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”The business of business is business”, said Nobel Prize winning economist Milton Friedman in 1970. And with that statement he made it a globally accepted principle, that companies should exclusively focus on earnings, and not be concerned about ethics, social responsibility and regulation.

Though few companies today would subscribe wholeheartedly to Friedman’s statement, turnover and bottom line still trumps any other agenda, and rights and responsibility further down the supply chain is still regarded as someone else’s responsibility, as long as the company itself lives up to standards, laws and agreements. CSR is regarded as a choice rather than an obligation, and is opted in- and out of at will.

With the adoption of the UN Guiding Principles on Business and Human Rights in 2011, the business of business became responsibility. And although the principles have been in effect for almost a decade, many companies are still not aware of how they affect their business.

A new global distribution of power

Enforcing human rights issues was historically the responsibility of national governments. The hierarchy was – and still is – set in stone; only states have the right to make laws and enforce them, and consequently the possibility to sanction companies that break the law.

But following globalization, flows of capital and business moved frictionless across borders while sanctions to the largest extent remained national. And production was outsourced to third world countries where governments and national institutions by and large were weaker than where the production originated.

The distribution of power between governments and enterprise had pivoted in favor of business. It had become much more difficult to hold companies responsible for violations of human rights in the supply chain, and third-party stakeholders such as unions and NGO’s were unable to provide protection to individual workers.

The UN Guiding Principles on Business and Human Rights

In 2011 the UN adopted a set of guidelines that addressed these issues. The guidelines assigned companies a much greater responsibility for their productions, to ensure that their production had positive effects in the form of employment, growth and development rather than negative consequences like human rights abuse, environmental damage and corruption.

The Three pilars

The UN Guiding Principles on Business and Human Rights rests on three pillars:

  1. The first pillar states that governments have an obligation to pass laws that prevents violations of human rights – Just as they always had.
  2. The second pillar states that business’ activities cannot result in violations of human rights in their supply chain – regardless of where and in what context they take place. Simply adhering to local legislation is no longer regarded as enough, since there is no guarantee that those are adequate and properly enforced (e.g. in authoritarian states). Businesses have an obligation to take concrete measures towards remedying violations of basic human- and workers’ rights in their supply chain. This is without exceptions, and cannot be compensated for by e.g. building bridges and digging wells.
    Additionally, businesses are obligated to exercise due diligence. In practice, this means that they have an obligation to be familiar with their supply chain, able to identify risk areas and have a plan to take action in case of issues. It is no longer enough to remain passive until an issue arises.
  3. Third pilar addresses the consequences of not meeting the criteria in the first two pillars. Governments are madated to establish a court or similar institution that is able to deal with complaints and wrongdoing in regards to the previous pillars. Business must respect this institution, and actively work to improve the issues found by them. These institutions must work efficiently, and if they work too slowly or are corrupt, they will be regard as biased and illegitimate. The Danish institution is Mæglings- og klageinstitutionen for Ansvarlig Virksomhedsadfærd. And the Norwegian is Norges OECD kontaktpunkt.

Factlines is an efficient tool to ensure compliance with the criteria stated in the UN Guiding Principles including due diligence. With Factlines you gain insight, identify risk areas and form an overview of which actions must be taken when problematic issues arise.

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