New legal requirements, such as the UK’s Modern Slavery Act and the United Nations Guiding Principles on Business and Human Rights, mean there is an increasing need for human rights due diligence in organisations around the world. Increasingly, companies must be able to demonstrate understanding of their impact on the human rights of stakeholders.
As ethical stewards of an organisation, management accountants have a duty “to ensure that their employers recognise the relevance of human rights in business, and that the success of their operations should not come at the expense of the human rights of other people,” according to a CGMA briefing developed with the Global Compact Network UK.
By highlighting and communicating the risks in the company’s direct activities or value chain – such as child labour, dangerous working conditions, environmental degradation, and the misuse of data – finance professionals can also promote the long-term sustainability throughout the business.
Roger Seabrook, FCMA, CGMA, vice president of finance, marketing, and sustainability at Unilever, outlines the importance of respecting human rights and assessing the company’s impact in the briefing: “It is fundamental for the way we do business, for our operations, our value chain, and the communities where we operate. Only when we look at our entire footprint are we able to see and implement the appropriate standards that you would expect of Unilever.”
Unilever’s assessment of its supply chain, for instance, identified human rights issues including discrimination, forced labour, freedom of association, harassment, health and safety, land rights, fair wages, and working hours.
Within the company, harassment was identified as the most frequently reported issue in 2014, particularly in the agricultural sector. In light of the finding, Unilever launched initiatives to combat the problem in affected areas, with community outreach, safety talks, and targeted training exercises. The company has made a commitment to report on the progress made through these initiatives in future editions of its human rights report.
Identifying and mitigating
The CGMA briefing, Business and Human Rights: Evolution and Acceptance, describes the intention of a human rights due-diligence process as to identify, prevent, mitigate, and account for how an organisation addresses its adverse human rights impacts.
Management accountants can draw insight from corporate information and metrics to identify the risks and opportunities. Such data could include the number of grievances raised (and whether they are clustered in particular teams or markets), any litigation brought against the company, workplace accidents, regulation breaches, and the findings of human rights impact assessments. The information gleaned enables them to determine short-term priorities for action in the organisation as well as processes to uphold these rights, support corporate objectives, and safeguard reputation. The data can also be used to illustrate the company’s revised priorities to its stakeholders.
Management accountants can contribute through their allocation of funds, taking into account the resources required for a thorough due-diligence process. They can ensure that the process complements, and is integrated into, existing risk-management systems. They can also provide an independent, objective viewpoint to review and test the rigour of the findings and ensure that issues which come to light are acted upon. Once solutions have been proposed, accountants can ensure that these are cost-effective and meet the needs of the affected stakeholders.
The briefing highlights questions finance professionals can ask to determine how well embedded the organisation’s commitment to human rights is:
- Has the company made a public commitment to respecting human rights?
- Is it a participant in a sectoral standard or initiative?
- Is that commitment communicated throughout the company, and is detailed training provided to those teams most exposed to this type of risk, such as purchasing?
- Does human resources monitor issues that may arise within the company’s operations, such as gender equality?
- Is the organisation’s commitment to human rights, and expectations that partners adhere to that commitment, specified in contracts with suppliers and others?
Further contributions management accountants can make:
- Review existing strategy and business plans for potential adverse effects on your stakeholders’ human rights. How will these be addressed? How could these affect the company’s financial position?
- Ensure that due-diligence processes for acquisitions or divestiture prospects take into account existing and legacy human rights issues. If the company is considering entering new markets, assess the human rights situation in those territories.
- Develop KPIs that measure and track human rights progress and initiatives, as well as non-financial KPIs for business functions in specific regard to their interaction with these risks. Metrics to track the degree of progress made could include the number of staff who have received human rights training specific to the work they carry out, the number of external contracts that specify a commitment to upholding human rights, whether the number of grievances is falling, and so on.
- Define how management reporting systems will address non-financial issues, including human rights.
- Monitor changes in the regulatory landscape and any developing reporting initiatives that involve human rights. These include nascent global initiatives such as the Corporate Human Rights Benchmark (CHRB) and the Business and Human Rights Reporting and Assurance Frameworks Initiative (RAFI). The CHRB is a ranking of the world’s largest publicly listed companies on their human rights performance and was established by investor groups and human rights research bodies. Shift, a not-for-profit centre for business and human rights practice, along with professional services provider Mazars, created RAFI to facilitate the sharing of companies’ experience of reporting on their alignment with the UN Guiding Principles.
—Samantha White (email@example.com) is a CGMA Magazine senior editor.