Diversity, Equity and Inclusion

Corporate Responsibility & Human Rights

When we talk about human rights violations, we often picture distant places with dictatorial regimes. But the truth is, human rights concerns aren't confined to remote corners of the globe.
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Almost 75 years ago, the United Nations (UN) created the Universal Declaration of Human Rights (UDHR) in response to the atrocities of World War II. The UN set 30 articles that define our fundamental rights and freedoms and guide how we should treat each other as human beings.  

In the following decades, this landmark declaration has shaped international laws and norms sparked a global dialogue on the role of businesses in society. 

Protecting and respecting human rights has become integral  to a responsible and sustainable business. 

Heightened scrutiny by governmental bodies, regulatory authorities, consumers, and investors pushes human rights to the forefront of corporate agendas, driving companies to reevaluate and reinforce their commitments to these fundamental principles. 

This new paradigm of business ethics has ushered in an era where corporate responsibility and human rights are more than a buzzword; it’s a pivotal framework that challenges businesses to align their strategies with ethical practices.  

The Concept of Corporate Responsibility & Human Rights

Why do businesses exist?  
To generate profits or to serve a purpose?  
For shareholders or society, customers, employees, and the environment?  

In 1970, Economist and Nobel laureate Milton Friedman wrote a New York Times piece that sparked a heated debate with his claim that a business’s sole duty is to increase its profits, dismissing Corporate Social Responsibility (CSR) as “hypocritical window-dressing.”  

Although environmental concerns were growing in that period, his opinion mirrored the general corporate skepticism towards CSR.   

However, the dawn of the 1970s in the United States marked the birth of the “social contract” between business and society. It means that companies exist and function because of public consent; therefore, the first objective must be to contribute to society’s needs.   

With scandals like the Nike sweatshop or the mismanagement and collapse of Enron in the early 2000s, the public became increasingly aware of corporate activities that have potentially negative social and environmental impacts.  

Back then, CSR had gradually morphed into a crucial strategy for major corporations, but still, most companies viewed CSR initiatives and sustainability as a luxury.   

Today, the corporate responsibility to respect human rights does not only belong to large businesses. It has expanded its reach to encompass all organizations, with a profound focus on human rights. 

An overwhelming majority of companies recognize their pivotal role in human rights advocacy, as evidenced by the following data: 

  • 83% of executives acknowledge their role in safeguarding human rights and recognizing the impact of their companies across various human rights domains. 
  • 96% of S&P 500 companies published corporate responsibility reports in 2022, an all-time high. In comparison, just under 20% of S&P 500 companies reported on their CSR and related topics and issues in 2011. 
  • Most consumers (70%) want brands to take a stand on social and political issues, as they believe that brands can create real change. 

Despite this progress in mindset, translating ideals into action and public communication remains challenging.  

The U.N. Framework for Business & Human Rights

Clearly, business and human rights have experienced a dramatic evolution over the last couple of decades.  

From a polarized situation where human rights activists and companies were at odds, we have evolved to one where stakeholders have a common understanding of the risks, challenges, and opportunities of human rights. 

This evolution is best exemplified by the UN Human Rights Council’s endorsement of the Guiding Principles on Business and Human Rights in 2011. These principles, also known as the “Protect, Respect, and Remedy” framework, outline three key pillars: 

  • Protect: States must prevent human rights abuses by third parties, including businesses. 
  • Respect: Businesses should act responsibly to avoid violating others’ human rights. 
  • Remedy: Victims should have access to effective remedies if their rights are violated. 

The Guiding Principles, developed by John Ruggie, provide a globally recognized framework for businesses to respect human rights in their operations and supply chains. 

Corporate Responsibility & Human Rights

Just as governments have a legal obligation to respect human rights, so too do all private actors in the state, including businesses. 

Governments define  the legal framework within which businesses operate, but society defines the broader scope of the responsibility to respect human rights. Named, a company’s “social license to operate.” 

So, in addition to following the law, businesses should also respect human rights as a baseline responsibility.  

If they are not a good corporate citizen, they could face public backlash from employees, communities, consumers, civil society, and investors. Depending on the severity of the violations, they could also face legal charges. 

In short, businesses are responsible for respecting human rights, regardless of size, industry, or location.   

And yet, failures of human rights protection continue to dominate headlines.

The Corporate Responsibility to Respect Human Rights

When we talk about human rights violations, we often picture distant places with dictatorial regimes.  

We hear of sweatshops in Bangladesh, the plight of migrant workers in Qatar, and children in the mines of the Democratic Republic of the Congo, laboring for cobalt under harsh conditions.  

But the truth is, human rights concerns aren’t confined to remote corners of the globe. 

The United States, often seen as a beacon of freedom and opportunity, has surprisingly weak worker protections compared to many other OECD nations. 

For example, the US is the only developed country that does not guarantee some form of paid parental leave. The US also does not mandate employers give workers breaks during the day or ensure workers get paid extra for night shifts. 

As a result, much of the American workforce is overworked, underpaid, and burnt out, according to the International Labour Office (ILO).  

Recognizing such issues within our borders is crucial, as it gives us a starting place to assess the societal impacts of businesses and to evaluate risks effectively. 

Eleanor Roosevelt, a pivotal figure in shaping the Universal Declaration of Human Rights, wrote that human rights must begin from within our immediate surroundings— “the world of the individual person; the neighborhood he lives in; the school or college he attends; the factory, farm, or office where he works.”

In our interconnected global economy, corporations play a crucial role in shaping and influencing both markets and societal norms and values.  

With this power comes a profound responsibility: to respect human rights within their sphere of influence.  

"Where, after all, do universal rights begin? In small places, close to home – so close and so small that they cannot be seen on any maps of the world. Yet they are the worlds of the individual person; the neighborhood he lives in; the school or college he attends; the factory, farm, or office where he works."
Eleanor Roosevelt
The Great Question, 1958

The Distinction between "Responsibility" & "Duty" in International Human Rights Law

In international human rights law, “responsibility” and “duty” carry distinct meanings.  

While states have a legal duty to protect human rights, corporations are instead guided by a responsibility. This responsibility is not about adhering to laws but exceeding them through ethical practices and societal expectations.  

Companies increasingly integrate human rights into their corporate social responsibility (CSR) initiatives beyond simply meeting legal requirements. 

This evolving standard is gaining traction as consumers, investors, and society demand that businesses respect human rights. 

However, CSR initiatives often address human rights in an ad hoc and inconsistent way across companies. They are typically decoupled from internal control and oversight systems, and many lack external accountability practices. 

To fulfill their obligation towards upholding human rights, companies should: 

  • Establish and adopt a formal policy with their commitment to human rights. 
  • Conduct human rights due diligence to discover, prevent, mitigate, and be accountable for their impact on human rights. 
  • Implement mechanisms to correct any negative human rights impacts they are responsible for. 

Human Rights Due Diligence & Legal Compliance

Businesses have the power to uplift communities by providing employment and contributing to local development and state revenues.   

However, neglecting human rights can lead to terrible outcomes like underpaid, hazardous jobs, and severe labor violations, including modern-day slavery. 

So, how can responsible businesses ensure that their products do not contribute to human rights violations in their operations, supply chains, or markets? 

Implementing human rights through due diligence is a proactive process that allows businesses to recognize, prevent, manage, and report on their human rights impacts.   

Here’s how it works: 

  • Declare corporate human rights policies 
  • Evaluate potential human rights impacts 
  • Incorporate these findings into daily operations 
  • Monitor and communicate progress  

Many businesses are already taking positive steps and have implemented key elements of human rights protection. Still, they often struggle to integrate these existing processes into their human rights strategy.  

For example, a company’s code of conduct and supplier’s code of conduct may contain human rights clauses, but these ethical guidelines will have little practical impact unless the company is prepared to terminate contracts with suppliers who violate human rights. 

Ultimately, human rights due diligence (HRDD) is not just good practice; it’s increasingly becoming a legal mandate in many places worldwide. This process safeguards businesses against risk, bolsters reputation, ensures legal compliance, and helps steer clear of financial and legal repercussions.   

Corporate Governance & Legal Compliance

Imagine a business with no rules, clear hierarchy, and no one to hold anyone accountable.  

That is what businesses would be like without corporate governance and legal compliance.  

Corporate governance and legal compliance are rules and practices that help businesses run smoothly and ethically. They also help to protect businesses from legal and financial risks. 

Corporate governance is the system of rules, policies, and practices that a company uses to manage its operations, make decisions, and interact with stakeholders.  

It includes the roles and responsibilities of the board of directors, management team, and shareholders, how financial reporting is done, and how risks are managed. 

Legal compliance ensures that a company’s activities comply with all applicable laws and regulations (labor laws, environmental regulations, and financial industry rules).  

Protection Against Mismanagement Claims

In 2023 alone, the US Customs and Border Protection have seized products valued at nearly $1 billion suspected of being produced through forced or child labor. 

Or consider the Girl Scouts, who, upon learning about the human rights risks linked to the palm oil in their cookies, switched to a certified, sustainable alternative. 

In another case, the world’s biggest grain trader – Cargill, is facing legal action in the US for alleged environmental harm and human rights breaches in Brazilian soya supply chains. 

These examples highlight the pressing need for businesses to ensure their global operations and complex supply chains are free of human rights violations. 

Moreover, conducting human rights diligently can protect corporate boards against claims of mismanagement by shareholders.  

After all, corporate boards are the ultimate guardians of a firm’s financial, human, and reputational capital. They have a fiduciary duty to their shareholders, which includes ensuring that the company’s activities do not pose undue risks. 

As such, they need to raise their standards and adopt a proactive approach to winning with integrity. Instead of waiting for problems to arise, directors must proactively identify and address potential risks. 

By thoroughly assessing human rights impacts and taking steps to address them, boards can demonstrate that they are exercising due care in their oversight responsibilities, therefore protecting themselves from potential legal claims. 

The Significance of Corporate Responsibility in Respecting Human Rights

Human rights are no longer only about legal compliance, but a cornerstone of corporate responsibility.  

This commitment is essential for building and maintaining a company’s reputation, values, and long-term success.  

By prioritizing human rights, businesses can: 

  • Protect and promote their brand 
  • Maintain and expand their customer base 
  • Foster positive relationships with communities 
  • Decrease the risk of legal issues 
  • Attract ethical investors 
  • Contribute to a stable and supportive operational environment 

Embracing human rights is critical to reducing internal and external disruptions and ensuring smooth business operations.  

It is not just about avoiding negative impacts but also about actively contributing to societal and environmental well-being. 

Written by Ivana Radevska

Senior Content Writer at Shortlister

Sources

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