Responding to Investor Concerns Regarding Human Rights Impacts

by Foley Hoag LLP - Corporate Social Responsibility
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4117044Increasingly, companies will face explicit demands from investors, especially members of the socially responsible investor community, that they provide detailed disclosures regarding internal processes and procedures to assess and manage the human rights impacts of their operations. For many companies, responding to these requests will require careful review of the nature of the impacts of their operations and the development of internal capacity to understand and communicate those impacts through a human rights lens.

Following up on the release of the U.N. Protect, Respect, Remedy Framework and the U.N. Guiding Principles on Business and Human Rights, the Institute for Human Rights and Business, Calvert Investments, and the Interfaith Center on Corporate Responsibility recently published Investing the Rights Way, a comprehensive guide for investors on business and human rights. In the guide, the authors note that

Companies are now in a position to address and diminish human rights-related risks within an internationally accepted framework, while other stakeholders – including shareholders – can apply the same framework to hold companies to account.

The guide calls on investors to assess corporate capacity to assess and manage the adverse human rights impacts of their operations and to raise questions with company representatives regarding:

  • Human rights policies
  • Human rights due diligence, including with respect to corporate supply chains, mergers and acquisitions, joint ventures, franchising, and licensing relationships
  • Integration of human rights due diligence findings into the management of corporate operations
  • Tracking of human rights performance
  • Reporting of human rights impacts and responses
  • Grievance mechanisms
  • Personnel capacity to manage human rights concerns
  • Stakeholder engagement and consultation

These recommendations are reflected in a recent statement regarding the recent tragedies in Bangladesh by over 100 investors, representing more than $1.2 trillion on assets. In the statement, investors state that

As shareholders who have been engaging apparel companies and retailers to foster responsible sourcing practices, including human rights due diligence with robust audit oversight in global supply chains…We call on brands and retailers to collectively pledge to implement the internationally recognized core labor standards of the International Labor Organization. Further, we expect companies to acknowledge their human rights responsibilities as delineated in the “protect, respect and remedy” framework of the UN Guiding Principles on Business and Human Rights.

The language in the statement, while focused on Bangladesh, is reflective of the type of demands that companies will increasingly encounter from investors and other key stakeholders. The investor guide notes that we are in a “new era” which includes “broad acceptance of the imperative to integrate human rights considerations into business[.]”

Some companies, including many members of the apparel industry, have already developed considerable internal capacity to speak to investor concerns in a manner that reflects understanding of international human rights norms. For companies in many other industry sectors, the language of human rights, and the need to assess human rights impacts, is still quite new and this presents potential risks associated with failures to adequately address stakeholder concerns. Companies will need to assess their internal capacity to manage these issues and develop strategies to increase capacity as necessary.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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