What is the common rejoinder in considering the quality of company
sustainability reporting, of human rights due diligence and of purposeful
business?
Each time, the answer comes back as effective stakeholder relations — in
essence, not making judgments about your company’s impact on people, without
asking people themselves.
In the past, business often equated this as engagement with non-governmental
organisations (NGOs), and the key challenge for a company was how brave to be in
addressing the most critical voices amongst the NGOs.
The old criticism was that companies would choose 'soft' stakeholders or even
connive in establishing 'phantom' NGOs, to take the place of genuine stakeholder
interests.
Day two of this year's UN Annual Forum on Business and Human
Rights in Geneva
heard that the new era of human rights due diligence introduces some very
different challenges.
New challenges
The first requirement of business today is to identify: Who are the communities
affected by the business? There can be no assumption that NGOs necessarily speak
for people actually impacted by the company.
This is not to delegitimize NGOs, but to recognise that a company's obligation
is to undertake a human rights impact assessment to identify who is affected and
how they can best be engaged.
"In identifying who are stakeholders, another question is, what is their stake?
Research shows many stakeholders today are dispensable," Tom
Thomas, CEO of India's
Praxis Institute for Participatory Practices,
told the Forum.
Much of the discussion centered on how to bridge the power imbalance between
larger, Global North companies and stakeholders of companies in their global
value chain. Speakers emphasized that the challenge wasn't just one of a
mismatch of resources, but of also of knowledge.
"What is the knowledge which the community can bring to the table?" asked
Danielle Pamplona,
Professor at Brazil's Pontifícia Universidade Católica do
Paraná. "It is the community which should be defining
what it means to create a better life.”
Focusing on local context doesn't have to be a way of diluting international
standards but maximising impact in how they are applied. Speakers agreed that
capacity building should be as much about the way larger companies talk to
communities as about the capacity in local communities themselves.
Supplier companies
But the stakeholders who arguably need the greatest attention are supplier
companies in corporate value chains.
Jenny Holdcroft, Deputy Director
at the center of expertise on business and human rights at the Shift
Project, shared insights gained from interviewing
suppliers in Bangladesh, Kenya, Tanzania and Thailand. The
almost-uniform response was that producers felt that they were not being given
support by buyers and were reluctant to share information, as they felt it would
only lead to their company being penalised.
Government representatives from Germany and Netherlands insisted that
due diligence law should not be used by companies to disengage and should lead
to higher prices for Global South suppliers. Pakistani and Nigerian
representatives highlighted how their national action plans on business and
human rights helped provide a Global South
perspective
on how due diligence can be conducted.
A further positive example was given by Jhumki
Dutta, Project Manager at
Partners in Change in New Delhi — part of the
Southern Voice network, whose mission is to
rebalance knowledge asymmetry. She described how most micro-, small and
medium-sized businesses (MSMEs) in Indian states are not even registered with
local governments — their presence in the informal
economy
effectively preventing them from taking part in partnerships to address human
rights.
The project had sought to overcome the challenge by creating clusters of MSMEs,
giving them recognition, demonstrating very practical financial benefits by
sharing together in transportation costs and creating far greater negotiating
power to win better prices and contract terms from purchasing companies.
The power of partnership
The ability for companies to achieve a genuine balance of power through
partnerships with stakeholders was also explored by Kathrin
Raabe, Senior Manager of
Corporate Responsibility at German retail chain Aldi
Süd.
Raabe explained how the company had set up a remediation process in conjunction
with the Centre for Child Rights and
Business and had joined
multi-stakeholder initiatives to promote access to remedy in Thailand and
living wages in the banana supply
chain,
and to combat gender-based
violence
with African countries.
Perhaps it is not a tautology to say that stakeholders are the key to
stakeholders? Moreover, the retailer could hardly be accused of evading the most
difficult issues.
Raabe said that the effectiveness of Aldi Süd’s stakeholder relations had been
forged by nine years' of undertaking human rights impact assessments, which she
said due diligence
legislation
now means "thousands of companies" will follow.
Levelling up
It was the call for a "level playing field,” often heard from business regarding
the need for consistency in regulation on due
diligence,
which Forum members said most of all needs to apply to power relations between
companies and their stakeholders.
Raabe suggested this is best achieved by continuous and open dialogue with
stakeholders. Pamplona said companies could only "get the facts right" by
"starting by going first to rights-holders at the bottom."
Dutta put the emphasis on enabling SMEs "to be active partners” — calling on
purchasing companies to "develop a worker- and community-centric architecture,
which takes account first and foremost of the local context.”
Note: “Rights-holders,” not stakeholders. Building from “bottom up.” Being
willing to genuinely listen and enabling stakeholders to set their own agenda.
These represent the meaning in "meaningful engagement” — the new challenge in
stakeholder relations for companies in the era of human rights due diligence.
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Richard Howitt is a strategic adviser on Corporate Responsibility and Sustainability, Business and Human Rights. He is also a Board member, lecturer at Audencia Business School and host of the Frank Bold ‘Frankly Speaking’ responsible business podcast. Richard was Member of the European Parliament responsible for the EU’s first rules on corporate sustainability reporting and subsequently Chief Executive Officer of the International Integrated Reporting Council.
Published Nov 29, 2024 8am EST / 5am PST / 1pm GMT / 2pm CET