This piece is by Jordi Lesaffer, Expert Corporate Social Responsibility

The explosive situation in the Middle-East and the ongoing violence in Israel and Gaza raises some important questions for companies doing business in the region.

How will these companies manage human rights related risks? Which due diligence measures do they put in place to avoid potential infringements of human rights? How will they protect their reputation and license to operate? 

The United Nations ‘Protect, Respect & Remedy’ framework, the UN Global Compact, and the' OECD Guidelines for Multinational Enterprises' all agree that companies have a responsibility in the area of ​​human rights.

In June 2011, the UN Human Rights Council unveiled the ‘Guiding Principles on Business and Human Rights’ which outlines the ‘Protect-Respect and Remedy’ Framework.  The framework outlines;

-  The State (Israel and the Gaza Authority) duty to protect human rights.

-  The Corporate (companies present in the region) Responsibility to respect human rights.

-  Access to remedies for victims (be it Israeli or Arab citizens) of business related abuses 

Even if the human rights violations are committed by States (according to some UN resolutions and UNICEF, Israel - but also the Gaza Authority (Hamas) - is violating some international human rights norms and principles), companies can and should use their power and influence to reduce these violations as much as possible and avoid to be involved directly or indirectly, in human rights violations that can be linked to their activities. This is especially the case for companies doing business in the occupied territories (West-Bank, part of Jerusalem, Gaza…). This can be through their own codes of conduct, internal and external audits, cooperation with local and international NGO’s or human rights organizations, or the integration of social and human rights criteria in contracts. In some cases, they might even decide to stop doing business (in fact, several European companies already stopped (part of) their activities in Israel or the Occupied Territories).  

Some companies argue that "If we do not go there, someone else will go. The economic reality continues.", and “companies are not holier than the pope and do also business with other countries where human rights are not respected". Both answers are - from the perspective of business ethics and corporate social responsibility - wrong. The question is not whether or not a company can or should invest in countries where human rights violations take place, but under what conditions they can, and which due diligence processes they have put in place to avoid complicity in human rights violations.

A majority of the multinational companies are aware of the fact that they must avoid being directly involved in human rights abuses (e.g. private security companies), or indirectly benefit from it (supplying from the occupied territories some products). If they do not, their reputation, image and license to operate are at stake, which can have an impact on their financial performances and with a potential loss of market share as a result. The pressure of the public opinion should neither be underestimated. More and more Western consumers and NGO’s are calling for a boycott of products coming from the Occupied Territories, or even whole Israel.

Companies must be aware that the material impact of human rights allegations is not limited to the direct stakeholders impacted (in casu Israeli and Palestine civilians).  With increased consumer awareness and active social media, companies that are accused of being involved, of profiting from human rights violations in the region, will face a huge reputational damage. There are also concrete financial and operational impacts to companies that fail to uphold international standards. The above cited example of consumer boycotts is one example. But companies might also be held legally responsible of being involved in human rights violations.

 Also for the investor community the situation in Israel is a case for concern. Considerations of corporate human rights performances are increasingly a part of investors’ ESG (Environmental, Social & Governance) strategies. This is reflected, by the increasing number of signatories of the UN Principles on responsible Investing (UNPRI), which was at 1,248 in March 2014 (including 63.9% investment managers and 21.5% of asset owners). The human rights agenda is central to the selection of appropriate stocks and engagement policies. More and more, (ethical) stock indices demand strict human rights criteria of companies prior to including them in their indices. As part of their ESG strategies, these investors assess risks associated to companies that may be involved in violations of human rights.

So, aside of the purely ethical consideration – can I do business in a responsible way, and not profiting from human rights violations? -, there is also the more mercantile and financial consideration: the risk that investors will disinvest in your company. 

See also: http://sustainability21-lesaffer-jordi.blogspot.be/