Business and human rights – An imperative for Sri Lanka

Anisha Rajapakse

The UN Global Compact Network Sri Lanka will convene a training program on ‘An Introduction to Business and Human Rights’ today, 24 January, at Hilton Residences Colombo from 9 a.m. to 4:30 p.m. It is the first time that a training of this nature will be conducted in Sri Lanka, and will be the first in a series of trainings on the issue of Business and Human Rights (B&HR) for representatives from the private sector/business community to equip them with the knowledge and skills to make informed decisions about mitigating any potential risks in their business operations and supply chains and gain a more competitive edge.

The training will be delivered by Anisha Rajapakse, an international development expert who has two decades global expertise working closely with corporates, governments, intergovernmental and bilateral agencies, UN, civil society and other stakeholders. Till recently she was Europe-based, heading the Stakeholder Engagement department of a leading Business Association. Now relocated to Asia, she continues to engage closely with businesses to promote business integrity and reinforcing effective ways to improve respect for human rights and ensure sustainable global supply chains in line with the UN Guiding Principles on Business and Human Rights (UNGPs) Daily FT met up with Anisha Rajapakse, and asked her about what business and human rights really mean for Sri Lanka. Following are excerpts:

Q: How is Sri Lanka positioned in the area of business and human rights?

Sri Lanka is now a middle income emerging market, with one of the fastest growing economies in the Asia-Pacific Region. Its new economic strategies hold has the capability of bringing out the true potential of the country as a source for exports of diverse commercial and industrial interest, and making it a priority focus for international trade.

According to the BOI, the Government has a target of substantially increasing exports to reach $ 20 billion annually by 2020. However the FDI landscape remains fiercely competitive both globally and regionally in South and South East Asia. To ensure Sri Lanka’s continued attractiveness to FDI the country obviously needs a stable macroeconomic environment and the assurance of a predictable investment climate for investors which is quite critical. 

Whilst areas such as a competitive tax regime, safe and stable living and working conditions are important, investors are becoming increasingly risk averse. Many progressive international companies today will only look to locations and seek business partnerships with companies that can ensure transparency of their operations and their supply chains, and need tangible guarantees that they are free of unacceptable labour practices including workplace safety, child labour, forced labour and sexual abuse, violence and harassment of women in supply chains, etc.

Sri Lanka needs to stay ahead of the curve and have a greater competitive edge. The country’s FDI potential and efforts to attract new investments for the country will be further reinforced if businesses in-country are positioned as being aligned to an internationally accepted business and human rights framework such as the UN Guiding Principles on Business and Human Rights. The country will have a strategic advantage and will be able to achieve the vision of the government to ‘make Sri Lanka the most preferred destination for sustainable investment in Asia’. 

As globalisation has accelerated around the world, it has become increasingly clear that companies – whether local or multinational, publicly or privately operated – have major impacts on human rights, both positive and negative.

Sri Lanka is also facing growing investor pressure and regulations (in California and countries like the UK, The Netherlands, France and Australia) that seek compliance, and are clear in their intent that their suppliers must adhere to their ethical standards as a condition of working with them and maintain that any abuse of these standards will not be tolerated. The stakes remain high and cannot be ignored if Sri Lanka is to achieve its development goals and targets.

 

Q:  What are the UN Guiding Principles on Business and Human Rights and why should companies care?

 I really believe that one of the most significant changes in the human rights debate of the 21st century, is the increased recognition of the link between business and human rights. For a long time, Human rights was considered to be the responsibility of the government, not the actions of the private sector. Now the onus is on both. 

The UN Human Rights Council’s endorsement of the Guiding Principles on Business and Human Rights in 2011, was the result of a long consultative process with companies, activists, governments and others and still represents the most historic breakthrough in the field of business and human rights. The ‘Protect, Respect and Remedy’ Framework and the importance of corporate human rights due diligence sets of voluntary guidelines to enable business enterprises to act with due diligence and develop the necessary management systems, policies and processes to a reasonable extent as well as effectively prevent and address any adverse human rights impacts that may be detected in the supply chains. These have achieved widespread acceptance among stakeholders, having, for example, been inserted largely verbatim into the OECD’s Guidelines for Multinational Enterprises.

The Guiding Principles certainly are certainly not making unrealistic or complex demands of what businesses should or shouldn’t do. They are simply a guidance of what we can all reasonably expect of business in terms of respecting human rights. Companies that don’t respect human rights face increasing operational risks – disrupted supply chains, operating shut-downs, lost business opportunities, and an inability to recruit and retain the best employees. 

A very significant driver is the increasing scrutiny from the media, civil society, campaigners – particularly for consumer-facing companies that are arguably most exposed to brand damage and loss of market share. Social media has given people a channel to make their voices heard more loudly and clearly than ever before. ‘Naming and shaming’ companies that violate rights related to social and environmental sustainability and the resulting negative attention can damage critical relationships with investors, workforces and local communities. Furthermore, labour and trade unions are increasing their attention on human rights issues and on labour rights. 

High profile publicity around the tragic collapse of the Rana Plaza factory in April 2013 that killed over 1,000 garment workers in Bangladesh led to renewed questions about the quality of companies’ oversight of their suppliers’ human rights practices as well as the role of government in protecting such rights. It was a painful reminder that the clothing and fashion industry had, after decades of effort, failed to put its supply chain in order. Employees had been required to show up for work despite the discovery of cracks in the building the day before. It brought about intense pressure on global brands such as Nike, Gap and C&A. 

Very often, companies and their accounting systems fail to capture the bottom line costs that come with poor human rights performance, but there are examples from business that clearly demonstrates how significant they can be. These are invariably in the form of reputational, financial, operational or even legal risks. Threats to human rights are also a threat to business. The wider international community—including business itself—has agreed that business has a responsibility to respect human rights. It cannot be ‘business as usual’.

Q:  What exactly is due diligence? Can any company engage in human rights due diligence – even a SME?

 Simply put, due diligence refers to process or reviewing all available information. Human rights due diligence is about the prevention of adverse impacts on people. It concerns risks to people, not risks to business. 

 It’s not a complex process and requires anticipating potential risks or harm before they occur and to address adverse human rights issues based on good management systems, policies and processes and balancing expectations with resources. You need to know your supply chain. It needs to be mapped, because you cannot assess any risks if you do not know where your products are being made.

When a company has this vital information it will be able to detect, mitigate and manage risks as well as put in place the processes that lead to improving working conditions and promoting decent work. For any business operating or expanding globally, due diligence is not simply an extra process; it’s a legal and reputational imperative. Today supply chains face growing risks in the form of labour abuses, child labour, bonded labour, corruption and environmental impacts and the cost of non-compliance is high.

Conducting human rights due diligence, as set out in the UNGPs entails not only ‘knowing and showing’ that a company respects human rights in its own operations, but also throughout its value chain. This includes assessing impacts from a company’s business relationships such as where a supplier maybe subcontracting to. While large businesses generally monitor adherence to core International Labour Organization (ILO) conventions, they often don’t look beyond their own direct operations at their contractors.

Due diligence is going to become standard operating procedure going forward. Many companies have welcomed the principle and they are already applying it in practice because when done right, it can only be to their benefit. It provides protection in law suits and other liability issues. It doesn’t absolve companies when they commit wrongs, but if they can demonstrate that they’ve done everything possible to get things right. That really helps.

Sri Lanka needs to stay ahead of the curve and have a greater competitive edge. The country’s FDI potential and efforts to attract new investments for the country will be further reinforced if businesses in-country are positioned as being aligned to an internationally accepted business and human rights framework such as the UN Guiding Principles on Business and Human Rights. The country will have a strategic advantage and will be able to achieve the vision of the government to ‘make Sri Lanka the most preferred destination for sustainable investment in Asia’ 

Due diligence need not be a tall order for companies however large or small. If smaller companies do nothing, they are inherently at risk of potential loss of business. Large companies that source from them need to ensure supply chain transparency and conform to international standards and compliance requirements. If human rights abuse occurs in the SME supply chain, and that comes to light, the larger company will cease all business with that SME as the reputational risk would be too great and they will also be held accountable. Therefore, it makes real business sense for companies irrespective of its size, conducts due diligence of its supply chain. For most companies, human rights and human rights due diligence are still relatively unfamiliar territory. Many companies are now working towards improving their understanding of the issues, either through their own initiatives, or in co-operation with other companies, or with the help of experts and stakeholders.

When it comes to tackling rights abuses related to business, a company does not need to go it alone. This is where the power of partnerships and collaborations kick in. Any effective intervention would be informed by meaningful stakeholder engagement, in particular with affected stakeholders (e.g. workers themselves), trade unions and grassroots/community organisations. A collective voice can fast track positive change if the voices are in sync. Changes will not happen overnight, but they can lead to lasting impact over time.

Q:  What recommendations do you have for companies seeking to advance corporate respect for human rights within their own companies?

 In my experience, corporate respect for human rights needs to start from the top. Companies that make the greatest headway and are tremendously successful tend to have senior leadership actively involved in human rights issues. There needs to be internal understanding of the UNGPs and what potential human rights risks exist throughout all aspects of the business followed by buy-in from the top management to act to ensure that the company’s human rights responsibilities are fully met. If there is a lack of management commitment, you can be quite certain that other people and departments in the company will not be aware of their responsibilities to uphold human rights.

Next, it’s important to reflect on the key priority areas of your business – where are your greatest human rights risks? Start by focusing your actions here. Need to make sure companies engage wide range of stakeholders to identify these priorities, including those most likely to be impacted. Effective stakeholder engagement is quite critical

The UNGPs recommend that companies have a publicly available statement that, among other things, draws on external and internal expertise in its formulation. The statement or policy should also be communicated internally to all personnel as well as externally to business partners and other relevant stakeholders. Also, of importance is a due diligence checklist/strategy and a remediation process in place in the event of a complaint or grievance. Many larger companies will probably have many relevant tools and processes already in place – but may not necessarily be looking at it through a human rights lens. Need also to keep in mind that the simple existence of a policy does not mean very much on its own; what matters is its content and how it can be implemented.

On the positive side, globally, many in the business community are more focused than ever on the need to integrate human rights principles into their activities. For example, companies in the hospitality and construction sectors have joined the fight against human trafficking. Companies in the garment industry are actively engaged in improving poor labour conditions in global supply chains; agriculture and food companies are working to permanently eliminate child labour and forced labour, and companies in the information technology (IT) sector are engaged in improving working conditions in their supplier factories.

Compared to many countries in the Asian region, Sri Lanka is emerging as a place for ethical businesses and is more advanced in the manner its businesses respond to social and environmentally sustainability. Many of the leading companies in Sri Lanka and even some of the medium sized ones are already engaging in integrating human rights considerations into their policy making. Some already have internal policy statements on human rights, 

Q:  How can the government approach business and human rights? Does Sri Lanka need a National Action Plan on Business and Human Rights?

Today, ethical, sustainability savvy investors look for long-term prospects and they are the type that Sri Lanka should attempt to attract. Such Investors prefer sustainable investments rather than a lucrative business which gets shut down by human rights violations or corruption. Therefore, government has the prudent responsibility to create a level-playing field where unethical companies cannot undercut ethical ones for merely short-term gains. An increasing number of business agreements, free trade agreements and other international partnerships signed to-date include clauses of international human rights conventions, making them law. 

Establishing a specific Business and Human Rights framework within the Government of Sri Lanka will be an ideal way forward as the need for a responsible government body dedicated to rectifying business-related human rights violations is quite critical. It’s also important to keep in mind that there must be checks and balances in place not only for companies operating within Sri Lanka, but also for Sri Lankan companies operating outside of Sri Lanka through subsidiaries or joint ventures.

That’s why a National Action Plan on Business and Human Rights will be beneficial to Sri Lanka in the long term as it would complement the country’s ambitious development agenda and reduce the business-related risks and rights violations. For businesses, by conforming to a business and human rights framework, it would mean the mitigation of reputational, operational and legal risks that impact on wealth generation, job creation, and growth in trade and investment.

To date 20 national action plans (NAPs) on business and human rights that have been issued globally. These demonstrate government reaffirmation and expectation that business enterprises exercise human rights due diligence. While most of these are from countries in the West, there are other countries in which the State is in the process of developing a NAP, whilst another grouping which includes India, is currently taking steps to facilitate the development of national processes that would lead to the issuance of a NAP. 

For Sri Lanka, what is really needed are renewed discourses about formalising a set of such national voluntary guidelines – leading to the development of a National Action Plan for Sri Lanka on Business and Human Rights with adherence to the UNGPs that will enable both government and businesses to make clear what ‘responsible business’ should look like. It is always easier to be part of the solution, than part of the problem. That way, business can indeed be a force for good.