Human rights in business: A guide for board directors

Human rights in business: A dedicated corporate governance training guide for board directors to know their role. 

It should be no surprise to board directors that your stakeholders expect a fundamental commitment to upholding human rights. 

It may sound “grand-scale” to read it like that, but it translates down to a core day-to-day responsibility: you have a duty to ensure that every corporate stakeholder has their rights upheld, whether it’s during regular business, times of great success or periods of emergency. 

This responsibility starts at the board level. This guide will tell you more.

The expectation for businesses to respect human rights isn’t new, but the key difference is that rules and enforcement are ramping up. Boards need to understand what’s driving this shift.

Two key international frameworks set the stage:

• The UN Guiding Principles on Business and Human Rights (UNGPs): These are the global gold standard, backed by the UN in 2011. They stand on three pillars:
  1. Governments must protect people from business-related abuses.
  2. Companies must avoid causing harm and address any negative impacts. This means carrying out human rights due diligence (HRDD).
  3. Victims need access to effective remedies, both from the state and from companies themselves.
• The OECD Guidelines for Multinational Enterprises on Responsible Business Conduct: These government-endorsed guidelines push multinationals to perform risk-based checks across their operations and supply chains. The goal? Spot, prevent, and fix adverse impacts, including human rights issues. The 2023 update raises the bar on climate, tech, and anti-corruption efforts.

These frameworks clearly define expected behaviour for all companies. Human rights impacts are now a risk boards can – and must – foresee, making oversight a core part of their duty.

What started as “soft law” is rapidly becoming a hard legal obligation. The European Union is a prime example of this, instituting laws that turn human rights from a ‘nice-to-have’ to ‘must-do’ compliance task. 

• EU Corporate Sustainability Due Diligence Directive (CSDDD): This game-changing EU law forces large companies in the EU market to conduct thorough human rights and environmental checks across their value chains. They need to find, stop, fix, and report on negative impacts. Failing to comply brings hefty penalties.
• EU Corporate Sustainability Reporting Directive (CSRD): CSRD beefs up reporting rules. Companies must disclose detailed ESG info, including human rights performance, using new European standards (ESRS). It introduces “double materiality” – reporting on how sustainability hits the company’s bottom line and how the company impacts people and the planet. Expect third-party checks on this data.

Similar laws demanding human rights due diligence are popping up worldwide (think Germany, France, the UK, California). This creates a complex legal maze that requires smart navigation from the board.

Beyond the law, pressure is building from all sides – investors, customers, employees, and affected communities are all demanding action, weaving human rights into their measure of corporate integrity, choosing brands they see as ethical and boycotting those they link to rights abuses. Bad press travels fast, hitting reputation and sales. NGOs and media keep a close watch. 

They form these opinions through a combination of businesses’ actions and media portrayal, which can be challenging to combat once a narrative is created.

Boards can’t just passively observe; they need to actively lead the charge on human rights.

• Policy Approval: Boards need to sign off on a clear, public human rights policy aligned with global standards like the UNGPs.
• Culture Champion: Directors must actively promote a company culture where respecting human rights is non-negotiable.
• Resource Allocation: Ensure management puts real money and people behind the human rights strategy.

• Assign Responsibility: Decide who owns human rights oversight – the full board, a dedicated committee (ESG, Sustainability), or integrated into existing ones like Audit or Risk.
• Clear Mandates: Spell out the human rights duties clearly in committee charters. No ambiguity allowed.
• Information Flow: Make sure the board gets regular, concise, and actionable updates on human rights risks, progress, and challenges.
• Expertise and Training: Boards need the right skills. This means diverse members, ongoing training on human rights issues, and potentially bringing in external experts. Guidance exists to help boards enhance their capabilities.

• Link to Strategy: Human rights shouldn’t be a silo. Weave it into the company’s core strategy, purpose, and how it plans to create value.
• Enterprise Risk Management (ERM): Treat human rights risks (risks to people) just as seriously as financial or operational risks within the main ERM framework. Prioritise based on the severity of potential harm.
• Monitor Performance: Track progress using clear KPIs. Consider linking executive pay to human rights performance to show you mean business.
• Oversee Stakeholder Engagement: Ensure the company genuinely listens to and acts on feedback from those potentially affected by its operations.

Fundamental beliefs, global standards, new laws, and intense stakeholder scrutiny combine to mean boards must provide active, informed oversight of human rights. 

This involves setting the right tone, ensuring strong governance, embedding human rights into strategy and risk processes, demanding effective due diligence, and making sure remedies are available when harm occurs.

Boards need to ask tough questions, challenge assumptions, and continuously push for improvement. This isn’t just about compliance; it’s about building resilient, ethical businesses that create lasting value for everyone. Leveraging tools like the Corporate Human Rights Benchmark can provide objective insights into performance and where to focus efforts. The future belongs to companies that understand that success and respect for human rights go hand-in-hand.