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New GRI Standards Emphasize Human Rights Due Diligence

By:
Chris Gaetano
Published Date:
Oct 7, 2021
GettyImages-1251262510-human-rights

Three new standards from the Global Reporting Initiative (GRI) that are universally applied to all users emphasize, among other things, the need for due diligence in assessing and remediating human rights impacts. 

"The organization’s impacts on people refer to the impacts on individuals and groups, such as communities, vulnerable groups, or society," said the GRI. "This includes the impacts the organization has on people’s human rights. An organization can have an impact on people through, for example, its employment practices (e.g., the wages it pays to employees), its supply chain (e.g., the working conditions of workers of suppliers), and its products and services (e.g., their safety or accessibility). Individuals or groups that have interests that are affected or could be affected by the organization’s activities are referred to as stakeholders."

By "human rights," the GRI refers to those rights inherent to all human beings, which are all interrelated, interdependent and indivisible. At minimum, this means the rights set out by the U.N. International Bill of Human Rights as well as the International Labor Organization's Declaration on Fundamental Principles and Rights at Work. It added that other U.N. instruments elaborate further on the rights of indigenous peoples; women; national or ethnic, religious and linguistic minorities; children; persons with disabilities; and migrant workers and their families. There are also standards of international humanitarian law that apply in situations of armed conflict, such as the International Committee of the Red Cross (ICRC) Geneva Conventions of 1949. 

Companies are instructed to consider their impact on human rights (and efforts toward mitigation in the event of negative impacts) in a wide variety of disclosures, including those pertaining to governance; strategies, policies and practices, as well as policy commitments (such as whether the company has a specific policy about respecting internally recognized human rights), among many, many more. 

In terms of assessing impact, the GRI said that firms should think less in terms of likelihood and more in terms of severity. The severity of a negative human rights impact is not limited to physical harm. Highly severe impacts can occur in relation to any human right. For example, interfering with, damaging, or destroying a sacred space without consultation or agreement with the people for whom the space has spiritual importance can have a highly severe impact on their cultural rights.

When considering the scope of its impacts, a company should begin with impacts commonly associated with its sectors, its products, its geographic locations, or its specific organizations. Such organizations can include specific entities of an organization, or entities that it has a business relationship with that have a poor history of conduct in relation to respecting human rights.

Companies cannot circumvent these issues by working with other companies, as the standards require that each company considers not only its own impact but the impact of those that it has business relationships with as well. 

While consideration for human rights had always been within the environmental, social and governance (ESG) arena, it has generally not been as heavily considered as environmental and governance factors. A GAO report, for example, found that out of the 32 companies the agency looked at, only 22 reported on the topic: Only six identified company operations that might endanger human rights, only four provided specific metrics for human rights reviews performed by the company, and only two disclosed metrics on the number of identified human rights infringements. 

Human rights are also apparently tripping up fund managers due to conflicting priorities. A  businessman in Belarus, which has cracked down on democratic activities, has been lobbying fund managers around the world to dump Belarusian sovereign debt due to the bond money going toward what he described as a terroristic regime with gross human rights violations. Many funds, especially in Europe, agreed and divested their holdings. 

But, at the same time, this stance has been putting other ESG funds in an awkward position. Belarus, a relatively small country, is one thing. But then there are countries such as Saudi Arabia, which sold $32 billion of sovereign bonds since 2019; Russia, which has raised $10 billion, and Egypt, all of which have engaged in documented human rights abuses. If fund managers are truly called upon to put their money where their mouth is, it will sorely test the common rhetoric that profits and sustainability can co-exist, as it will force a stark choice as to just how much money funds are willing to give up for human rights. Would they be willing to divest from, say, Chinese debt? 

On the one hand, fund managers don't want to be in the position of judging a country's human rights policy. On the other, ignoring it can undermine the entire point of the  movement toward corporate social responsibility. To speak of one's concern for human rights while, at the same time, investing in a country that literally makes use of slave labor can raise awkward questions regarding one's commitment to corporate social responsibility. 

The GRI universal standards cover far more topics than just human rights, as they represent just one part of a larger overhaul of overall reporting. 

Universal Standard 1 outlines the purpose of the GRI Standards, clarifies critical concepts, and explains how to use the standards. It lists the requirements that an organization must comply with to report in accordance with the GRI Standards. It also specifies the principles--such as accuracy, balance, and verifiability-- fundamental to good-quality reporting. 

Universal Standards 2 goes over disclosures relating to details about an organization’s structure and reporting practices; activities and workers; governance; strategy; policies; practices; and stakeholder engagement. These give insight into the organization’s profile and scale, and help in providing a context for understanding an organization’s impacts.

Universal Standard 3 explains the steps by which an organization can determine the topics most relevant to its impacts and material topics, and it describes how the sector standards are used in this process. It also contains disclosures for reporting its list of material topics; the process by which the organization has determined its material topics; and how it manages each topic.