Richard Karmel explains how pillar two of the UNGPs applies to us all

In Richard Karmel’s first blog of 2015 he explains how pillar two (corporate respect for human rights) of the United Guiding Principles on Business and Human Rights applies to us all.

About Richard Karmel

Richard Karmel is the Business and Human Rights Partner at Mazars. He is a lead member of the project team for the Reporting and Assurance Framework Initiative which has designed the United Nations Guiding Principles Reporting Framework as a guide for companies when reporting on their human rights performance.

Respect for Human Rights

One of the key philosophies of the United Nations Guiding Principles on Business and Human Rights (UNGPs) is that a business should respect human rights.

This is not just within its own operations, but throughout all the activities that it undertakes.

As a result, they apply to all workers in supply chains and communities in which the company and its suppliers operate.

Companies have a moral obligation

The wider impact on supply chains first came to global recognition in 1996, when sports brand Nike was accused of using child labour in its supply chain.

Initially, Nike said that it wasn’t responsible for its suppliers that had employed boys as young as 12 years old to stitch footballs, in Pakistan. But, following an enormous backlash by customers and the public, Nike reviewed its stance and fully accepted that whilst it didn’t, prima facie, have a legal obligation to ensure respect for human rights in its supply chain, it did have a moral obligation.

Today, Nike’s website helpfully includes archived copies of many of its previous annual reports. Its 1995 annual report, issued prior to the child labour scandal, makes no reference to labour rights, either within its own operations or that of its suppliers.

However, the 1997 annual report (after the supplier child labour scandal) begins to recognise that publicly commenting on its stance in this area may make good commercial sense:

And finally, we will continue to lead our industry in embracing the best labour practices throughout the world. Throughout this quest we will make mistakes. When we do, we’ll be punished.  By the media. By the Public. By Wall Street. To be successful, to improve and consistently rise to higher levels, risks will have to be taken, mistakes will inevitably be made.  This is part of progress.”

Reactive rather than proactive

Whilst a comment like that could form the heart of a whole thesis in itself, I will just content myself by identifying that if Nike’s supply chain practices hadn’t come to the fore in 1996, it is highly unlikely that the above comment would have been made in its annual report.

It was included because Nike realised that the billions of dollars that it had spent on building its brand image and reputation was at stake. The company needed to win back the hearts and minds of its customers and potential customers.

Companies require education

The big problem that we face today, is that there are so many more Nike’s of 20 years ago operating without regard to the impacts of their operations on supply chain workers and communities.

As a result of Nike’s difficulties in the nineties, many companies attempted to promote their human rights credentials by publicly reporting on the amount of money they contributed to local communities and their infrastructures.

Whilst this philanthropy is, of course, admirable, it does not exonerate the company from ensuring proper labour practices within its supply chain. For example, it doesn’t help if the company builds local schools using profits they generated from the use of child labour. A company’s respect for human rights is not demonstrated by how it spends its profits, but by how it earns them.

How do human rights apply to us?

And this started to make me think over the Christmas period. Do we, as individuals, think about how we are spending our hard earned and taxed income?

Christmas is a traditional period of giving, but do we give much thought as to the provenance of what we are giving? Do we think about who was paid less than the minimum wage, or who had to work excessive hours of overtime, or who put their lives at risk to ensure the product reached our wrapping paper?

The answer is for most of us (and I am as guilty as the next person), that we probably didn’t.

So here’s the issue. The UNGPs require companies to respect human rights throughout their activities; however, as individuals, what are we doing to respect human rights throughout our own personal supply chain?

Maybe, if we started to think about where we spent our money and rewarded those companies who demonstrate respect for human rights with our custom, change will be hastened even more within the corporate world.

Richard Karmel

Mazars LLP