Legal and compliance leaders have displayed concern over the increasing environment, social, and governance (ESG) imperatives from a broad range of parties including investors, stakeholders, global authorities, as well as the public. This is motivating organizations to formulate statements that make their international commitment to human rights clear.
While companies may publish a brief statement or include language in their codes of conduct to express their support for human rights, this approach is often seen as insufficient. In light of this, many organizations are under growing pressure to employ more far-reaching methods of assessing, avoiding, and disclosing risk pertaining to human rights.
A dedicated human rights policy could play an important role in establishing more comprehensive standards in response to evolving expectations. Some recently legally enacted measures such as the EU Corporate Sustainability Reporting Directive and the European Sustainability Reporting Standards mandate that some companies must report on social issues, including human rights, within their own workforce, value chain, customer base, and end users.
Existing legislation such as the US Uyghur Forced Labor Prevention Act and the UK Modern Slavery Act also impose specific requirements on businesses within their jurisdictions.
Apart from regulatory compliance matters, public scrutiny on human rights issues within corporations and their supply chains is intensifying due to shareholder proposals and media reports. Any failure to meet public expectations in this area could result in reputational damage that may affect brand value, hiring, retention, and ultimately, the company’s bottom line.
Companies with standalone human rights policies are scored favorably by ESG rating firms assessing their ESG maturity. Such a policy, adopted by many corporations, is indicative of their dedication to human rights.
In assisting organizations to decide on the necessity of a human rights policy, company compliance leadership should keep in mind and explore the following questions:
- Is a standalone human rights policy aligned with our organization’s corporate and ESG strategies?
- Is our firm’s industry, operating geography, or business model putting us at a high risk of human rights abuses in our value chain?
- Are our investors asking about our handling of human rights issues and the existence of related policies?
- Are our company’s clients or employees seeking clearer expressions of our commitment to human rights?
- Are there any regulations requiring our company to have a standalone human rights policy?
Effective human rights policies feature a wide range of topics and supporting documents. Best practices in such policies also emphasize the need to communicate industry-specific challenges, explain the enforcement of the policy, and detail responsibilities of the board, the CEO, ESG committees, and other team members tasked with implementing ESG governance.
Policies are vital in showcasing an organization’s commitment to human rights. However, operationalizing policy declarations and ensuring their execution is where the real work lies, as known to every compliance leader.
Written by Chris Audet.