By IESE Insight
Since one of its Brazilian subcontractors was accused of using slave labor, the Spanish fashion multinational Zara has committed itself to eliminating this sort of abuse and is working hard to make good the damage.
The company has invested 1.4 million euros in social initiatives in the country, and has also set up an emergency fund to resolve similar situations should they arise in the future.
This case shows that companies need to be alert to possible abuses of human rights and able to react when they occur — putting them right and remedying any harmful effects they might have produced.
Business and human rights are not necessarily at odds. One example of good practice is the U.S. department store chain Macy’s, which sells baskets produced by widows and women survivors of the 1994 Rwandan genocide.
To move from words to action, companies must get closely involved in their own operational context and, in particular, with their business associates.
A new document produced by “La Caixa” Chair of Corporate Social Responsibility and Corporate Governance looks at how business leaders can meet their basic responsibilities and help to support human rights.
Beyond Social Responsibility
Human rights are an ethical obligation. For this reason, they are enshrined as fundamental rights in most legislation around the world.
Yet their universal nature transcends the strictly legal framework, and respect for human rights goes beyond mere law or current practice.
Unlike corporate social responsibility, businesses cannot choose which rights to uphold and which to ignore.
For example, they cannot, on the one hand, respect the terms of their employees’ working day and, on the other, take part in an investment project that displaces rural families from their land.
Human rights are universal, indivisible, interdependent and inalienable, whereas social responsibility is part of the sustainable development of a particular business activity.
Not Just a Legal Problem
During the rapid expansion of global supply chains in the 1990s, some transnational corporations violated the rights of their employees by paying below the minimum wage, prejudicing their health and safety, and banning free trade unions.
Some governments of emerging countries chose not to uphold basic human rights, and many companies hid behind these legal differences to avoid complying with their human rights obligations.
Over time, there has been a growing emphasis on the need to create institutional mechanisms, so that companies can be held accountable for their negative impact, regardless of the judicial framework within which they operate.
Using these agreements as a basis, various voluntary initiatives have been implemented to deal with the relationship between business and human rights.
The most recent is the report written by Harvard professor John Ruggie, “Guiding Principles on Business and Human Rights,” at the request of the U.N. Human Rights Council.
The Way Forward
The U.N. initiative recommends that businesses adopt policies and processes to prevent, mitigate and remedy human rights violations. Among other practices, the Ruggie report proposes the following.
Identify and assess negative impacts. The objective is to understand real effects on real people in a real operational context. This evaluation should be carried out periodically, such as when starting a new activity, a new commercial relationship or when taking an important decision.
Integrate providers in the assessment. The measures taken will differ depending on whether it is the direct responsibility of the company or of one of its associates. If the abuses are carried out by an associate, the company must use its influence to change these practices and, if this is not successful, terminate the relationship.
Monitor the effectiveness of the measures adopted. Companies need to use appropriate indicators, both qualitative and quantitative, and ensure that they include opinions from both within and outside the company, in particular the views of the most affected and vulnerable groups. They can use existing instruments, such as performance-based contracts and reviews, as well as inspections and audits.
Communicate company actions. The U.N. guidelines recommend that companies openly communicate the impact of their activities on human rights, and that this information should be accessible to those whom it concerns. It must also include sufficient information to assess whether the response to specific consequences is adequate, while not putting people at risk or violating the legitimate need for confidentiality.
Making Good the Damage
Even when they have been diligent in their duties, it’s possible that companies’ actions may negatively impact human rights. When this happens, they must intervene to stop the abuse, but also compensate for the damage caused and ensure that it doesn’t happen again.
It is particularly important that they find formulas through which the affected parties have access to the mechanisms of reparation.
In this regard, the main guidelines distinguish three types of mechanisms that must be extended and strengthened: the state judiciary, extrajudicial mechanisms for lodging complaints, and non-state mechanisms.
On a positive note, more and more companies are realizing that respecting human rights is not only an ethical obligation, but also a crucial source of competitive advantage.
Besides helping to improve a company’s reputation, a strong track record on human rights can also enhance its ability to attract and maintain close relations with its employees, clients and other stakeholders.