Spotlight on human rights reporting

14 May 2014

Businesses are increasingly expected to report on human rights – but not many are anywhere near getting it right. Human rights specialist, Patrick Shaw-Brown explains what companies can do to improve their human rights reporting and the underlying benefits.

What obligations do companies have around human rights?

There are two aspects to companies’ human rights activities. There’s the reporting – the ‘back end’; and then there’s what companies actually do about human rights – the ‘front end’ (and in some cases these don’t align).

In 2011, the UN conducted a study of 39 countries, which looks at the extent to which national corporate law encourages companies’ respect for human rights. It revealed a lack of clarity over what companies are required to do about human rights. It also showed that there’s limited cooperation between the regulators and the government agencies responsible for protecting human rights legislation. So you have an environment, globally, where there might be something that a company needs to do to be compliant with the law, but they’re not doing it because they don’t know about it, or they’re doing it to a lesser extent because the regulators aren’t on top of encouraging or policing implementation. And as a direct result of that, companies are struggling to report well on human rights.

So are companies generally unclear about what they should be reporting?

Yes and no. In most countries that were surveyed, there is some form of explicit requirement to do something about human rights. The UN survey found that where you have to do something about human rights, you also have to report on it when, for example, not doing so would harm the company’s short or long-term interests and where human rights might be considered ‘material’ or ‘significant’ to the company’s operations and finances. So in some cases it’s quite clear what you have to report. But there’s often limited regulatory guidance for companies on when their human rights impacts might reach that threshold. So in that sense, there is lack of clarity, yes.

But whether or not local requirements are explicit, there is an opportunity for companies to take the initiative in both their activities and what they are reporting. They can think about what their stakeholders would want to see and how they want to see it – it could be about the scope and severity of the business’ impact on human rights, or whether a company is fundamentally a ‘good’ business. And companies can be quite innovative in their presentation of that information. I appreciate that there could be a lot more guidance on this issue, but companies don’t have to be led by the hand.

What kinds of things should companies be looking into when they start out reporting their human rights activities

One of the first things to do is to come up with or refine a policy. Company policy should be guided by legislation – what do you have to do and report? But it should also be shaped by your stakeholders – who are they and what do they want to see? Does this mean that you’re going to have to do more about human rights than you already are? And how are you going to show that you’re discharging your duty transparently?

Companies need to be confident in the disclosures that they make, which means that they need to consider all the potential human rights impacts caused by their operations. This means coming up with a robust method by which they can assess impact.

Though companies do have to look at the human rights behaviours of those they work with, it isn’t all about sweatshops and poor working conditions; they have to think more widely. For example, one of the biggest and fastest-evolving risks that nearly every company faces in some way is data and the right to privacy – it’s things like this that can go right to the core, and to the value, of a lot of organisations.

What can we see from the reporting that is already out there?

Well, one of the key things to remember is that sometimes voluntary reporting is better than its mandatory friend! We’ve looked at a range of mandatory reporting, in a variety of regions, and I’m afraid to say that overall, the quality of disclosure is very poor. Companies are happy to make pretty hollow statements that don’t really benefit the reader. Most will say, for example, that they uphold the Universal Declaration of Human Rights without giving any details on how they do this.

Companies also tend to focus on labour rights – this is the obvious part of human rights – but there’s not much acknowledgement that human rights is a far broader issue. In some cases, companies are even excluding human rights from their reporting because it’s ‘not material’, but very few are explaining their impact assessment to support this. Some aren’t disclosing human rights matters because they don’t consider it to be necessary for the understanding of the company’s business activities. But this misses the point! Not all stakeholders are interested in only financial matters. And on quite a regular basis, we’re seeing companies get human rights mixed up with broader ethical behaviours. Human rights should be split out from other social and environmental activities.

So if the bar’s quite low, what simple things can companies do to improve their human rights reporting?

Probably the best bit of advice is for companies to make the link between the numerous activities that they are already doing and their human rights impacts. They can also align their reporting to the ‘Ruggie Framework' – the guiding principles on business and human rights put together by the UN.

Discussing implementation is another big win. Lots of companies don’t do this. Talking about how you implement your human rights policy in, say, your supply chain would be very welcome – actions truly speak louder than words here. Tell your stakeholders what you’re doing to fulfil your commitment to the UN Guiding Principles.

In terms of specific things to include in reports, the addition of stakeholder voices, including comments, questions and challenges – can help build a balanced report. Addressing the lack of balance – so in some cases, reporting how the company is responding to the negative as well as the positive – would be a good move. When you get these reports with 99.9% positive content, it does make you wonder!