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In The Business of Human Rights: An Added Dimension to Risk and Liability

A new benchmark is being developed to rank businesses on their human rights records and, hopefully, drive improvements for workers around the world. As such, this ranking can affect a business’s ability to obtain insurance coverage.

In The Business of Human Rights: An Added Dimension to Risk and Liability

Spurred by tragedies like the 2013 Rana Plaza disaster, a new benchmark is being developed to rank businesses on their human rights records and, hopefully, drive improvements for workers around the world. As such, this ranking can affect a business’s ability to obtain insurance coverage. A poor human rights record can make a business’s risk and liability increase dramatically.

Disastrous Business Dealings

Increasing corporate accountability has become a key issue following workplace disasters. Relatively recent tragedies like Bangladesh’s November 2012 Tazreen Fashions factory fire and April 2013 Rana Plaza building collapse, which killed more than 100 and 1,100 workers, respectively, have prompted industry to take action, and accept at least some measure of responsibility. Ultimately, insurance is about people. Yes, you need to cover your bases and make sure your business interests are taken care of…but, it still comes down to people, whether employees or customers.

Unfortunately, voluntary agreements are dependent on corporate backing, which does not seem to be a reliable long-term strategy to ensure participation. Consequently, many are looking for effective ways to further increase scrutiny of corporate actions at home and abroad. To that end, a group of investors and corporate accountability advocates announced last December that they were going to launch a rating system to rank companies on the basis of their human rights performance. Five hundred of the top global companies from four key sectors—agriculture, information and communications technology, apparel, and extractives—will initially be researched and ranked for the Corporate Human Rights Benchmark (CHRB).

CHRB: A New World Ranking Order

The finer points of the CHRB are still being developed, but according to Stephen Hine, deputy CEO at EIRIS, the group aims to have the first public launch of the finalized benchmark go out in Spring 2016. Soon thereafter, it hopes to make reports publicly available on the first 300 companies, with the remaining 200 reports coming out in 2017. The benchmark will NOT make it easy for corporations to rise in the ranks and improve their human rights record. They will need to make a concerted effort to make positive and noticeable changes.

A Cool Reception

There has been little reaction from businesses thus far. Apparently, it is too early in the process to discuss the impact of the benchmark or whether it is likely to be a fair indicator of business conduct. Some of the companies that are likely to be included in the initial rankings have welcomed news of the benchmark, however. Many experts have also welcomed the initiative.

While the benchmark is set to probe the source of goods and services, some experts also want to know if it will take into account where the finished products are sold and to whom. To make a long story short (too late), the benchmark must take into account a variety of variables that will impact the human rights ranking. These variables must be consistent and inclusive.

The Opening Number

Time will tell as to the actual impact of CHRB. It does, however, have the potential to improve or decrease risk and liability for corporations that conduct business in developing countries. When the rankings are made public, some businesses will take a hit because some business, as we all know, have an atrocious human rights record.

As this ranking gets started, we will see if the focus of business once again turns to where it all started…to people.