Mairead Keigher: Human rights reporting: a must for European business

Both shareholders and other stakeholders want to know if companies are doing business with respect for human rights. Formative legislation such as the UK's Modern Slavery Act (2015), the French 'Devoir de Vigilance' (2017), the California Transparency in Supply Chains Act (2010) and the EU non-financial reporting Directive (2014) requires companies to disclose information related to their human rights policies, risk management processes and outcomes. Moreover, we have seen a proliferation of company performance benchmarks, indices and ratings, such as Behind the Brands, the Corporate Human Rights Benchmark, Ranking Digital Rights, and the Workforce Disclosure Initiative.

The UN Guiding Principles on Business and Human Rights emerged out of decades of argument between governments, business and civil society over how (and even whether) to hold companies accountable for harms to people's fundamental rights. That the Guiding Principles were unanimously endorsed by the UN Human Rights Council in 2011 was testament to the new consensus they represented. They clarified that the responsibility to respect human rights requires companies to place the focus on risks to people connected with their business, not just risk to the business itself. They also make clear that approaches of 'do no harm' are insufficient, instead requiring a proactive approach to tackling human rights challenges; that harm to people's human rights cannot be offset by philanthropic or CSR initiatives; and that businesses must respect human rights throughout their own operations and importantly across their value chains as well. The Guiding Principles empowered companies to move away from just reacting when 'named and shamed' and instead to start 'knowing and showing' - knowing what their human rights risks are and how effectively they are being managed, and showing the progress they are making - including through public disclosure.

Over the past several decades, reporting by companies on 'sustainability' or 'CSR' has increased. Yet the emphasis has often been on philanthropic activities or community volunteering, alongside environmental issues. Too many companies still demonstrate a lack of understanding about what is meant by 'human rights', and about what the Guiding Principles ask companies to do. Recent research we conducted on 74 FT500 companies highlighted some worrying realities:

Over 50% of the companies analyzed did not indicate which human rights issues they are managing, and talked only in very high level terms about their management of human rights issues.

16% were completely silent about the governance of human rights issues within their organization and a further 45% provided no detail about where day-to-day leadership of these issues rests within the company;

90% had no coherent narrative about internal processes to manage and mitigate issues that arise;

Only 8% shared specific insights about their stakeholder engagement, including how stakeholders' input helped inform company decision making.

The transposition of the EU non-financial reporting Directive into Polish legislation means that Polish and other European companies now need to address these disclosure gaps. This also presents an opportunity: good disclosure - disclosure aligned with the Guiding Principles - can be a catalyst for improved performance on human rights.

It was the desire to reconnect companies' human rights reporting practices with good human rights risk management that led Shift, together with Mazars, to develop the UN Guiding Principles Reporting Framework. The UNGP Reporting Framework was the result of extensive consultations with companies, investors, governments and civil society across all continents. First published in 2015 in English, it was translated into Polish in 2016 with the support of the Polish Institute for Human Rights and Business and company sponsors, and made available through the website of the Polish Ministry of Economic Development.

The Reporting Framework helps companies understand what strong human rights disclosure looks like. It asks companies to begin with a focus on their salient human rights issues - that is, those human rights that are at risk of the most severe negative impact - and then to provide information on the governance and management of these issues. The Reporting Framework provides companies with a set of questions to which they need to have answers - at least internally - to know whether they are identifying and addressing their human rights risks effectively. Addressing the questions helps companies uncover gaps in their policies, management systems and resources. As they then build stronger management processes, they can in turn strengthen their human rights disclosure. In this way, the Reporting Framework becomes a roadmap to better company performance, enabling companies to 'show' that they 'know' what their human rights risks are, and that they are being managed.

Strong human rights reporting typically shows a number of qualities. Key among these are a willingness to talk about challenges rather than just showcasing 'successes'; the inclusion of clear examples of how processes are working in practice; and information on forward-looking plans for further improvement. And this kind of meaningful and relevant information does not need to be published in a separate human rights report (although it can be). Indeed, dozens of companies, such as Electrolux, H&M, Microsoft, NEC and Novo Nordisk, are using the UNGP Reporting Framework to strengthen the human rights content of their reporting under broad sustainability and integrated reporting frameworks like the Global Reporting Initiative or the International Integrated Reporting Framework. The coalition of 87 investors representing over $5.3 trillion assets under management that backs the Reporting Framework is urging companies to continue this trend to integrate meaningful human rights content in their reports.

From Europe to South Africa to India, where I have worked with companies on their human rights reporting, we are hearing that the principled and pragmatic approach of the UNGP Reporting Framework is helping companies improve both their human rights disclosure and the human rights due diligence processes on which they are reporting. As Sofie Nystrom from H&M puts it, "The UN Guiding Principles tell us we should 'know and show' that we respect human rights in practice. To be able to show, you have to know. To be able to know, you have to do. The Reporting Framework uncovers the places where you need to focus and improve, so that it becomes very clear what you need to do."

The UNGP Reporting Framework is proving to be a lever that powers the shift from reporting for reporting's sake to reporting that drives improved outcomes for people and helps companies future-proof their business. The combination of clear human rights standards and tools alongside rising shareholder and societal expectations makes the case quite clear: now is the time for companies - including in Poland - to know and show that they do business with respect for people.

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