Why specific industry sector guidance is needed for corporate reporting on human rights

Richard Karmel is an expert in corporate human rights reporting. He is currently the Global Head of Human Rights at Mazars, where he is responsible for the UK firm’s award winning social performance and human rights reporting line.

Corporate reporting

Currently, corporate reporting on human rights is all over the place; it’s inconsistent, variable and potentially misleading.  Whilst it is easy to criticise companies, it’s not solely their fault.

Companies are usually good at following guidance, particularly where it is enshrined in legislation or principles that become best practice. However, companies find it difficult when it comes to reporting on their human rights performance, as there is very little guidance on best practice.

Following the unanimous endorsement of the UN Guiding Principles on Business and Human Rights in 2011 by the United Nations Human Rights Council, a reference point was there for companies to understand how they should behave; for example: respect human rights arising from all impacts of your operations.

Last year, the Companies Act 2006 was amended by statutory instrument 1970, which requires all quoted companies to report on their human rights performance to the extent necessary for providing an understanding of the development, performance or position of the company’s business.

Corporate Human Rights reporting is essential

Whilst this had good intentions, the result has been – judging from the quality of disclosures – that most quoted companies don’t believe that reporting meaningfully on human rights is necessary for giving a greater insight to a company’s business.

What a trick these companies are missing!

I would hazard a guess that most companies don’t really understand what is meant by the term human rights.  Given the recent UK news about how a future Conservative government would look to extract the UK from the EU Convention on human rights, the concept of human rights is not receiving favourable press.

Whilst this is a great pity – and probably not the intention of either side of the argument – it taints corporate actors’ views on what human rights might mean to them.

Greater Engagement

If companies really understood how to respect human rights they may be surprised. They would receive greater engagement with their workers, suppliers and communities; legal costs arising from abuses would reduce; there would be greater stability and higher quality of supplies from vendors and they may even receive investment from the trillions of dollars invested in ethical funds.

However, if we were to break down the term human rights into its pertinent parts in a business context, it will more than likely receive a greater understanding within corporates.

For example, if you wanted to speak to a Board member of a large oil and gas company about impacts arising from its operations on human rights in Nigeria, you may receive short shrift.

But, if you rephrased it by saying that you wanted to talk about what measures the company has taken to protect its reputation through its recent land acquisition in Nigeria, you will probably be given more time by the said Board member.

Mazars’ and Human Rights

Over the past two years, Mazars, a global audit and tax practice of over 13,500 professionals, has been working with Shift; a team that was centrally involved in shaping and drafting the UN Guiding Principles.

It’s chaired by Professor John Ruggie and was also instrumental in the design of the Human Rights Reporting and Assurance Frameworks Initiative (RAFI).

The RAFI has been developing two guidance frameworks for formal launch in early 2015.

  • Reporting Framework: a guide for companies about what good reporting on their human rights performance looks like;
  • Assurance Framework: a guide for assurance professionals who assure these reports about how best to do that assurance.

This week saw the publication of the first draft of the Reporting framework.

How to report on Human Rights

The Framework is the first comprehensive guidance for companies to report on how they meet their responsibility to respect human rights in line with the United Nations Guiding Principles on Business and Human Rights.

Now that we have the next piece of the jigsaw in place to enhance corporate understanding for respect of human rights, what is now needed is specific industry guidance to follow on from this Reporting Framework.

As indicated above, many companies have difficulty in understanding what human rights means to them in terms of their business. However, sector guidance could greatly help as the risks in each industry sector can be vastly different; for example: key risks in the oil and gas industry are likely to revolve around health and safety, environmental impacts on communities and security; whilst the key risks in the garment industry are likely to revolve around treatment of workers in supply chains.

This Reporting Framework does not only represent a great opportunity for companies to start to understand what respect for human rights looks like, but it also represents an opportunity for industry associations to provide more specific industry guidance to their members on where the key risks may lie and the types of policies, procedures and controls that should be implemented to minimise the risks of a human rights abuse arising.

Richard Karmel

Richard.karmel@mazars.co.uk

Mazars LLP