Working Group
The most effective organisations are proactively taking steps to move from ‘do less harm’ to ‘positively impact society’
The most effective organisations are proactively taking steps to move from ‘do less harm’ to ‘positively impact society’
Embedding human rights due diligence within a business is highly complex. Encompassing multiple areas – from introducing internal mechanisms to mandating new supplier processes – a robust human rights policy requires a commitment from stakeholders throughout the company’s value chain.
With human rights in supply chains representing the greatest risk to most companies’ social standards, organisations understandably dedicate much of their resource to addressing such issues. Increasingly, however, businesses are placing a renewed focus on their internal policies, developing structures that ensure their direct and controlled operations are held to the highest possible standards.
Sustainability Leaders’ Working Group on human rights due diligence examined how businesses are simultaneously managing and continuously improving both these aspects of their human rights approach.
As part of developing their internal human rights policies, the companies in the working group identified five steps that they typically take as part of a process of continual improvement. This starts with conducting a gap analysis of existing policies, reviewing and communicating any changes, and then carrying out a saliency assessment to monitor how positively or negatively the company is impacting its priority human rights areas. (see Figure 1, below).
When undertaking a gap analysis to initiate this process, companies will typically compare their standards against established frameworks, guidelines and regulations. While there is little in the way of a set framework to follow, there are several standards that many businesses in the working group use to benchmark their approach.
Among these, the UN’s Guiding Principles on Business and Human Rights is the most common standard that companies adopt, with many participants using it as the foundation of their policy.
Additionally, new regulatory frameworks have emerged that are shaping human rights policies in different industries, such as Germany’s Supply Chain Due Diligence Act and the UK’s Modern Slavery Act. Several companies remarked that these new regulations have prompted them to review their policies, but also emphasised that their businesses must often go beyond the minimum remit of such laws to ensure their human rights policies are of the highest possible standard.
Among others, when reviewing and reestablishing their human rights policies, companies will examine:
Having reviewed their commitments, companies will communicate them to their workforce and integrate them into standard business processes. Methods for doing this include internal newsletters, webinars, employee onboarding and training, as well as embedding human rights responsibilities into relevant stakeholders’ KPIs, in particular HR and heads of department.
It is then incumbent on companies to assess how well they are implementing these policies within their controlled operations – and this is typically done through a saliency assessment or due diligence process, which will help determine which human rights standards are most at risk of being negatively impacted internally.
Some companies in the working group conduct these assessments themselves, if they have the necessary resource and expertise, but most hire a third party to conduct it for them. Third parties mentioned include Business for Social Responsibility (BSR), Det Norske Veritas (DNV), and the ‘big four’ accounting firms. Organisations use the feedback from any such assessment to further inform their existing policies and ensure they are continually reviewed.
With supply chains representing the majority risk to most companies’ human rights standards, much investment and resource is dedicated to embedding due diligence processes into procurement and supply chains. For many businesses, this will be called a responsible sourcing process.
A typical responsible sourcing process will involve putting all a company’s direct suppliers through a risk screening. Participants often do this through a third-party provider, such as Sedex or EcoVadis, who will support auditing suppliers and collate data on the company’s key human rights standards. This will then help the buying company place their suppliers into a risk bracket – either low, medium, or high. Several companies commented that it’s important to create KPIs within procurement to both have suppliers support these audits, as well as close any issues that are raised through the audit. If such KPIs are not created, it can be difficult to operationalize this work.
Broadly, companies highlighted two types of human rights risk that they encounter in their supply chain: systemic risk, and operational risk. Systemic risk will exist for a company due to the industry or sector they work within, while operational risk will exist as a result of the company’s own business dealings, placing it more with a company’s direct control to address. One example given was with a certain material used in agricultural processes. While any company sourcing this material will be exposed to certain human rights risks – namely, worker conditions for where the material is exclusively produced – companies can address the operational risk of this by working directly with their suppliers on safeguarding measures.
“There exists a connotation around human rights that it’s about managing your brand’s risk and ensuring you do not get caught out, which can make it difficult to do project work that really drives impact”
Sustainable sourcing specialist, beverage company
While the responsible sourcing process is a traditional way of managing human rights within supply chains, organisations are increasingly looking at new ways of proactively improving conditions. This prompted one beverage company to shift its focus from conducting audits, assigning KPIs and assessing compliance, and towards three areas in which it wanted to drive progress:
Here, the company seeks to gain more data on the supplier in question. This could still include an audit, but the company also works with service providers to gather information on a supplier that isn’t obtained through an audit, as well as encouraging the supplier to go through an ESG certification. Importantly, much of this work is now done at the supplier onboarding stage to ensure issues are identified before the supplier is integrated into the supply chain.
The business identifies actions to address issues within its supply chain. This could include partnering with companies experiencing the same issue. For example, if there is a fair wage issue in the sourcing of a particular material in a specific region, the company identifies other organisations sourcing the same material to address the issue collaboratively and systematically.
In this final area, the company is focused on building expertise in the supply chain to drive improvement. This could include working with smallholder farmers who might engage in practices the company does not allow. For example, if a farmer is found to be using child labour, the company will provide training and support over an extended period to help them stop.
Several other companies in the working group are in the process of developing a similar approach, where they combine conventional responsible sourcing practices with a new collaborative approach to address human rights issues. As Alex Skyes, Sustainable Sourcing Specialist at Diageo, commented: “We spent time changing how we talk about human rights away from ‘do less harm’ towards ‘positively impacting society’. This takes time, but it’s important that people do not perceive human rights as a negative, reactionary programme, as this can limit the good your company can do.”
