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By Caroline Rees, President of SHIFT
I took the liberty last week of telling a room full of institutional investors that they reminded me of Dutch beer. I think I got away with it, but let me explain.
The event was a dinner hosted by Microsoft and Hermes with around 60 investors attending a conference of the Council of Institutional Investors. The purpose was to talk about the UN Guiding Principles on Business and Human Rights.
The Guiding Principles set the global standard regarding both the duty of states to protect people against harm from corporate activities, and the responsibility of companies to respect human rights as they go about their daily work.
My proposition to the investors was that the Guiding Principles are a real game-changer for companies and investors, since they focus not on repeating the human rights outcomes businesses need to achieve, but on the process for how to get there.
When Professor John Ruggie, then UN Secretary General’s Special Representative for Business and Human Rights, was developing the Guiding Principles, there were many expectations that they should be a kind of “Mega Code of Conduct” – a listing of all the human rights companies should not harm.
But companies weren’t contesting that they should respect human rights. Quite the contrary: corporate leaders largely assumed their organizations should and did respect human rights. The challenge came when they were asked ‘how do you know you do?’ Companies simply didn’t have the evidence to answer that question.
That’s the gap the Guiding Principles aim to fill in defining the corporate responsibility to respect human rights. They set out for companies the basic policies and processes they need in order to know and show that they are respecting human rights in practice.
By focusing on process, the Guiding Principles have changed the discourse regarding business and human rights. Exchanges once dominated by angry disputes about who did what to whom, are now increasingly constructive, based on a range of really meaningful questions, such as: What’s your policy on human rights? How do you embed it into your operations? What did you do to assess your human rights risks and impacts? How did you use your leverage to reduce them?
These questions are meaningful for NGOS, investors and for companies themselves. They address the quality of the business processes that affect human rights outcomes on the ground.
And that brings me back to Dutch beer.
When I was growing up in England, we had a famous series of television commercials by Heineken, for which the punch line was: “It refreshes the parts that other beers cannot reach.”
And so it goes with investors and companies. Investors reach into the parts of companies well beyond those staff who spend their days thinking about corporate responsibility. They talk with executives who are focused on core business operations, risk management, quarterly results and long-term financial performance. They have a business interest in seeing companies manage their human rights risk effectively to avoid all kinds of business consequence – from operational disruptions to reputational damage to lost business opportunities to expensive lawsuits.
The Guiding Principles give them the material to refresh those conversations and connect human rights to companies’ core operations. Because respect for human rights isn’t about philanthropy or social investment; it’s not just a non-discrimination policy and diversity training. It’s about how a company does business: its values, culture, ability to manage a key form of risk, and ultimately, in more and more ways, its bottom line.
Embedding respect for human rights across a company is a journey that takes time. Institutional investors can incentivize, support and reward companies along that road.