Implementation of the UN Guiding Principles on Business and Human Rights continues apace across a range of businesses and civil society organisations. The role of national States in the principles is crucial, and often overlooked in the CSR / business and human rights world. A major formal milestone was reached this week with the proposals from the UK Department for Business, Innovation and Science (BIS) to require quoted companies to start reporting on ‘human rights issues’ in addition to the existing requirements on environmental, employee and social and community issues.
The new human rights reporting proposal is included alongside wider changes to narrative reporting, otherwise termed non-financial reporting, intended to capture and disclose a range of risks and other relevant information that may affect the company and its performance. (Another notable inclusion is a new requirement to report on the gender breakdown of directors, managers and employees). Given the number of international companies that are listed on the various London markets, the potential impact of this rule change goes much wider than what are perceived as ‘UK’ companies.
The proposed new regulation follows a consultation last year on whether quoted companies be explicitly required to include information about human rights in the company’s new ‘Strategic Report’. A substantial majority of respondents agreed that there should be an explicit requirement for quoted companies (and some suggested it should also apply to larger private companies). Most qualified this by noting that only reporting should only apply where human rights issues were of strategic importance and/or material.
A parallel EU consultation in 2010/11 on companies’ disclosure of non-financial information, also investigated whether ‘companies be required to disclose the steps they take to fulfil the corporate responsibility to respect human rights?’ The responses to the consultation, perhaps unsurprisingly varied by type of respondent. A majority of NGOs and academics, but only around half of companies, supported the proposal. Interestingly, the proportion was lower still among government officials, other standard setters and accountants. As with the BIS exercise, a clear message coming from the corporate response was that there should only be disclosure of action taken in relation significant human rights risks, and it should be for the company to determine what was significant and material.
So, what are the human rights issues that quoted companies will have to report on? Associated with this are two further questions: How much do companies really know about their material human rights impacts and risks? How much of this are they prepared to tell the outside world? Presuming that the reporting requirements become law – there is a final month of public consultation before the regulations will be prepared for introduction to Parliament for those of you who want to make your views known – we will soon start to find out the answers to these questions.
From our perspective, having worked on both corporate reporting in general, and human rights impact assessments and human rights due diligence in particular, for over a decade, it is certain that many companies’ knowledge about their human rights impact could be vastly improved. In many cases there are obvious issues – whether these be supply chain labour or security – but getting a more sophisticated view on these and, equally importantly, on wider, yet uncharted, human rights impacts, is an area for substantial future work. For example, it is only when you get into the heart of analysis of how a supply chain or infrastructure project can impact the rights of freedom of expression or civil and political rights related to transparency – and the appropriate steps the company should take – that the complexity and importance of the exercise becomes clear.
So the first step is – in line with the recommendations in the UN Guiding Principles – for companies to understand better actual and potential human rights impact. This can be done through scoping or impact assessment studies, country level work and improved stakeholder engagement. All of which, in our experience, can significantly enhance understanding of the issues and the potential actions to support respect for human rights. This is the start point; but one which can be time consuming and resource intensive. Once this is complete, then the question of how much to report / disclose needs to be addressed.
While the new Regulations are but a minor step, and BIS would be well advised to think about the kind of guidance and support they can offer companies, they should not be discounted. While some companies will inevitably respond with boilerplate and irrelevant statements, others may use the momentum of the new requirements to develop much more sophisticated systems of understanding, engagement and action.
The proposals may also stimulate more discussion on what Governments should do to promote the UN Guiding Principles. The UK Trade Union Congress, for example, have recently produced a position paper, based on a thorough benchmarking exercise against the UN Guiding Principles, suggesting a comprehensive range of what should be done both domestically and internationally by the UK Government to support the implementation of the Principles – strangely, the TUC missed the reporting obligation off their list. As the debate starts to become much more sophisticated and practically focussed, I am really looking forward to participating in the first UN Forum on Business and Human Rights in Geneva on 4-5 December 2012, and discussing these issues further and deepening my own understanding on what business, civil society and Governments are doing.