A Clear Human Rights Policy Helps Steer Corporate ESG Priorities

Legal and compliance leaders are rightly concerned about growing environmental, social, and governance imperatives from investors, internal stakeholders, global regulators and enforcers, and the public. These concerns are driving organizations to create statements that express their company’s international commitment to human rights.

Companies often publish a brief statement to declare their support for human rights or include this kind of language in their codes of conduct. But this approach can be insufficient, as organizations face increasing pressure to implement a wider scope of actions to assess, avoid, and disclose risk in the human rights space.

A dedicated human rights policy can help establish explicit and comprehensive standards in response to evolving expectations.

New laws, such as the EU Corporate Sustainability Reporting Directive and relevant European Sustainability Reporting Standards, require certain companies to report social issues—including human rights—in their own workforce, value chain, affected communities, customers, and end users.

Existing laws, such as the US Uyghur Forced Labor Prevention Act and the UK Modern Slavery Act, already come with specific mandates that apply to businesses operating in those jurisdictions.

Beyond matters of regulatory compliance, shareholder proposals and media reports continue to scrutinize human rights issues within companies and their supply chains. Failing to meet public expectations in this area is likely to involve reputational damage that can impact hiring, retention, brand value, and ultimately the bottom line.

A standalone policy is among the positive factors several ESG rating firms use when scoring a company’s ESG maturity.

Compliance leaders should play a critical role in evaluating how to codify a company’s commitment to advancing internationally proclaimed human rights. To help organizations decide whether they need a human rights policy, compliance leadership should gather details from relevant stakeholders to answer these questions:

• Does a standalone human rights policy fit into our company’s corporate strategy and ESG strategy?
• Does our company’s industry, geography, and/or business model pose a high risk of human rights abuses in the value chain?
• Are our company’s investors asking how we manage human rights issues?
• Are they inquiring about the existence of any related policies?
• Are our company’s customers and/or employees asking us to articulate our commitment in this space?
• Do our company’s suppliers and/or other third-party partners have questions about our expectations of them?
• Has an ESG evaluator asked our company about the existence of a standalone policy?
• Is our company subject to any regulations that require a stand-alone human rights policy?

Emerging Practices

The best human rights policies are clear, transparent, and enforceable—and do the following:

Feature broader topics and supporting documents. Effective human rights policies specifically call out workplace civility topics such as anti-harassment, anti-discrimination, diversity and inclusion, safety, and anti-violence.

Also important is addressing labor standards, which can include prohibitions on human trafficking, forced labor, unsafe or unsanitary work conditions, guidance on work hours, prohibitions on child labor, fair wage and overtime practices, and benefits standards.

These rules should apply both inside and outside of an organization, including employees, contractors, suppliers, third-party partners, and customers. Leading organizations also make available public supporting documents such as ESG reports or dedicated human rights disclosures, and highlight company engagement and membership in relevant international groups and coalitions.

Spell out industry-specific challenges. Companies should consider incorporating industry-specific issues to demonstrate the policy that has been formulated around the context of the individual organization, as opposed to being a kind of off-the-shelf declaration.

For example, a technology company may cover data protection practices that specify how it balances privacy protection with government surveillance activities.

Organizations that work with Indigenous communities may want to create a dedicated policy about global community relations and rights of Indigenous peoples. For food and beverage companies, land rights and water resources may be another aspect of human rights to highlight since it’s critical to bringing their products to market.

Explain how the policy is upheld and enforced. Leading companies are proactive in how they follow through on their human rights policies. These should detail the responsibilities of the board, CEO, ESG steering committee, and/or other internal ESG team members involved in governance of the policy.

It’s also paramount to implement a program designed to engage, assess, and audit suppliers—another way to show enforcement is to share the methodology of supplier audits and the results.

A policy is just one opportunity for compliance leaders to demonstrate their organization’s commitment to human rights. As every compliance leader knows, the real work lies in executing organizational commitments and ensuring policy declarations are operationalized.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Chris Audet is vice president of research in Gartner’s assurance practice.

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