‘Human Rights are inalienable and should be upheld regardless of their value for business success': human rights as an ESG enterprise or a global standard?
Understanding the ‘S’ in ESG
Human rights are rights ‘inherent to all human beings, regardless of race, sex, nationality, ethnicity, language, or religion, or any other status’. They play a significant role in the ESG, (environmental, social, and governance) framework, which fundamentally, ‘is a means by which companies can be evaluated with respect to a broad range of socially desirable ends’—typically measuring the non-financial impacts of projects and companies. Human rights principles belong to the ‘S’, (social), active in subjects of ‘modern slavery, corporate security, diversity, employee and consumer relations, and supply chain sustainability’. These values are not just a ‘moral obligation’, or even securely self-evident: they are critical to every business operation and should be recognised. The need to protect and integrate these principles has become increasingly clear as companies work to thrive post-pandemic, and now within the climate crisis. Whilst organisations strive towards sustainable ventures, it is often the case that many fail to adequately uphold human rights, creating a centrally flawed sustainability endeavour. However, human rights are principal - regardless of their impact on business success.
In an article by the Business & Human Rights Resource Centre, Quick and Dobson question the ESG human rights gap, stating, ‘human rights are inalienable and should be upheld regardless of their value for business success’. The ESG project is quickly complicated by ethical tensions, for how can human rights be responsibly implemented into the enterprise value of a corporation? The pursuit of enterprise, whilst maintaining sustainable discourse, is a conflict of priorities.
Tension is subsequently found between human rights, corporate responsibility, and the global standards of ESG. However, by uncovering discrepancies, future risks can be mitigated. Transparency can drive long-term value creation, and also enhance company reputation. This article will define inalienable human rights; compare ESG’s success in protecting said rights versus its downfalls and poor remedial efforts, and interpret the ESG framework with regulation and accountability data. This will demonstrate how inalienable human rights are, whilst reflecting their fusion to business landscapes, for better or for worse. With outlooks constantly changing, and additional measures in place, there is hope that this global standard will no longer be undermined by feigned sustainability. Rather, it can be boldly protected by regulation and public opinion.
What are inalienable human rights?
Inalienable human rights, as outlined in the preamble to the 1948 Universal Declaration of Human Rights, (UDHR), represent the ‘inherent dignity and of the equal and inalienable rights of all members of the human family’, safeguarding our ‘freedom, justice, and peace in the world’. They are fundamental to the essence of humanity. The declaration enshrines many core rights, including the ‘right to life, liberty and security of person’, the freedom from ‘slavery or servitude’, freedom from torture and ‘inhumane treatment’, and the ‘right to recognition as a person before the law’. Human rights are also defined in the 1966 International Covenant on Civil and Political Rights, ensuring protections of the UDHR, with a critical treaty. These rights form a legal and moral framework aimed at enforcing human dignity and protecting global justice.
A business’s failure to uphold and prioritise these rights in pursuit of its enterprise would be incredibly damaging – a shortfall to something so universal and indivisible is a violation of the declaration. This universality can result in better understanding; liability risks like social negligence are often reported and large public enterprises in particular are being held accountable. Amnesty International recognises the power of multinational economic players as something ‘unprecedented’ and precarious. The devastating oil spills in Bodo Creek, Nigeria, evidence this claim – the impact was ‘catastrophic…thick black oil leaked into the rivers and creeks for weeks, killing fish and robbing people of their livelihoods’. Oil company Shell became negligent of their social responsibility and delayed providing proper compensation. It took Amnesty and the Bodo community six years of legal action to receive adequate aid and justice. Uncovering truths and ‘false statements’ can mitigate these failures, but also raise awareness, with ongoing investigations into Shell plc’s failure ‘to manage the material and foreseeable risks posed by climate change’.
This emphasises the urgent need for a company to take accountability, as reputation and long-term viability can so quickly be tainted. It is evident that focussing on economic value alone will not deliver the sustainable, progressive advances businesses strike to attain. Unfulfilled external expectations create negative universal impact. However, a robust social framework is a multifaceted challenge. Identifying, disclosing, and remedying human rights issues in the ESG framework is difficult—the tension between upholding social strategy amongst outstanding ESG commitments and market capitalisation, makes this landscape delicate. This is exemplified by the often limited interpretation of human rights to ESG in company profiles.
Poor relation of human rights to ESG
For businesses to fulfil their human rights obligations, definition and strategy is key. Arguably, the social elements of ESG have played a ‘secondary role’ to its adjacent standards: environmental and governance. Engaging remedial actions for human rights impresses upon some businesses as a kind of ‘lingering enterprise’ that cannot be defined or quantified – far removed from its reality, a global standard that demands to be upheld. Although embedding intricate principles is difficult, organisations can be deemed negligent of certain parts of the ESG framework. Examining this lack of engagement with ESG by companies can be aided by looking at difficulties with definition and prioritisation. Social sustainability policies are arguably weakened by indefinite strategy. Furthermore, inadequate measuring and remedial attempts place human rights in an unpredictable governance landscape. Yet by comparing these classification shortfalls to examples of productive environmental impact, change seems tangible.
The urgency of the climate crisis has served enterprises with a prevalent environmental outlook. Its undeniable influence at every stage of economic development in resources, ecosystems, and services magnifies this concentration. Specific considerations on natural resource issues like ‘water scarcity, land use, and biodiversity’, have benefited from waste diversion metrics. This is exemplified by the success of circular frameworks, (a tracking tool for companies to assess their full impact), with the 2020 Cradle to Cradle Innovation Institute offering a set of metrics that targeted ‘sourcing such as recycled or renewable content’, ‘biodegradability’, and ‘end-of life’ strategies on investment in infrastructure. The incorporation of metrics enables impressive accountability from businesses, balancing enterprise goals whilst critically safeguarding the environment.
Comparatively, the debate continues as to how accurately social metrics can be recorded. Caution should be exercised as the regulation on human rights issues, (which will soon be unpacked), is nascent, with ‘market maturity on social considerations still evolving’. This immature profile arguably hinders accurate data assessment – with some critics arguing ‘aggregate ESG scores’ offer little meaning with different ‘weighting and methodology’ across diverse ratings and score providers.
Despite this limitation, there are some comprehensive strategies in place to mitigate risks. Streamlined reporting for example, with ‘private ratings and scores providers such as MSCI, Refinitiv, S&P Global, and Sustainalytics’ offer insightful measures of environmental and social performance. This ‘measured and quantified’ action from third parties demonstrates the possibility of a balanced ESG methodology, that operates at every level.
As organisations ‘are more knowledgeable about sustainability and their own impact on the climate than ever before’, environmental endeavours are seemingly more accessible. However, it is crucial for businesses to equally embed social and environmental considerations across their whole business, as arguably an organisation’s purpose can only be fulfilled ‘if environmental and social challenges are considered together’. A balanced definitive strategy leads to a clear agenda for growth.
Social issues take force
Despite the previously discussed discrepancies for ESG’s engagement with human rights, businesses are increasingly considering social impact within their operations. Within capital markets, a strong social foundation arguably encourages good business sense, leading to ‘more sustainable markets and better outcomes for societies’. If social targets can integrate human rights considerations and business success, it is feasible that the tension between the pursuit of enterprise and sustainability can be dissolved.
To provide an example of this integration on a private limited company, The Hill Group model arguably exemplifies strong business sense combined with humanitarian focus. The UK homebuilders were conscious of their social impact, creating specialised communities to improve people’s quality of life and wellbeing in new housing developments. As part of its 20th anniversary in 2019, £12 million was pledged ‘to build 200 modular homes for homeless people, working with local authorities and housing associations to source land and secure planning’. This pledge drives towards company expansion whilst incorporating bold social practice, reflecting how societal purpose can be met with opportunities for enterprise.
Nonetheless, the tension between human rights and company responsibility is prevalent. Navigating sustainable enterprise in the midst of ‘self-interest’ and consistent ‘profitability’ is complex, and social welfare often gets left in an ‘ambiguous’ ethical place. As social impact can be immeasurable and limited by a lack of auditable data, businesses may struggle to define their sustainability strategy. This, coupled by objecting voices of ESG as a ‘sideshow - a public-relations move, or even a means to cash in on the higher motives of customers, investors, or employees’ - makes practical change difficult.
As will be interpreted in the following regulation section, in order to achieve consistent social impact, bolder enforcement should be in place. The long-term implications for business’s reputation and values should be made explicitly clear. Hollow propositions are not enough – action is needed.
Regulation
The primary regulation in place to protect human rights in the conduct of business, are the UN Guiding Principles on Business and Human Rights, adopted by the UN Human Rights Council in 2011. These ‘contain ten principles that oblige states to protect human rights and fourteen principles that deal with the responsibility of companies to respect human rights’, clearly articulating and promoting the duties of a respectful business. By affirming; ‘the state duty to protect, ‘the corporate responsibility to respect’, and ‘the access to remedy’, human rights can be safeguarded with ‘concrete, actionable steps’ for long-term social change.
Whilst the regulation is aware of crucial business responsibility, its limitations should be considered. The UN Guiding Principles are not legal duties, but merely elective guidelines. Without establishing a framework of ‘binding international obligations’, there is arguable risk of voluntary human rights actions to be ‘subject to corporate whim in the absence of legal sanction for violations’. This concern hinders human rights regulation, as beyond voluntarism, protections can be stagnant and compromised.
However, the progress with company regulators offers a more favourable depiction of human rights regulation. The striking safeguarding improvements with the gender pay gap should be recognised. The Financial Conduct Authority (FCA) issued a policy statement, ‘requiring listed companies to report information and disclose against targets on the representation of women and ethnic minorities’ on boards and executive management. This generated considerable progress in reporting standards and transparency, therefore improving company focus for change. By regulators stepping ‘up their policy work’ and enforcing operational records, human rights can be upheld with accountability and transparency.
Voluntary civic work, (promoting the quality of life in a community), also broadens ‘the scope for legal responsibility’ for human rights. Futhermore, it is possible for companies to use public commitments as a means to drive and implement change, working in tandem with legal mechanisms ‘to ensure that corporate wrongdoing is remedied’. Such approaches typically encourage human rights due diligence, (HRDD) and the prevention of misleading company profiles and action.
Although these regulations arguably enforce progress with clear-cut guidelines, the gender pay gap, and volitional action—the debate continues as to whether markets can feign sustainability. Despite there being measures in place, pressurised and enforced by guiding principles and regulations, more could be done.
Conclusion
Human rights are inalienable and should be upheld regardless of their impact on business success. This is a global standard, of global justice. An organisation’s responsibility to safeguard the fair rights and equitable treatment of humankind goes far beyond moral obligation; human rights principles are critical to every operation. Disclosures, accountability, and remedies should be implemented for businesses to find confidence in their strategies.
Certainly, this robust ESG framework comes with challenges. The tension between enterprise growth and humanitarian impact is complicated, and relies upon an organisation’s duty of care despite self-interest and profit motive. To manage foreseeable risks whilst bolstering company prospects, organisations should remain transparent and accountable. Furthermore, the lack of engagement of human rights to the ESG framework demonstrates that a great deal remains to be done with coherent classification, from definitions to data. Regardless, as environmental projects progress with accurate metric assessments, discrepancies and future risks become more foreseeable and solvable.
Growth is plausible when organisations are conscious of a balanced social foundation. Integrating company expansion with bold social practice can build enterprise, uphold human rights, and better society as a whole. Practical change comes with regulation, enforcing progress with internationally guiding principles, company regulators, and voluntary aid. Human rights are inalienable, and in order for companies to take action, social mandates are just the beginning.
This is a global standard that demands to be upheld. The social agenda will continue to develop, but human rights, the ‘S’ in ESG, should never be left behind.
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