Reana RossouwWritten by

How human rights management reduces risk in the supply chain

Advisory and consulting| Views: 93

Companies operating globally in sectors associated with higher stakeholder risk can benefit from a human rights management strategy. Case studies from various industries show that human rights due diligence practices not only limit violations and infringements of human rights; they also reduce the risk of stakeholder activism.

When things go wrong and human rights are impacted, companies need to restore trust and justice via remedial frameworks. This is easier said than done, but with effective due diligence processes and policies and strategies in place it is possible to manage stakeholders better.

Human rights risk management requires proactive engagement

It is important to look at engagement and communication practices with internal as well as external stakeholders to understand the dynamics of relationships. A common problem is that companies are unsure how many stakeholder groups need to be consulted, who the stakeholders are that have an influence over or are impacted by its operations, and the control individual stakeholders have over large stakeholder groups. These days, many stakeholder groups also claim additional rights and companies are not necessarily aware of the expectations and rights of these stakeholders.

Companies that operate globally sometimes place different emphases on their stakeholders around the world. These imbalances increase the risk for companies that may not be aware of growing expectations in various geographic locations.

Multinational companies can have long value chains, several thousand stakeholders and stakeholder groups as well as rightsholders, impacting the business in various ways. To ensure sustainable business practices, they have a responsibility to monitor stakeholder management.

A good place to start is evaluating and assessing stakeholder engagement procedures. When this is done, companies can create a benchmark for good practice. Once a company has a clear vision of the rights of its stakeholders, it can evaluate their relationships across the value chain.

At this stage, it is important to recognise multiculturalism and the rights of stakeholders in this regard. Consideration that is linked to human rights practices include cultural and religious aspects, inclusivity and responsiveness, language and gender, literacy and access to the internet or other technology platforms.

A consideration of diversity implies that people have different levels of understanding, expectations and diverse experiences of, for instance, public education and other services, such as healthcare. These factors, and many more, will impact the way stakeholders interact and respond to organisations during engagement processes.

Different stakeholders may interpret inclusivity differently. Stakeholders may claim rights that companies do not recognise or are uncomfortable including in strategies. Therefore, multiculturism, diversity and inclusivity are ways in which human rights management and stakeholder engagement intersect, impact and influence each other. Complications will occur when a company does not respect or take cultural diversity into consideration, as this can have an adverse effect on the business.

Suitable management approaches

Human rights management in specific industry sectors and across the supply chain can be a complex process to manage, as the wide range of stakeholders affect risk in diverse ways. Take the mining industry, for example, where people working in mines can be exposed to health and safety risks and impacts. The company needs to ensure that the human rights, safety and welfare of its workers are protected and guaranteed.

The company is also liable for ensuring the protection the environment in which it mines. And it has to consider the community in which a mine is located. The question is which rights are more important, which stakeholder has the biggest impact on its operations and whose rights should be recognised and in which order.

Human rights management practices have often had significant impact for businesses using the natural environment as the main source of creating products and revenue. Utilising the natural resources of a country or its people often includes prioritising rightsholders and their expectations. For instance, does the land being mined belong to the government or the indigenous community living on it? Whose rights should be protected first – the employees mining the land, the people who own the land or the government who issues the licence for mining?

In this case, indigenous people can be subjected to violations or infringements of their rights because of resettlement or damage to the natural environment where their livestock graze. Indigenous rights and the unavoidable link to land claims are an essential human right for various companies and their stakeholders.

The oil and gas industry, for example, also has to consider the inclusivity of human rights across social, economic and environmental aspects. In this case, companies can occupy land or sea areas for decades. Since no geographical area stays the same and conditions are likely to change, businesses will have to consider solutions and arrangements with stakeholders that will protect their investments over time.

Advancement in technology makes human rights management even more critical

The telecoms industry has strict regulations regarding privacy laws and the protection of customer information. However, governments put enormous pressure on telecoms companies to provide customer information, to shut down or limit operations in a specific location or over a specific period. They have also recognised the commercial value of mining and selling customers’ information.

Again, the link between rightsholders, stakeholders and the priority of needs and expectations of these stakeholders should be identified, analysed and prioritized. Human rights strategies, policies and due diligence processes will assist companies in dealing with these complex issues. The risk of not protecting and guaranteeing human rights has widespread implications, as, for example, freedom of expression, freedom of movement or the right to information are universal and must be guaranteed all over the world.

From a human rights perspective, how can telecoms companies ensure that they protect and support human rights if they have little influence over the entire value chain? After all, their licence to operate depends on governments, their sales depend on consumers and their products depend on suppliers and manufacturers.

Human rights have sometimes been regarded as more vital to implement for companies operating in high-risk zones – geographically or politically. This is a false understanding of human rights management, as every company, big or small, is subject to and accountable for human rights risks. All companies are also liable to investors and governments (for several reasons) to demonstrate accountability, responsibility and transparency in their practices.

Recent studies show that ordinary citizens are putting pressure on companies – these stakeholders are expressing their fundamental human rights. That demonstrates that human rights management has equal importance and function to every business, regardless of size.

Human rights and supply chain management

For many companies, the biggest risk is to control and monitor actions and activities taking place in the supply chain. For example, human rights violations could be taking place at a small vendor, which could result in the company downstream or upstream facing allegations of supporting the offence, as was the case with Apple and child labour in its manufacturing plants. Allegations could be as severe as supporting human trafficking, child abuse or forced labour.

Other human rights infringements, such as collusion, fraud, corruption and bribery, are more common in countries where governments lack transparency. No company can fully guarantee that its supply chain is not a threat to the business in terms of human rights violations and overstepping boundaries. That said, human rights due diligence practices serve to protect a company from social, political and reputational damage perspectives, as they attest to good intentions.

Supply chain management and human rights strategies are closely linked, as they reduce risk for companies collaborating with others. Human rights have a measurable impact on sales and revenue, as consumers like to support companies with ethical business practices. Human rights management can therefore strengthen the reputation of a company and make it more attractive from an investment perspective. Stakeholder management, integrated with human rights management, is therefore effective when the strategies, policies and implementation processes are integrated.

Next Generation assists companies with the following human rights management services:

  • Identifying, analysing and prioritising stakeholders and rightsholders
  • Benchmarking compliance against specific global standards, guidelines and frameworks
  • Conducting materiality, risks and impact assessments across the value chain
  • Conducting due diligence of processes and systems
  • Conducting country and sector assessments
  • Developing human rights strategies
  • Capacity-building in human rights practices

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