Peter Frankental from Amnesty International UK argues that companies must overcome their state of denial on human rights, if they are to manage risk effectively and comply with principles in the UN Universal Declaration of Human Rights.
The emerging realisation that managing stakeholder expectations may well provide the key to successful corporate strategy in the new century is likely to challenge the presumption that shareholders have no interest other than short-term profit. Most shareholders are long-term investors concerned about the viability of their investments over time. The recent report of the Turnbull Commission, clearly establishes the need for corporations to treat reputational issues as part of their risk management framework in order to protect the interests of their shareholders.
This represents a significant change in thinking. In the past, when companies have been buffeted by reputational crises linked to issues of social responsibility, their share prices would not have been marked down. Markets assumed that the crisis would blow over quickly and would not affect the underlying profitability of the company. This assumption is increasingly being challenged by a profound values shift in civil society reflected in changing expectations of corporate behaviour.
Human rights concerns lie at the heart of these changing expectations. Public opinion is moving against companies using or benefiting from forced labour, bonded child labour, inhumane sweatshop conditions or other forms of abusive labour practices. The perception is growing that companies operating in regions of conflict cannot be considered neutral, in so far as their investments are likely to have an impact. Another perception is that cosy relationships between many transnational corporations and repressive regimes, and the unwillingness of companies to speak out against human rights violations in areas where they operate, may contribute to those violations. At the very least, such companies are failing to use their legitimate influence to promote and protect human rights.
Barriers to human rights
A fundamental problem when it comes to putting human rights on the corporate agenda is to break the barriers of denial that companies have put up. The first layer of denial is a lack of conception of what human rights means. The second layer is lack of acknowledgement of their responsibility for the human rights impact of their operations. The final layer is lack of analysis as to how their operations might impinge on human rights, and how they might use their legitimate influence to actively further human rights.
If we were to interview the corporate affairs managers of all the FTSE 100 companies, asking for their definition of human rights, we would get some wide-ranging answers. Companies tend to subsume human rights within other policy areas such as health & safety, environment, equal opportunities and community relations. What most companies appear to be ignoring in adopting self-serving definitions of human rights is the whole development of human rights architecture that has taken place within the United Nations system over the past 50 years. Yet, this architecture embodies widely accepted principles and definitions, which are the fundamental building blocks of human rights. Most UN conventions and protocols have been ratified by an overwhelming majority of member states. There are at least a dozen international treaties, with human rights at their core, which have direct relevance to the operations of companies.
Lack of compliance mechanisms
Given this well developed framework of international human rights law, largely reflecting the values of civil society across cultures, it may seem surprising that companies should be in a state of denial. However, the reluctance to accept responsibility stems from the view that states, and states alone, have the obligation to further human rights. According to this perspective, the responsibility of companies is limited to compliance with regulations to which they are bound in law.
However, the notion that states alone are responsible for the realisation of human rights is a misconception. The UN’s Universal Declaration of Human Rights summons “every individual and every organ of society” to play a role in that realisation. The levels of responsibility of a company may be conceptualised according to the degree of control which it is in a position to exercise. Corporations have the greatest degree of control within their own operations, covering their impact on their employees and on members of the communities that are directly affected by their operations. Companies also have control, albeit to a lesser extent, over their business partners, suppliers, contractors and sub-contractors extending to the end of their supply chains. As a consequence, they should require that these groups also meet human rights standards.
This is especially relevant when a company enters into a contract with private security forces. In such cases, it should ensure that these forces embrace the standards contained in the UN Basic Principles on the Use of Force and Firearms and the UN Code of Conduct for Law Enforcement Officials . Finally, while corporations are not responsible for human rights violations committed by the states in which they operate, they are in a position to ensure that they are not complicit in those violations and that they use their legitimate influence over the host government to promote and protect human rights.
Companies are discovering, sometimes at cost to their reputation, that they are operating in a global goldfish bowl where their activities are under constant scrutiny. The growing gap between societal expectations and corporate behaviour is reinforced by the international reach of the media industry and the effectiveness of NGOs in exposing corporate malpractice. Consumers are becoming increasingly critical and the ethical investment industry is rapid growing. For example, the Ethical Investment Research Information Service is developing a set of human rights criteria to include indicators of whether companies benefit from forced labour or child labour, whether they respect freedom of association, whether they monitor workplace conditions, and to what extent they use their influence to further human rights in countries where they operate.
Drivers of change
Another significant driver for change is the development of social auditing and reporting methodologies, focusing on the triple bottom line – financial, environmental and social. In the foreseeable future, companies that underperform in relation to social and environmental benchmarks may pay penalties built into the regulatory system (on the principle of ‘the polluter pays’). A likely consequence of triple bottom line auditing is that markets will begin to judge companies with regard to their social and environmental performance, and not merely according to financial indicators. In this way competitive and market mechanisms will ensure that companies which perform responsibly will gain a competitive advantage.
As more companies begin to acknowledge their responsibility for the human rights impact of their activities, and take steps to integrate human rights concerns into their operations, then other companies will come under increasing pressure to do the same to avoid falling behind prevailing standards. Benchmarking and ranking may all help mobilise peer pressure.
There is very little material currently available on good practice viz à viz human rights. The lack of exemplars is an obstacle to progress, making it difficult for companies to learn from the experience of others. The Business Group of Amnesty International UK are trying to address this by working with Prince of Wales Business Leaders Forum, New Economics and Ashridge Management College on a common project to help companies put human rights principles into practice. A primer entitled “Human Rights – is it any of your business? ” will be published in February 2000 illustrating dilemmas that companies have faced and practical steps that they have taken to address these.
Amnesty International’s ‘Human Rights Guidelines for Companies’ are available, free of charge, from Peter Frankental, Amnesty International UK, 99-119 Rosebery Avenue, London EC1R 4RE (0171 417 6382; email: Peter.Frankental@amnesty.org.uk).
Corporate Citizenship Briefing, issue no: 48 – October, 1999