General Human Rights Principles are important as a foundation for understanding the effect any investment or action has on societies. The Human Rights Principles offer a basis for understanding how to not only avoid harm but also how to address it once it has happened, as well as for understanding the interconnectedness between not only rights but between environmental impact (and the rights involved in environmental actions, see below) as well as the concepts around good governance and the importance of engagement and of identifying stakeholders to fully understand the effect of investment decisions as well as company actions. They are also helpful to understand the underlying notion of engagement which has to be around continued efforts towards positive change.
The principle of universality of human rights is the cornerstone of international human rights law. This means that we are all equally entitled to our human rights. As first emphasized in the Universal Declaration of Human Rights, this principle is repeated in many international human rights conventions, declarations, and resolutions.
Human rights are inalienable. They should not be taken away, except in specific situations and according to due process. For example, the right to liberty may be restricted if a person is found guilty of a crime by a court of law.
All human rights are indivisible and interdependent. This means that one set of rights cannot be enjoyed fully without the other. For example, making progress in civil and political rights make it easier to exercise economic, social, and cultural rights. Similarly, a lack of respect for one or more of one’s economic, social and cultural rights can negatively affect the enjoyment of other rights.
Article 1 of the UDHR states: “All human beings are born free and equal in dignity and rights.” Freedom from discrimination, set out in Article 2, ensures this equality.
Non-discrimination cuts across all international human rights law. This principle is present in all major human rights treaties.
Participation and Inclusion: All people have the right to participate in and access information relating to the decision-making processes that affect their lives and well-being. Rights-based approaches require a high degree of community participation, civil society, minorities, women, young people, indigenous peoples, and other identified groups.
Accountability and Rule of Law: States and other duty-bearers are answerable for observing human rights. They must comply with the legal norms and standards enshrined in international human rights instruments. Where they fail to do so, aggrieved rights-holders are entitled to institute proceedings for appropriate redress before a competent court or other adjudicators in accordance with the rules and procedures provided by law. Individuals, the media, civil society, and the international community play important roles in holding governments accountable for their obligation to uphold human rights. Importantly when States enact legislation imposing certain actions or banning others which aim at protecting the human rights of individuals this is part of the States’ obligation to create peaceful and secure societies. This includes when legislation is aimed at businesses/investors in order to further sustainability.
While investors, in most cases, are not responsible for directly addressing adverse effects that portfolio companies are involved with, they are expected to consider risks throughout the investment lifecycle, including prior to investment decision-making, during investment decision-making, and throughout investment stewardship. They are also expected to use and maximize their leverage to facilitate and incentivize portfolio companies and other influential actors to prevent, mitigate, and, where appropriate, address harm (see the Investor Alliance for Human Rights Investor Toolkit, 2020).
Human Rights Due Diligence (HRDD)
Human rights due diligence is a way for enterprises to proactively manage potential and actual adverse human rights impacts with which they are involved. It involves four core components:
- (a) Identifying and assessing actual or potential adverse human rights impacts that the enterprise may cause or contribute to through its own activities, or which may be directly linked to its operations, products, or services by its business relationships;
- (b) Integrating findings from impact assessments across relevant company processes and taking appropriate action according to its involvement in the impact;
- (c) Tracking the effectiveness of measures and processes to address adverse human rights impacts in order to know if they are working; and
- (d) Communicating on how impacts are being addressed and showing stakeholders – particularly affected stakeholders – that adequate policies and processes are in place.
Enterprises should identify and assess risks by geographic context, sector, and business relationships throughout their own operations (HQ and subsidiaries) and the value chain.
Several useful tools have been developed around human rights indicators, e.g., OHCHR as well as the Danish Institute for Human Rights (see Annex). It is essential to see indicators as only one part of measuring where a company is going. This is why active engagement is about more than compliance and quantitative reporting but about a dialogue that furthers change.
Linking goals and indicators will give structure concrete action points and allow the possibility of using existing rights-based indicators to measure progress and work towards continuous positive change.
Indicators and goals on human rights are fundamentally indicators related to societal change. Any investee looking at the human rights frameworks and the rights found therein may give some very concrete guidance on what issues to look at, from non-discrimination to children’s health literacy rates to standard of living. The indicators developed by OHCR on human rights and the targets and indicators linked to the SDGs will also be useful.
Any set of indicators and any strategy on human rights formulated around change must be understood as a “living” tool that will link to the investee’s strategic objectives and the investor’s expectations. This means that as processes around understanding impact, broader societal context, and changes effected either by the efforts of the investee or by external factors create change, the objectives, goals, and relevant indicators will change. This means that indicators should be understood as a basis for meaningful dialogue and disclosure between investor and investee.
This is just one example of using human rights as a basis for indicators – in a practical and concrete way. Human rights standards and the experience in the UN on measuring implementation give very valid guidance on how to create indicators for Social “impact”.
An example is adequate wages which in turn has an impact on people’s livelihoods and standard of living (including housing, health and educational level). For most people, the most important characteristic of work is pay, and the principle of an “adequate living wage” is mentioned in the preamble to the ILO Constitution. Nearly all individuals who work or seek work do so in order to earn an income and ensure the economic well-being of themselves and their households. Besides providing adequate income in the static sense of a decent rate of pay, decent work must also address the dynamic aspects of continuing to provide sufficient income.
One dynamic aspect of decent work is whether individuals are able to improve future work and income via training and further education. Check that:
- the above standards are clearly integrated and respected in your own operations;
- a requirement to ensure respect for maximum working hours and overtime restrictions is included in the company’s terms of the contract with suppliers and contractors;
- the ability of suppliers/contractors to comply with the requirement is assessed during the qualification and selection of new suppliers and contractors.
In terms of indicators, adequate pay can be measured directly by an indicator of pay rate. It can also be measured indirectly through indicators on hours of work that call attention to individuals who work many hours because their rate of pay is not sufficient, or who have limits on their hours of work, resulting in inadequate income. Notice that these indicators mainly rely on distributional data for pay rate and hours of work to identify the per cent of workers who: receive inadequate/low pay, have opportunities only for inadequate hours of work, or have long hours of work. The reason for this focus is to help identify workers without decent pay and/or hours. Participation in job-related training provided or subsidised by the employer provides an indicator of future earnings possibilities.
Importance of qualitative data
It is however important to keep in mind that not everything can or should be quantified. Quantifying specific aspects of the corporate responsibility to respect human rights might however end up selling a “story” very short – and could even end up condoning human rights abuses and giving unwarranted prominence to easily measurable (but not necessarily more important) issues. Thinking that only quantification is an answer also risks missing out on important nuances and completely disregarding the narrative around progress and where a company is going.
Conclusions
The trend is clear – the societal part of sustainability is becoming ever more prominent. Broadly speaking risks of NOT being sustainable – and being able to show it – range from:
- Penalties/fines as a result of breaches of regulations (e.g. EU SDFR)
- Litigation – see e.g. Shell has a case litigated in the UK even if the damage was overseas;
- Loss of social/regulatory licence to operate;
- Reputational cost in a society where consumers are ever more demanding that the products they have access to are sustainably produced;
- Competing with firms who will obtain increased revenues/profit from “responsible” products/services and who will have improved risk management as well as improved access to capital compared to those who do not operate and show to be operating sustainably.
- There will be risks related to an inability to make repayments due to environmental/ social costs and simple loss of value
- Potential direct liability for investors – who will want to avoid that risk when they make investment decisions: the danger of damage to reputation through association with polluting, exploitative or ‘unethical’ investees – which they will want to avoid this funnelling their investments elsewhere.
A rights-based approach coupled with the thinking around a change narrative and results-based management treated in a previous insight piece can concretely assist investors in tackling the challenges around social impact and good internal governance. It does require assistance from professionals who have experience with these issues and cross-sector collaboration.