According to a joint survey conducted by Herbert Smith Freehills and Legal Business, 51 per cent of the 275 senior in-house counsel surveyed believe their companies have changed their supply chain management practices to incorporate human rights duties.
Stéphane Brabant (pictured), co-head of Herbert Smith Freehills’ business and human rights group, said corporates are increasingly recognising that failing to respect human rights carries real legal risks, as well as reputational, financial and operational risks.
“Companies and lawyers need to change their mindsets. Hard sanctions can increasingly be imposed via soft law mechanisms, or by what can be described as ‘new judges’ (any stakeholders) and companies must anticipate and get ahead of this risk,” Mr Brabant said.
“We have come a long way from a few decades or even a few years ago when some multinationals did not feel concerned by human rights and did not want to hear about respecting human rights. Developments including the approval in 2011 of the UN’s Guiding Principles on Business and Human Rights have seen some of the very same companies become model citizens.
“There is now a growing recognition among corporates, as reflected by our survey, that human rights are not a law-free zone for businesses, and businesses’ obligation to respect human rights in their supply chains is no longer an option, it is a necessity.”
According to the survey, 46 per cent of respondents believe their organisation has made a public commitment to respect human rights, with 51 per cent saying this took the form of a code of conduct for suppliers and 44 per cent saying this was via a formal human rights policy.
However, 22 per cent of respondents are unsure whether their organisation has made such a commitment.
In response to the question of whether senior management is aware that the organisation may be held liable for non-compliance with its unilateral commitment on human rights, 65 per cent of respondents said management is either not aware, unsure or only partially aware, while just 35 per cent said senior management is fully aware.
Herbert Smith Freehills partner Daniel Hudson said that, since there is potential for litigation and enforcement if companies do not live up to their commitments, it is vital that in-house counsel are on top of the pledges and public statements being made in relation to human rights.
“It is also important for companies to go beyond what is strictly required under the law. They need to look beyond the strict legal litigation risks and consider reputation risk,” Mr Hudson said.
“Customers, shareholders, NGOs and lenders will expect them to be doing this and meeting high standards.”