Environmental, social and governance (ESG) risk will be front and center on the compliance agenda in 2021, with a particular focus on human rights and modern slavery. With supply chains in the spotlight as a result of the coronavirus pandemic, identifying modern slavery in the value chain supports both good governance and strong performance. Global businesses are confronted with a mountain of new regulation, and in the US, the policy impact of the Biden administration will shortly be seen. EU Human Rights Due Diligence legislation, in particular, will be transformative for businesses in the next 12-24 months. That legislation will add to a long list of existing human rights regulation, which includes the UK Modern Slavery Act, the EU Conflict Minerals Rules, the Australian Modern Slavery Act, and the California Transparency in Supply Chains Act.
For many compliance teams, rooting out modern slavery, in addition to existing compliance responsibilities, can seem overwhelming. Where do you start and how do you instigate an enterprise-wide change in corporate culture to effect real change? As a follow-up to our recent expert-led webinar, we take a look at the nature of human rights due diligence, some of the challenges, and tips on how to get started.
What is Human Rights Due Diligence?
Human rights due diligence is a process used by an organization to identify, prevent, mitigate, and account for their impact on human rights. Businesses should identify these risks on a geographical basis both in their enterprise-wide supply chains as well as in their business operations and partnerships. The overarching goal of human rights due diligence is to reduce the risks to people. It is best conducted on an ongoing basis to reflect the evolving nature of the risk.
Overcoming Organizational Challenges
For a cross-border organization with a variety of global stakeholders, the task at hand might feel impossible. Regulatory changes and increased expectations have led to several challenges for human rights due diligence:
- Where Do You Start? Organizations have established and embedded processes. Figuring out where to integrate human rights considerations gets tricky, quickly.
- How Do You Make It Effective? Impactful human rights due diligence must be about more than checking boxes on processes and procedures. It must be forward-looking and ongoing.
- Where Are the Blind Spots? While there are many overlaps with existing anti-corruption efforts, identifying modern slavery and human rights risks requires different risk indicators, specific expertise, and oversight of your supply chain.
- How Do You Engage with the Most Vulnerable? There must be a shift in focus to a victim-centered approach, but what does that look like in practice?
- How Do You Ensure There Is a Meaningful Response? Finding a violation is only half of the problem. Responding swiftly and appropriately is vital and building preventative measures to stop a recurrence must be incorporated into the process.
Four Ways to Get Started
As with many things in life, the first step is always the hardest. But taking action gets the forward momentum going. Here are our four suggestions for getting started:
- Don’t be afraid to start small. This is a marathon and not a race, so taking the crucial first step needn’t be overwhelming. Educating the leadership team can be a good place to start to build the foundations of a strong infrastructure and set the tone from the top.
- Look for overlaps. Take a look at what you are already tracking and identify performance metrics that may support the journey. For example, reviewing calls to your hotlines or the results of internal audits can be practical ways to get the ball rolling.
- Bring people together. To set your priorities and understand what the biggest issues are, bringing vulnerable and relevant stakeholders together will be a driving force in establishing robust human rights due diligence.
- Take a holistic approach. Embedding human rights and provisions against modern slavery into the fabric and culture of an organization requires an interconnected view of risk. The business is part of a bigger system, and playing a role in shaping these systems can affect the necessary change.
How IntegrityRisk Can Help
IntegrityRisk is transforming human rights due diligence with ImpactCheck — commercially oriented, evidence-based impact risk assessment, analysis, and reporting. Using a systematic, analytically driven, and comprehensive approach, we combine due diligence and investigative assets, data analytics tools, and internationally accepted accounting and reporting standards to verify, validate, and authenticate environmental, social, and governance investing performance.