A criticism of Environmental, Social, and Governance (ESG) over the years has been that it is so broad as to be meaningless. I would argue that, on the contrary, it needs its breadth to capture the interlinking qualities of ESG, which is more like a Venn diagram than a set of neatly contained boxes. Human rights provide a good example. Although, as the UN’s Principles for Responsible Investing points out, human rights “are the foundation of the ‘social’ pillar within the term ‘ESG’”, they also pertain to the environmental issue of climate change, since climate change has a “significant impact on human rights.”[1] Chatham House has observed, “It is now widely accepted that the climate crisis is also a human rights crisis, perhaps the most consequential of all time.” [2] The Global Reporting Initiative (GRI) also takes a broad view: “Human rights impacts are hugely important as they form the basis for wider reporting across the entire ESG spectrum.”[3] This pervasiveness of human rights requires a thorough analysis in defining ESG strategy and in developing a comprehensive learning programme.
In preparation, some questions an organisation might ask itself include: How robust are the organisation’s due diligence processes necessary to detect human rights abuses in the company’s own workforce, in its value chain, both upstream and downstream, and in the communities in which it operates? How comprehensive are its policies and procedures for applying the UN’s Ruggie principles to protect and respect human rights and to provide a remedy when abuses are uncovered? How well trained are employees in understanding the core elements of human rights within the ESG framework?
In defining and communicating strategy, human rights presents a particular challenge to businesses because it is a more abstract concept that requires a clear definition in order to manage its risks, opportunities, and impacts. Both the European Union and GRI have helped in this regard by incorporating the UN’s Guiding Principles on Business and Human Rights (UNGP) and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct into their ESG reporting frameworks. A starting point for organisations should be mastering their content, both for formulating strategy and for preparing robust human rights due diligence guidelines. The UN’s document itself says: “These Guiding Principles should be understood as a coherent whole and should be read, individually and collectively, in terms of their objective of enhancing standards and practices with regard to business and human rights so as to achieve tangible results for affected individuals and communities, and thereby also contributing to a socially sustainable globalization.”[4]
The UNGP, in turn, incorporates the International Bill of Human Rights and the principles concerning fundamental rights set out in the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work. So, these too should be thoroughly understood in analysing the many ways that human rights affects strategy. As GRI has noted, the UNGP “have become an authoritative global reference point. As a result, companies now have a better understanding of their responsibilities, which they can consequently incorporate into reporting.”[5] For GRI, the reporting is voluntary. For the EU’s Corporate Sustainability Reporting Directive it is mandatory, meaning that the 1,183 UK companies to which the European Sustainability Reporting Standards apply must file reports in 2025 for their 2024 financial year.
Effective reporting, of course, requires a knowledgeable workforce, which is responsible for contributing reliable non-financial information to the reporting process. To achieve this necessitates developing a company-wide learning programme based upon the documents noted above, as well as the organisation’s unique ESG human rights obligations, defined through its own internal human rights due diligence exercise. The programme would also need to be monitored to stay up to date with changes in human rights laws and regulations, as an integral part of the organisation’s continuous improvement policy.
Climate change and human rights are inextricably linked. It is impossible to control the former without incorporating the latter into an organisation’s ESG strategy and learning. Given their impressive history in diversity and inclusion[6], the Livery Companies are well placed to promote the vital role that human rights plays in managing climate change in the twenty-first century.
Tim Bovy, CEO & Cofounder, Six Sentinels
[1] “An introduction to responsible investment: Human rights,” 9 January 2024, available at https://www.unpri.org/introductory-guides-to-responsible-investment/an-introduction-to-responsible-investment-human-rights/12026.article#:~:text=Human%20rights%20are%20the%20foundation,significant%20impact%20on%20human%20rights.
[2] Chatham House Briefing Paper, “Renewing human rights: Inequality, climate and technology at the heart of the human rights agenda,” September 2023, available at https://www.chathamhouse.org/sites/default/files/2023-09/2023-09-14-renewing-human-rights-griffiths.pdf
[3] “Human rights is at the heart of corporate transparency,” 5 May 2022, available at https://www.globalreporting.org/news/news-center/human-rights-is-at-the-heart-of-corporate-transparency/
[4] United Nations, Guiding Principles on Business and Human Rights, 16 June 2011, available at https://www.ohchr.org/sites/default/files/documents/publications/guidingprinciplesbusinesshr_en.pdf
[5] GRI, “Helping Businesses Uphold Human Rights,” available at https://www.globalreporting.org/standards/standards-development/topic-standard-project-for-human-rights/#:~:text=Since%20the%20last%20update%20of,can%20consequently%20incorporate%20into%20reporting.
[6] City and Livery, “Diversity and inclusion among the City and its Livery Companies,” September 14, 2016, available at https://docs.google.com/document/d/1ElsIo7Ne0NMnp4_FaWHNdFISdMgK52kjdI-tqSgqTF0/edit