There is now a growing consensus amongcompanies on the invaluable commercialintelligence that active engagement withstakeholders can bring.

For example, by engaging with localcommunity leaders in the planning,siting and development of facilities oroperations, companies are better placedto identify and respond to local needs andinterests. Building trust and confidenceamong local stakeholders sets a solidfoundation for the long-term securityand effectiveness of an operation. Aclear commitment to responsible humanrights policies and practices enhances

this relationship and can give a companya greater margin for error in the eventof being linked to human rights abuses.It may allow time to meet with injuredparties and take remedial action beforematters spiral out of control.

In Australia, National Grid

is constructing the worlds

longest undersea power

cable between Tasmania

and the mainland. We tookthe decision very early

in the project to bring in

representatives from the

aboriginal communities

to help us to supervise

the construction. The

costs of employing the

representatives are far

outweighed by the benefits

to the project now and in the

future.

Gareth Llewellyn, National Grid

Poor relations with local stakeholders ora failure to engage with them can fosterresentment and suspicion. Surveys showthat NGOs often have more credibilitywith consumers and communities thancompanies do26. Unless companies takesteps to earn the trust of communitygroups, local NGOs and local chaptersof international NGOs, there is greaterlikelihood that even spurious allegationswill be believed and circulated.

Considering the speed and global reach ofmodern NGO networks, there are clearadvantages to be gained from ensuringgood stakeholder relations.

In unstable regions in which certain ethnicor religious groups are marginalised or failto benefit from foreign direct investment,there is a danger that companies maybe made scapegoats for longstandinginjustices. Several firms have incurredlarge bills to cover vandalism, kidnappings

and violent attacks as a result. Diversityis a vital part of the human rightsagenda. Where companies recruit fromdisenfranchised local stakeholders andseek ways to benefit vulnerable groups,they can minimise the chances that theirpresence will exacerbate existing tensionsthat further destabilise the operatingenvironment.

MEET INVESTOREXPECTATIONS

Access to finance, by way of investmentcapital and loans, is highly competitiveand those providing finance are underpressure to understand and assess thebusiness risks - including human rightsexposures of the businesses theysupport. International agencies such as theWorld Bank, the International FinanceCorporation, the Asian DevelopmentBank and the European Bank forReconstruction and Developmentinclude reference to these issues in

their governance requirements, therebyheightening the awareness of their localpartner organisations in setting conditionsfor financial support.

An increasing number of institutionalinvestors and the managers responsiblefor their funds are taking a close interestin the responsible business practices ofthe companies in which they invest.The rationale behind this interest isto understand better both the risks towhich the businesses are exposed andthe potential impact of those risks onperformance. Evidence that managementis aware of and taking steps to mitigate

risks is an indicator of managementquality. Reflecting this, over thirty majorglobal banks and financial institutionsadopted the Equator Principles launchedin 2003, which require them to put inplace internal policies and processesfor project financing based on the IFCsafeguard policies on environmental andsocial performance.Investors will be concerned by theimplications of investing in companiesoperating in unstable environments,

especially those prone to conflict orhuman rights abuses. Having a humanrights policy in place, as well as riskassessment and management procedures,not only minimises the risks, but alsobuilds confidence in the minds of theinvestors.

Responsible business practices alsoattract the growing socially responsibleinvestment (SRI) market. According tothe Social Investment Forum, in the USAalone some US$2.16 trillion worth of

professionally managed portfolios are nowinvested in accordance with at least onesocially responsible investment strategy27.The human rights agenda is central tothe selection of appropriate stocks; forexample, the FTSE4Good and DowJones Sustainability indices demand stricthuman rights criteria of companies priorto including them in their indices.

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GETTING STARTEDCompanies addressing the humanrights agenda for the first time have theadvantage of being able to draw on severalyears experience from those companieswho have led on the subject. Lessonshave been learned, often as a result ofinadequate responses to human rightschallenges, and new approaches are beingcontinuously formulated and tested. Thereis already an emerging consensus on the

basic ingredients of effective policies andpractices.

Drawn from research and insights gainedfrom working closely with companies,industry bodies, expert NGOs,government agencies and donors at bothheadquarters and in-country levels, IBLFoffers an eight-point framework for action.

The framework provides no guarantee ofsuccess because managing human rights

issues is not an exact science. As yet,there is no single internationally acceptedcompliance standard to guide corporatebehaviour, although there are a number ofconventions and guidelines such as thosereferenced in the introduction (see page1).

Local contexts within which humanrights challenges arise also varywidely. For example, the rights ofone set of stakeholders may have to bebalanced against the rights of another.Nevertheless, the suggested frameworkdoes provide a roadmap through which tonavigate this complex issue.

I. Understand the concernsand expectations of keystakeholders Identify the companys key stakeholders,

especially those for whom the human rightsaspects of the companys activities are likelyto be of prime concern.

Consult with key stakeholders to understandtheir concerns and expectations.

Engage with even the staunchest of critics.Listen and take note of points of complaint.

Distil an overall understanding of the humanrights expectations of stakeholders.

Be transparent and put in place ongoingstakeholder consultations, to share evolvingknowledge and experience.

II. Identify the companys keyhuman rights risksHaving identified stakeholder concerns andexpectations and researched the latest toolsavailable to businesses on human rights: Conduct a review with operational colleagues

to determine how human rights issues impacton the companys activities and its riskexposure.

Compare current performance againstknown industry standards and regional goodpractice, and benchmark the companys

record against that of competitors and otherindustry sectors that share similar challenges.

Prioritise the key human rights objectives forthe company, set clear parameters for actionin meeting those objectives and publish theminternally and externally.

Recognise past experiences of human rightschallenges within the company and createa corporate memory to influence futurecorporate behaviour.

VII. Establish monitoringmechanisms Evolve procedures to capture and evaluate the

companys performance against its key policyobjectives.

Consider using third parties to assess the companysperformance and to benchmark it against otherrelevant companies.

Publish the results of the evaluation. Use the monitoring and evaluation process as a tool

for raising the awareness of local managers on thebusiness case for acting responsibly and for trainingto achieve improved performance.

Provide mechanisms to protect employees whoreport malpractice within the company and bybusiness partners.

FRAMEWORK FOR ACTION

addressing the human rights agenda

VIII. Be transparentRecognise that moderncommunication makes it virtuallyimpossible to keep events secret, andmake a virtue of open communication. Be prepared to explain to both

internal and external stakeholdershow the company met orattempted to meet its key human

rights policy objectives. Report annually on progress againsthuman rights policy pledges.

Acknowledge openly events wherethe company has run into difficultyor could have dealt with a problemmore effectively.

Use open communication asa vehicle to gain active supportfrom stakeholders inresolving problems.


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CONCLUSIONWith the appointment of a UN SpecialRepresentative of the Secretary-Generalin 2005, the discussion concerning thehuman rights role of business movedbeyond the point where companiescan sensibly regard human rights asdiscretionary. Human rights nowconstitutes a distinct business issuein its own right, one that is closelylinked to risk management, but withenormous opportunities both for businessgrowth and to benefit individualsand communities in countries wherecompanies are active.

To be credible on human rightsand engage meaningfully in policylevel discussions and dialogue withstakeholders, companies need todemonstrate that they both understandand, more importantly, are acting on their

areas responsibility, including spheres ofdirect control and influence.

Enough good practice now exists to givecompanies confidence on human rights,and working within the framework IBLFoffers in this paper companies should beable to get started.

III. Recognise the companysspheres of influenceDistinguish between those human rights issues that: lie within the companys core business apply between the company and its business

partners, for example along supply and distributionchains

arise between the company and the communitieswithin which it is located

arise between the company and any national andgovernment agencies with which it is engaged.

Stakeholder expectations demand that companieslook beyond their core operations and examine thewider impact of their activities. Where a companyslocal economic weight and impact is significant as an employer, as a taxpayer and as a consumerof local natural resources the imperative ofrecognising and assessing human rights risksis even greater. There is in these circumstancesadditional external pressure to be an influence forgood across the community.

IV. Define and publish clear

policies on human rights Define specific policies for the company,guided by existing information andresources on good practice.

Publish policies internally and externally. Make explicit use of the term human

rights within policy statements and referto internationally recognised instruments,codes and guidelines, especiallythe Universal Declaration of HumanRights and the core conventions of theInternational Labour Organisation.

Avoid reliance on internal human resourceor personnel guidelines as the sole policy

on human rights. Apply policies globally and across all

operations of the company.

V. Assign managementresponsibility and deviseimplementation procedures Signal the seriousness of the companys

intent by assigning senior managementor board level responsibility for theimplementation of the human rights policythroughout the company.

Put in place clear procedures for theimplementation, monitoring and reporting ofhuman rights issues and policies across thecompany.

Communicate the procedures to allemployees and business partners, includingsuppliers, subcontractors, distributors and jointventure associates, making them availablein local languages and accessible to thoseunable to read.

Provide training to employees and first tiersub-contractors including security providers on the implementation of the procedures.

Apply continuous monitoring of practice toensure that policies are being applied. Make clear the sanctions that will apply in the

case of breach of the policies and proceduresand provide rewards for good performance.

VI. Conduct human rightsmpact assessments

Companies are increasingly expected to

assess the impact of their activities onhuman rights issues. Companies considering an operation with

a heavy physical footprint should ensurethat the required environmental and socialimpact assessment also covers issuesrelating to human rights.

Other companies are advised to regularlyconsider the impact of their activities.Tools to assist in this process exist, andthere are organisations and consultantsthat can provide specialist advice. Ofparticular importance is the HumanRights Compliance Assessment tool

developed by the Danish Institute onHuman Rights28. IBLF, together withthe International Finance Corporationand a number of global companies, ispublishing a guide to human rights impactassessment.

11


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The International BusinessLeaders Forum (IBLF) is a non-profit organisation that promotesresponsible business practicesinternationally that benefit businessand society, and which help toachieve socially, economically andenvironmentally sustainabledevelopment, particularly in newand emerging market economies.

The IBLFs Business and HumanRights Programme provides advice tocorporate executives with responsibiltyfor managing human rights relatedissues. The programme facilitates

constructive dialogue betweencorporations, the public sectorand human rights campaigners toair associated dilemmas and findappropriate solutions.

Lessons learned from the programmeare available in two publications,produced with Amnesty International:Human rights is it any of yourbusiness? and Business & HumanRights: A Geography of Corporate

Risk (both available from www.iblf.org).

For further information [email protected]+44 (0)20 7467 3600

www.iblf.org/humanrights

FOOTNOTES1 According to GlobeScans 2005 CSR Monitor,

an annual 20-country public opinion survey on

the changing expectations of companies, over 8out of 10 of the 21,000 people surveyed holdlarge companies at least partially responsible forreducing human rights abuses. Chris Coulter,Vice President of GlobeScan, comments thatsocietal expectations for companies in this area aresignificant. For example, public expectations forreducing human rights abuses is greater than forcorporate philanthropy.

2 Complicity is a hotly contested term in legalcircles, but can broadly be defined as knowinglyparticipating in and/or contributing to an act,often an unlawful act, with forseeable harmfuleffects.

3 See ILO Worst Forms of Child LabourConvention, 1999 (No. 182).

4 On 28 July 2005, UN Secretary General KofiAnnan appointed Professor John Ruggie asSpecial Representative of the Secretary-Genaralon the issue of human rights and transnationalcorporations and other business enterprises. Thecreation of this post was requested by the UNCommission on Human Rights in its resolution2005/69 and was subsequently approved by theEconomic and Social Council in spring 2005. Theposts two-year mandate includes identifying andclarifying standards of corporate responsibility andaccountability with regard to human rights.

5 www.business-humanrights.org

6 Each initiative has its own discussion networks andset of criteria to which participants are expected toadhere.

7 Labour rights, many of which are articulated inthe Universal Declaration of Human Rights, oftenlie at the heart of supply chain management ascompanies are called to account for the rights ofworkers and affected communities in their supplynetwork.

8 Press Release: The 2005 Business & Human RightsSeminar. www.bhrseminar.org

9 According to findings published in Business Week,2 August 2004, Coca-Cola is the worlds mostvaluable brand, estimated at US$67,394 million

for 2004. Interbrand Corp., the force behind thefindings, assert that Coca-Colas brand representsas much as 60% of the value of the business (www.zfu.ch/service/fartikel/fartikel_99_cbr.htm).

10 The Independent, 21 May 2005.

11 The surveys referred to include GlobeScansCorporate Social Responsibility Monitor2004, page 31; GlobeScans CorporateSocial Responsibility Monitor 2003, page 29;SustainAbility and UNEPs Buried Treasure:Uncovering the business case for corporatesustainability, page 22; Cone, Inc. 2002 ConeCorporate Citizenship Study; CSR EuropeThe First Ever European Survey of Consumers

Attitudes towards Corporate Social Responsibility.12 Fairtrade aims to secure better prices, decent

working conditions, local sustainability andfair terms of trade for farmers and workers indeveloping countries. Internationally recognisedFairtrade standards for product labelling operate inover 20 countries worldwide.

13 The Independent, 21 May 2005.

14 In an interview for this publication Dr Makinstated Action on human rights is hard work andit doesnt just fall into place. You have to keepworking at it and change the corporate culture, butthere has not been any alternative as far as I amconcerned. It is a business imperative.

15 Hewitt Associates, Press Release, January 3, 2005

16 GlobeScans Global Campus Monitor 2003-1,page 18.

17 In a submission for this publication David BLowry, now retired, stated Although we know thatby making a public commitment to human rightswe may be held to a higher standard, it has beenworth it.

18 www.ilo.org/public/english/dialogue/ifpdial/la/gp/philippines.htm.

19 Letters to the Editor: Responsibility is not a costbut an investment. Financial Times, 3 May 2005.

20 Lawsuits for alleged violations taking placeoutside the jurisdiction of the companys homegovernment.

21 Helena Ward, Legal Issues in CorporateCitizenship, Swedish Partnership for GlobalResponsibility, 2003. See also, David Kinley &Junko Tadaki, From Talk to Walk: The Emergenceof Human Rights Responsibilities for Corporationsat International Law, (2003-04) Vol.44(4)Virginia Journal of International Law, pp.931-

1024.22 UN Global Compact Principle 2 calls on

companies to make sure they are not complicit inhuman rights abuses.

23 Texaco was taken over by Chevron in October2000.

24 http://www.cbsnews.com/stories/2000/11/16/national/main250144.shtml. See also http://www.washingtonpost.com/ac2/wp-dyn/A62004-2004Jun22?language=printer

25 The Case for Social Responsibility, speech byLord Browne at BSR Annual Conference, 1998(www.bp.com). See also http://www.africare.org/news/news_release/nigeria.html.

26 2004 Edelman Fifth Annual Trust Barometer.

27 These figures were published in the 2003 Reporton Socially Responsible Investing Trends inthe United States. According to to the EthicalInvestment Research Service (www.eiris.org) theequivalent figure for the UK at the end of 2003stood at GBP 4.3 billion.

28 International Alert have also produced a conflictrisk and impact assessment tool specific to theextractive sector: Conflict Sensitive BusinessPractice: Guidance for Extractive Industries.

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