To explain the reporting company’s efforts and progress in building a coherent approach to addressing the salient issues, including their root causes, across all relevant parts of the business.

Most human rights issues are relevant for more than one business function, unit or department in a company. It is usually the case that different parts of the company can exacerbate and/or mitigate the risk of impacts on human rights through their actions and decisions. The reporting company can use its response to this question to explain how the responsibilities of people in different parts of the company are understood with regard to each salient human rights issue, and how those people are involved in the company’s efforts to find solutions.

Relevant information for the company’s answer could include:

• Structures, such as cross-functional committees, through which information is shared and/or decisions are made across the relevant parts of the business regarding each salient issue (e.g., a human rights committee, a supply chain board, a sales compliance board, a community relations committee);

• Other processes through which information is shared and/or decisions are jointly made across the relevant parts of the business in relation to each salient issue (e.g., issue-specific meetings, internal updates and reporting on evolving issues, reporting to senior management; reporting to the Board);

• Examples of specific decisions or actions taken that have involved different parts of the business in preventing or mitigating potential impacts related to the salient issue.

UN Guiding Principle 19 provides that:

“In order to prevent and mitigate adverse human rights impacts, business enterprises should integrate the findings from their impact assessments across relevant internal functions and processes, and take appropriate action…”

The commentary to UN Guiding Principle 19 states that:

“The horizontal integration across the business enterprise of specific findings from assessing human rights impacts can only be effective if its human rights policy commitment has been embedded into all relevant business functions. This is required to ensure that the assessment findings are properly understood, given due weight, and acted upon.

In assessing human rights impacts, business enterprises will have looked for both actual and potential adverse impacts. Potential impacts should be prevented or mitigated through the horizontal integration of findings across the business enterprise…”

Please note:

1. Assurance provided at the higher tiers should include indicators from lower tiers.
2. These indicators are supported by further notes in the Microsoft Excel version of the indicators. For all support materials on assurance of human rights performance and reporting, please see our website section on assurance.

TIER ONE ASSURANCE

• There is evidence that those functions, departments or business units whose decisions or actions can affect risks to human rights are actively involved in discussions, including cross-functional discussions, of:
  • the human rights risks concerned and the implications for their decisions or actions
  • ways they can avoid increasing, and to the extent possible reduce, risks to human rights through their decisions and actions

TIER TWO ASSURANCE

• There is evidence that those functions, departments or business units whose decisions or actions can affect risks to human rights have taken deliberate measures to avoid increasing risks to human rights and to reduce them as far as possible.

TIER THREE ASSURANCE

no additional indicators

To offer insights into principles, policies or processes that guide the reporting company in handling any conflicts between preventing human rights impacts in the most effective way and meeting other business objectives, whether in general terms or through specific cases that have arisen.

This question recognizes that the corporate responsibility to respect human rights may, at times, be in conflict with certain (often near-term) financial, commercial or other business interests. For example:

• Pressures to advance certain operations, purchases or sales quickly may reduce the time available to mitigate potential human rights impacts;

• Opportunities with a new supplier or joint venture partner may be commercially compelling despite that entity’s poor human rights track record;

• Lobbying against new regulations that would raise the minimum wage may help preserve profit margins even though a failure to pass the regulation would keep some workers on poverty-level wages.

Such tensions may arise during the conduct of ongoing business or at the point of making decisions about whether to enter a new market or develop a new product or area of operations.

In some instances, the competing business interests may also raise ethical considerations of their own, and even have human rights implications. For example, reducing sourcing in a jurisdiction where human rights abuses are known to be common may, at the same time, jeopardize the jobs of relatively poor, low-wage employees.

The question is, therefore, not aimed at suggesting that there is only one ‘right’ answer in such dilemma situations, but at seeking information on how the tensions are recognized and how different considerations are weighed in order to reach decisions.

To the extent that individual examples can be provided, this will provide a useful illustration of how the reporting company addresses tensions of this kind. However, if examples reflect an ad hoc decision rather than being the result of a typical process, this should be made clear in order to avoid misleading the reader.

Relevant information for the company’s answer could include:

• Any situations that are recognized as often raising tensions or dilemmas in relation to a salient issue (e.g., the sale of sensitive products to certain kinds of customer, approvals to proceed with projects affecting local communities, entry into high-risk, high-opportunity markets, the provision of security for personnel in conflict-affected areas);

• Any principles or policies that set the framework for decisions in such instances;

• Any specific principles or policies that guide decisions on corporate lobbying in relation to human rights issues;

• Any formal processes for supporting decisions where these tensions arise (e.g., gateway decision-making processes, formal sign-off processes);

• The level within the company at which decisions relating to such dilemmas are made (e.g., an individual or group at the country, regional or corporate level, someone in senior management or at Board level);

• Any involvement of external experts in the assessment of dilemmas on a standing or ad hoc basis (e.g., an independent advisory board or council, academic or other experts);

• Any specific examples of how tensions have been addressed, during the reporting period, in relation to a salient issue.

The commentary to UN Guiding Principle 19 states that:

“The horizontal integration across the business enterprise of specific findings from assessing human rights impacts can only be effective if its human rights policy commitment has been embedded into all relevant business functions. This is required to ensure that the assessment findings are properly understood, given due weight, and acted upon. […]

The more complex the situation and its implications for human rights, the stronger is the case for the enterprise to draw on independent expert advice in deciding how to respond.

If the business enterprise has leverage to prevent or mitigate the adverse impact, it should exercise it. And if it lacks leverage there may be ways for the enterprise to increase it. Leverage may be increased by, for example, offering capacity-building or other incentives to the related entity, or collaborating with other actors.

There are situations in which the enterprise lacks the leverage to prevent or mitigate adverse impacts and is unable to increase its leverage. Here, the enterprise should consider ending the relationship, taking into account credible assessments of potential adverse human rights impacts of doing so.

Where the relationship is ‘crucial’ to the enterprise, ending it raises further challenges. A relationship could be deemed as crucial if it provides a product or service that is essential to the enterprise’s business, and for which no reasonable alternative source exists. Here the severity of the adverse human rights impact must also be considered: the more severe the abuse, the more quickly the enterprise will need to see change before it takes a decision on whether it should end the relationship. In any case, for as long as the abuse continues and the enterprise remains in the relationship, it should be able to demonstrate its own ongoing efforts to mitigate the impact and be prepared to accept any consequences – reputational, financial or legal – of the continuing connection.”

UN Guiding Principle 23 provides that:

“In all contexts, business enterprises should: […]

(b) Seek ways to honour the principles of internationally recognized human rights when faced with conflicting requirements…”

The commentary to UN Guiding Principle 23 states that:

“Although particular country and local contexts may affect the human rights risks of an enterprise’s activities and business relationships, all business enterprises have the same responsibility to respect human rights wherever they operate. Where the domestic context renders it impossible to meet this responsibility fully, business enterprises are expected to respect the principles of internationally recognized human rights to the greatest extent possible in the circumstances, and to be able to demonstrate their efforts in this regard.”

Please note:

1. Assurance provided at the higher tiers should include indicators from lower tiers.
2. These indicators are supported by further notes in the Microsoft Excel version of the indicators. For all support materials on assurance of human rights performance and reporting, please see our website section on assurance.

TIER ONE ASSURANCE

• The company has principles, policies or processes for:
  • identifying tensions between the prevention/mitigation of severe human rights impacts and other business objectives
  • engaging the appropriate functions/departments/business units and levels of senior management in identifying solutions

TIER TWO ASSURANCE

• There is evidence that any principles, policies or processes for handling tensions between the prevention/mitigation of severe human rights impacts and other business objectives have:
  • guided company decision-making processes
  • resulted in actions aimed at preventing or mitigating risks to human rights
• Where a known tension between the prevention or mitigation of impacts and other business interests has not been resolved in a manner compatible with internationally recognized human rights standards, there is evidence that:
  • the company has systematically considered the tension and how to address it
  • there are credible reasons for the course of action it adopted

TIER THREE ASSURANCE

• There is evidence that actions taken to prevent or mitigate risks to human rights are effective where there is tension with other business objectives.
• Where a known tension between the prevention or mitigation of impacts and other business interests has not been resolved in a manner compatible with internationally recognized human rights standards, there is evidence that:
  • no severe impacts on human rights have resulted

To demonstrate, through concrete examples, what the reporting company has done during the reporting period to reduce the likelihood of negative impacts related to each salient issue occurring, recurring or continuing, and the results achieved.

The focus of examples in response to this question should be on actions to prevent potential impacts. Section C6 addresses actions by the reporting company to enable remedy for those harmed by actual impacts to which the company has caused or contributed.

The reporting company may nevertheless find it useful to respond to this question in combination with questions 3.1 and 3.2 (regarding trends, patterns or examples of the existence of actual or potential impacts during the reporting period) and 6.5 (regarding what kinds of remedy were provided for actual impacts), particularly where a case offers examples that are relevant to two or more of these questions.

Relevant information for the company’s answer could include:

• Terms included in contracts with governments, joint venture partners, suppliers, customers, mergers and acquisitions and other agreements, aimed at mitigating potential impacts related to the salient issue;
• Monitoring of the implementation, by third parties, of agreements that relate to the salient issue;
• The agreement and implementation of corrective action plans following on from supply chain audits, and resulting changes in practice and compliance;
• Joint fact-finding or monitoring with affected communities, workers or others;
• Support to government in introducing or implementing key legislation to protect human rights in relation to a salient issue;
• Engagement with industry organizations, international organizations or others that can raise awareness collectively of a salient issue and reduce the risk of negative impacts;
• Capacity-building of workforce to mitigate the risk of negative impacts in relation to a particular salient issue;
• Capacity-building of suppliers or other business partners to mitigate the risk of negative impacts in relation to a salient issue (e.g., training of security providers or contractors, helping suppliers to develop management systems to improve labour rights compliance);
• Root cause analysis to understand and be able to address underlying reasons that increase or perpetuate the risk of negative impacts related to a salient issue;
• Other ways in which the company has exercised its influence (leverage) over business customers, joint venture partners, suppliers or others in its value chain to reduce risks of negative impacts related to a salient issue;
• Collaborative initiatives with others to better understand and address potential impacts related to a salient issue (e.g., through multi-stakeholder initiatives);
• External challenges faced in seeking to prevent or mitigate potential impacts related to a salient issue;
• Any other approaches to addressing systemic risks to human rights in relation to a salient issue.

UN Guiding Principle 19 provides that:

“In order to prevent and mitigate adverse human rights impacts, business enterprises should integrate the findings from their impact assessments across relevant internal functions and processes, and take appropriate action.

(a) Effective integration requires that:

(i.) Responsibility for addressing such impacts is assigned to the appropriate level and function within the business enterprise;

(ii.) Internal decision-making, budget allocations and oversight processes enable effective responses to such impacts.

(b) Appropriate action will vary according to:

(i.) Whether the business enterprise causes or contributes to an adverse impact, or whether it is involved solely because the impact is directly linked to its operations, products or services by a business relationship;

(ii.) The extent of its leverage in addressing the adverse impact.”

The commentary to UN Guiding Principle 19 states that:

“Where a business enterprise causes or may cause an adverse human rights impact, it should take the necessary steps to cease or prevent the impact. Where a business enterprise contributes or may contribute to an adverse human rights impact, it should take the necessary steps to cease or prevent its contribution and use its leverage to mitigate any remaining impact to the greatest extent possible. Leverage is considered to exist where the enterprise has the ability to effect change in the wrongful practices of an entity that causes a harm.

Where a business enterprise has not contributed to an adverse human rights impact, but that impact is nevertheless directly linked to its operations, products or services by its business relationship with another entity, the situation is more complex. Among the factors that will enter into the determination of the appropriate action in such situations are the enterprise’s leverage over the entity concerned, how crucial the relationship is to the enterprise, the severity of the abuse, and whether terminating the relationship with the entity itself would have adverse human rights consequences.

The more complex the situation and its implications for human rights, the stronger is the case for the enterprise to draw on independent expert advice in deciding how to respond. If the business enterprise has leverage to prevent or mitigate the adverse impact, it should exercise it. And if it lacks leverage there may be ways for the enterprise to increase it. Leverage may be increased by, for example, offering capacity-building or other incentives to the related entity, or collaborating with other actors.

There are situations in which the enterprise lacks the leverage to prevent or mitigate adverse impacts and is unable to increase its leverage. Here, the enterprise should consider ending the relationship, taking into account credible assessments of potential adverse human rights impacts of doing so.

Where the relationship is ‘crucial’ to the enterprise, ending it raises further challenges. A relationship could be deemed as crucial if it provides a product or service that is essential to the enterprise’s business, and for which no reasonable alternative source exists. Here the severity of the adverse human rights impact must also be considered: the more severe the abuse, the more quickly the enterprise will need to see change before it takes a decision on whether it should end the relationship. In any case, for as long as the abuse continues and the enterprise remains in the relationship, it should be able to demonstrate its own ongoing efforts to mitigate the impact and be prepared to accept any consequences – reputational, financial or legal – of the continuing connection.”

Please note:

1. Assurance provided at the higher tiers should include indicators from lower tiers.
2. These indicators are supported by further notes in the Microsoft Excel version of the indicators. For all support materials on assurance of human rights performance and reporting, please see our website section on assurance.

TIER ONE ASSURANCE

• There is evidence that the company actively looks for ways to use its leverage to mitigate risks to human rights associated with its business relationships.
• There is evidence that, where necessary, the company seeks ways to increase its leverage to mitigate risks to human rights associated with its business relationships and fully utilizes them.
• There is evidence that the company has exercised its leverage to mitigate risks to human rights associated with its business relationships.
• In situations where the company’s leverage has failed, over a reasonable period of time, to mitigate severe risks to human rights associated with certain business relationships, there is evidence that:
• the company has, wherever possible and compatible with human rights considerations, terminated those relationships
• the Board and senior management have considered and approved the decision taken

TIER TWO ASSURANCE

• There is evidence that actions taken by the company to prevent or mitigate severe impacts on human rights are capable of, and appropriate to, achieving this objective given resource limitations and other relevant constraints.

TIER THREE ASSURANCE

• There is evidence that actions taken by the company to prevent or mitigate severe impacts on human rights have achieved this objective to the extent possible within reasonable resource limitations and other relevant constraints.