February 06, 2021

Business and Human Rights – What Do Investors Expect of Boards?

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All companies have a responsibility to respect human rights. They may impact human rights in several ways through their business operations and supply chains, their community interactions and the marketing and use of their products and services. Respecting human rights is an inherent part of good practice. We expect companies to integrate human rights into their policies, corporate strategy, risk management and reporting.”

So says Norges Bank Investment Management (NBIM), which manages one of the world’s largest sovereign wealth funds, in its Human Rights Expectations Document. The Expectations Document is primarily aimed at company boards and a helpful a starting point for their interactions with companies on human rights.

In this Blog Post, we investigate what it means for boards to integrate human rights into policies, corporate strategy, risk management and reporting in a practical way that resonates with investors.

NBIM “expects” Boards to ensure that companies take the following concrete, practical steps to better fulfil their obligation to respect human rights. Importantly, these expectations are not unique to NBIM.

Indeed, a range of investors (both institutional and retail) are increasingly demanding attention to human rights issues. All boards may look to these practical steps to better address the concerns of their investors and other stakeholders more broadly.

Integrate human rights into policies and strategy, which involves:

  • Understanding the business implications of human rights issues, which should inform strategic business planning.
  • Making a public policy commitment regarding the respect of human rights.
  • Understanding and reflecting emerging industry standards and good practices addressing human rights.
  • Effectively communicating company policies and practices relating to human rights to employees and contractors.
  • Considering the introduction of third party expert input into their human rights strategies and policies (an area in which we see increasing interest from a range of market participants).

Integrate salient human rights into risk management, which involves:

  • Conducting tailored and proportionate human rights due diligence – identifying actual and potential negative impacts on relevant human rights in relation to the company’s business activities.
  • Implementing measures to address salient human rights risks.
  • Tracking preventative and corrective actions.
  • Conducting human rights-focused impact and risk assessments.
  • An adequate supply chain management system.

Report on management of salient human rights, which involves:

  • Disclosure of companies’ human rights strategies, policies and processes including human rights action plans, governance structures, operational procedures, risk and impact assessments, stakeholder relationships and remediation processes.
  • Reporting on their implementation of the UN Guiding Principles on Business and Human Rights.
  • Communication demonstrating explicit board oversight.
  • Performance reporting, with metrics enabling year-on-year comparisons.
  • Taking a full value chain perspective.

Engage transparently and responsibly on human rights, including through grievance mechanisms, which involves:

  • Engagement with workers and their representatives, potentially affected groups and other relevant stakeholders on human rights issues.
  • Effective and accessible operational-level grievance mechanisms.
  • Transparent policies or guidelines for engaging with policy makers and regulators on human rights.

The post Business and Human Rights – What Do Investors Expect of Boards? appeared first on Eye on ESG.

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