Financial Services


The Road from Principles to Practice

By Mazars Group and the Economist Intelligence Unit

Over the last decade, the field of business and human rights has seen a dramatic evolution, from a situation in which companies and human rights activists were at odds, to one in which stakeholders have begun to approach a common understanding of the risks, challenges and opportunities involved. This evolution is best represented by the UN Human Rights Council’s endorsement in 2011 of the Guiding Principles on Business and Human Rights, following a long process of consultation and debate among companies, activists, governments and many others.

This watershed event was, however, only “the end of the beginning”, in the words of John Ruggie, a former UN secretary-general’s special representative on human rights and transnational corporations. Spectacular failures of human rights protection still claim headlines. To cite just one of several recent examples, the tragic collapse of the Rana Plaza commercial building in April 2013 led to renewed questions about the quality of companies’ oversight of their suppliers’ human rights practices as well as the role of government in protecting such rights.

On the positive side, many in the business community are more focused than ever on human rights and how to apply the 2011 Guiding Principles—even as debates continue on the limits, precise content, and legal status of companies’ responsibility to respect human rights. To gain closer insights into this debate, The Economist Intelligence Unit undertook this study, which is based on a survey of 853 senior executives from a range of industries, as well as in-depth interviews with nine corporate leaders and other independent experts. The study’s key findings are listed below.

A large majority of executives now believe that business is an important player in respecting human rights, and that what their companies do—or fail to do—affects those rights. In our survey, 83% of respondents agree (74% of whom do so strongly) that human rights are a matter for business as well as governments. Similarly, 71% say that their company’s responsibility to respect these rights goes beyond simple obedience to local laws. Finally, for each of the 11 clusters of human rights in our survey, most respondents report that their firms’ operations have an impact. This degree of agreement represents a substantial shift from views in the past. Arvind Ganesan, director of the business and human rights division of a non-governmental organisation (NGO), Human Rights Watch, recalls that as recently as the late 1990s, “there was no recognition that companies had human rights responsibilities.”

Companies see human rights mainly as a stakeholder and ethical issue; a business case for respecting human rights focused on more immediate costs and benefits is less widely accepted. The leading drivers of corporate human rights policies, which are broadly consistent across industries and regions, are: building sustainable relationships with local communities (cited by 48% of respondents); protecting the company brand and reputation (43%); meeting employee expectations (41%); and moral/ethical considerations (41%). Although such stakeholder and ethical issues have a substantial impact on the long-term profi tability of the company, only 21% say that a clear business case is driving their human rights policy. Similarly, when asked about the main barriers that their companies face in addressing human rights, 15% of respondents agreed with the statement, “Business would incur costs/see profi t margins reduced”. Moreover, while stakeholder relations are an important business consideration, these can sometimes lack the immediacy of other concerns. This helps to explain why the second-largest barrier to addressing human rights is a lack of resources (27%).

While corporate attitudes are evolving fairly quickly, concrete steps to reform company policies and to communicate such changes externally are slower to follow. Our survey shows that companies are integrating human rights considerations into their policy making. For example, 44% of respondents say that human rights are an issue on which chief executive officers (CEOs) take the lead, and 22% say that they have a publicly available human rights policy in some form. Interpreting these results is a matter of perspective. For some, figures such as these are encouragingly high, given the relatively short length of time that human rights have been on the corporate agenda. As Jan Klawitter, government-relations manager of Anglo American, puts it, “Big corporations need time to change; processes take time to change. (…) It is just a reality.” Others focus on the gap between the proportion of respondents willing to acknowledge the importance of human rights to business, and the smaller proportion saying that they have taken action. Mr Ganesan, for example, says that “a lot of companies do not do these things” and sees no real shift in the business environment. Only time will show to what extent the current activity in this field will bring real change.

Companies are still coming to grips with what their responsibilities mean in practice, a process that will also take time. When it comes to human rights, Ruth Davis, head of the cyber, justice and national security programme for IT industry group, techUK, describes businesses as “often uncertain of where to start.” Respondents list a lack of understanding of their company’s responsibilities in this area (32%) and a lack of training and education for employees (26%) as the first and third most common barriers to progress. Similarly, new initiatives that respondents are most likely to say would help them carry out their responsibilities are about providing data: public benchmarking of company performance (39%) and access to reliable, independent information on country-level human rights situations (32%). Companies are working towards improving their understanding of the issues, either through their own initiatives, or in co-operation with other companies, or with the help of experts and stakeholders. The result of these efforts to date show that there are no shortcuts: efforts to sharpen the corporate focus on respecting human rights will take time and experience.

Current leaders in corporate action on human rights have moved ahead by embedding respect for human rights within their organisations, but acknowledge that they still have much to learn. The 25% of respondents who believe their company’s human rights policies outperform those of their competitors have several things in common. These firms are more likely to have internalised respect for human rights: 52% say that moral and ethical considerations are a leading driver of human rights policies, compared with just 39% of other firms. The leading companies are also far less likely than other firms to say that their corporate culture hampers progress on human rights issues. Moreover, leading companies tend to have senior leadership actively involved in human rights issues. Unsurprisingly, moreover, leading companies are more likely to have human rights policies in place and to communicate externally and internally on human rights matters. Where they are similar to other companies, however, is in citing a lack of understanding as a barrier to further progress. This is not because their efforts have failed to bring knowledge—quite the opposite. They have made clear how much more there is to learn in a very complex field.

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