Reporting Insights & Trends: Who’s Responsible and Accountable for Addressing Human Rights Risks Within the Company?

The UNGP Reporting Database was launched in March 2016. This article is the second of a series designed to highlight trends and key insights from corporate human rights disclosures found in the Reporting Database.

In the previous article in this series, we noted that 75 per cent of companies in the Reporting Database have a policy commitment to respect human rights. Far fewer companies, however, are clear about the governance and accountability structures they have in place to ensure the policy is implemented

Indeed, while 80 per cent of companies in the Reporting Database mention having a committee responsible for sustainability, CSR or ethics and compliance, 62 per cent fail to tell us if that committee is actually accountable for their human rights commitment.

Without this governance information – the explanation of oversight structures that are critical to embed the policy commitment into practice – stakeholders can have little confidence that the company can effectively manage its human rights risks.

What kind of disclosure is relevant regarding the governance of respect for human rights?

UN Guiding Principle 19 states that responsibility for addressing human rights impacts should be “assigned to the appropriate level and function within the business enterprise” and that “internal decision-making, budget allocations and accountability processes [should] enable effective responses to such impacts”.

Good disclosure therefore makes clear who within the company has responsibility for human rights issues. This includes day-to-day management, the most senior level of oversight and accountability, and whether the Board and top leadership are involved in addressing areas of respect for human rights.

There is no single way to organize the overall responsibility for human rights – companies can choose to have one or several point of responsibility. For instance, human resources, ethics and compliance or external affairs are all relevant functions to address aspects of human rights management. Specific structures may also be set up to address salient human rights issues, such as cross-functional committees.

What’s especially relevant is an explanation from the company about how the structure(s) it has actually help achieve respect for human rights.

What trends are we seeing?

The majority of companies in the UNGP Reporting Database do not provide information about governance of human rights, and few offer real insight into their accountability structures.

Trend 1: 22 per cent of companies in the Reporting Database disclose very little or nothing at all about governance of sustainability issues, let alone human rights.

The ICT sector performs particularly badly in this area, with six out of 10 ICT companies silent on their governance of human rights issues.

It’s worth mentioning that during the consultations that informed the UN Guiding Principles Reporting Framework, investors consistently placed the greatest emphasis on this area of companies’ reporting. Those companies that provide meaningful information about how respect for human rights is governed instill greater confidence that their commitment is being implemented in practice. They offer shareholders and other stakeholders a clear understanding of the ways in which the company manages human rights risks and reasons to believe that the company has the means and intention to make respect for human rights part of how business gets done. | Learn more about investor support for the UNGP Reporting Framework

Trend 2: While 80 per cent of companies have a committee that has in principle some oversight over human rights related issues, 62 per cent of those same companies fail to clarify how much attention is given to human rights in comparison with other issues.

The bodies cited by companies as having some oversight may be termed sustainability committees or be CSR, risk and compliance, ethics or audit committees, to name a few examples. Yet 62 per cent of these companies do not provide any further detail about those committees’ mandates with regards to human rights. This makes it difficult to determine how much attention is given to human rights – if any at all – in comparison with other non-financial issues, like the environment and philanthropic initiatives.

Trend 3: About one-third of companies provide limited – but human rights specific – information about governance of human rights.

Thirty per cent of companies in the Reporting Database provide some information about who’s responsible for addressing human rights issues. This includes brief statements about day-to-day responsibility or leadership oversight, with few details about the specific tasks or mandate of those structures. This type of disclosure offers limited but valuable insight. For example, HSBC includes a section on governance in its Statement on Human rights:

“The Board of HSBC Holdings plc has established a Conduct & Values Committee which oversees the development of HSBC’s human rights commitments and policies. Executive responsibility rests with the Group Management Board which has primary accountability for the businesses or functions relevant to particular human rights issues.

We always investigate credible allegations of human rights violations as they are reported to us via engagement with stakeholders. Serious issues are reported to the Group Management Board.”

Trend 4: Only 7 per cent of companies provide a comprehensive narrative that clearly explains the chain of responsibility for human rights in the company.

What does good disclosure on governance include? Leading examples provide clear and detailed information about:

  • The staff position or business function responsible for day-to-day management of human rights;
  • The specific responsibilities and tasks of that position or function;
  • The highest level of accountability for human rights.

When provided with this information, readers can clearly understand the coherent chain of responsibility for human rights in the company, and have greater confidence that human rights risks are being addressed in practice.

Yet only 7 per cent of companies provide this level of information.

The food and beverage sector does particularly well, with leading examples of reporting from Nestlé, Unilever and PepsiCo. For example, Nestlé discloses in its Creating Shared Value Report 2015 that its Human Rights Working Group focuses on human rights-related issues exclusively, but that other bodies are also involved and then proceeds to identify them. It also pinpoints top-level responsibility at the Board level:

“The Human Rights Working Group (HRWG) complements the mandate of the Group Compliance Committee by focusing on human rights-related issues exclusively. Other important bodies dealing directly or indirectly with human rights and compliance issues include the Nestlé in Society Board, the Issues Round Table, the Operations Water Task Force, the Child Labour and Women’s Empowerment Steering Group, and the Nestlé Water Task Force…

The Nestlé in Society Board is the highest level where an update on human rights is provided to Executive Board members on a regular basis. The Nestlé in Society Board is assisted in this task by the HRWG which meets to:

  • Supervise and coordinate the progress made on the implementation of the HRDDP at the corporate and market levels against Nestlé’s commitments;
  • Provide strategic orientation on areas that need to be prioritised to embed human rights further into the mainstream of Nestlé’s structure and operations;
  • Contribute technical expertise to ongoing and future human rights initiatives and activities; and
  • Pre-empt and discuss specific Nestlé-related human rights issues and any action to be taken.

The heads of the following departments and functions are members of the HRWG: Human Resources (Co-Chair); Public Affairs (Co-Chair); Legal; Compliance; Security; Procurement; Safety, Health and Environment; and Risk Management. In addition to the HRWG, other groups that are chaired by an Executive Board member have human rights as part of their scope of work, including: Group Compliance Committee; Issues Round Table; Child Labour and Women’s Empowerment Steering Group; Operations Water Task Force; Nestlé Water Task Force; and Seafood Task Force.”

Another interesting example of disclosure is found in Unilever’s Human Rights Report 2015. The company clearly states who is responsible for the human rights commitment, its management and monitoring. They also have multiple statements of support for human rights from top leadership:

“Our commitment is led from the top. Our work in human rights is overseen by Unilever’s Chief Executive Officer and supported by the Unilever Leadership Executive – including the Chief Supply Chain Officer, Chief Human Resources Officer, Chief Marketing and Communications Officer, Chief Legal Officer – as well as the Chief Sustainability Officer and the Global Vice President for Social Impact. Additional Board-level oversight is provided by the Corporate Responsibility Committee…

While our regional organisations and human resources and supply chain teams are accountable for ensuring human rights are respected within our operations, our efforts in Unilever’s extended supply chain are led by Procurement. The Business Integrity team in Legal is responsible for the Prevent – Detect – Respond framework to implement the Code of Business Principles and related Code Policies across all Unilever operations. The Global Vice President for Social Impact, appointed in 2013, leads the human rights strategy and best practices globally.” 

Tips for better disclosure on governance of human rights

Leading examples of corporate disclosure on governance of human rights issues provide comprehensive information about responsibility and accountability for human rights, from the operational level up to top leadership:

  • What staff positions or business functions are responsible for day-to-day management of human rights, including salient issues?
  • What are the specific responsibilities of that position or function?
  • What is the most senior level of oversight and accountability for human rights?
  • What issues are discussed by senior management and by the Board? How frequently?
  • What does that responsibility to manage human rights looks like in practice, such as examples of how issues are addressed by the different levels of responsibility or how information might ‘travel’ between those parts of the company?

Stay tuned for more reporting trends and insights from the UNGP Reporting Database. The third article of this series will address Part B of the Reporting Framework: Defining a Focus of Reporting.