Authors: Lena-Marie Finkenzeller, Jenna Hahn, Wiebke Lachnitt, August 26, 2024
1 Definition and Relevance
For most of the 20th century, human rights were seen as a matter for governments only and it was the duty of states to protect them. But this changed with the globalization of business towards the end of the 20th century when companies were also seen as responsible and began having influence on states. They became another actor in addition to state actors to take responsibility for human rights. Today transnational or multinational corporations (TNCs and MNCs) have a lot of power when it comes to the global promotion of human rights1. When looking at human rights from a corporate perspective, it is often associated with human rights abuses such as child labor, discrimination, modern slavery or migrant workers. Additionally, there are industries that are known for having more human rights violations than others, such as the apparel, mining, or the food/agriculture industry2. However, companies can have a positive impact on human rights through their operations e.g. by introducing health and safety measures3.
Nevertheless in 2013, the discussion on exploitation and violations through corporate actions reached a new peak after the Rana Plaza disaster, when a garment factory in Bangladesh collapsed due to the negligence of responsible companies and operators, killing 1,134 workers and injuring at least 2,500 people. The building housed five garment factories where the workers produced clothes for companies in Europe and North America4. It is well known that many multinational companies outsource their production to the global South because production costs are much lower compared to the global North. Underlining this, Ascencio et al. (2024) found that North American and European companies are most often accused of corporate human right abuses and that these companies most often violate human rights in countries other than where they are headquartered, namely in the Global South2. The fact that the issue is characterized by the actions of multinational companies and human rights violations occurring all over the world, one must discuss this issue on a global level.
The problem is that there is no universal definition of what human rights are, and therefore there is no universally accepted human rights framework for all nations around the world. The best-known framework for human rights is the International Bill of Human Rights. It consists of the United Nations Universal Declaration of Human Rights (UDHR), the International Covenant on Economic, Social and Cultural Rights (ICESCR), and the International Covenant on Civil and Political Rights (ICCPR). Today, the International Bill of Human Rights is the most important human rights framework, and it is the foundation of what human rights are at the core5. The Declaration was proclaimed and adopted by the United Nations General Assembly in 1948, immediately after the Second World War, as a common standard for all people and all nations. To this day it functions as a common standard of achievement for all nations and to which all nations worldwide should aspire. The UDHR consists of 30 articles that serve as the foundation of human rights and the understanding of what fundamental human rights mean. Today, many human right treaties are based on the UDHR6,7. Although the UN Declaration of Human Rights is recognized by many countries, it holds no legally binding character. It is only when the articles are codified through international human right conventions and then ratified by countries or adopted through national legislation that they become binding5.
The two Covenants, also called ‘the International Covenants’ (ICESCR & ICCPR), can be binding if they are signed and ratified by a country, which means that the country agrees to abide by them7. To date, there are still several countries that have not signed and ratified either the ICESCR or the ICCPR. The ICCPR has been signed and ratified by 173 countries8, while the ICESCR has been signed and ratified by 171 countries, excluding the US, which has only signed it9.
Looking specifically at corporate human rights, the ICESR, adopted in 1966, addresses the issue of corporate human rights in Part III, Article 7, where it states:
“The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and favourable conditions of work which ensure, in particular:
- Remuneration which provides all workers, as a minimum, with:
- Fair wages and equal remuneration for work of equal value without distinction of any kind, in particular women being guaranteed conditions of work not inferior to those enjoyed by men, with equal pay for equal work;
- A decent living for themselves and their families in accordance with the provisions of the present Covenant;
- Safe and healthy working conditions;
- Equal opportunity for everyone to be promoted in his employment to an appropriate higher level, subject to no considerations other than those of seniority and competence;
- Rest, leisure and reasonable limitation of working hours and periodic holidays with pay, as well as remuneration for public holidays“10.
2 Sustainability Analysis
2.1 Relationship between firms and human rights
Business serves as a major driver for human progress, supporting global human rights11. Increased recognition of human rights in business processes enhances reputation, improves employee morale, leads to a higher motivation, and productivity, and gives enhanced access to new markets, consumers, and investors12. By adopting explicit human rights policies along with mechanisms for their implementations, firms are better prepared to prevent human rights abuses11.
2.2 Impact of firms on human rights
As already stated in chapter 1, there are various international guidelines on human rights responsibilities of companies that have been developed. They do provide frameworks for appropriate company behavior, either as tools to guide the performance, or to serve as a benchmark by which companies may be held to account. Besides that, several voluntary initiatives aim to adhere or guide companies regarding human rights-related principles.
This chapter describes how a business may be involved with negative human rights impacts, given examples of human rights in the UN treaties – the ICESCR (1966) and the ICCPR (1966) – a short explanation of the rights, and examples of how a company’s operations might potentially impact them. The two 1966 Covenants were chosen because of their wide international acceptance and expression of the comprehensive range of internationally acknowledged human rights outlined in the UDHR (1948). Two exemplary articles of each Covenant were chosen while no attempt was made to rank the rights regarding their relevance to businesses. The rights chosen seem to be prioritized by all businesses in different industries all over the world, while other rights are unlikely to affect businesses (e.g. Article 15: Right to be free from retroactive criminal law, ICCPR 1966). Nevertheless, no definite rules exist, as rights may require a different corporate response from one industry to the next and from one location to another.
International Covenant on Civil and Political Rights
Article 8: Right not to be subjected to slavery, servitude or forced labor
Slavery exists when one human being effectively owns another, while servitude covers other forms of dominance, egregious economic exploitation, and degradation of human beings. Due to the extreme nature of both human rights abuses, they serve as absolute rights without restrictions or qualifications11. According to the International Labour Organization (ILO) (1930), forced or compulsory labor is defined as “all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily” (§ 2 (1))13. Providing payment for the labor does not mean that the work is not forced if the other elements of the definition are met. Civic obligations (e.g. firefighting, rendering medical aid) is not classified as forced labor11.
Companies might unknowingly benefit from slavery, forced, bonded or involuntary prison labor and trafficked workers through their supply chains (e.g. on agriculture plantations). Especially women and children are at risk for such actions14. Companies operating in the transportation industry, such as airline and shipping, or the tourism sector, may be involved with trafficking of individuals in purpose of forced or bonded labor. If companies make use of such labor, they risk allegations of abusing this right. Also, when these companies benefit from the use through their supply chains, subcontractors, or other business partners11.
Article 24: Right of protection for the child
Children are in special need of protection, which is in duty of his or her family, community and state. A child has the right to be registered, given a name right after being born, and acquire a nationality. Child protection involves safeguarding children from sexual and economic exploitation. Companies, particularly in regions with prevalent child sex trade, may be complicit if they ignore such exploitation near their operations. Additionally, children should not be subjected to hazardous or underpaid labor, and child labor often deprives them of education and harms their health due to poor working conditions and long hours11. According to the Minimum Age Convention 138 §2 (3), labor is prohibited for children under the age of 1515. Furthermore, hazardous work is prohibited for all children under 18, following the Worst Forms of Child Labor Convention 18216. In some cases, eliminating child labor is a difficult task, having families relying on the income and work of children to ensure the access to food and other necessities. For example, during farming harvest period it is widely recognized for children to work for this time11.
A company’s activity might impact this right by involving hazardous work, e.g. working in mining under the age of 18. Therefore, a company respects the right by complying the minimum age for employment. Nevertheless, simply dismissing the child or ending a contract with the supplier could force the child into even more dangerous work (e.g. prostitution, drug trafficking). Thus, companies can tackle the problem at the source and create educational opportunities, participate in action approaches, and paying adult employees a living wage so there is no need for the child to work11.
International Covenant on Economic, Social and Cultural Rights
Article 7: Right to enjoy just and favorable conditions of work
The right to enjoy just and favorable conditions of work are highly relevant for companies since it affects the way of treating their employees. The Article recognizes the right to a fair and equal remuneration for work of equal values, regardless of gender. Furthermore, remuneration must allow the workers and their families to live under decent conditions11. It also includes safe and healthy working conditions, equality of opportunity for promotion, and the right to rest, leisure and holidays14. Amongst various others, the following ILO standards provide further guidance, e.g. employees should not be required to work more than 48 hours per week, or ten hours a day (possible exceptions)17,18, employees should have at least one day off in every seven days, and a minimum of three weeks’ paid holiday (public holidays excluded) for every year of full-time service19-21, minimum wages should enable the right to a standard of living, having enough to provide decent food, clothing and housing, and should be paid regularly and in full22,23.
As employers, companies can significantly influence the enjoyment of the various rights outlined in Article 7. Companies might negatively impact the compliance of this right by having inadequate workplace health and safety, cascading into accidents. Also, a company’s purchasing practices consistently permit changes to product order terms without adjustments to price or delivery time, placing pressure on its suppliers, who in turn impose excessive overtime on their workers. A business might be also involved with a negative impact, when staff employed by a third-party company, is paid extremely underpaid, with no or very limited entitlements14.
Article 12: Right to health
This Article acknowledges the highest standard of physical and mental health. As a state’s obligation, prevention and treatment of diseases, infant mortality reduction, improvement of hygiene, access to medical services, and promotion of health conditions must be ensured. The right also includes the control over one’s health and body (e.g. reproductive rights, freedom from interference). It is also required to have access to the essential health factors like nutrition, housing, safe water, sanitation, and a healthy environment24.
Pollution from business activities can negatively impact the health of workers and/or surrounding communities. To limit this, companies are expected to operate in a way negative impacts are minimized. Moreover, companies can have a negative impact by selling products which can be hazardous to consumers. Within a company, missing appropriate health and safety standards can have significant negative effects on the health of workers. Especially pharmaceutical companies have a responsibility to respect the right to health, extending beyond their own employees. NGOs and others expect these companies to provide access to essential medicines for poorer communities through methods like tiered pricing and flexible intellectual property policies. Additionally, there is pressure on pharmaceutical firms to invest in research and development for treatments of neglected diseases that are still prevalent in developing countries. Also, companies in high-risk pollution sectors, like extractive and chemical industries, are closely scrutinized for their pollution control policies. They must ensure their operations do not harm the health of workers and nearby communities11,14.
2.2.1 Impact of firms on rightsholders
People whose rights might be impaired by a company’s business activities are called rightsholders. Possible rightsholders include for example own employees, supply chain workers, employees of business partners, communities near production sites, consumers, parties affected by environmental impacts, and temporary workers. Vulnerable groups, including children, the elderly, minorities, women, etc., may be impacted at greater risk than others, as these groups struggle in making themselves heard. Regular dialogue with rightsholders or their representatives is crucial to ensure compliance of human rights25. The following table provides two examples of negative human rights impacts on own employees, communities near production sites and consumers as examples of rightsholder26.
| Own employees | Communities nearproduction sites | Consumers |
| Employees who are prevented from joining a trade union, or fired if they do so, are impacted in their right to freedom of association | Relocating indigenous peoples to make way for a new facility without proper consultation would violate their right to free, prior, and informed consentregarding the land they inhabit or use | Insufficient safety measures in company stores may compromise shoppers’ right to personal security |
| Employees living under unhealthy company housing may be impacted by their right to an adequate standard of living | Company traffic resulting in noise, dust, or safety issues could impact the community’s rights to life and health | Companies that encourage the irresponsible consumption of alcohol or high-sugar drinks, particularly among young people, may jeopardize their right to health |
2.3 Measuring human rights
In general, it is relatively easy to measure e.g. environmental impacts like emissions or energy consumption. In contrast, measuring the fulfillment of human rights, impacts on local communities and empowerment of marginal groups is more complex27. Since the abundance of data available is greater than ever, it is assumed that there are enough accurate metrics to measure human rights performances. But political sensitivity and governments avoiding producing and sharing this information constitutes a main obstacle. Reliable data enables state and actors to evaluate performance and identify which policies and institutions are truly effective in promoting human rights. Early attempts to measure human rights mainly focused on the right to physical integrity, facing many obstacles and restrictions: various interpretations of the concept of human rights across countries, governmental obligations, fragmentation, and reliability to and access of information. Even when measurement challenges are overcome, skeptics argue that human rights metrics may oversimplify complex violations and risk dehumanizing victims by reducing their suffering to numbers. Therefore, qualitative and quantitative research with diverse approaches, methods, and communication can deepen the understanding of the topic28.
2.3.1 Human rights indicators
Human rights indicators are a possible data-driven approach to make human rights measurable to companies27. Davis et al. (2012) define a human rights indicator as “a named collection of rank-ordered data that purports to represent the past or projected [human rights] performance” (p. 73)29. The main advantages of indicators are that they simplify and standardize data on human rights, taking context out of the account, and allow comparability over time and across companies. Despite these promises, human rights indicators risk yielding (1) invalid results and (2) non-emancipatory effects. Simplifying complex data can misrepresent corporate performance, and the current production of indicators can disempower victims and legitimate authorities. Quantifying corporate impacts might overlook abuses and prioritize easily measurable, but less significant issues30. The table below offers two examples of possible indicators measuring human rights abuses:
| Human right | Indicator example |
| Right of protection of the family and the right to marry | Percentage of employees who have taken all the parental leave to which they are entitled, by gender |
| Right to education | Participation rate of employees in educational programs and training in the last 12 months, by gender and employee category |
Given the relevant indicators for preserving human rights in companies, is just the first step of integrating them into the management system. On a corporate level, the second step is to convert them into key performance indicators (KPIs) by setting goals and creating implementation strategies. To access all relevant data means, to develop strategies for data collection, e.g. through collaboration across corporate departments and tools like company surveys. The collection of data on severe human rights violations, like child labor, poses a particular challenge. Therefore, companies should form cross-company cooperations and align with civil society actors and affected persons to tackle human rights issues. With that, it is easier to understand and compare the human rights impacts on business activities31. While companies already use KPIs in areas such as sales and overall strategy, human rights KPIs introduce rightsholder-centric metrics that have been missing from corporate strategy and decision-making27.
2.3.2 Human rights measurement initiatives
In the following, given only a few of many examples of measurement initiatives, the purpose is to show that initiatives use human rights indicators as a standard practice for measuring human rights in businesses.
Management tools
According to the UN’s Guiding Principle (GP) 20 (2012), management tools should “verify whether adverse human rights impacts are being addressed, business enterprises should track the effectiveness of their response” (p. 22)32, “based on appropriate qualitative and quantitative indicators” (p. 22)32 and draw on feedback from affected rightsholder32.
The Danish Institute for Human Rights published the Human Rights Compliance Assessment (HRCA) which can be used to self-evaluate human rights-related policies, procedures, and performance. The HRCA comprises around 200 questions and 1,000 indicators across eight sections, each tied to a specific business area. These questions and indicators are based on international human rights law and labor instruments, such as the UDHR and ILO Core Conventions33.
The following best practice example deals with compliance assessments carrying out human rights compliance audits at chosen production sites to establish a foundation for developing a management system that upholds the responsibility to respect human rights. The name of the company is not mentioned, despite operating in the automotive industry. The given company used the widely acknowledged and independent DIHR’s HRCA tool as a basis for the assessments, rather than developing its own questionnaire. The result was that the company’s guidelines and processes widely met the human rights requirements but also revealed potential for growth. Overall, the tool helped the company to increase awareness and understanding of corporate human rights, established dialogue between different corporate functions, and make risks more visible and predictable in the future34.
Reporting frameworks
As the UN GP 21 recommends, businesses are expected to formally report on severe risks of human rights abuses, either due to their business operations or the contexts. Reports should describe how they identify and address these impacts to enhance credibility32.
The Global Reporting Initiative (GRI) publishes one of the most widely recognized reporting standards including guidelines to enable organizations to report the sustainability information that matters. Since the G4 Sustainability Reporting Guidelines by the GRI (2015), human rights have also been included in a sub-category for the first time. It “covers the extent to which processes have been implemented, incidents of human rights violations, and changes in stakeholders’ ability to enjoy and exercise their human rights” (p. 173)35, regarding issues like nondiscrimination, gender equality, or child labor35.
Human Rights Impact Assessment (HRIA) Tools
As written in the UN GP 18 (2012), “to gauge human rights risks, business enterprises should identify and assess any actual or potential adverse human rights impacts with which they may be involved either through their own activities or as a result of their business relations” (p. 19)32. The purpose of HRIA can be defined as a process of identifying, understanding, assessing, and addressing the effects of business activities on the fulfillment of human rights36.
For example, the UN Global Compact published the Business Guide to Conflict Impact Assessment and Risk Management which guides companies to develop strategies that minimizes the negative effects and maximizes positive effects of investing in areas of conflict and potential risks. The Guide assists in decision making, stakeholder analysis and engagement, as well as impacts assessments around human rights37.
The best practice example presented for HRIA is a company operating in the tourism industry (name unknown). The tourism company recognized human rights as a critical issue affecting different sustainability topics. Consequently, the company developed a human rights policy and due diligence measures. With help of a human rights consultancy, an NGO, and a stakeholder advisory group, they implemented a HRIA, aiming to create a methodology specific for the tourism industry. The HRIA methodology included a toolkit of interviews with local stakeholders, conducted by the global Corporate Responsibility team with local support focused on children’s rights, workplace rights, and women’s rights. The results of the HRIA were published in a report which identified potential and actual human rights impacts, and areas for improvement. The tourism company then applied measures to address these issues (e.g. promoting its code of conduct, enhancing gender equality awareness)34.
2.4 Recent development: The Act on Corporate Due Diligence Obligations in Supply Chains
The Act on Corporate Due Diligence Obligations in Supply Chains (Gesetz über die unternehmerischen Sorgfaltspflichten zur Vermeidung von Menschenrechtsverletzungen in Lieferketten – LkSG) came into force on January 1, 2023. For the first time, the responsibility of German enterprises to respect human rights in supply chains was established by law38. Companies are responsible for their entire supply chain (rated based on their influence). They must meet obligations in their own operations and with direct suppliers, and address issues with indirect suppliers once aware of violations. The law outlines how companies must fulfill their human rights due diligence, including risk analysis, preventive and corrective actions, grievance mechanisms, and reporting of activities. The law also covers environmental protection since environmental risks (e.g. water and air pollution) can lead to human rights violations39.
3 Sustainability Implementation
The sustainability analysis can be counted as one of the first steps of the sustainability implementation, since the analysis provides the needed knowledge for improvements and where these are necessary. This chapter deals with implementation measures, that companies can take in order to improve their human rights performance and most importantly prevent them.
3.1 Public commitment
Companies can implement different measures in order to implement Human Rights into their corporate activities. At first, it is important that firms openly commit to implementing human rights into their policies, for example starting with a code of conduct. This means corporations should develop and adopt human rights policies that align with internationally recognized standards like the UN Guiding Principles on Business and Human Rights (UNGPs), which is the most recognized standard globally, or the OECD Guidelines for Multinational Enterprises (OECD Guidelines). These policies need to be publicly communicated internally and externally41,42. The internal communication of their human rights responsibility should be formulated in a language that makes it clear for everyone, where “the lines and systems of accountability” (p. 17)42 lie. Furthermore, the policies need to be recognized throughout the whole company. The external communication should address all, that are directly linked to a company’s supply chain and possibly affected stakeholders42.
Depending on the industry, size and other factors, companies might need to consider further guidelines and standards since the severity of different human rights infringements varies across industries and sectors. Moreover, by openly committing to human rights principles, companies should also hold themselves accountable for human rights violations occurring due to their business activities42.
A best practice example for public commitment is BASF’s (chemicals sector) ‘Statement on Human Rights’ in which they not only publicly commit to adhering to human rights, but also go into detail about the measures they have taken43.
3.2 Human Rights Education
A directly connected measure is that corporations should train their employees, especially those directly working with suppliers and on the selection of new suppliers about the importance of human rights in supply chains and everything it entails. Moreover, companies should raise awareness about the importance of human rights within their company, which is an action directly connected to the step of being publicly committed44.
All employees should be trained about their company’s human rights policies, code of conducts or any other human rights commitments, and how to execute them, on a regular basis. Employees should be made aware of supporting and protecting internationally recognized human rights. Further, employees should learn to avoid human rights violations and avoid the involvement in any human rights abuses. For this to work company-wide, it is necessary to train every employee including the top management and develop a human rights competence25,44.
Moreover, best practice examples Continental (technology and automotive sector), Deutsche Telekom (information and telecommunications technology sector) and Adidas (sportswear sector) illustrated, that a clear, accessible and practical language is important, because it makes abstract principles tangible. Human rights concerns should be made aware of in locations with the highest risk to locations with lower risk, since human rights risks, such as diversity or discrimination, can become a problem anywhere around the globe. At high-risk locations, topics like working hours, mental and physical stress, work-life balance and the general working conditions should be looked at in detail25.
3.3 Stakeholder Dialogue
Freeman (1984) defines stakeholders as any group or individual affected by or having an influence on an organization’s operations and success45. Consequently, some stakeholders are affected by an organization’s human rights violations, which makes stakeholder dialogue an essential part when it comes to human rights. Through stakeholder dialogues, companies can engage with their stakeholders along the supply chain, including local communities, NGOs and others that might be important. By communicating regularly, companies can use their stakeholders’ input to establish the right direction of controversial decisions40. Stakeholder dialogue can also be of advantage for a company because it can strengthen their corporate legitimacy due to a demand for more transparency and taking company-external voices into account40. To ensure to meet the company’s stakeholders’ expectations, companies can utilize stakeholder management, which are strategies to do just that and also to coordinate the relationships between a company and their stakeholders46.
As a next step, firms need to implement and integrate human rights activities into their business processes. One tool companies can use to implement this along the whole supply chain, is to write a (supplier) code of conduct, that has to be regularly fulfilled by every supplier40. Other tools can be certificates or standards. For instance, standards like the Fair Labor Association, with a focus on the manufacturing industry (textiles, agriculture, electronics etc.) or the Global Network Initiative, which operates in the information and communications technology industry. Both are sector specific, multi-stakeholder initiatives, which means all stakeholder-groups have the same voting rights. Through certificates and standards like these, a company has more security in the suppliers’ human rights efforts being legitimate, since they are established in their specific sectors. Furthermore, companies implementing standards like these show initiative beyond governmental regulations47.
A best practice example for using stakeholder dialogue to its full potential is Siemens (technology, industry, transport, medical technology). To identify human rights risks associated with their business activities, Siemens conducted a materiality survey with over 500 stakeholders. In order to identify human rights risks, participants were asked to rate the likelihood and severity of human rights risks. Additionally, Siemens collects data about human rights through multiple tools like supplier self-assessment and audits and conducts further risk analyses, particularly looking at rightsholders and ethnic or religious minorities, among other vulnerable groups25.
3.4 Due Diligence
Further, companies should undergo a human rights due diligence (HRDD). Due diligence is the process of analyzing the whole supply chain, suppliers, partners etc. about their individual human rights adherence42. The widespread use of HRDD has been initiated by the UNGPs and has been adopted to many other international documents, like the OECD Guidelines, since. It has also become a norm for corporate conduct41. Due diligence has not been used in relation to its impact on human rights and business activities until the connection has been made in the UNGPs41.
In the UNGPs HRDD is explained as interrelated management processes, that helps businesses to “identify, prevent, mitigate and account for their actual and potential adverse human rights impacts” (p. 459)41. What distinguishes the HRDD from other processes, is that is must be continuously implemented throughout the whole company and therefore the whole supply chain and it is not a one-time procedure41. HRDD can be included into the broader risk assessment of a company. However, it goes beyond the identification and management of material risks, the human rights risks should be considered as risks to rightsholders, rather than risks to the businesses. Furthermore, during the development of new activities or new business relationships, human rights due diligence should be initiated as early on as possible, because human rights risks can be increased or mitigated through new contracts41,42.
The use of the HRDD has increased through state regulations48. Many states, as well as supranational unions like the EU, have made some form of HRDD, in accordance to the UNGPs, mandatory. However, the foci of these due diligence acts vary. To just name a few, there is the Dutch Child Labour Due Diligence Act 2019, the German Corporate Due Diligence in Supply Chains Act 2021 and the UK Modern Slavery Act 201541. Nevertheless, there is some criticism about the effectiveness of the HRDD. There is a gap between businesses in support of the HRDD and those which put the HRDD actually into action. Moreover, the flexibility and voluntary nature of the HRDD prevent companies from seriously implementing it into their businesses41.
Tools companies can use to identify and prevent possible Human Rights risks are independent external assessment platforms like EcoVadis or Sedex49,50. Due to the periodical assessment, companies can track their performance and identify where they still lack the prevention of human rights abuses49,50. Moreover, the UN, partnered with the Japanese Government, developed their own B+HR Academy, B+HR standing for Businesses and Human Rights, that companies can join for support on implementing a HRDD. The B+HR Academy offers a guidance service along three steps: a human rights assessment along the companies supply chain, a training on HRDD to equip companies with the skills to identify, manage, and address human rights issues across their supply chain and guidance sessions with international experts for further information to avoid human rights violations51.
A best practice example of the prevention of human rights violations is BASF. Next to their own compliance department, BASF set up an advisory board with external, independent experts to introduce interdisciplinary aspects and ensure a general understanding25. BASF has integrated human rights aspects into their corporate management and therefore into their business processes and decisions. This facilitates BASF’s ability to identify potential human rights concerns at an early stage25.
3.5 Monitoring and Reporting
Alongside other sustainability actions it is fundamental for companies to monitor and report their human rights actions. On the one hand monitoring can help a company to improve its human rights performance and on the other hand by reporting a company acts transparently, which can improve their credibility concerning their human rights actions. By reporting, companies build a greater resilience in preserving their reputation amid negative impacts, due to improved public awareness of their comprehensive efforts to avert such incidents42,48,52.
Alongside the UNGPs, there are many tools for companies after which they can report, monitor and measure their Corporate Social Responsibility (CSR) performance, like the GRI standards, as mentioned in chapter 2.3.2 Human rights measurement initiatives. Furthermore, reporting can be counted as the final step of a due diligence process of a company. After identifying and addressing human rights risks, the reporting should be based on an effective HRDD that incorporates both preventative and corrective measures41.
In addition, companies can implement management systems that ensure the compliance to human rights, like ISO 45001 for occupational health and safety, which is the successor of the Occupational Health and Safety Assessment Series (OHSAS 18001)53. Moreover, management systems can help to improve a company’s social and environmental performance, alongside their economic performance. Beyond that, the economic performance is positively affected by financial or economic value created through the implementation of ecological and social measures54.
A best practice example for reporting is Bierbaum-Proenen (work wear sector). Through different reporting formats, progresses, implementation challenges and with insides into their HRDD approach and performance, the company provides transparency and credibility for their stakeholders. Additionally, Bierbaum-Proenen publishes audit-results and video footage of their international production facilities, and they write member reports for organizations like the Fair Wear Foundation25. The Fair Wear Foundation is an NGO that advocates for better working conditions in garment factories55, which makes sense for Bierbaum-Proenen to utilize since most of their work wear is produced in countries of the global south, e.g. Tunisia, Armenia, Pakistan, Bangladesh, where labor rights are often neglected2,56.
3.6 Corporate Grievance Mechanisms
Grievance mechanisms are procedures and frameworks that allow complaints about the workplace and workplace violations and can play an important role in corporate accountability. These mechanisms should be established along the supply chain and made available for every employee from top management down to the “small” workers in minimum wage countries. Grievance mechanisms can offer, in some cases, a quicker and cheaper way of resolving complaints than judicial measures. Also, they can become of particular importance to rightsholders in places, where juridical measures are failing to protect human rights violations57,58. Grievance mechanisms are addressed in the UNGPs as well, in which effectiveness criteria of grievance mechanisms are named. The criteria state, grievance mechanisms should be: “legitimate, accessible, predictable, equitable, transparent, rights-compatible and a source of continuous learning” (pp. 33 f.)42.
Company-run, internal grievance mechanisms are often non-transparent, which is why the adherence to external benchmarks or guidelines is of importance. There currently are some mandatory regulations by states like Germany or Norway, that address corporate grievance mechanisms, but these only mandate that one is in place and not the effectiveness of it. This can lead to the risk that more companies will implement grievance mechanisms, but most companies will not follow-through with actually executing them. Hence, there will not be an improvement in corporate accountability57. To ensure state laws are effective, they should include three key aspects: “the accessibility of the complaints system, the way complaints are handled, and the outcomes produced for rightsholders, including most importantly, the degree to which they provide remedies for rightsholders.” (p. 14)57. The comparability of these measures will help to uncover poor performing corporate grievance mechanisms and will allow further measures to improve the performance57.
Additionally, companies can join other international institutions such as the Better Work Program, which is a collaboration of the ILO and International Finance Corporation, which advocates for better working conditions in garment and footwear factories. “[G]overnments, employers’ and workers’ organizations, global brands, factory owners and workers”59 are being united by Better Work58,59.
Additionally, companies can join multi-stakeholder initiatives, like the Ethical Trading Initiative, for improvements and more legitimacy in their grievance mechanisms. Moreover, they can add certificates, e.g. by the Fair Wear Foundation because they require that members introduce complaints procedures. Benchmarks, ratings and other indicators can increase the quality of grievance mechanisms as well. The Corporate Human Rights Benchmark, which is based on the UNGPs, is an option. Others are the GRI standards, where grievance mechanisms are a part of the mandatory GRI 2: General Disclosures 202158,60.
A best practice example for grievance mechanisms is Adidas. They have set up a global compliance hotline, available to employees and third parties. Other channels where complaints can be expressed are via e-mail, post or fax. Adidas encourages factory workers especially to use hotline numbers provided in every factory. In addition, Adidas has set up an app, which workers can use to send feedback about how satisfied they are with the factory’s response to their complaints. Lastly, grievances can be submitted through independent channels, such as the Fair Labor Association. Adidas publishes the complaints alongside their current statuses and analyses them. However, not all cases are being published due to privacy concerns of the complainant25.
3.7 Remediation Framework of Corporate Human Rights Violations
Even with a comprehensive implementation of human rights actions, corporate human rights violations can occur. If that is the case, the question of the best way to handle these violations, comes up. Schormair & Gerlach (2020) have developed a framework for corporate remediation of human rights abuses through restorative justice based on the third pillar of the UNGPs, which is access to remedy42,61. Stage 1 is about discovering the human rights abuse through monitoring mechanisms and an immediate reaction to the complaint. The second stage is about process design and preparation. It is about engaging with the victim and offender about the upcoming remediation process and if both are in agreement about the offense. A restorative dialogue is the third stage. The purpose is to answer the following questions: What happened? Who was affected? What repairs can be made? The last stage is about reintegration, which is to make sure the agreed upon repairs are implemented by the company. Furthermore, this step is about ongoing support for the victim, maintaining the new repairs and regaining legitimacy and stakeholders’ trust61.
All things considered, there should be a continuous effort of improvement of corporate human rights activities, which applies to all the previous steps of implementation.
4 Sustainability Drivers and Barriers
This chapter focuses on the instruments, regulations and actors that can improve or hinder the human rights situation within companies and along their supply chains. The system of drivers and barriers is very complex and multi-layered, sometimes requiring a detailed understanding of the international legal system. Overall, they can be divided into internal and external processes and tools, which often influence each other and often overlap with corporate social responsibility drivers and barriers. Importantly, the drivers and barriers to human rights improvements cannot be generalized to all countries and companies around the world. A study by Alizadeh (2022) found that the barriers to CSR differ in importance in the Middle East and North African (MENA) region and Western countries62. Furthermore, the drivers and barriers are characterized by a power system between the global North and global South, and a power gradient between influential companies and workers along the supply chain.
4.1 Drivers
Starting with the internal drivers, the first approach to improving of human rights within companies is for them to take responsibility for their actions on a global scale. This concept is also known as corporate responsibility or business ethics. An important framework that underlines the importance of corporate responsibility is the UN Guiding Principles on Business and Human Rights (2011). The principles recognize that, alongside the state’s duty to respect and protect human rights, businesses act as ‘specialized organs’ with specific functions to respect human rights and comply with relevant laws42. According to Brenkert (2016), corporate responsibility “involves a deep sense of moral responsibility and pertains to all dimensions of corporate performance (economic, social and environmental) […].”1. Thus, with a growing sense of responsibility for their actions, human rights can be improved, as companies become actors that, in addition to creating wealth, also have a duty to respect and protect the rights of their employees and all human rights1.
Second, stakeholders (consumers, investors and employees) can be powerful in pressuring companies to pay attention to human rights and to take responsibility for their business actions. Stakeholders can act, for example, through consumer boycotts or trade unions. On the consumer side, individuals who buy from a company can be expected to be concerned about, or at least interested in, the performance of the company they are dealing with. If the company does not pay attention to customer attitudes or the social norms, it risks losing profits and its reputation as customers may choose to buy elsewhere or boycott the company63. In addition to stakeholders, social norms also have an impact on companies, as negative publicity can damage a brand’s reputation. Moreover, companies can be held accountable for their actions not only by the public, but also by the courts in the case of violations, and by their investors1.
Other external drivers include governmental drivers that affect companies. These can be legal obligations (CSRD or Corporate Sustainability Due Diligence Directive) or, according to Amalric & Hauser (2005), the prospect of new regulations. They argue that in a competitive market, companies may promote government regulation, but only if they can expect to obtain a competitive advantage over other companies, for example because they have already adopted better working conditions. A further incentive for companies to pay attention to their corporate responsibility without being obliged to do so would be the possibility of having to pay more under government regulation than under a self-regulatory approach63.
Next, NGOs can put public pressure on companies or promote human rights through partnerships, such as the Business & Human Rights Resource Centre. NGOs have taken an interest in corporate social responsibility and have begun to work with transnational corporations in the form of financial support from the businesses or support for corporations through management tools. Alongside these actions, NGOs have promoted voluntary regulations for companies in the form of codes of conduct or certification schemes. However, this approach has been criticized because these systems are only voluntary for businesses and the local victims are often not heard and represented. Therefore Noh (2017) suggests for NGOs to help strengthen grassroots movements with local actors and victims to seek remedy themselves, rather than acting over their heads64.
Linked to grassroots movements is another form of unionization, namely trade unions, which can also be external drivers of human rights improvements because they work to protect and support workers’ rights. The right to form trade unions is enshrined in the Universal Declaration of Human Rights6 and the ICESCR (Article 8)10 and the ICCPR (Article 22)65. In addition, the ILO Declaration on Fundamental Principles and Rights at Work includes the “freedom of association and the effective recognition of the right to collective bargaining”66. Forming trade unions means standing up for one’s rights and being able to draw attention to precarious working conditions and corporate violations of human rights66.
Finally, international organizations such as the ILO or the UN Human Rights Council are important actors in the global human rights arena, working to improve corporate human rights standards around the world and to prevent corporate human rights abuses.
4.2 Barriers
Although, there are several drivers that focus on the improvement of human rights, there are still a number of human rights violations that occur every day due to the barriers that are posed by the legal system and the organization of businesses. Most of the external barriers to improving human rights are in the legal sphere, which is highly complex and extensive due to the number of national and international laws and jurisdictions. Nevertheless, some of the challenges associated with this complexity will be discussed at a superficial level in this chapter, as they represent the most significant barriers. Legal barriers also include the issue of remedies for human rights violations, which are often times not easily accessible to victims.
From a legal perspective, the most important external barrier is the lack of a clear legal framework on who is responsible for corporate human rights, or what human rights responsibilities companies have alongside states. There are two views on this issue. On one hand, academics argue that companies are only responsible for a limited number of human rights. For example, Donaldson (1982) published a list of ten fundamental rights for which companies are responsible to avoid violating67. On the other hand, John Ruggie, the former UN Secretary-General’s Special Representative for Business and Human Rights, argues that companies are potentially responsible for all human rights that they might impact through their business activities. Although, there are two approaches to the responsibilities of business enterprises, it is important to remember that there is still a difference between the human rights responsibilities of the state and those of business enterprises1,68. The lack of a clear distinction between state and business responsibilities, and the absence of an overarching business and human rights treaty to govern business activities around the world is the most challenging barrier to the protections of human rights. Fundamentally, it is up to the states to regulate business activities in their own countries and to ensure the well-being of their people1.
Another important barrier in the imposition of regulatory obligations is the power and influence that actors in the field have over the state. Often, influential interest groups have to share values and interests with the posing regulator in order to be heard. In addition to the alignment of interests between social groups and policy makers, the former must also have financial resources and be well organized to compete successfully with other interest groups63. The term lobbyism is used to describe communicative actions aimed at influencing policy-makers and governments. The largest group of societal actors are economic lobbyists, who have the largest financial resources. Around the world, lobbying is dominated by economic lobbying, which highlights the power of corporations to influence states in their interests. The fact that other societal actors, such as labor organizations, do not have the financial resources of companies makes the struggle for visibility and regulatory influence unfair and contrary to democratic principles69.
The lack of a legal framework plays into the second external barrier, which is the legal complexity of the issue. Existing laws around the world can be divided into international and national laws, but the problem is that these laws are not always aligned, which makes it difficult to bring claims for violations. When looking specifically at breaches by European companies, each case has to be considered on its own merits due to the different structure of competences and legislation between the EU and its Member States, as well as the differences between the legal systems of the Member States themselves70.
And where can victims find remedy? In addition to legal complexity, access to justice is another major obstacle for victims. Increasingly, victims of corporate human rights violations have sought remedy in the legal system of the parent company, rather than in the victim’s home country. In the EU, companies have been sued through civil litigation, where a dispute between two parties, such as the company and the victims, is not based on criminal actions71, or through criminal cases, where the victims are the injured parties70.
On the internal barrier side, MNCs or TNCs are characterized by complex supply chains that make it difficult to gather information on human rights along all stages of the supply chain and to manage all suppliers responsibly. Outsourcing business activities can offer many opportunities for companies, such as improving and supporting specific competencies, but human rights violations along supply chains have always been a prevalent problem. As supply chains become longer and more complex, the question of who is responsible along the supply chain also comes into focus72. The barrier of supply chain complexity has recently been addressed by the EU’s Directive on Corporate Sustainability Due Diligence, which specifically addresses human rights and environmental impacts inside and also outside of the EU73.
The second internal factor that contributes to the complexity of the issue, and therefore also hinders the improvement, is that MNCs are organized in groups of separate legal persons, often domiciled in different countries, making the legal implications of violations complex. Rubio & Yiannibas (2017) write that it can be challenging for the EU to incriminate MNCs that have parts of their business based in the EU, while other parts of the company are based in non-EU countries. From a law enforcement perspective, these companies appear “as a multitude of separate legal companies with different ‘nationalities’.” (p. 7)70.
Lastly, the competition for foreign investments can be a barrier there is an interdependence observable between labor standards (e.g. labor laws, labor practice) and the competition for foreign investments through firms. This is especially evident in the Middle East and Latin America, thus Kucera (2013) explains this as improved labor standards having a negative impact on firm investments. He therefore suggests that it is important to consider the effects trade agreements between Western companies and countries with low labor standards have on other competing countries. As an effect the competing countries could further lower their labor standards and thus decrease human rights standards74.
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