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Remediation, Grievance Mechanisms and the Corporate Responsibility to Respect Human Rights

Summary

In the Guiding Principles, the term remediation is used to refer to the process or act of providing remedy. It should not be confused with “remediation” in the context of social audits, where the concept includes (and typically focuses on) forward-looking actions to prevent a non-compliance from recurring. 

At its core, the concept of remedy aims to restore individuals or groups that have been harmed – in this case by a business’s activities – to the situation they would have been in had the impact not occurred. Where this is not possible, it can involve compensation or other forms of remedy.

As the Guiding Principles set out, “remedy” in the judicial context is understood to include: “apologies, restitution, rehabilitation, financial or non-financial compensation, and punitive sanctions (whether criminal or administrative, such as fines), as well the prevention of harm through, for example, injunctions or guarantees of non-repetition.” These forms of remedy are relevant – or have equivalents in the case of punitive actions – also in the context of non-judicial mechanisms, with the exception of criminal sanctions. 

Understanding the Business Responsibility for Remedy

The Guiding Principles make clear that a company’s responsibility to provide for remedy depends upon its connection to the human rights impact that has occurred: “Where business enterprises identify that they have caused or contributed to adverse impacts, they should provide for or cooperate in their remediation through legitimate processes,” (Guiding Principle 22).

Where the company has neither caused nor contributed to an impact, but the impact is nevertheless linked directly to its operations, products or services, there is no responsibility under the Guiding Principles to provide for or contribute to a remedy. A company may choose to contribute to remedy in these situations for other reasons – humanitarian, commercial, reputational or other – but this is not grounded in their responsibility to respect human rights.

Understanding and assessing the nature of a company’s responsibility with respect to a specific impact can therefore be an important step in determining a company’s responsibility to provide remedy. Few companies have systematic approaches for analyzing the nature of their responsibility. One company representative observed that, “Our incident management systems are primarily designed to see if an impact occurred, but we have no systematic way of analyzing what our role with the impact may have been.”

Mapping the Place of a Grievance Mechanism

Where companies have caused or contributed to an impact, they have a responsibility to provide or contribute to remedy for those who have been harmed. Primarily, the way companies have understood this responsibility is the need to establish grievance mechanisms, through which affected stakeholders can raise and seek redress for impacts that have occurred. 

The internal “ecosystem” for remediation

Internal policies and processes that may already exist and provide a channel for receiving complaints and/or for addressing them include:

  • Whistle-blower / ethics hotlines
  • Employee ombudsman / human resources complaints processes
  • Open Door / Speak up policies
  • Trade Unions / Industrial Relations processes
  • Consumer complaints mechanisms
  • Community facing grievance mechanisms
  • Business-to-Business contract clauses with dispute resolution provisions
  • Code of Conduct requirements for supplier mechanisms
  • Audit processes (and worker interviews)
  • Supply chain hotlines
  • Stakeholder engagement (at the site level and the policy level)

Mapping the internal ecosystem for remediation serves a number of purposes:

  • Increasing internal comfort with the concept
  • Identifying gaps
  • Learning from existing processes
  • Ensuring connectivity: impacts and grievances are channeled to the right people to be addresses, and the business has full visibility into its human rights impacts.

The external “landscape” for remediation 

Just as companies can look at the internal ecosystem as they consider strengthening or augmenting existing remediation processes, they can likewise look at the “external landscape” for remediation in different operational contexts.

States have critical roles to play in ensuring that effective judicial and non-judicial processes are present. They do so through national court systems and statutory and regulatory bodies, such as national human rights institutions, labor dispute bodies, as well as through administrative mechanisms such the National Contact Points (NCPs) of the OECD Guidelines for Multinational Enterprises. Public financial institutions and multi-stakeholder initiatives may also provide accountability mechanisms and grievance processes to enable those affected by their clients’ or members’ business activities to raise concerns and seek redress for impacts. 

Operational-level grievance mechanisms administered or co-administered by companies sit within this landscape – as non-state-based, non-judicial mechanisms, which should be primarily dialogue based in nature. 

Operational-Level Grievance Mechanisms

Operational-level grievance mechanisms are a systematic means of providing remediation processes.

This resource does not seek to provide full treatment of how to make operational-level mechanisms effective. However, some key areas to keep in mind include:

  • Need for effective management system of the grievance mechanism
  • Determining scope for the grievance mechanism
  • Considering how to talk about the grievance mechanism
  • Designing the system with an holistic and integrated, rather than silo’ed, approach
  • Ensuring an escalation process
  • Using the effectiveness criteria (set out in the Guiding Principles)
  • Connecting grievance mechanisms with stakeholder engagement
  • Getting started by knowing where you currently are

Roles and Responsibilities for Remedy in the Value Chain

When impacts occur within a company’s value chain, businesses often find themselves in a “linkage” situation: that is, the company has not caused or contributed to the impact, but the impact is directly linked to the company’s operations products or services.

In such circumstances, businesses should first confirm that it is indeed a situation of linkage, and not contribution. For instance, in the supply chain context, companies can in some instances contribute to impacts that occur at the supplier level, for example, through their purchasing practices or payment terms.

In these circumstances, companies can play an important role in incentivizing those in their value chain to provide effective grievance mechanisms. This is likely to be easier in relation to suppliers than in downstream relationships.

Ways companies incentivize suppliers to establish grievance mechanisms may include:

  • Making expectations of grievance mechanisms clear in contracts or codes of conduct;
  • Including review of grievance mechanisms during assessments;
  • Offering capacity building for suppliers on grievance mechanisms;
  • Providing a recourse mechanism (like a hotline) if local grievance mechanisms are inadequate.

Organizing the Human Rights Function Within a Company

This resource is based on Shift’s experience working with companies from diverse sectors and contexts. The summary is excerpted from the resource.

Summary

In order to deliver on a company’s commitment to respect human rights, individual people within the company need to know their specific role in making that commitment a reality. The commitment has to be embedded into employees’ day-to-day activities.

So how do companies choose to assign that responsibility? Who leads and who implements? How do they coordinate their efforts? Who is ultimately accountable for their success?

This analysis reviews real company practice and identifies four general models for how companies organize human rights responsibility. These models include:

  • Cross-functional working groups, which bring together relevant business functions in a collective platform to address and manage a company’s human rights risks;
  • Hosting a “guide dog” function within existing business departments, where the focus is typically on awareness-raising, information-sharing, support and guidance in helping relevant business units meet the enterprise’s overall responsibility to respect human rights;
  • Legal and/or compliance-driven “guard dog” models, which place greater emphasis on oversight, compliance and accountability for implementation;
  • Separate responsibilities allocated across different departments, through which various departments, based on their respective areas of expertise, assume responsibility for different aspects of the company’s responsibility to respect human rights.

To help readers understand which model – or combination of models – may be most valuable for their company, this resource reviews the models’ relative merits and limitations based on real company experience.

Business and Human Rights Impacts: Identifying and Prioritizing Human Rights Risks

This report reflects learning from a workshop with 12 Dutch companies together with expert stakeholders, hosted by the Social and Economic Rights Council of the Netherlands, about how companies can identify and prioritize human rights risks and test their findings through stakeholder engagement. The annex features examples of real company risks and prioritization exercises within a set of analysis tools. This workshop supported the process leading to the development of sectoral covenants in the Netherlands to address human rights risks in global supply chains. | Learn more about our work supporting the broader covenant process

This report summarizes the key lessons learned from a workshop facilitated by Shift on identifying and prioritizing human rights risks. The workshop was convened by the Dutch Social and Economic Council of the Netherlands (SER) on January 15-16, 2014, in The Hague. The workshop involved over 20 representatives from 12 participating companies, as well as 12 expert stakeholders, including from trade unions, NGOs and other non-profit organizations.

The objectives of the workshop were to:

  1. Build practical experience in applying key tools and approaches for identifying, appropriately prioritizing and taking action on human rights risks;
  2. Generate broader learning about implementing these approaches to share with a wider audience in order to contribute to evolving understandings of how to put business respect for human rights into practice.

The workshop focused on the first two steps of human rights due diligence as they are elaborated in the Guiding Principles, and incorporated in the OECD Guidelines for Multinational Enterprises – assessing impacts and integrating and taking action on identified impacts. It drew on existing methodologies developed by Shift through its work on putting the Guiding Principles into practice.

In advance of the workshop, participating companies were asked to prepare an initial identification of human rights risks related to their operations. In addition, three pilot companies applied the relevant methodologies in more depth, with support from Shift. During the workshop, participants engaged in table discussions (with three companies and 2-3 expert stakeholders at each table) about the methodologies for identifying, appropriately prioritizing, and taking action on human rights risks. The companies shared their own efforts and received feedback from the other participants.

The role of the expert stakeholders was two-fold: to provide sector-specific knowledge about human rights risks in a particular commodity and/or country, and to help stimulate critical thinking by company participants. Each session ended with a plenary discussion about key learning, as well as common pitfalls and challenges experienced by companies, which are summarized in the body of this report.

Supporting Effective Factory-Level Grievance Mechanisms With the Better Work Programme

Over the past several years, the International Labour Organization’s (ILO) Better Work Programme has been working with apparel factories in several developing economies to improve compliance with international labor standards and competitiveness in global supply chains. Better Work’s Enterprise Advisors engage with factory management and workers to improve industrial relations, strengthen systems and processes, and support sustainable improvements in working conditions at the factory level.

One important tool for achieving these objectives is effective grievance mechanisms, which can play an important role in identifying, preventing and remediating issues of concern on the factory floor. Factory-level grievance mechanisms can help support workers’ ability to raise concerns and seek remedy in the workplace, enable factory management to understand and address those issues before they escalate, and provide global brands and retailers with an important source of data about factory conditions in their supply chains and help build confidence that suppliers have the systems in place to prevent and address their human rights risks.

As the Guiding Principles make clear, such mechanisms should not undermine the role of legitimate trade unions; indeed, industrial relations processes involving management and those unions are themselves a form of grievance mechanism.

In collaboration with Better Work staff, Shift developed a manual for Enterprise Advisors to integrate guidance on effective factory-level grievance mechanisms into the support that Better Work provides to factories. The practical guidance is intended to enable Enterprise Advisors to facilitate and accompany factory management and workers through the process of understanding what effective grievance mechanisms are, how they can contribute to improved worker-management engagement, with an emphasis on supporting and involving trade unions, and key steps in designing and implementing such mechanisms.

Shift led a capacity-building workshop for a representative group of Enterprise Advisors from Indonesia, Vietnam, Cambodia and Lesotho in Jakarta in November 2013 provided continuing support to those Advisors as they worked with factories in the months following the workshop.

Also see: resources on remedy and grievance mechanisms

Using Leverage in Business Relationships to Reduce Human Rights Risks

Summary

What is leverage? It is a company’s ability to influence the behavior of others.

The concept of leverage plays a key role for companies in meeting the corporate responsibility to respect human rights. The Commentary to Guiding Principle 19 states that leverage is considered to exist where the company ha the ability to effect change in the wrongful practice of an entity that causes harm

Leverage gets to the heart of what companies can realistically be expected to do in practice when faced with human rights challenges. Even when companies have a dominant or influential commercial position in a business relationship, there are many questions about how to identify and exercise the most effective forms of leverage. At the same time, every company — regardless of size, industry or geography — faces situations in which it does not have, or does not perceive, sufficient leverage to influence the behavior or others. This raises questions about what steps can be taken to create or increase leverage; what steps could have been taken earlier in the relationship to have created leverage; and when and how to consider terminating a business relationship.

Leverage Over Whom, How and for What Purpose?

Companies can ask themselves three questions when they are seeking to build and exercise leverage over an entity:

  1. Over whom am I seeking to exercise leverage?
  2. How could I exercise leverage?
  3. What purpose could different forms of leverage achieve?

1. Over Whom?

What types of business relationships may a company have that would connect it to potential human rights harms? Very often, those types of relationships may be:

  • upstream suppliers;
  • joint venture or other “horizontal” business partners;
  • downstream business customers, clients or end-users;
  • goverments.

For specific examples of ways to exercise leverage over these groups, see page 17 of the resource.

 2. How?

Once a company identifies who it is trying to influence, it can try to systematize its approach for exercise leverage by examining five categories of leverage.

  1. Traditional commercial leverage: leverage that sits within the activities the company routinely undertakes in commercial relationships. Specific means may include:
    1. Contracts;
    2. Audits;
    3. Bidding criteria;
    4. Questionnaires
    5. Incentives (price, volume, long-term business)
  2. Broader business leverage: leverage that a company can exercise on its own but through activities that are not routine or typical in commercial relationships. Specific means may include:
    1. Capacity building;
    2. Presenting a unified voice from each business department;
    3. Referencing international or industry standards;
  3. Leverage together with business partners: leverage created through collective action with other companies in or beyond the same industry. Specific means may include:
    1. Driving shared requirements of suppliers;
    2. Bilateral engagement with peer companies.
  4. Leverage through bilateral engagement: leverage generated through engaging bilaterally and separately with one or more other actors, such as government, business peers, an international organization or a civil society organization. Specific means may include:
    1. Engaging civil society organizations with key information;
    2. Engaging multiple actors who hold different parts of a solution.
  5. Leverage through multistakeholder collaborations: leverage generated through collaborative action, collectively with business peers, governments, international organizations and/or civil society organizations. Specific means may include:
    1. Driving shared requirements of suppliers;
    2. Using convening power to address systemic issues.

For more detail on types of leverage with examples, see page 14 in the resource. The Annex contains multiple examples of how companies have used these different types of leverage with suppliers, governments, joint venture partners and others.

3. For What Purpose?

Leverage is about creating the opportunity to change how people think and behave. In the context of the Guiding Principles, it is about changing the thinking and behavior of key people within a supplier, contractor, business partner, customer, client or government, where their organization’s actions are increasing risks to human rights.

The purposes of using leverage may range from obliging another entity to address the issue, to engaging another entity to discuss the issue, to persuading another entity to address the issue.

Identifying Opportunities for Leverage

Companies may find it helpful to identify moments of traction, where there is a particular opportunity to exercise leverage. These moments may include:

  • Contract negotiation;
  • Licensing agreements/renewal;
  • Setting qualification criteria for bidding processes;
  • Periodic reports on implementation of a service or plan of action;
  • Renewal of service agreements;
  • Points when services or products require maintenance;
  • Disbursement of funds;
  • Monitoring/audit engagements;
  • Provision of technical or advisory assistance;
  • Processes/investigations for addressing complaints.

Building the Skills of Persuasion

In practice, real behavioral change may happen more often through persuasion than through obligation.

The art of persuasion has been studied in the field of dispute resolution, including by Dr. Robert Cialdini, who developed six principles of persuasion based on basic human instincts. These are:

  1. Reciprocity: the tendency to want to return a favor;
  2. Commitment and consistency: the tendency to wish to honor commitments and be true to one’s self-image;
  3. Social proof: the tendency to do things one sees other people doing;
  4. Liking: the tendency to be persuaded by people one likes;
  5. Authority: the tendency to obey authority figures;
  6. Scarcity: the tendency to want something that is in short supply.

See this video to hear Dr. Cialdini explaining these six principles.

State of Play of Corporate Human Rights Reporting Initiatives 2013

Overview

This research took place in 2013 and was originally titled, “Update to John Ruggie’s Corporate Law Project: Human Rights Reporting Initiative.” Since that time, a number of corporate reporting requirements have been developed or amended. For more information on corporate reporting on human rights, please see the Communicate section of our resource library.

In early 2009, Shift’s Chair and the former Special Representative of the UN Secretary-General for Business and Human Rights, Professor John Ruggie, established the Corporate Law Project. The project involved more than 20 leading corporate law firms from around the world assisting pro bono to identify whether and how corporate and securities law in 39 jurisdictions encourages or impedes companies’ respect for human rights. The former Special Representative also convened several expert consultations to discuss key findings and next steps. This pro bono research fed into the report Human Rights and Corporate Law: Trends and Observations From a Cross-National Study Conducted by the Special Representative, presented by Prof. Ruggie as an addendum to his final report to the UN Human Rights Council in May 2011. This report explored issues of incorporation and listing, directors’ duties, reporting and stakeholder engagement.

Since the research for the 2011 report was conducted, there have been a number of notable developments with regard to reporting on human rights, spurred by the convergence of key international standards and other guidance around the provisions of the Guiding Principles, combined with growing demands from investors, shareholders, labor, consumer and civil society organizations for accurate information regarding companies’ social and environmental impacts.

Shift therefore provides this note to update the research related to reporting, and in particular question 16 of the Human Rights and Corporate Law Report: “Are companies required or permitted to disclose the impacts of their operations (including human rights impacts) on nonshareholders, as well as any action taken or intended to address those impacts, whether as part of financial reporting obligations or a separate reporting regime?”

Although this note provides an update where recent regulations and/or stock exchange requirements encourage or compel human rights-related information to be disclosed by companies, it is not intended to describe the effectiveness of those reporting requirements in practice. Where the language updates a specific paragraph in the Human Rights and Corporate Law Report, the paragraph updated is indicated in square brackets.

The remainder of this resource includes references to the following:

  • Regulatory requirements from the following governmental/intergovernmental bodies: Brazil, Colombia, Denmark, European Commission, France, India, Norway, South Africa, Sweden, United Kingdom, United States
  • Stock exchange requirements in the following countries: Brazil, Egypt, India Indonesia, Malaysia, Singapore, South Africa, Thailand, Turkey, United States

Bringing a Human Rights Lens to Stakeholder Engagement

Meaningful stakeholder engagement is fundamental to the implementation of the UN Guiding Principles on Business and Human Rights. This resource provides an overview of some of the key approaches companies should have in mind when seeking to ensure that their processes for engaging with affected stakeholders are effective in practice, and help them meet their responsibility to respect human rights.

From Audit to Innovation: Advancing Human Rights in Global Supply Chains

Summary

Over the last several decades, global companies have increasingly recognized their roles and responsibilities in addressing social impacts and labor conditions within their supply chains – a responsibility reaffirmed by the Guiding Principles.

As awareness of this responsibility has increased, so too has a recognition of the limitations of the conventional approach to tackling these issues – social compliance auditing. Despite the hundreds of thousands of social compliance audits conducted each year to ensure minimum workplace conditions in companies’ supply chains, there is little evidence that they alone have led to sustained improvements in many social performance issues, such as working hours, overtime, wage levels and freedom of association.

There are many reasons why the traditional audit paradigm has struggled to produce sustainable improvements in these and other key areas of social performance, with each of the following playing their respective roles:

  • A lack of disclosure by suppliers of accurate information on their performance during some audit processes, calling into question the value and validity of information gathered;
  • A lack of capacity among suppliers to address issues that have been identified for remediation in a sustainable way;
  • A lack of perceived incentives among suppliers, both external and internal, to address social performance issues, and a corresponding lack of commitment to invest in sustainable improvements;
  • Systemic challenges that are beyond the control of individual suppliers, including social context, regulatory environments, and industry-wide issues;
  • The purchasing practices of global brands and retailers, and a need to recognize and improve upon the role they themselves may play in contributing to impacts on workers.

These issues are no secret to global brands and retailers, many of whom have grown increasingly frustrated with the limitations of the traditional audit paradigm. In the absence of clear alternatives, many companies continue to base their due diligence and remediation solely on an audit approach that they privately acknowledge is not producing sustainable results.

However, a number of leading brands and retailers are attempting to change the conversation. They are openly acknowledging what everyone knows – that audits alone have not produced sustainable change.

Instead they are asking – themselves, their industries, their suppliers, and other stakeholders – what to do about it. They have a growing body of individual and collective experience with alternative and supplementary approaches to addressing social performance issues in their supply chains – approaches that seek to recast their relationships with suppliers, from “policemen” to “partners.”

This research, undertaken by Shift in collaboration with the Global Social Compliance Programme (GSCP), is based on conversations with leading companies, industry experts, and – for the four case studies presented – suppliers and other stakeholders. The first part of the report begins by identifying 10 leading trends and elements that form this new generation of social compliance programs for supply chains:

  1. The shift from pass/fail compliance to comprehensive continuous improvement programs;
  2. Replacing audits with collaborative assessment and root cause analysis;
  3. The role of grievance mechanisms in improving social performance;
  4. The integration of capacity-building approaches for suppliers;
  5. Different forms of partnerships between global brand companies and civil society organizations;
  6. Providing commercial incentives to suppliers for improvements in social performance, such as price, volume, duration, and supplier preference;
  7. Developing metrics to help suppliers identify the business case for better social performance;
  8. Efforts by brands to use their leverage to address systemic issues;
  9. Industry-wide collaboration to tackle systemic issues;
  10. Aligning internal purchasing practices with social commitments made by global brands and retailers.

In the second part of the report, we highlight four company case experiences in more depth, whose approaches combine many of the elements identified above to address complex social performance challenges in supply chains:

  1. Timberland’s approach to collaborative assessment, which has transformed its relationship with suppliers globally (p. 22);
  2. Chiquita’s holistic approach to its passion fruit supply chain in Costa Rica, which combines commercial incentives and innovations, capacity-building, civil society partnerships, and adherence to social and environmental standards and practices (p. 34);
  3. Tesco’s approach to promoting sustainable improvements in addressing issues within its agricultural supply chain in South Africa, premised on the support of local initiatives driven by local actors (p. 42);
  4. HP’s multilateral approaches to a range of systemic challenges in different parts of its IT supply chain, through which it collaborates with industry, civil society, and government actors to address industry-wide issues (p. 49).

This report does not attempt to imply that any company has the best model for, nor a perfect record in, addressing supply chain human rights challenges. Nor did the research seek to rigorously test the models discussed. Rather, it explores innovative models used by leading companies, who themselves report their effectiveness, as a basis for further analysis and evaluation.

Bringing a Human Rights Lens to Stakeholder Engagement

Summary

Stakeholder engagement is foundational to effective implementation of the UN Guiding Principles. Meaningful stakeholder engagement is particularly essential in a business’ efforts to meet its corporate responsibility to respect human rights. An increasing number of companies have sophisticated systems and processes for conducting a wide range of stakeholder engagement activities, and there is a substantial body of guidance around effective stakeholder engagement. 

However, in practice, many human rights impacts can be linked back to challenges related to stakeholder engagement. It appears that more effective stakeholder engagement often could have prevented or mitigated them.

The Guiding Principles reference the importance of consulting with affected stakeholders at several key moments:

  • in identifying and assessing actual and potential human rights impacts;
  • in tracking and reporting on company efforts to prevent and manage those impacts;
  • in designing effective grievance mechanisms and remediation processes.

Affected stakeholders may include:

  • staff (employees and contract workers) and communities directly affected by a company’s operations;
  • more physically remote stakeholders affected through business operations in a company’s supply chain;
  • customers or end-users of a particular product or service who may be even more dispersed, such as in the ICT or financial services sectors.

Companies may also choose to engage at the broader policy level with issue expert stakeholders: individuals whose human rights are not themselves affected by a company’s activities, but who can provide insights into identifying and addressing human rights challenges, and with whom it may be important for companies to communicate about their overall performance on human rights issues. Engaging with issue experts may be helpful to companies, but it is not a replacement for engaging with affected stakeholders.

Key elements for companies to consider when engaging with stakeholders on human rights issues include:

  • Engaging the right stakeholders;
  • Engaging about the right issues;
  • Engaging the right way;
  • Engaging at the right time;
  • Engaging at the policy level;
  • Engaging internally;
  • Engaging neutral parties.

Supporting the OECD on Stakeholder Engagement in the Extractive Sector

Update: In 2016, the OECD published the OECD Due Diligence Guidance for Meaningful Stakeholder Engagement in the Extractive Sector.

The OECD Guidelines for Multinational Enterprises set out a range of recommendations with regard to responsible business conduct. Following their revision in 2011, they now include a new chapter on human rights, which mirrors the language of the Guiding Principles. They also include a new provision regarding stakeholder engagement, which states:

“Enterprises should engage with relevant stakeholders in order to provide meaningful opportunities for their views to be taken into account in relation to planning and decision-making for projects and/or other activities that may significantly impact local communities.” (Chapter II.14)

Shift is pleased to have collaborated with the OECD to explore the potential for new guidance on the implementation of this provision of the Guidelines. This collaboration was part of the OECD’s “proactive agenda,” led by the governments of Canada and Norway.

Shift submitted a discussion paper in June 2013 on stakeholder engagement in the extractive industry, setting out options and recommendations for a proposed “user guide” to address this issue. The paper considers how best to build on existing guidance and address relevant gaps. It was discussed at the inaugural meeting of the OECD Global Forum on Responsible Business Conduct in June 2013.

Related to the OECD Guidelines, also see: