Human rights and their relevance to business

In Germany, the UN Leipzig Principles for Business and Human Rights were anchored by the National Action Plan on Business and Human Rights (NAP) and by the CSR reporting obligation. The NAP, adopted in December 2016, does not contain any legal requirements for a human rights due diligence, but does formulate clear expectations of German policy towards companies. In addition to conducting a due diligence process, including a human rights risk analysis, companies are expected to issue a public policy statement on respect for human rights, implement procedures to identify violations of human rights and provide transparency in corporate activities. The aim of the NAPS is that by 2020, 50% of all German companies with more than 500 employees have integrated a human rights due diligence check into their corporate processes. If this goal is not achieved, the NAP envisages the adoption of legislative measures.

At European level, the CSR Directive adopted by the European Parliament in 2014 calls for an extended reporting obligation for capital market-oriented companies. The CSR Directive Implementation Act was passed by the German Bundestag on 9 March 2017 and applies retroactively since 1 January 2017. In contrast to the NAP, the CSR reporting obligation is legally binding. All companies with more than 500 employees are therefore obliged to be more transparent with regard to the implementation of a human rights risk analysis, measures to minimize human rights risks and regular monitoring. The legal changes affect not only large companies, but indirectly also smaller and medium-sized companies such as suppliers and business partners of companies that fall under the CSR reporting obligation.

Social expectations

Today, respect for human rights is part of a modern corporate sustainability strategy, such as the responsible use of natural resources and the endeavor to reduce environmental impact. Probably the greatest pressure on companies is exerted by the work of NGOS and the media and the associated fear of reputational damage. Through social media, broad masses of the population can be informed about human rights abuses in no time at all. Not infrequently this happens, for example. to uncover big scandals, to publicly call for a boycott and to demand more sustainability and transparency. Human rights due diligence also plays an important role for consumers. According to the annual Edelmann Trust Barometer, in 2016, 80% of respondents believed that companies could increase their sales while improving social and economic conditions. Furthermore, 50% of respondents said that their confidence in a company declines if the company does not contribute to the common good. In particular, young people are increasingly attaching importance to responsible business practices, not only when buying products, but also when choosing their employer.

Economic needs and opportunities

The implementation of a human rights strategy offers social benefits as well as numerous economic benefits and opportunities. Companies that exercise human rights due diligence can prevent and minimize potential risks such as reputational, litigation or liability risks. Sustainable business can also result in new partnerships and improved trade relations. Improved supplier relationships or a diversification of procurement sources can also reduce the procurement risk of scarce raw materials. Sustainable economic activity thus makes an important contribution to a fairer shaping of globalization and contributes to social peace.

In addition, a sustainable corporate strategy can facilitate access to investors and new funding. According to a study by the Boston Consulting Group in 2016, sustainability is an important investment criterion for 75% of the investors surveyed, and the trend is rising. In Germany, as many as 88% of the surveyed investors see sustainability as an important factor in investment decisions. Even when recruiting new qualified employees, a well-founded sustainability strategy offers great competitive advantages. According to a study by Cone Communications in 2015, 62% of so-called millennials would even accept a salary reduction to work for a responsible and sustainable company. In addition, responsible corporate strategies can promote innovative ideas and open up new sales markets.

Examples of human rights in an economic context

Depending on the sector, production and value chain, the human rights affected by entrepreneurial activities and the extent of the effects differ. A robust and extensive human rights risk analysis is therefore the cornerstone of a successful human rights strategy. Internal and external experts should be consulted to ensure the most objective possible analysis of a company’s potential and actual negative human rights implications. It is important to take into account both the risks relevant to a company (risk assessment) and those relevant to the impact assessment. Decisive for a good risk analysis is the stakeholder engagement, ie the involvement of all relevant groups and individuals who are interested in and influence the corporate strategy (eg employees, investors or suppliers).

In 2016, the relevance of individual human rights for companies was assessed in our study “Supply Chains are Human Chains: WHERE German Companies Are Related to Human Rights.” The survey shows that almost all companies see a link between human rights and their business.