Saturday, November 24, 2012

Supply Chain Sourcing and Human Rights

In my "introduction" post, I described the key elements and drawbacks of Supplier Codes of Conduct. Based on that information, you may understandably wonder why developing and implementing an even more ambitious human rights policy makes sense, especially given already stretched resources. I hope below I can provide a convincing rationale as well as provide some hints and resources.

Developing a Human Rights Policy

Philosophically, a human rights policy is all encompassing and applies to all stakeholders, beyond employees and suppliers, including parties and communities directly impacted by operations. Some elements may already exist within your organization, such as an anti-discrimination policy and the supplier code of conduct. Some items might seem obvious, and we do tend to take certain rights for granted (especially those ensconced in our own founding documents). These are rights that must be protected, developed, sometimes even explained to government officials and citizens in developing (and some developed) nations. Consider that groups oppressed by their government for decades (for example, Myanmar's Rohigya) likely have limited access to the Universal Declaration on Human Rights and GPs. As much as we struggle with defining and defending our rights in the U.S. (interpretation and application to new technology, for example), imagine how difficult it is to enforce them in operations in foreign countries, especially those run by corrupt governments.

Practical Guidance

The GPs are not binding, but voluntary based on ability to operationalize by industry and country. The corporate responsibility under the GPs is to respect human rights and to provide remedy for failures, as appropriate. In contrast, it is the state’s responsibility to protect the human rights of its citizens and establish a system by which they can obtain remedy for shortfalls. These organizations are actively involved in translating the GPs to best practices for industries and organizations:
Domestic laws (in the country of operations) are often not sufficient to meet above guidelines. It’s no secret western companies are attracted to developing nations with the intent of gaining access to raw materials and labor at lower expense due to lack of infrastructure and government regulations.

HR Impact Assessment

Before developing a human rights policy, the company should complete a human rights impact assessment in order to identify and prioritize areas of concern. The basic steps are:
  1. Identify the most relevant issues
  2. Identify gaps in current management system
  3. Proactively shape the agenda (look for opportunities)
  4. Find balance between addressing risks and finding opportunities
  5. Get expert views and hear concerns of “rights holders”
  6. Impact/evaluate at product or segment level (micro) and at corporate (macro) – thinking about actual results, as well as value of transparency (in a report to the public or perhaps working with competitors to find solutions to bigger problems)
Important to realize this is not an “all or nothing” proposition – should be aspirational and incremental. You can't solve all the problems in a day. Think about the most obvious HR risks. Chances are you are not the only one to notice and there are people on the ground trying to address it or other companies that have tried and can share successes, failures, and lessons learned. However, don’t neglect a rare worst-case scenario that could have a huge HR impact. These are the events rights holders might be concerned about and that NGOs and governments have no idea or capability to address (e.g., BP oil spill or Bhopal gas leak). This will require creative crisis planning that could pay-off in the long run – at the site of design, at other sites, or even for competitors. Imagine if you have planned for a leak or equipment failure and the actual cause is sabotage. At least you have a plan to work from. Weigh the probability of occurrence against the estimated impact but realize these are moving targets, especially when dealing with developing nations and the potential of government turmoil.

Examples - Human Rights Policies

Implementing a Human Rights Policy

You can copy and revise HR policies as seems appropriate for your organization. However, the trick will be in implementation and integration within your business processes. Here are some key questions that need to be answered:
  • Who will be responsible for implementing? If it is to be a team, who are the right people for that team and why?
  • How will responsibilities be divided? by country/region or by issue or by function/segment? 
  • How will they share information?
  • How will they make decisions?
  • What is their organizational structure? Who do they report to? Why is that appropriate?
  • How will their policies be integrated into continuing operations?
  • How will their progress be tracked and evaluated?
It is important to be pragmatic, aspirational, and flexible. As world events occur, risks and opportunities will also change.

Other Lessons

Focus on the process - when designing and implementing a human rights policy, the key is to be process-focused rather than outcome-focused. A focus on outcomes often ignores what went right or wrong along the way and ignores room for improvement. We need to realize, and be able to communicate coherently to stakeholders, we are dealing with complex environments with a multitude of unique situations that must be approached as such and, preferably, not abandoned at first perceived failure.

Look for success stories - as much as the above is true, not every situation is so unique that other opinions, experiences, and best practices can be ignored. Even a thread of similarity might be useful to address current challenges.

Utilize local resources - don’t be afraid to rely on (a wide variety of) locals to contextualize. You may be missing an essential piece of the puzzle if you don’t understand all the cultural dynamics. This is especially true if, at meetings and negotiations, you notice a particular demographic (perhaps, women) is missing. You may have stumbled upon a component of the informal power structure within the community and an indication of who is operating behind the scenes. It is also valuable to identify the observers and historians within communities as they can tell you who actually makes important decisions.

Look for opportunities, cautiously - The GPs focus on eliminating risks but do not build on to enhancing or promoting human rights opportunities. An important, but risky, opportunity would be developing basic social services not provided by the government. An organization considering such a venture needs to also develop a viable exit plan in case the operation ends, for whatever reason. Perhaps partnering with a local NGO and obtaining independent funding sources would help to ensure continuation of services.

Defend transparency - A common question asked by practitioners, executives, and boards is what actions open the organization up to more risk, particularly legal or reputation? Unfortunately, we are still dealing in the reality where results are valued over transparency. Western corporations are often forced to make and defend a business case (ROI and legal protections) to investors and lenders, but are rarely called to account on the ethical imperative of human rights unless the damage has been done. There is a shift in consumer and investor behavior, but not sufficient to cause a sea change. A paradigm shift is needed here in both the investor and NGO communities.

Use leverage - what if the government is unwilling or unable to protect the human rights of its citizens, let alone create a legal system? How far can (should) a corporation go to fill the role of the state? One suggestion is using the leverage of the business relationship and U.S. regulations to provide incentives to the government officials for protecting human rights principles directly related to smooth operation of facilities. If necessary, the company may be able to devise penalties for failure to protect, especially in particularly egregious events that could negatively impact the company’s ability to operate in the country and reputation at home. For example, the conflict mineral provision of the new Dodd-Frank legislation may have good and bad aspects in implementation; however the existence of the law now provides U.S. corporations with leverage to use when dealing with the DRC and other countries of concern.

Establish a grievance mechanism - the mechanism should be available to address small issues that arise directly related to the operations and their impact on employees and the surrounding communities. The mechanism should aim to find solutions before small problems become big problems (e.g., Lonmin). A government unwilling or incapable of protecting the rights of its own citizens is also not likely to establish an effective legal system, and it is currently unresolved as to where such citizens of a foreign nation might have their complaints heard, if a corporation response is inadequate (see Kiobel Supreme Court case).

Integrate human rights practices into existing processes - and include progress in job evaluations. Again, for evaluations, it is important to focus not just on the results, but also on incremental progress, ability to trouble-shoot and work with other outside entities, engagement with human rights experts and rights holders, and appropriate transparency. Focus on identifying the challenge, developing and implementing a strategy, evaluating the impact, and identifying the lessons learned so that an industry standard might be developed. Keep in mind the corporate obligation to “respect” versus the state obligation to “protect” and be aware that, in some cases, rights holders may not be aware of or understand their rights.

As always, if you have any comments or questions related to the above, please let me know.

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