Investors Back Reporting Framework for Human Rights

February 28, 2015

Investors Back Reporting Framework for Human Rights
by Robert Kropp

The United Nations Guiding Principles Reporting Framework is launched to help corporations report effectively on human rights issues, and gains the support of a $4 trillion coalition of institutional investors organized by Boston Common Asset Management.

SocialFunds.com — Platforms for disclosure by corporations and governments on human rights policies, recently launched by the UK-based Business & Human Rights Resource Center, reveal how far those entities have to go to realize the vision set out in Professor John Ruggie’s Guiding Principles on Business and Human Rights, endorsed by the UN Human Rights Council in 2011.

“While companies noted significant challenges resulting from governance gaps, several governments cited opposition by business interests as an obstacle,” the nongovernmental organization stated. “This mismatch highlights that governments and companies are at best not cooperating, and at worst avoiding responsibility by pointing the finger at each other.”

“Any company looking for long-term success in the face of major social and environmental challenges needs to take human rights seriously,” Annabel Short of Business & Human Rights said.

A device to provide guidance to companies on human rights was launched this week. The UN Guiding Principles Reporting Framework, the culmination of 18 months of research and consultation led by Shift and the accountancy firm Mazars, “enables companies to begin reporting on their human rights performance, regardless of size or how far they have progressed in implementing their responsibility to respect human rights,” a press release states. “It is also designed to incentivize them to improve over time.”

Thus far, five companies—Unilever, Ericsson, H&M, Nestlé and Newmont—have adopted the Framework, and more companies are expected to start using it in 2015.

“Robust reporting can drive better internal management of human rights-related issues, which in turn can have a huge positive impact in the lives of workers and communities,” Caroline Shift stated.

A coalition of institutional investors, representing $4 trillion in assets under management, released an Investor Statement in support of the Framework, regarding it “as an essential tool that enables investors to review companies’ understanding and management of human rights risks. It will also guide us in our engagement with companies going forward.”

“Meaningful disclosure of human rights performance can play a significant role in reducing a company’s human rights risks, contributing to a company’s competitive advantage, and strengthening its long-term financial stability by:
1. Cultivating heightened internal attention to policies, processes, and practices to proactively manage and embed respect for human rights;
2. Providing greater access to business opportunities with governments, business customers, and buyers who recognize the reduced risks to themselves;
3. Improving relationships with key external stakeholders and securing a stronger license to operate;
4. Improving the ability to preserve reputation when negative impacts occur; and
5. Providing a comparative advantage, with a growing number of stock exchanges scrutinizing companies’ non-financial performance, including human rights performance.”

The investor coalition was organized by Boston Common Asset Management. Managing Director Lauren Compere said, “Ultimately, investors want to protect value by knowing human rights risks are being monitored and managed by the companies they invest in. This is a groundbreaking new tool as the UN Guiding Principles Reporting Framework provides smart and comprehensive guidance that means investors can more effectively identify and understand human rights risks in their portfolio.”

“We hope it will encourage more investors to engage with companies on human rights,” Compere continued.

In December, a coalition, led by Aviva Investors and including the sustainable investment research firm EIRIS was formed to promote the Corporate Human Rights Benchmark. The goals of the Corporate Human Rights Benchmark include:
1. make corporate performance on human rights easier to see and simpler to understand;
2. rank and reward companies doing well while highlighting poor performance of others;
3. enable investors, society and regulators to challenge companies where performance lags behind that of their peers; and
4. introduce a positive competitive environment within which companies can operate.

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