Establishing Governance for Human Rights Due Diligence
In any corporate sustainability initiative, whether it be environmental or social, establishing governance is one of the most important factors for success. The broad integration and effective management of sustainability issues requires leadership, direction, and strategy–all of which are factors of a robust governance structure. Before diving in, it's important to define what exactly I mean when saying, ‘a robust governance structure’: a system of procedures and guidelines that help manage and oversee a company, often concerned with risk management and sound decision-making. This structure allows sustainability to be embedded across the business which ensures accountability and encourages transparency.
Why Existing Governance Structures Won’t Cut It
Existing resources about corporate governance and sustainability tend to focus on environmental sustainability or a company’s anti-corruption functions, often leaving out the importance of governance for human rights due diligence programs. This may be telling of the existing model of corporate governance that majorly focuses on shareholder interests, rather than stakeholder interests (including vendors, employees throughout the supply chain, customers, and community).
This traditional model of governance, referred to as the Anglo-American Model, includes a board of directors, often consisting of director-level positions or major shareholders, who direct the management of the company and focus on financial risks and adverse risks to the company. Based on the composition of the governing body and this definition of risk, I propose that this traditional model is unsuitable to meaningfully address human rights in business. Human rights due diligence (HRDD), on the other hand, is the process by which companies identify and address adverse human rights impacts, not just the risks of the company itself. This process is founded on a definition of risk that includes not only risk to the company but also risk from the company to external stakeholders. In this blog, I explore several models of alternative governance that could properly address human rights.
Alternative Models of Governance
The first step in HRDD is embedding human rights into policies and management systems, which is where an effective governance structure comes in. It is important to note that there is no ‘right’ model for establishing governance for human rights functions, but there is a ‘right’ way to embed human rights. The most effective approach takes into account the company's unique business model–keeping in mind leadership structures, cross-functional collaboration potential, performance incentives, and conceptions of salient human rights issues across the business–and embedding respect for human rights throughout the totality of a company’s management systems and procedures. In doing so, human rights have the potential to become a core element of the corporate culture and be seamlessly mainstreamed into a decision-making process.
There are multiple ways to organize governance for HRDD, from placing the onus on one existing department to lead the program to establishing cross-functional groups to share responsibility between departments. The question of where to house the governance structure depends highly on the context and leadership structure within the company. Below are some different models of governance for HRDD:
Cross-functional human rights committees or working groups: convene multiple relevant business functions regularly to identify and address a company’s human rights risks. A committee or working group has a direct line of communication with the most senior governing body in the company;
Human rights representation in ESG or sustainability governance groups: there is a permanent chair in an existing ESG working group dedicated to human rights. The focus is on awareness-raising, information-sharing, and support in helping various departments meet the company’s human rights strategy;
Legal and/or compliance-driven governing group: human rights programming is led primarily by the legal and compliance team. There is greater emphasis on compliance and accountability is delegated to relevant business units;
Choosing the Right Model
Each model has its pros and cons. Tying the governance body to a single department may increase accountability and create a clear direction of leadership for human rights, but also may lead to challenges of cross-departmental buy-in or may limit the power for decision-making. Cross-functional groups, on the other hand, can communicate that human rights is a responsibility of the whole organization, but can prove to have less clarity of accountability. Hosting the governance body in a department that delegates responsibilities can send signals of power imbalance. Ultimately, the best model relys on the unique capacity of every company.
Purpose & Intent of Governance
The more important question than where to house the governing body is the intention and purpose. The intention can be grounded in more of ‘guard dog’ purpose, meaning the role is to provide oversight, or can be grounded in more of ‘guide dog’ purpose in which the function’s intention is to act as a coach within the company.
Key Takeaways & Best Practices
All the governance models that have been suggested in this blog have advantages and disadvantages. Likely, a combination of many of these models may be the best structure for a company depending on the unique business conditions in which it operates. Evenstill, without the ‘perfect’ model, here are some things to keep in mind when establishing an HRDD governance structure.
Be intentional. Human rights issues must be handled with care. It is important to keep in mind that several of these topics have lasting effects on rights holders and should be taken seriously. Because human rights are often not included in traditional business models, the only way they will be embedded throughout the company is through intention and due diligence, not by chance.
Ask the right questions. Beyond the ‘where’ of the governance structure, it is important to ask more questions like ‘who within the company has the leadership and influence to meaningfully drive HRDD?’, ‘what are the primary roles and responsibilities of the governance structure?’, ‘how will accountability be established to ensure effective implementation?’.
Remember continuous improvement. An important aspect of HRDD is continuous improvement. Governance structures may have to change to accommodate the evolving needs of the company, its stakeholders, and the companies in which it operates. That’s okay! Taking an approach where change is welcomed and the needs of rights-holders is prioritized is key to a successful HRDD program.
Intersectionality is important. Human rights impacts all business functions. Figuring out what human rights mean to each function is an important part of the process. Promoting a cross-functional understanding and approach will engage multiple functions and lead to deeper embedding and longevity of the program.
Need help building and implementing a well-designed and intentional HRDD governance structure? Uplift’s experts are equipped to help you on your journey. Schedule a free consultation today.
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