POLICY
simply isn’t a one-size-fits-all solution and the capabilities of businesses vary, as will their leverage. Of course, there are challenges, particularly around how to engage beyond the first tier of suppliers, where no contractual relationships exist. But assessing human-rights risks shouldn’t be thought of any differently from the kind of routine risk assessment that boards undertake as a matter of course. Simple steps can be taken to integrate respect for human rights into these processes. Even directors less familiar with human-rights impacts should remember that they are already likely to be addressing relevant issues in the supply chain, but using different vocabulary, such as labour standards, health and safety and non-discrimination. Businesses can have a profound impact on human rights, for good or ill. While firms are keen to talk about their positive contributions to society, the Ruggie principles focus on the minimisation of unintentional harm. The principles are clear that activity to promote human rights does not offset corporate violations. To return to Friedman’s pencil: a pencil manufacturing operation could not negate its failure to assess the risk that a supplier is using forced labour to extract graphite by ensuring that its timber is sourced exclusively from forests where workers are paid a decent wage.
Chain of command: new legislation, such as the UK’s Modern Slavery Act 2015, requires directors to take account of the various links in their firms’ supply chains in order to prevent human-rights abuses, including forced labour. Leaders may also be held personally liable if their businesses fail to address rights issues and mitigate risk
A MATTER OF REPUTATION By considering their human-rights impacts, boardrooms are sealing off not only legal risks but also reputational ones. Mitigating and eliminating threats is a mainstay for any director and managing exposure in this area helps insulate the hard-won esteem of a brand. But even for firms that are under less public scrutiny, considering their human-rights impacts can show to other important stakeholders, including potential investors, their commitment to managing material business risks. Ultimately, integrating human-rights considerations into existing risk management frameworks helps to protect directors from liability, shields reputations and helps to ensure ongoing access to capital. So, while there is still not a single person in the world who could make a pencil, a director’s picture of their supply chain has to be more than just a sketch.
IoD members can join the Policy Voice group to have their say on business issues by taking part in monthly surveys. Visit
iod.com/policyvoice
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