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Corporate Contradictions

How companies can avoid four stumbling blocks on the path to respect for human rights.

September 2015 | | Caroline Rees

As the reach of the UN Guiding Principles on Business and Human Rights extends across ever more corporate sectors and regions, we see increasing numbers of companies putting time, thought and resources into understanding what respect for human rights should mean for their business. We see human rights policies being launched, innovative practices to manage human rights risks emerging, and collaborative initiatives to address collective challenges strengthen and grow. This in turn is helping to change the debate about what is possible.

Yet barriers to better practice remain. There are a number of contradictions or inconsistencies in company approaches to the issue of respect for human rights that I come across repeatedly and which are stumbling blocks on the path to progress. They can become a considerable distraction from the honest and pragmatic search for solutions that is needed.

I offer four examples here for reflection.

1. Help me tick a box, but don’t put me in a box

The first, and perhaps the most common inconsistency I hear from company staff – often within the same conversation – is a request for a simple checklist for meeting the responsibility to respect human rights, and the observation that no one size fits all: their industry is distinctive and within the industry their company is distinctive.

The latter is surely true. But how, then, can there be single checklist of action points for delivering respect for human rights?

Clearly different actions are required to ensure respect for human rights if you are the head of operations at a mine, a sales team at a communications technology company, the procurement team for a clothes retailer or an institutional investor. That much is obvious.

But even at the industry level, standardized checklists have their limits. They can be useful as a tool for verification or for tracking performance, but they still require thoughtful adaptation and application within a company’s cultural and operational realities if they are to succeed.

Fifteen years of labor rights audits in factories and farms have brought us sufficient evidence of this point. Conducting audits against standard labor rights protocols has done little to improve respect for labor rights over time. As one company representative commented in a workshop, "you don’t fatten a pig by continually weighing it."

At Rana Plaza over 1,100 workers were killed in 2013 in the collapsed rubble of the building where they worked. The audit protocols of brands and retailers sourcing from factories in the building had included plenty of checks for fire safety: exits unlocked and unblocked, fire extinguishers present and working, workers trained. But the audits largely ignored the underlying issue of unsafe building structures, even though it was widely known. Only a handful of companies deliberately avoided sourcing from Rana Plaza and other residential buildings that today house factories. They had their own processes to understand evolving risks on the ground and then changed their sourcing decisions to meet that reality.

Respecting human rights is not at root the stuff of checklists, tick-the-box exercises or compliance tools. It is first and foremost a culture and a way of thinking that needs to be part of each company’s DNA. Checklists can then play a supporting role, tailored to meet the need. They are not the starting point.

Human rights due diligence is not that complicated. But it requires awareness, reflection, engagement, and adaptation. Because one size cannot fit all.

2. Levers of change

The second inconsistency arises less often within a company, but often in industry-level discussions. It arises from the error of connecting responsibility with influence.

On the one hand, large companies will argue that they should not be seen to have more responsibility for human rights just because their size may give them particular leverage with a government or another company. That’s quite right as a point of general principle. It could lead ultimately to the view that the largest companies should become a major actor in defining state policies and practices in small or weak states – hardly a democratic, rule of law ideal.

Yet companies cannot then assert – as they too often do – that just because they have little or no influence to reduce certain human rights abuses linked to their products or services, they therefore have no responsibility.

Just as having great influence should not dictate great responsibility; so little or no influence cannot mean there is little or no responsibility. A company cannot ignore the abuse of workers who make its products just because it doesn’t source much product from the factories where they work; an investor can’t ignore grave human rights abuses by companies it invests in on the grounds that the investment stake is small.

The Guiding Principles are clear on this point: responsibility is a function of impact, not influence. If a company’s operations, products or services are linked to harm to human rights, it has a responsibility to seek to prevent them.

What the company can reasonably do in meeting its responsibility is, however, tied to its influence – or its leverage in the language of the Guiding Principles. But that in turn requires attention to how the company can increase its leverage. Companies that grasp this fundamental point have demonstrated that far more options exist for creating and using leverage than at first meet the eye.

3. Limits to learning?

The third inconsistency I see frequently is a healthy desire to identify and learn from so-called "best practices" of other companies (I prefer the more relative term of "leading practices"), yet a quick assumption that there is little or nothing to be learned from their failings and crises.

Doubtless theories of optimism bias can in part explain this: we just assume certain bad things are less likely to happen to us than to others. Or perhaps companies ascribe the reasons for a crisis to unusual factors – a particular operating context or singular decision – rather than looking for deeper root causes that might more closely mirror their own experience.

As a result of this bias, the lessons to be learned often go ignored. There is a growing library of cases in which companies have hit trouble from paying too little attention to the origins of the land they acquire, ignoring arbitrary dispossessions and displacement of communities in the past to make way for mining, agriculture or construction. Yet despite this evidence, other companies readily assume that that was "there not here;" "then, not now;" "them, not us." So the cases continue to stack up and the evidence of costs incurred by the companies concerned – let alone the communities harmed – does too.

Research into land tenure risk has found that companies that ignored pre-existing or customary local land rights in their acquisition process experienced financial damage that ranged from a 29 fold increase in operating costs to the outright abandonment of operations. Separate research co-authored by Shift’s Rachel Davis shows similarly striking results in terms of the costs to companies of company-community conflict in the extractive sector.

Clearly companies can learn plenty from the leading practices of others, and such lessons should be gleaned where they can. Yet there may be even greater value – figuratively and literally – in learning from repeated bad practices. However, this requires that companies start from the assumption that they are not immune to such failings themselves.

4. The blame game

This brings me to the fourth and last contradiction. Companies are quick – and justified – to point to government failings to meet their own duty to protect human rights. Where governments fall short, they make it far harder for companies to respect human rights: labor rights standards are not enforced, indigenous peoples’ rights are not recognized, land title of poor farmers is somewhere between ambiguous and non-existent, migrant workers are left open to exploitation.

States have obligations under international human rights law to respect, protect and fulfill the human rights of people under their jurisdiction. It is no mistake that state duties are the focus of the first pillar of the Guiding Principles.

But here’s the problem. Companies are not always just passive victims of government failures to protect human rights. Too often, they are contributors to, or conscious beneficiaries of, those government failures.

After all, why have many apparel companies shifted a large portion of their supply chains from China to Bangladesh or Cambodia? Primarily because labor is cheaper. And where labor is so very, very cheap, there have to be underlying reasons – usually because the government is not ensuring a living wage and a host of other labor rights.

It is not simply an economic choice to move supply chains based primarily on labor costs. It is a choice with human consequences that must be recognized and assessed on those terms.

In other industries, such as extractives or construction, companies may bemoan the government’s inability to meet communities’ basic needs for water, electricity, schooling and healthcare – all clearly the primary duty of the state. This creates growing pressure on companies to become proxies for the state and provide for ever more of those goods through social investment.

Yet too few companies examine their often energetic practices of negotiating with those same governments to minimize tax payments, royalties and such revenues that are the essential means for governments to provide basic services to their citizens.

In another example, a company surely foregoes the right to complain that governments don’t do their job of protecting human rights through their laws and enforcement mechanisms, if the company actively lobbies to undermine such protections for human rights, or stands behind business associations that do so on their behalf.

So what should a company do?

These, then, are some of the common contradictions I hear from companies about practicing respect for human right. So what's a company to do that wants to move past these stumbling blocks and take effective action?

1. First, focus energies on building a corporate culture – a way of thinking and working – that integrates respect for human rights. Rather than just imposing demands on colleagues across the business or thrusting checklists into their hands, look first to build their understanding of why respecting rights is relevant, important and feasible for them. Compliance tools can then come later, or at least find their rightful place as a tool that supports good practice, not as the definition of good practice.

2. Second, recognize responsibility even when the negative impact on people is far removed from your control. If your products or services are linked to abusive behavior, you have a responsibility. Whether the abuse was of someone working in your warehouse or of someone who put buttons on the shirts that were then stitched, packaged and shipped to your warehouse affects at most the nature of your responsibility, not the fact of it. Once you face up to the need to do something to stop this situation from persisting, the creative possibilities for how to do so open up. Sometimes there is truly too little leverage to bring meaningful change; often there is just the illusion of little leverage, and change is in fact very possible.

3. Learn by examining peer companies' failings – and their root causes – and find connections to your own business that might suggest similar risks. There is usually at least a nugget of learning that can be captured. Doing so will make your company wiser and stronger in its efforts to respect human rights. And it’s a lot cheaper than waiting for your own crisis to come along.

4. Work to ensure that the company's business choices don’t take advantage of governments' failures to protect people's rights. States have their own duty to respect human rights, and there is no question that where they fail to meet that duty, it is harder for companies to respect human rights. But there can be no excuse for supporting or helping to perpetuate those failings. So connect internal assessments of human rights risks to core business choices: lobbying priorities, contract negotiation objectives, decisions on the terms for entering new markets. Respect for human rights starts at the core of how you do business, not as an afterthought.

Caroline Rees

President and Co-Founder

As Shift's President, Caroline leads our strategic development and drives our thought leadership work on key challenges and opportunities in advancing corporate respect for business and human rights.

Caroline Rees
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