Companies’ single greatest opportunity to contribute to human development lies in advancing respect for the human rights of workers and communities touched by their value chains, according to the new paper, Business, Human Rights, and the Sustainable Development Goals, authored by Shift and commissioned by the Business and Sustainable Development Commission.
People around the world are affected by business activities every day, many very positively. Roughly 2 billion people are touched by the value chains of multinational companies.
Yet these same people are exposed to the harms that can also result when their human rights are not respected by business, cutting them off from the benefits of development. At least 21 million people work in forms of forced labor and slavery. There are 168 million child workers, with 85 million working in hazardous environments. Social safety nets worldwide are often weak. More than 2.3 million people die every year as a result of occupational accidents or work-related diseases. Such negative realities in global supply chains are large risks to companies that touch them.
Where companies are involved with harms to people’s human rights, whether through their operations or value chains, their business is increasingly exposed to risks as well. In fact, severe risks to human rights have today arguably become a leading indicator of risks to business, and can incur real costs. These can include:
- Operational disruption and delay risks
- Reputational risks that affect opportunities to find new business partners or customers, new financing or consumers
- Divestment or lost investment risks
- Risks of lawsuits and administrative complaints, and
- Risks to the recruitment and retention of employees.
For instance, disputes between communities and investors over land and natural resources are estimated to have increased three-fold since 2003. Where they escalate to conflict, they can affect entire local economies and set back development more widely. Other research shows that the most frequent costs from community conflicts arise from lost productivity – typically US$20 million per week in net present value resulting from delay and lost production on a capital expenditure project of US$3-5 billion. The greatest costs are the opportunity costs in terms of the lost value linked to future projects, expansion plans, or sales that did not go ahead, and the most overlooked costs came from staff time being diverted to managing conflict.
So what can businesses do to minimize these risks and their costs? Better integrate human rights into their business models and can their collective leverage to address shared human rights challenges. Most companies have limited their understanding of what ‘respect for human rights’ means for their business, seeing it as just ‘doing no harm’ and compliance. Even, those committed to achieving positive impacts often turn their attention and resources elsewhere. Some fall back on philanthropy and social investment. Others look to shared value and inclusive business models: valuable innovations that should be advanced wherever possible, yet constrained to certain market opportunities and policy environments.
But there has been recent progress at looking at human rights in global supply chains holistically. In June 2016, the EU introduced a requirement for all but the smallest importers of tin, tantalum, tungsten and gold to follow the OECD due diligence steps in assessing their suppliers, in order to prevent the trade being used to help fund conflicts and human rights abuses. The OECD is now developing due diligence guidance for other industries such as agriculture, garments and footwear.
And investors are moving in similar directions as the assets under management linked to ethical investment criteria grow rapidly in both the US and Europe. The Principles for Responsible Investment, an investor initiative with 1,500 signatories, has launched guidance for investors to engage with agricultural companies on the management of human rights risks in their supply chains.
The report sets out a number of complementary and reinforcing ways in which businesses, governments, and civil society could go even further.
- Undertake a concerted campaign to advance respect for human rights through global value chains in line with the UN Guiding Principles.
- Actively promote the concept of joint action and accountability platforms as a critical and innovative form of partnership.
- Lobby governments to introduce human rights due diligence into their own procurement policies and practices, and where applicable into their development finance and export credit practices.
- Support and promote better human rights disclosure by companies in line with the UN Guiding Principles.
- Support research into effective ways to assess how well companies are implementing respect for human rights, recognising the need for more meaningful metrics than many of those available today.
- Press the G7 and the G20 to advance this agenda further, building on the G7 Elmau Summit Declaration and recognising the leading role that governments must play in building a global economy in which prosperity for business brings with it growing prosperity for everyone who plays their part, up and down global value chains.
Download the report to read the full recommendations and findings found in this report.