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#Human rights

When workplaces become crime scenes –
Discussing human rights in the engagement dialogue

When workplaces become crime scenes

Discussing human rights in the engagement dialogue
Child labour, unsafe workplaces and pollution that damages health and costs lives – the list of human rights violations that companies have been found guilty of is a long one. There must be more accountability for ensuring humane and healthy working conditions, both for moral reasons and to enable companies to achieve sustainable business success.

For a long time, protecting human rights was not much of a priority in business as this was considered a responsibility of the state. In the absence of statutory regulations, it was up to the individual businesses to decide whether they wanted to take voluntary action. In many developing countries and emerging markets, this is still the case today and many large companies from industrialised nations have outsourced their production to these countries. However, after a number of scandals causing serious damage to the reputation of the firms involved, attitudes appear to be changing. There are now several initiatives of international standing and influence, which address unjust and inadequate conditions within companies and define new standards for human rights and rights to safe working conditions. In his role as UN Special Representative on business and human rights from 2005 to 2011, John Ruggie was one of the driving forces behind this change. He developed the ‘Guiding Principles on Business and Human Rights’ based on the United Nations ‘Protect, Respect and Remedy’ framework. His guiding principles called on governments to establish a clear basic legislative framework to prevent companies from violating human rights.

Protect, respect and remedy

The Guiding Principles also represent an attempt to define in clearer terms the responsibility of businesses to uphold human rights. They stipulate that companies are responsible for observing human rights, terminating any potentially harmful aspects of their business activities and remedying these. To this end, the guidelines set out a ‘human rights due diligence’ procedure that helps companies to review their own internal working conditions and those of suppliers and acquired businesses with a view to human rights compliance. Ruggie’s reference framework has now also found ist way into the newly revised OECD Guidelines for Multinational Enterprises. “Union Investment is an asset manager with responsibility for the funds it holds in trust and so we are careful to review each and every investment we make with regard to human rights compliance,” says Janne Werning, a sustainability analyst in the portfolio management team of Union Investment. “This enables Union Investment to meet legal requirements and furthermore allows us to strengthen protection against risks such as litigation and reputational risks,” Werning continues. “Human rights issues are therefore a key component of our engagement dialogue with companies and an important factor in the exercise of voting rights at annual general meetings”.

#United Nations Guiding Principles on Business and Human Rights

The United Nations Guiding Principles on Business and Human Rights, also known as the Ruggie Principles, were issued by the UN in June 2011 and represent a global standard for business and human rights. A broad range of private and public stakeholders were involved in their formulation. These principles, named after John Ruggie, former UN Special Representative on business and human rights (pictured above), are one of the most broadly accepted international standards regarding companies’ responsibility for human rights compliance.

#OECD

The Organisation for Economic Co-operation and Development (OECD) was founded in 1961. It is an international organisation that strives to improve the lives of people across the world in economic and social Terms by encouraging and initiating political changes through analyses, recommendations and Guidelines.

Human rights violations – an international topic

Complaints about companies for human rights violations

Thankfully, human rights violations at work are a very rare exception in Germany. But German companies are still affected by this topic, for example when they assume responsibility for operations abroad through acquired companies or supplier relationships. A global study conducted at Maastricht University (Menno T. Kamminga, Company Responses to Human Rights Reports: An Empirical Analysis, 2015) examined a pool of 1,877 human rights complaints. German companies were affected in 87 cases, which puts Germany in fifth place in an international comparison. Only the US (511 cases), the UK (198 cases), Canada (110 cases) and China (94 cases) were involved in more complaints. It was found that complaints in relation to companies in industrialised nations often stemmed from human rights violations occurring along the supply chain of these companies.

A future sustainable world should be built on human dignity

Human rights protect all aspects of human life, from freedom from torture and slavery to access to food, freedom of speech, protection of privacy and access to education. All of these are cornerstones of sustainability. A sustainable world must be built on a foundation of human dignity. But unfortunately, these human rights are often disregarded in everyday work. As a sustainability-oriented asset manager, we consider it crucial that companies fulfil their duty of care with regard to human rights. In short, this means that in addition to observing national laws, they should also pursue a proactive risk management approach in order to prevent human rights violations.

In our engagement dialogue, we call upon companies to review their business activities with regard to human rights that might be at risk and then take the measures necessary to prevent any harm. How can investors help to ensure that companies comply with human rights? We believe that investors are one of the most influential groups of stakeholders – alongside legislators and consumers – when it comes to companies’ sustainability efforts. If investors demonstrate openly and transparently that their investments are contingent upon the fulfilment of certain sustainability criteria, they create a strong incentive for companies to move in this direction. Many funds and large institutional investors already follow this approach and have stopped investing in companies that do not assume responsibility for their impact on the environment, climate change and especially human rights. Can you give us an example where this approach has been successful? If we look, for example, at the situation among Asian suppliers in the 1990s and compare it with today, we can see significant improvements. But despite all efforts, only a small number of companies fully shoulder their responsibility to implement processes that ensure human rights are respected.

We believe there is still room for improvement. Therefore, we strongly support concentrated efforts of all stakeholders to advocate human rights compliance and we definitely see investors as a key part of this advocacy group. The observance of human rights not only acts as an indicator of the company’s social acceptance, but also limits operational, legal and reputational risks. Consumer demand for products could drop in response to severe violations of human rights, and revenue would collapse. Human rights contravention also brings with it enormous litigation risk. From the perspective of the capital market, human rights issues have dramatically increased in importance – and not just in the supply chain.

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Janne Werning

Sustainability analyst in the portfolio management team at Union Investment