All businesses have a responsibility to respect human rights. They face serious reputational damage, financial loss and potential legal liability if they are involved in or linked to human rights abuses. The proper management of human rights risk is prudent, supports a sustainable business model and may enhance commercial performance.
Governments, consumers, employees, markets and investors increasingly demand that businesses respect human rights. Embracing a responsible business model, aligned with international standards, is an important starting point, but it is important to manage human rights with an eye to legal frameworks and risks.
The regulatory scene is moving fast. Requirements to report transparently on human rights risk management or to conduct and disclose due diligence measures are on the rise. The possibility of civil or criminal human rights related litigation against companies, their directors and employees cannot be ignored. In an added layer of complexity, businesses have to be aware, not only of the risks from their own decisions, acts or omissions, but also those of their business partners, including within supply chains.
Leadership, based on a risk-based boardroom strategy, is key. Clifford Chance works with some of the world’s leading companies to implement effective governance around human rights, and to embed it throughout the organisation.
Be clear on business and human rights risk
5 questions to ask yourself
Is the board leading on a proactive strategy, and setting the tone from the top?
Stakeholders increasingly demand effective actions and transparency on human rights. Are you meeting external expectations by setting the tone from the top and overseeing human rights risk management from the boardroom? You must be assured that robust processes exist to identify, address and account for human rights risk. Is your policy commitment to respect human rights fully endorsed by the board and embedded within the culture of your organisation?
What are our salient human rights risks, and are they being addressed?
Every multinational needs to assess its business operations and relationships, to identify the impacts that may arise, with a priority on the most severe risks. Does your company have a robust process for identifying and then addressing these risks? Are risk assessments updated on an ongoing basis?
Do our policies and processes operate effectively?
Your business needs to be able to identify and manage actual and emerging human rights impacts. Human rights due diligence should be integral to your overall risk management strategy, and form part of assessing new business opportunities and transactions. Do employees at all levels receive adequate training to spot risks? Are there escalation triggers and reporting lines to senior management? Are there clear decision-making processes when issues or complaints are raised, so the organisation can respond nimbly? How are impacts and outcomes monitored?
Are we addressing the human rights risk profile of suppliers and other business partners?
There can be serious negative consequences of being linked to suppliers, or joint venture, franchising or licensing partners that do not mirror your high standards on human rights and ethical practices. Has your organisation developed a robust diligence process to assess its business relationships? What steps (e.g. in policies, procedures, contractual arrangements) does the company take to influence and encourage its business partners to adopt the "right" behaviour and mitigate potential risks? Before investing in new business opportunities, including possible corporate acquisitions, do you undertake adequate human rights due diligence, and follow through post transaction?
What is our response plan when an incident involves human rights impacts and reputational risk?
When an incident breaks, a clear response plan is needed across the organisation to ensure that business leaders, legal, compliance, HR, IR and PR teams work together as one, consistent with the organisation's values. Multiple stakeholders may be involved, and having a legal adviser with an intimate knowledge of your risk management strategy will help you to investigate and react, mitigating impacts on both affected groups and the business.