One of WBCSD’s Action2020 Business Solutions is to help more companies operationalize the UN Guiding Principles on Business and Human Rights. These principles require that companies:
- Prevent and fix adverse human rights impacts in their actions
- Prevent and mitigate human rights impacts that are even indirectly linked to their business.
Institutionalizing these principles requires robust business processes to identify, prevent and correct social red flags in the supply chain. And as a new report from EY, “Human Rights and Professional Wrongs” observes, while factory auditing of social impacts is now a widespread business practice, it’s not necessarily being executed in an effective manner. Some of the operational barriers EY identified included:
- Limited stakeholder engagement and transparency
- A checklist auditing approach which fails to assess the systemic culture and root causes of human rights impacts
- Outdated social compliance standards
EY also noted that in very poor and fragile countries—where a lot of production has moved because of cheap labor costs—fixing human rights issues goes way beyond what an audit at an individual factory can address. Is this the elephant in the room? Can production against aggressive cost and volume criteria be met while at the same time providing workers with basic needs and rights such as health and well-being and favorable work conditions? And if the answer is no, does that mean for us, as consumers, that the price is not right?
WBCSD’s new Redefining Value Initiative aims to create a framework in which natural and social capital are properly valuated and managed in business processes, strategies and decision-making. Such an approach should lead to a re-alignment of corporate KPIs that will move companies beyond social compliance and check-lists to entirely new business models in which positive social and environmental impacts are rewarded in the marketplace.
Our theory of change suggests that pricing should reflect externalities and that we need to change the rules of the games. This, of course, opens up another philosophical—or maybe even practical—discussion: how will this integrated approach impact pricing and consumption? Are we, as consumers, ready for a price that’s right?