The video explores the evolution of corporate responsibilities in terms of human rights, emphasizing the transformative impact of the UN Guiding Principles on Business and Human Rights. Initially, it was a radical notion for businesses to incorporate human rights into their operations, but over the last twelve years, it has gained acceptance globally, with companies now recognizing their obligation to uphold human dignity and equality. This materializes in various ways, such as policy changes, collaborative initiatives, and regulatory developments, primarily in the EU, which mandate companies to report and act on human rights issues effectively.

Business leaders are encouraged to shift their mindset, recognizing that respecting human rights aligns with their financial success, reputation, and societal norms. The discussion highlights that profitability should not come at the cost of human rights and vulnerability. The due diligence legislation, particularly in the EU, pushes companies towards understanding and mitigating risks to people's rights. Different industries face unique challenges, and companies are increasingly realizing that managing these issues strategically benefits their long-term business prospects.

Main takeaways from the video:

Please remember to turn on the CC button to view the subtitles.

Key Vocabularies and Common Phrases:

1. externalizing [ɪkˈstɜrnəˌlaɪzɪŋ] - (verb) - To project, attribute, or assign external or outside factors, often to deflect from oneself. - Synonyms: (project, attribute, assign)

Business cannot succeed if it is externalizing costs and risks onto the most vulnerable people in our societies.

2. normative [nɔːrmətɪv] - (adjective) - Establishing, relating to, or deriving from a standard or norm, especially of behavior. - Synonyms: (standard, model, customary)

So the UN Guiding principles on Business and Human Rights are essentially a normative standard of conduct for business.

3. materialize [məˈtɪriəˌlaɪz] - (verb) - To come into being; become real or actual. - Synonyms: (emerge, occur, appear)

...what they need to be doing about them to avoid those materializing into impacts or to deal with impacts that have actually happened.

4. due diligence [duː ˈdɪlɪdʒəns] - (noun) - A comprehensive appraisal of a business undertaken by a prospective buyer, especially to establish its assets and liabilities. - Synonyms: (investigation, analysis, assessment)

...but actually being expected to act in certain ways. And we call this due diligence legislation.

5. trajectory [trəˈdʒɛktəri] - (noun) - The path followed by a projectile flying or an object moving under the action of given forces. - Synonyms: (path, course, route)

So we've seen this rolling trajectory from policy and rhetoric to practical initiatives and through to regulation and legislation...

6. misnomer [mɪsˈnoʊmər] - (noun) - A wrong or inaccurate name or designation. - Synonyms: (mislabel, misclassification, error)

And I think that's a misjudgment, a misnomer.

7. paradigm [ˈpærəˌdaɪm] - (noun) - A typical example or pattern of something; a model. - Synonyms: (model, pattern, standard)

This is a paradigm for looking at how a company's activities and its value chains can lead to risk to people.

8. philanthropic [ˌfɪlənˈθrɒpɪk] - (adjective) - Seeking to promote the welfare of others, especially by donating money to good causes. - Synonyms: (charitable, benevolent, humanitarian)

I think the most positive set of responses that we do see again and again in our work is the realization that this is very, very far from where we were 30, 40 years ago of talking about corporate social responsibility as some kind of philanthropic endeavor

9. enlightened [ɪnˈlaɪ.tənd] - (adjective) - Having or showing a rational, modern, and well-informed outlook. - Synonyms: (informed, educated, aware)

It may be that they have an enlightened leader who's brought that realization to play.

10. cognizant [ˈkɒɡnɪzənt] - (adjective) - Having knowledge or being aware of. - Synonyms: (aware, conscious, informed)

The second point that I would highlight is to be really cognizant of where the root causes of human rights harms may lie within the four walls of your company.

Caroline Rees - A radical proposition is putting people at the center

Back before we had the guiding principles, it was honestly a fairly radical proposition that corporations had responsibilities when it came to issues of human rights. It's not telling business to think about what's in it for them. From respecting people, it's putting people at the center. Business cannot succeed if it is externalizing costs and risks onto the most vulnerable people in our societies. This is a conversation about how companies make their profits and what happens along the pathways to doing so. Working with governments and with civil society actors to unlock solutions that can mean that business can succeed in making its profits while also supporting respect for human rights.

One of the things I've loved seeing again and again in the work that we do with businesses are those light bulb moments when people within the organization connect the head and the heart. So the UN Guiding principles on Business and Human Rights are essentially a normative standard of conduct for business. It speaks to what's expected of business when it comes to the ways in which their practices and their business relationships affect people's basic dignity and equality of worth. It's a reasonableness standard. What can reasonably be expected of business as they go about their operations, as they work with value chain partners to understand where the greatest risks to people lie and what they need to be doing about them to avoid those materializing into impacts or to deal with impacts that have actually happened.

So it's 12 years going on, 13 years now since the Human Rights Council at the United Nations endorsed the guiding principles. And back before we had the guiding principles, it was honestly a fairly radical proposition that corporations had responsibilities when it came to issues of human rights. Today, not just in Western countries, but in large economies around the country, around the world, it's actually quite normal for companies to accept that they have responsibilities when it comes to these most acute impacts on people. And we see that driving through in a range of ways. We see it in the sheer number of companies that are going out there publicly and saying they're committed to respect human rights. So we start with words and we start with intention.

But we see it also coming through in practice of companies, companies coming together in collaborative initiatives with others in their industry, coming together with civil society and labor organizations to actually change up what's happening out in their value chains within their operations, to change up practices, the ways that decisions get made, and to engage the people that they may be affecting, to find solutions to the kind of harms that may be occurring. Whether we're talking about forced labor and child labor or living wages in supply chains, or we're talking about displacement of communities around extractive sites, or we're talking about the ways in which data gets used and privacy or wellbeing might be threatened through IT platforms and social media and so forth. In all of these domains of business, we see how the guiding principles have changed assumptions about what companies should be doing and are changing the practices of what they actually do within their four walls and in their relationships with other businesses.

But really critically, it's not just about what companies are doing in response themselves. It's also about how we see both national governments and international organizations responding as well. So we've seen a growth in regulation around this that started in reporting standards. It started in the form of what governments and organizations like the European Union are expecting companies to tell their investors and their other stakeholders about how they are managing and responding to impacts on people. We've seen that in the EU reporting standards that are coming into force in the next year or so, we've seen that in national reporting requirements around specific issues like forced labour and child labour and so forth. But now we're also seeing a slew of legislation, again mostly in the European Union, but not uniquely about the actual conduct. So not just reporting what you're doing, but actually being expected to act in certain ways. And we call this due diligence legislation.

We have a corporate Sustainability due diligence Directive that's about to be finalized in the European Union and which will apply to some 40,000 or more companies that are expected to take certain actions to understand where there are risks to people's human rights and take action to address those and have some accountability, even in certain limited circumstances, civil liability associated with whether or not they're doing that effectively. So we've seen this rolling trajectory from policy and rhetoric to practical initiatives and through to regulation and legislation, really on the back of what the guiding principles have been saying are the expectation of companies in their day to day conduct. The European Union legislation around reporting will affect an estimated 40,000 or more companies. It's very hard to say exactly, but estimations suggest that maybe up to 3,000 of those will be US companies with significant operations or presences in the European Union.

So it is centred on companies that have a level of operations and presence within that jurisdiction. But of course they can, like US companies, be headquartered elsewhere. That's a large number of companies by any measure. And there's no question that there are companies in the EU and in the US and elsewhere that are familiar with the guiding principles and have been taking action to implement due diligence to be reporting on what they're doing for a good number of years now. It's not novel in that regard that it's appearing in legislation is the change rather than the practice. However, there are thousands more companies that this really has not been on the radar of, and which are certainly for the first time, really turning their minds to what it's going to take to have the information that they need to be sharing with their investors, with their other stakeholders on the basis of this legislation, to have the story to tell about how they're understanding risk to people's human rights in their operations, in their value chains, and what it is that they're doing about that.

So there's going to be a huge learning curve for many companies to go up in this regard. One thing that I would say is that there's often a concern amongst business that this is just yet another burden, yet another thing that they have to do. And even that it's a distraction from doing the doing. Or shouldn't we be spending our resources on getting out there and solving the problems, not having to expend them all on producing reports for people about that? And I think that's a misjudgment, a misnomer. Yes. If you treat reporting as a mere compliance exercise, for sure you're going to end up seeing it as a burden, something extra you have to do.

But if you really understand what the reporting standards are asking of companies, which is to talk about, how do you understand where the risks to people are in your operations and in your value chains? How are you getting ahead of those issues? How are you managing the related risks to the business itself that result from those issues, then you're really asking a business simply to tell you things that it should know for its own good, management of risks. It's not, in that regard, a burden, if you see it through that lens. It is saying we need you to be able to answer certain questions to which you really should have answers for your own interests in the first place. And I think that's a really critical point to understand as we think about the role of this legislation in the world.

Companies that start using the UNGPS are starting from very different places with very different kinds of challenges. If you're an apparel company that's been looking at issues of child labor or forced labor or poverty wages in your supply chain, that's very different to if you're a mining company or a renewable company, that's looking at impacts on communities that are being displaced from land and cultures and livelihoods, which is very different from if you're a tech company that's looking at downstream use of your technologies or, or platforms. The places that companies are starting at are very different. And the reasons that companies other than legislative requirements come to these issues are also very different.

It may be that they have a burning platform, they've had a crisis and light bulbs have gone off, that they need to get ahead of these issues. It may be that they have an enlightened leader who's brought that realization to play. It may be that they're in an industry where there are competitive pressures to not fall behind on these issues. So it's very difficult to say that there's sort of one set of responses to the issues. I think the most positive set of responses that we do see again and again in our work is the realization that this is very, very far from where we were 30, 40 years ago of talking about corporate social responsibility as some kind of philanthropic endeavor. Right.

That was a conversation about how companies choose to spend their profits. This is a conversation about how companies make their profits and what happens along the pathways to doing so. And therefore, I think the response from many companies is in fact a realization that this is in their own interests, that they don't want to be a corporation in the world that is known to be making profits on the back of misery and poverty and the degradation of human experience. That they want to be a company that is out there making their profits in ways that are aligned with social values. But also the realization by many that in doing so, that in respecting people's human rights, they're also shoring up their own reputations, their own operational and financial success for the future. To be an employer of choice, to be a business partner of choice, to be a buyer of choice, to be an investment of choice.

So these societal imperatives that we see, that business should be embedded within social norms and values, the ways it works should be reflective of those norms and values is very much aligned also I think, with the realization that this is ultimately in the interests of successful business. Its the guiding principles are really premised on the idea that business cannot succeed if it is externalizing costs and risks onto the most vulnerable people in our societies. And indeed, that proposition of short term shareholder value has been part of the reason why we have arrived at a situation where so many costs and risks are being externalized onto the most vulnerable people.

So at root, the guiding principles are saying, look, you can outsource your supply chains, you can outsource your labor force and employ through third parties, but you cannot Outsource your responsibilities for how the people who help you succeed in the world are treated and whether their basic dignity is being respected in that regard. Really, it is an antidote to the more extreme interpretations of profit maximization and return to shareholders. It's saying that business can do a great deal, a great many things in the world that are going to benefit business and make money, but it cannot do so, and it should not do so at risk to the most vulnerable.

One thing that's really important about the guiding principles is that it flips the lens. It's not telling business to think about what's in it for them from respecting people. It's putting people at the center. This is a paradigm for looking at how a company's activities and its value chains can lead to risk to people. It centers people in the paradigm of what do you deliver. It recognizes that when businesses effectively manage risk to people, they are also de facto managing related risks to the business. But the lens through which to do so is an understanding of risk to people.

Let me give you an example. Too many businesses, when they start from the lens of risk to the business, say, well, okay, we need to make sure that our first tier suppliers are doing the right thing because that's where we have a direct relationship. That's where we're most exposed. It's not the case. What we see again and again is that the issues hitting the media, the issue hitting even the courts, are issues of child labor 3 tiers up your supply chain, of forced labor 5 tiers up your supply chain. You find the risks to business first and foremost, where you find the critical risks to people.

And that same philosophy, I think is now entering the realm of reporting standards. We see that in the European Union's reporting standards. Yes, they ask companies to report on issues that are financially material, environmental, climate related and social issues that can affect the success of their business. But they bring this idea of double materiality into play. It's not just about what's financially material. They're also asking companies requiring companies to report on their most material impacts on people and the environment, whether or not those may or may not result in financial consequences for the company itself. It's bringing into balance then these two lenses. Risk to people on the one hand and risk to business on the other, and saying that both should matter equally to our societies and then increasingly both matter to investors as well.

I think there are a couple of things that are really important for a CEO getting their heads around this. First of all, that this is not first and foremost A matter of compliance. Companies need to comply with the law and companies need compliance tools to push things across companies and make them happen across workforces. But ultimately this is about mindsets and culture. This is about how people in your organise think about the consequences of the decisions they make and the actions they take and the behaviors that they display. The pathway to success lies in understanding it first and foremost as being about mindset and culture and behavior with compliance tools in the toolbox along the way. But if you treat it as a leader, as a compliance issue, ultimately you fail. And ultimately it does become a burden rather than a pathway to success.

The second point that I would highlight is to be really cognizant of where the root causes of human rights harms may lie within the four walls of your company. It's quite easy to say, well, look, we have to work with these suppliers and they don't really understand, so we have to tell them to comply with our code of conduct and then try and police whether they do or they don't. And to miss the point that when your own purchasing department goes out to those suppliers and says, yes, we know we sent you this code of conduct and we know that those auditors will be coming in to make sure you're complying with it. But right now we're going to tell you that we need you to provide the same products this year as you did last year for a lower price or at higher speed, or we need you to take on the risk of warehousing because we don't want to carry the cost of that, that those companies are actually making it impossible for their suppliers to abide by that code of conduct, because the thin margins on which they operate simply mean that it's not feasible that they will have to, in order to meet those criteria, outsource to another factory that has child labor, not pay for overtime, or harm human rights in other ways.

And so for business leaders to internalize that, they cannot simply see this as a set of problems out there in the world that they have to tackle, but that they need to look internally at their own practices and even at their business models to find some of the root causes of the problem. And in order to solve those issues where they start. One thing that's really important about the UN guiding principles and what they're asking of companies is that this simply isn't a one and done thing. It's often a misconception out there that it's sort of a do no harm, do the guiding principles and then go on and do good things through other things you're trying to do as a business. Implementing respect for human rights is an ongoing challenge that honestly doesn't end. The environment you're working with within changes. The types of risks to people that arise out of that will be changing. And you're in a constant mode of getting ahead of those issues and managing them effectively.

The result of that is that there's no company in the world that can say, we've got this all sorted. But there are many, many companies that are doing great things on the pathway to resolving or better managing risks to people. And very often the companies that are leading in that are companies that have recognized they can't do it alone, that they're collaborating with peers around this. So you can see apparel companies coming together to say, you know what, we really can't be out there competing on the wages of the poorest people in our supply chains. Let's get together and find ways of operating that are going to take wages out of the equation of what we work on. So you have action, collaboration, transformation, an initiative specifically aiming to tackle that set of issues. You have others coming together around forced labor in seafood supply chains, in electronic supply chains to say, how do we tackle this issue that in many regards is endemic in parts of the world, and that's going to require a collective action in order to achieve that. You have mining companies that are working together to say, what is it that we should be doing? And doing better in order to have sustainable relationships with the communities around our operations, in order to move away from a paternalistic relationship where we build things for them, to a partnership relationship where we understand what they expect and rightfully need out of this relationship that we inevitably have with them, and how we build a future together where their interests are centered as well.

These are the kinds of ways that leading businesses are working today. Working with their peers, working with their suppliers, working with governments and with civil society actors to unlock solutions that can mean that business can succeed in making its profits while also supporting respect for human rights. So there are at least a couple of significant applications for investors of the guided principles. First of all, their firms, their companies, the guiding principles apply to them. They have responsibilities to make sure as they go about their work that they are respecting human rights, that is, in relation to their own workforces, in relation to their supply chains, for sure. But of course, it's also downstream in their portfolios.

What is the due diligence that they are doing on their portfolios to understand where the risks to human rights are and to use Their voice as well as their investment decisions in order to reduce those risks to people. The role of engagement with companies is absolutely critical here. What are the questions that they're asking of companies they invest in on those quarterly calls that aren't just the financial questions that also go to issues of what those companies are doing to understand and address risks to people's basic dignity. So how are they applying that through their own operations? How are they applying that in the questions that they ask of companies? And how are they coming together as investors? Right, we talk about collective action by companies. How are they coming together as investors to use collective leverage on industries? We see investors coming together around questions of living wages. We see investors coming together around questions of the IT industry and what they're doing to tackle risks to human rights, bringing together collective voice to have more weight with the companies that they are respectively investing in and bring that pressure to bear for more attention to be placed on these issues.

There's absolutely no question that quarterly earnings calls are a critical opportunity for elevating these issues with companies. What's interesting is that sometimes investors will say that, well, you know what I mean, we're just one investor. It won't have that much effect. But we see it also at the other end of that telescope. We see the people in companies who say, even when we get one question, one question on a quarterly earnings call about human rights and how we're managing them, the ripple effects in the company are enormous. Questions get asked from the top accountabilities for what's happening spread out across the organization. Answers have to be found, there's follow up. So I think investors can really underestimate the power of one smart question on a quarterly call.

The other aspect that arises is that investors will sometimes say, well, we can ask that question, but then we sometimes get a really slick answer and we just don't really know what to do with it. It sounds reasonable. Is that enough of an answer? Should we be happy with that answer or should we be pushing harder? And so I think there is an area here for investors to educate themselves to engage more in understanding the dynamics of what happens in companies, how human rights risks manifest, what the good follow up question is to the one that they're asking on the quarterly call. So they really can pursue that with more insight into what it is that they're hearing back from businesses. So I think educating themselves, talking with companies, talking with industries, to really understand more about how human rights risks arise and what best practices can make for a smarter set of exchanges.

The Term ESG has become a political football for sure, and nowhere more so than here in the United States. And I think it can divert us a little bit from the issues. There are many reasons it's become that, many reasons that people see it as pushing certain agendas and many reasons that other people see it as greenwashing and distracting from what's really going on in companies. I think the really important point here is understanding what it's talking about. It's simply an acronym that's reflecting that it matters whether companies are well governed and whether they're paying attention to the ways in which their actions affect the environment, the climate and people. And whether or not we call it esg, those realities aren't changing. It matters for societal reasons. It matters because we cannot continue without addressing climate change. We cannot continue without addressing chronic biodiversity loss, and we cannot continue without addressing inequality.

And the ways in which the extreme levels of inequality we see today are tearing at the social fabric of our societies, leading to a breakdown in trust in institutions, in the rule of law, in democracy and in information. These are critical issues that I think business, widely and increasingly the investor community recognizes have to be dealt with. And really getting lost in questions of ESG this and ESG that is a distraction from a point that is an imperative. Regardless, it's really important that we understand that the term sustainability is not just a term that refers to the environment and climate. It is a term that refers to the environment, climate and people. And people, since the beginning of the definition of sustainable development, have been at the center of the vision of what it's about. And unless we understand and we tackle these issues together, we're going to fail at tackling each and every one of them.

We see increasing attention to the nexus between climate and people, and we have this concept of just transition now, gaining more and more profile. That's the recognition that as we move towards, as we move through the transition towards carbon neutral economies, that we need to make sure that the most vulnerable people in our societies are not left behind, the ones who are most likely to feel the negative consequences of climate change. But I would argue that the nexus between climate and people is more than that. That in fact this parallel crisis of inequality that we face means that we have to be addressing that in its own right if we're to succeed in tackling climate change.

When we're in a world, when we're in societies where people are saying, look, I have to work three jobs just to put food on the table. I know that my kids are going to have a more difficult life than I had. We're going in the wrong direction. And policymaking and elite conversations about the solutions for the world are ignoring that reality I live in. When we have that conversation, then people are simply not going to buy into the policy prescriptions for tackling climate change. They're not going to support the measures and the costs that are going to be incurred in tackling climate change. So the point here is that if we don't treat inequality in its own right, if we don't address the effects of our economies on the most vulnerable within our societies in their own right, then we're not going to have the policy space to realize the action on climate that we need to achieve. These issues have to go hand in hand from beginning to end if we're to succeed in any of them.

So there's no doubt that it is a contribution to the conversation and it's a contribution to bringing more businesses into the conversation, to bring forward the cumulative evidence of how addressing these critical risks to people and planet is also in the interests of business. The business case is a reality and it has a critical audience and it helps to bring people on board. So I think academia can help us build out that case, can help bring the evidence to bear, can help show the correlations and the causations that convince more people, that bring more leaders into the conversation. But I think it's also important that academia isn't just left with research into the business case, because at root, this is so much more than that.

Surely we're not in a world where we want to be saying that the only reason not to have people in modern day slavery in your supply chains is because it's good for you, because it helps you make money. That's a really perverse proposition to be making. I think we also need academia to be part of the conversation about why this matters for the world we want to live in, to be showing the through lines between what business does out there in the world and inequality and the dissolution of the social fabric that we so rely on and need, as well as the effects on our planet and climate, that we have imperatives because of the world we all need and want to live in, and not just because it's going to help us make the next dollar.

I think it's important that the voice of academia is on both sides of that for sure. Let us bring forward that business. Kate's let's bring more people into the conversation faster, but let's not act as if that is the overriding reason why we're going about this and that this isn't at root about the need to be able to live and for our kids and our kids kids to be able to live in a world that is decent, fair and survivable. One of the things I've loved seeing again and again in the work that we do with businesses are those light bulb moments when people within the organization connect the head and the heart. That is to say, yes, they work day to day with the spreadsheets and the data points and everything else that's driving decision making within the business.

But they connect that up with their own visceral humanity, the sense of who they are in the world and how they see that. And we see various examples of this. We see it in the corporate leader who is out there at the mining site and talking to the indigenous leader and just understands at a visceral level what this means for communities and communities that have been anchored for thousands of years in the protection of our planet and in a sense of what it means to be a human in this world. We see it when the corporate leader is talking to the woman out picking strawberries in the field that are going to end up in their supermarkets and realizing what her day to day life is and the difference it makes as to whether she can put food on the table for her child or can't do that. We see it when the corporate leader sees the pictures in the newspaper of the man in the plant in India who is forging iron to make part of the products that go into his business's success and are walking around barefoot and in loincloths carrying molten metal and in danger of harm at any moment to their life and limb and suddenly realizing what it is that their business is doing out there in the world, how it matters to people, their safety, their children, their livelihoods, all of the same things that he or her values in their daily existence outside of the business and connects the two up.

Those are the light bulb moments when the empathic nature of the leader meets the data driven decision making aspects of leadership and he or she brings the two together in the decisions they make going forward.

Human Rights, Business, Global, Corporate Responsibility, Sustainability, Un Guiding Principles, Harvard Business School