Impact Topic: Human Rights
B Lab’s standards define the performance that a company needs to manage and continuously improve upon to achieve and maintain B Corp Certification. Since 2006, they have been developed to improve their impactfulness and clarity around what it means to be a leading business and to incorporate feedback shared along the way.
In order to achieve these goals, the draft standards have departed from the current framework where companies have flexibility in how to achieve a verified 80-point score, and instead meet specific requirements across the standards’ Impact Topics. While the components of the draft standards have been developed with the existing standards in mind, you can expect to see new topics, designed to optimize and improve our certification processes. After all, the B Corp community is on a journey of continuous improvement.
Human Rights as a topic is central to the concepts of justice, equality, and dignity for all individuals. Whilst historically an implicit topic for B Corp Certification, the latest drafts take a more explicit and concrete stance. Its inclusion as a separate topic aims to ensure B Corps take a much-needed leap forward on human rights due diligence.
Bernard Gouw, B Lab’s Senior Social Standards Manager, shares why this Impact Topic is critical for businesses of all sizes and industries and its deep-rooted links to other social topics.
We are now in the ‘Business & Human Rights’ paradigm, marked by the UN’s adoption of the Guiding Principles on Business & Human Rights in 2011. It was a game-changer. In this new model, there’s an explicit and agreed expectation of all companies to respect human rights. Never was the expectation so clear, making a much-needed distinction between what falls under companies’ responsibilities as opposed to the state. So what does it mean for companies to respect human rights? In short, they must practice human rights due diligence.
This entails treading carefully, mindful of potential negative impacts on all people that may be affected by a company’s operations: the company’s employees, its supply chain, and any end consumers. It’s a big and perhaps daunting scope, but the key to due diligence is knowing where to focus. And this requires companies to operate with their ‘eyes open’, being self-aware, proactive, and sincere in looking at how their operations touch people’s lives. It also requires constant learning and a commitment to continuous improvement over time.
Eventually, Human Rights due diligence should become second nature, much in the same way food safety or financial due diligence have become mainstream expectations of companies.
This new paradigm also clearly states that no amount of philanthropy can offset negative impacts. Company philanthropy is a choice; addressing negative human rights impacts is not. And where those negative impacts have occurred, despite a company’s best efforts, there’s an added expectation to remediate, or correct, the negative impact. This is a crucial piece of the puzzle and why due diligence and remediation are always presented as a package deal.
The Human Rights Impact Topic introduces a lot of new content to the standards. This is to align with the UN Guiding Principles on Business & Human Rights, as well as increasing consumer expectations and more rigorous legislation, particularly in the European Union (EU). The EU’s Corporate Sustainability Due Diligence Directive (CSDDD or CS3D), for example, will require large companies to practice due diligence, going a step further than only reporting on human rights, which is what the better-known Corporate Sustainability Reporting Directive (CSRD) requires.
The Human Rights Impact Topic ensures B Corps take a much-needed leap forward on human rights due diligence. For some B Corps, the content may feel new because of the specific framing and language borrowed from the UN Guiding Principles on Business & Human Rights. But many B Corps are already practicing aspects of human rights due diligence without knowing it or without calling it as such. In other words, B Corps won’t be starting from nothing.
Actions like protecting employees, improving working conditions in the supply chain, and ensuring products going to market are safe, are all part of human rights due diligence. The key difference will be that B Corp Certification requires businesses to do this more deliberately and consistently, accounting for the broadest set of potential negative impacts. For example, companies manufacturing alcoholic beverages or sugary treats may already be working on their supply chain practices but would be challenged to expand their due diligence to also consider health impacts on consumers. Likewise, a marketing agency that doesn’t have a significant supply chain would be challenged to consider who their clients are and what impacts their services have on people.
All four social topics in our standards intersect but require dedicated and distinct focuses.
Arguably, all four could fall under the Human Rights Impact Topic; JEDI (Justice, Equity, Diversity & Inclusion) has deep conceptual links with both Human Rights and Workplace Culture, and the Fair Wages topic addresses several human rights, both for a company’s own workers and those in their supply chain.
However, Human Rights and JEDI in particular often inhabit distinct spaces in sustainability and organizational change discourses. They also often fall under different roles or departments within a company and are subject to distinct frameworks, guidance, and regulation. It’s likely that JEDI and human rights will converge in the coming decade; but for now, we expect accelerated progress and impact by having companies approach these topics with focus.
The second consultation will run from 16 January 2024 to 26 March 2024.
The intended outcome is that B Corps treat all people affected by their operations with dignity and respect their human rights. Concretely, B Corps do this by implementing human rights due diligence.
The Human Rights Impact Topic introduces many requirements that do not currently exist in the B Impact Assessment. One notable exception is in the Baseline Requirements for MNCs, the extra standard for a multinational corporation (MNC), which requires them to have a human rights policy. In the new standards, we are proposing to require this of all companies that are medium-sized and larger.
One challenge with the Business & Human Rights movement is that it’s historically been focused on large, multinational companies. Perhaps this isn’t surprising given that large companies often commit the most severe human rights violations. Nevertheless, we mustn't forget that smaller companies collectively also have significant impacts and that most B Corps (currently 76%) are sole proprietors, or micro and small in size. This requires B Lab to translate existing frameworks and approaches, designed for larger companies, to the contexts of much smaller companies.
This is what led B Lab to partner with Fairtrade International in writing ‘People and planet in business: A simple guide to how small and micro companies can start or strengthen their due diligence’. This is the first human rights due diligence guide targeting micro-sized companies.
The short answer: all negative impacts on people. This doesn’t mean a company has zero negative impacts on people. It’s impossible to do this. Instead, companies are expected to know where to focus their efforts. Where there are potential negative impacts, they mitigate or prevent them. Where there are actual negative impacts, they remediate, or correct, them.
What about positive impacts? The UN Guiding Principles on Business & Human Rights focus on negative impacts, or ‘adverse impacts’ as they call it. Of course, negative and positive impacts are often different sides of the same issue. For example, the positive action of increasing wages reduces the negative impact of low wages. Nevertheless, stakeholders and standards setters are opting to more explicitly require companies to pursue positive human rights impacts. For example, the draft European Sustainability Reporting Standards refer to both positive and negative impacts. In our latest draft standards, the Human Rights Impact Topics focuses on negative impacts, while positive impacts are covered under the three other social topics and Impact Business Models (IBM) like the Workforce Development and Worker Owned IBMs.
Companies new to human rights due diligence should start by reading:
B Lab and Fairtrade International’s joint guide: People and planet in business
UN’s implementation framework: Guiding Principles on Business & Human Rights
Medium-sized and larger companies should initially focus their efforts on identifying their salient human rights issues. These are the human rights that are at risk of the most severe negative impacts through a company’s activities or business relationships (UNGP Reporting Framework). ‘Salient’ is another word for ‘material’, however in the human rights space the term ‘material’ is less commonly used as it historically referred to what was material to the company and not material to people.
Companies typically have a list of 5-12 salient issues, like low wages, gender discrimination, or access to water. Salient issues are crucial because whilst they are not necessarily the only risks a company should address, they represent the most critical ones that a company focuses on. It shapes what policies and processes they create, as well as what kinds of internal expertise and external stakeholder relationships they develop. It’s the starting point for many human rights due diligence expectations.
Several human rights sub-requirements refer back to a company’s salient human rights issues, so getting that right early on will not only help the company shape its due diligence approach but aid it in meeting other human rights sub-requirements in the new standards.
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