Issue Analysis:Integrating Human

Rights into CSR

Roni Abusaad, Steve Odom,

Nick Pearson

Strategic CSR

March 14, 2007

Human Rights: what are they?

Definition: Universal Declaration of Human Rights in

1948, set the minimum standards of all UN countries.

What’s new: Globalization

In an increasingly globalized world, issues have emerged: Transnational firms Emerging markets Regimes without strict human rights policies Increased attentions to human rights scandals:

Shell in Nigeria, UCC in Bhopal, etc. (You could argue that this is nothing new, just

more public attention)

Raising expectations: international codes/standards

In response to these trends, there has been a proliferation of human rights codes

Mostly voluntary Examples:

Global Sullivan Principles ILO Principles (Labor rights, child labor, forced labor, etc.

1998) OECD Guidelines for Multinational Enterprises (2003) UN Draft Norms for TNCs on Human Rights (2003) UN Global Compact (2001) Many multilaterial / geography-specific conventions

Trends in international codes and conventions

Increasingly specific (to geographies, issue areas) Growing number of codes Shifting expectation of corporate responsibility:

Old: TNCs should follow host countries’ laws New: TNCs should take responsibility for human rights

standards when host countries are weak or unwilling to enforce them.

Still largely voluntary

Other trends: voluntary intl. and industry associations

International business / human rights organizations: UN Global Compact Business Leaders Initiative for Human Rights International Business Leaders Forum World Business Council for Sustainable Development

Industry associations and initiatives: Extractive Industries Transparency Initiative Voluntary Principles on Security and Human Rights Electronic Industry Code of Conduct

Key human rights issues for businesses

Labor practices: freedom of association, forced labor, child labor, work conditions, etc.

Environmental health and safety: public health, pollution, environmental justice, etc.

Supply chain: should suppliers comply with human rights standards, and if so, how?

Security: ensuring that security of assets doesn’t jeopardize human rights (e.g. through security forces)

Corruption

Why integrate human rights into business practices?$$$?

How can human rights help my business improve? Does it cost much?

Do human rights really increase the “bottom line,” or is it just a new fashion passing by?

How can I see or measure the impact?

Benefits of integrating human rights into business practices

COMMERCIAL BENEFITS Human Resources

Low turnover High morale Recruitment—high talents Retention Increased productivity

Marketing Enhanced corporate reputation and brand image Sense of pride of the corporation—increasing loyalty to the

company and its products—increasing sales

Benefits of integrating human rights into business practices Relationships

More sustainable relationships with other organizations and the community-external

Increased sense of trust and loyalty between employees and management

Risk Reduced risk of consumer protest, boycotts, adverse

publicity Reducing risk of being brought to court

Competitiveness Improved investment climate Strengthened shareholder confidence Competitive advantage over other companies

Benefits of integrating human rights into business practices

SOCIAL BENEFITS Strengthening the rule of law Strengthening capacity of civil society Encouraging other companies to follow example Partnerships with civil society organizations and

strengthening social cohesion Decline in social unrest, conflict, violent sabotage More stable and equal employment opportunities Greater potential for sustainable socio-economic

development

Challenges

Enforcement Unclear/ambiguous international legal

enforceable framework—voluntary Difficulty observing what goes on in practice Uncooperative governments or dictatorial

regimes Local laws and traditional cultures Weak civil society organizations

Challenges

Internal communication within a corporation No training or educational preparedness—seen as

extravagant No structure or formal channels of communication

Evaluation and assessment Long term vs. short term business strategy--Unclear

business case Difficulty linking ‘profits” $$$ with human rights Demand for short term value rather than long term strategy Lack of quantitative measurements

Expected vs. Leading Practices

RE: General Obligations Expected:

Public statement of commitment to human rights Public statement of commitment the International

Labor Organization’s Core commitments, Global Compact guidelines, etc.

Leading Practice Cooperation and/or the joining of a Human Rights

related institution (e.g., International Business Leaders Forum, BLIHR)

Expected vs. Leading Practices

RE: Security Expected:

Understanding and supporting the Voluntary Principals on Security and Human Rights

Leading Practice Employee personal accident insurance Engage regional security advisors and government

officials in training with security staff regarding local laws and protection of human rights

Expected vs. Leading Practices

RE: Security Leading Example: Shell

Shell has its own Security Standard that it applies to contracted private security firms as well as Shell’s in-house security. The Security Standard was developed in collaboration with human rights groups and international agencies such as the United Nations.

Shell supports the Voluntary Principles on Security and Human Rights – a set of principles resulting from a collaboration of the US and UK government, business and NGOs that provide guidelines on things like risk assessment and relations w/ security providers.

Expected vs. Leading Practices

RE: Supply Chain Expected:

Communicate a commitment to human rights with suppliers

Leading Practice Outline a supply chain code of conduct Implement internal auditing processes for suppliers to

follow As well as maintain auditing of suppliers done by the

corporation and cut ties where violations occur

Expected vs. Leading Practices

RE: Security Leading Example: HP

HP implements a Supplier Code of Conduct and requires that all suppliers meet these standards

HP is leading the way in creating an industry standard for supplier conduct as it relates to human rights issues.

HP uses an internal auditing system to check suppliers and responds to issues as they arise, as well as sticking to their promises to cut ties with suppliers that do not meet the standards set.

Side note: HP is a member of the Business Leaders Initiative on Human Rights (BLIHR), a group of ten global companies working to protect human rights.

Expected vs. Leading Practices

RE: Health and Safety of Employees Expected:

Participation in industry safety forums and initiatives Training for employees

Leading Practice Community safety education programs Public safety awareness campaigns

Expected vs. Leading Practices

RE: Environment, Health and Safety Leading Example: Gap Inc.

In 2004, Gap worked alongside a consulting firm to conduct a high-level assessment of their environmental impact at each stage of their product life-cycle. As a result, Gap made major changes in their packaging use and disposal procedures, as well as reductions in energy consumption.

Despite a rise in working hours and employees, Gap’s worker injury rate has gone down by 9 percent in 2004 relative to 2003 due to a newly implemented worker safety protocol.

Issues to Argue

Avoid “biting off more than one can chew” Through conversations with Dow and by reading

reports from other corporations, it seems clear that Human Rights initiatives can be confusing and can form a “gray area” among the corporation’s principles.

It is advisable to focus on supporting one Human Rights initiative or “compact”.

Internal communication otherwise becomes a cumbersome issue

Issues to Argue

Insure rigorous assessment and evaluations Because of the self-monitoring nature of the

issues, third party auditors should play well-defined roles in the forming of corporation’s human rights policies.

Leading corporations should maintain rigorous supply chain codes of conduct and follow through with monitoring, auditing and disciplinary actions.

Issues to Argue: Our recommendations

Summary of issues: Increasingly globalized operations and supply chains Proliferation of international human rights codes and

conventions Increased scrutiny on human rights all the way through the

supply chain A rising bar for human rights policies among the world’s

largest firms.

--We recommend three actions for firms that want to address this issue and remain competitive….

Issues to Argue: Our recommendations

1. Keep it simple: develop a coherent internal human rights policy and only sign on to international codes as necessary. The broad nature of the issue and expanding landscape of

international initiatives and codes of conduct can confuse internal messaging and communication.

We recommend that unless there are specific industry initiatives that are appropriate, firms should just sign on to the Global Compact, which compiles most of the fundamental elements of human rights practice and reporting.

Issues to Argue: Our recommendations

2. An effective corporate human rights strategy should include developing and maintaining rigorous supply chain codes of conduct and follow through with monitoring, auditing, and disciplinary actions.

3. Ensure and institutionalize rigorous self-assessment and evaluations. Because of the self-monitoring nature of human rights issues, third party auditors should play a visible role assessing corporations’ human rights policies.