Why companies should use the UNGP Reporting Framework to demonstrate that they respect human rights
Four years after governments at the United Nations unanimously endorsed the UN Guiding Principles on Business and Human Rights, implementation by States and companies has been patchy. On the business side, feedback showed that despite the clarity the UNGPs brought to the corporate responsibility vis-à-vis governments, more expert support was needed to help companies "know and show" that they respect human rights in practice. The UN Reporting Framework fulfils this role.
Initial impressions from the launch
Launched to a packed audience on 24 February 2015 in London, following two years of global consultation with companies, governments, investors and civil society, the Framework helps businesses report meaningfully on how their policies, processes and performance impact on human rights.
Four key messages emerged from the launch where Professor John Ruggie, author of the UNGPs, discussed the importance of corporate reporting with Jo Swinson, UK Minister for Employment Relations and Consumer Affairs, Marcela Manubens, Global VP for Social Impact at Unilever, and Richard Howitt, EU Special Representative on CSR.
First, the Framework will help companies operationalise the UNGPs. Second, the Framework is simple to use (it's free and available online) and it will help stimulate tricky conversations inside companies. Third, it is a useful tool for all companies no matter their size, sector, geography or operating context. And fourth, it responds to the growing number of regulatory requirements for human rights reporting, including from the European Union, France, India, Norway, Sweden, the UK and the US.
This is no accident. When my firm Mazars teamed up with the leading UNGP expert centre Shift, we knew that the Reporting Framework would need to cover the full gamut of corporate-related human rights issues, recognise the wider landscape and be user-friendly and accessible to all.
So what is the UNGP Reporting Framework?
It is a ground-breaking tool comprising 31 "smart" questions (including eight key "overarching" questions) and comprehensive guidance for companies to report meaningfully on human rights issues in line with the UNGPs.
The Framework focuses companies' reporting on their salient human rights issues. These are the human rights at risk of the most severe negative impact arising from the company's activities or relationships, such as their supply chains.
The Framework's uniqueness is its use of "saliency" instead of "materiality". For a company to identify its salient human rights issues it needs to focus on the risk to the individual rather than the risk to the business. By focussing on these potential most severe negative impacts, the company will identify human rights issues that can be expected to converge strongly with risk to the business. These may take the form of operational disruptions and delays, lost productivity or reputational harm. This was a deliberate step by Mazars and Shift. If the concept of materiality is applied, potential severe negatives impacts to the individual may be missed.
Key drivers to promote better corporate reporting
The Framework's principal aim is to catalyse meaningful reporting on how companies understand and address human rights impacts associated with their business. This is a big challenge that requires a shift in corporate culture and practice, which will take time. However, we repeatedly heard from our consultations that the Framework is a helpful and feasible tool for companies to use and that the information it seeks to disclose is critical for regulators, investors, civil society and the companies themselves.
Two key drivers exist for companies to understand how to respect human rights and to demonstrate that respect. The first is regulation. There are increasing regulatory requirements, including from the EU and within the UK Companies Act, that make it mandatory for many companies to report on their human rights performance often with explicit reference to the UNGPs. As the only comprehensive tool for reporting on human rights in line with the UNGPs, the Framework can help companies fully meet these requirements.
The second driver arises from the investor community. By the time of the launch, 67 investors representing US$3.91 trillion assets under management pledged their support for the Framework. They, along with other stakeholders, recognise that instead of creating an additional burden to companies, the Reporting Framework helps companies meet their emerging reporting requirements. It also dovetails with existing frameworks, such as the G4 Guidelines of the Global Reporting Initiative, while importantly providing greater clarification on what should be reported to demonstrate respect for human rights in line with the UNGPs. Lastly, there is a clear business case for using the Framework to demonstrate greater engagement with its stakeholders. Studies show that where there is greater engagement, this more often than not leads to greater trust and greater profitability. This is particularly clear with regard to employees as demonstrated by the Harvard Business Review Survey "The Impact of Employee Engagement on Performance." One of its conclusions was that 71 percent of its respondents believed that greater engagement results in "overall organizational (sic) success."
The UNGP Reporting Framework is a simple tool that can stimulate behavioural change. It will enable companies to show that they respect human rights, while meeting the needs of many stakeholders and help improve their own performance. Governments worldwide and the global business community have adopted the UNGPs as the authoritative standard for business to respect human rights. We now have a practical tool to guide them all in their implementation and positively impact the lives of millions.
The UNGP Reporting Framework with implementation guidance is available for free at: www.UNGPreporting.org
Richard Karmel is a Partner at Mazars, the global audit, tax and advisory firm employing some 1,400 people in the UK and 14,000 across 73 countries. He heads up the business and human rights service line, and recently led Mazars participation in the drafting of the United Nations Guiding Principles Reporting Framework.