What is human rights due diligence? How do the Guiding Principles define stakeholders? This short glossary provides standard definitions for some of the most common terms related to the Guiding Principles, as well as corporate disclosure on human rights.
Many of these definitions are drawn from The Corporate Responsibility to Respect Human Rights: An Interpretative Guide.
What do we mean by “internationally recognized human rights”? What is an example of a human right? How could a company’s activities infringe on somebody’s human rights? This concise table lays out what human rights are and gives concrete examples of how businesses can impact them.
Examples of internationally recognized human rights
The table draws on the publication by the UN Office of the High Commissioner for Human Rights, International Business Leaders Forum and the Castan Centre for Human Rights Law, Human Rights Translated: A Business Reference Guide (2008), which is an excellent source of additional information and guidance for companies.
This guidance was developed with input from companies participating in the UN Global Compact’s CEO Water Mandate. | Learn more about the collaboration.
The summary below is excerpted from the resource.
This guidance aims to help companies (particularly heavy water users) translate their responsibility to respect the human rights to water and sanitation (HRWS) into their existing water management policies, processes, and company cultures.
The main audiences for this guidance are staff with responsibility for human rights and those with responsibility for water stewardship within companies. Both large and small companies should find the guidance useful, but it should be particularly relevant for those with heavy water use in their operations.
In addition, the guidance should be of use to other stakeholders, including representatives of states, civil society organizations working on water and sanitation or on broader human rights issues, investors, international organizations, and others who have an interest in supporting, incentivizing, or requiring companies to meet their responsibility to respect the HRWS.
What is different when a company brings a human rights lens to its water management efforts? At its core, this means focusing on water-related risks to people rather than water-related risks to the business. This means that company efforts to understand their actual and potential impacts need to take full account of the severity of such impacts on “affected stakeholders,” as defined in the Guiding Principles. This could include workers, local community members, or other individuals or groups whose rights may be negatively affected. These impacts may involve the HRWS, but they may also have an effect on other human rights, such as the rights to health, life, and food. They may also have particular implications for individuals or groups who are at heightened risk of marginalization or vulnerability, who are entitled to additional protections under international human rights law.
Many impacts on the HRWS start as less severe social or environmental impacts, so it can be helpful to consider impacts as existing on a continuum. Preventing less severe social or environmental impacts can therefore help prevent negative impacts on the HRWS, as well as prevent negative impacts on other human rights.
This report provides an analysis of corporate reporting related to human rights from October 2013 to March 2014. Since that time, corporate reporting has further evolved. To see more examples of corporate reporting on human rights, we suggest exploring the many companies listed in the UN Guiding Principles Reporting Database. For examples of good corporate reporting on human rights, we recommend reading Examples of Good Reporting on the UNGP Reporting Framework website.
The underlying research for this report was commissioned by Shift to build understanding of how leading companies across different sectors currently report on their human rights performance, and how this disclosure relates to the UN Guiding Principles on Business and Human Rights. The research was desk-based, using the information publicly reported during the period from October 2013 to March 2014 (or earlier) by the 43 companies in the research sample.
The findings summarized here indicate that many companies already disclose information about their human rights performance in relation to the key components of the corporate responsibility to respect human rights, as set out in the UN Guiding Principles. However, most disclosure on human rights is at present limited to relatively general statements about process, with little information disclosed about how these relate to specific risks or impacts, or company responses to them.
That said, examples included within the research sample also illustrate that fuller and more specific disclosure on human rights performance is feasible. Companies whose disclosure is excerpted in this report include Rio Tinto, Nike, Gap Inc., HP, Anglo American, Ford Motor Company, PVH, Timberland, Nestlé, Coca-Cola Company and AngloGold Ashanti.
General trends identified within the research sample are as follows:
This resource was developed through extensive confidential interviews with industry, analyses of 50 publicly available cases, as well as field work in Peru. It contains a typology of costs that are of relevance to companies well beyond the extractive sector. The summary below is excerpted from the resource.
Over the past decade, high mineral and energy commodity prices have driven expansion of the extractive sector. Mineral and energy developments profoundly transform environments, communities and economies – and can often generate social conflict. This study seeks to answer the question: if the costs of conflict experienced by companies in the extractive industry were better understood, would relationships between companies and local communities receive greater priority and attention?
Through in-depth interviews and empirical case analysis, the study explores the value at stake when companies in the extractive sector experience conflict with local communities. The study involved detailed case analysis of publicly available information regarding 50 situations of prolonged or otherwise significant company-community conflict, as well as 45 in-depth confidential interviews with individuals from, or with great experience in, the extractive industry.
The research shows that most extractive companies do not currently identify, understand and aggregate the full range of costs of conflict with local communities. Although company-community conflict may generate the same broad effects as those caused by technical problems, contractual or regulatory disputes, or environmental or safety breakdowns (such as a reduction in or suspension of operations), it is typically not given equivalent attention or resources. In the research, costs were understood broadly as meaning any negative impacts on a company’s tangible or intangible assets, including value erosion, from failing to avoid, mitigate or resolve conflict at an early stage.
The case analysis revealed that environmental impacts such as pollution typically precipitate or trigger conflict, while broader social and economic issues (such as the distribution of project benefits or the quality of the company’s ongoing consultation processes) typically underlie situations of conflict. These underlying issues can affect the quality of the relationship between the company and community and lead to a situation in which a trigger is more likely to set off a confrontation. Nearly half of the cases analyzed involved a blockade, while a third involved a fatality or injuries, damage to property, or the suspension or abandonment of a project – a particular risk in the feasibility and construction stages.
The research explored the most frequent, greatest, and most often overlooked costs of company-community conflict. The most frequent costs were those arising from lost productivity due to temporary shutdowns or delay. For example, a major, world-class mining project with capital expenditure of between US$3-5 billion will suffer costs of roughly US$20 million per week of delayed production in Net Present Value (NPV) terms, largely due to lost sales. Direct costs can accrue even at the exploration stage (for example, from the standing down of drilling programs).
The greatest costs of conflict identified through the research were the opportunity costs in terms of the lost value linked to future projects, expansion plans, or sales that did not go ahead. The costs most often overlooked by companies were indirect costs resulting from staff time being diverted to managing conflict – particularly senior management time, including in some cases that of the CEO. There may also be costs associated with the inability to recruit and/or retain top talent, particularly in the community relations function.
The “language of costs” was seen as being particularly useful for a company’s community relations/social performance team in reaching two key audiences: senior management and financial colleagues. One company had undertaken a systematic review of the potential costs of nontechnical risks connected to its various projects and identified a significant figure – a value erosion of more than $6 billion over a two-year period, representing a double-digit percentage of its annual profits – which it used to attract Board-level attention to these issues.
Interviewees cautioned against relying on pure cost-benefit analysis; rather, those within companies that had experienced success with cost-based arguments emphasized the need to tie them closely to anecdotal experiences and to the company’s own values when communicating with internal audiences. The need for reliable data was emphasized; interviewees noted various challenges in determining causality when attributing certain costs to company-community conflict, and in aggregating costs across different projects or regions.
Interviewees saw a need for extractive companies to better understand the costs – in the sense of loss of value – that can arise from failing to build sustainable relationships with local communities; for example, a less-resilient supply chain or an unreliable local workforce, and the impact that this can have on core business. They highlighted the need for companies to distinguish their social investment spend from what they allocate to social risk mitigation; confusing the two tends to lead to a focus on money rather than on building relationships, as a way to address problems, and to rewarding those individuals who are most vocal while ignoring others who may also have real concerns.
Industry experts observed that the triggers of company-community conflict are increasingly predictable, yet not enough companies are using root cause analysis or similar processes to evaluate such incidents and learn the relevant lessons. Certain other company systems and processes were seen as particularly relevant to identifying (and preventing) costs arising from conflict, including impact assessment, risk and commitment registers, and operational-level grievance mechanisms.
Taking the necessary time to prevent and address such conflict, particularly the time needed to build sustainable relationships through engagement with local communities, is often in tension with short-term production targets or ambitious construction schedules. A failure to identify the connections between distinct budget lines (eg, between security costs and community relations) can also limit understanding of these issues. Conversely positive internal incentives can help enhance attention to the costs of conflict – and the action needed to prevent it. The research highlighted some examples of creative approaches to social performance objectives and indicators by extractive companies.
External incentives that can enhance company attention to these issues include evidence of impacts on capital – for example, in a key study analyzing the impact of company-community relationships on the stock prices of Canadian gold mining juniors. Reputational impacts remain hard to quantify, but heightened stakeholder attention to issues of materiality and reporting regarding social impacts appear likely to drive greater attention to this area.
Interviewees observed that effective management of community expectations requires “frontloading” the company’s investment in community relations. This may be easier for large multinationals with positive cash flow, while smaller and medium-size companies may face constraints in this regard. Limits on cash flow at the start of a project can lead a company to adopt an approach that relies on remediation of social impacts after things have gone wrong, rather than seeking to prevent impacts, and conflict, from occurring. Yet experienced interviewees emphasized that it only gets more expensive to try to “buy support” later in the project lifecycle and that this almost never leads to sustainable relationships. Analyzing the costs of conflict can thus help community relations staff to make the business case for increased attention to community engagement before severe impacts occur and the company reaches a tipping point in its relationships.
Finally, the research explored a number of market drivers of greater company attention to company-community relationships. These include project lenders and insurers, some of whom are increasingly sensitive to their clients’ social risk exposure – and to their own as a result. In some cases, this is translating directly into financial risk for lenders. For example, there is emerging evidence in Peru to show that banks are exposed to higher default rates on the financial support that they provide to small businesses or individuals in areas around extractive projects that are experiencing high levels of company-community conflict. There is also increasing awareness of these issues among juniors because of the growing implications for successful onwards sale of assets, and among business customers and consumers in areas like conflict minerals and coal. Government, of course, can play a variety of roles – as a source of positive pressure on the sector, as a hindrance to company efforts, or as a potential partner in joint venture situations.
Overall, the research suggests that improved identification and analysis of the costs of company-community conflict is important for the extractive sector. It identifies a range of factors that are likely to influence the extent to which companies pay attention to these costs, and invest in the underlying relationships with local communities.
This resource is based on Shift’s experience working with companies from diverse sectors and contexts. The summary is excerpted from the resource.
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:
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.
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:
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.
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.
Companies can ask themselves three questions when they are seeking to build and exercise leverage over an entity:
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:
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.
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.
Companies may find it helpful to identify moments of traction, where there is a particular opportunity to exercise leverage. These moments may include:
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:
See this video to hear Dr. Cialdini explaining these six principles.
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:
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:
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:
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:
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.
