Richard Karmel: Companies should “know and show” with regards to human rights impacts

Richard Karmel is the Global Head of Human Rights at Mazars LLP and alongside his team has devised innovative services to help companies and banks manage the risks to their reputations, whilst ensuring compliance with their social and environmental obligations.

UN Guiding Principles on Business and Human Rights

The overarching philosophy behind the United Nations Guiding Principles on Business and Human Rights (UNGPs) for companies is that companies should understand the impacts, or potential impacts, that can arise from their own or through the business relationships connected to those operations, and they should report on the key elements; “know and show.”

UNGP 15 states that: “In order to meet their responsibility to respect human rights, business enterprises should have in place policies and processes appropriate to their size and circumstances” with the linked commentary that: “Business enterprises need to know and show that they respect human rights. They cannot do so unless they have certain policies and processes in place.” The premise is that unless a company can demonstrate that it respects human rights its claim that it does will remain just that and not a fact.

Why should a Company disclose its Human Rights impact?

So what’s in it for the company to potentially publicly disclose its human rights impacts or what could be its potential human rights impacts?

Currently company reporting on respect for human rights is sporadic.  Many companies publish their codes of conduct but very few report on their effectiveness.  In publishing these codes, do these companies think that this is sufficient to persuade their stakeholders that this is enough to demonstrate their respect for human rights?

Do they believe that their stakeholders will not wonder how effectively that code of conduct is monitored and enforced?

Companies are making progress on Human Rights

Until a few years ago, companies wouldn’t have even bothered publishing these codes; in fact, the majority still don’t.  But reporting on human rights is a journey; every year should demonstrate incremental improvement over the previous year.

However, a company that is confident enough in itself, its products, its brands and its strategy will not shy away from fair and balanced reporting.  Stakeholders are all the time becoming more educated in the operations of companies as corporate transparency increases.

Whether companies like it or not, many more people are finding out what companies are really like through widespread use of social media and through the increasing skills of Non-Government Organisations (NGOs).

If you don’t tell people about your Human Rights, others will

So what is becoming increasingly self evident is that if a company isn’t able to tell to its stakeholders a credible story about itself then there are plenty of individuals and organisations ready to do it for them.

In this age of transparency, companies that try to avoid talking about their negative human rights impacts are gambling with their company’s reputation.  Hiding the truth, and hoping that everyone will forget about severe impacts may have been possible a few years ago.

In particular because most human rights abuses take place in jurisdictions where the state is able to protect its citizens, whilst communication of what took place in these states was sporadic or not considered newsworthy.  However, in this age of social media and the ever-increasing use of smart phones across the globe, the odds are against hiding and hoping!

So what should companies do?

It would be trite to say, just report. However, if the company were to truthfully report about the impact, how it happened, how the company is trying to remediate the damage and the new processes that it is going to implement to use its best efforts to make sure it doesn’t happen again, isn’t is just possible that stakeholders may have greater confidence in this and all the other reporting that the company makes?

Reporting in this fair and balanced way will increase engagement and will lend itself to building greater trust with its stakeholders.  And, of course, many studies show that where there is greater trust there is greater profitability.

Richard Karmel

Mazars LLP