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Corporate Finance, DeFi, Blockchain News

Key Corporate Sustainability Risks and the UN Guiding Principles

The jury is no longer out on the importance of Corporate Social Responsibility (CSR). Most directors and managers agree that CSR is now an important management component for the sustainability of any business and plays a significant role in the board of directors and management responsibilities.

Porbunderwalla Kersi
Porbunderwalla Kersi
Global corporations are heavily involved in focusing on their legacy and footprint starting with a series of sustainability mega forces that impact almost every business environment over the coming years.

Management must build internal awareness to interact, because the elements of Globalization, Digital connectivity, Ecological decline, material resource or water scarcity or the lack of global governance are all interconnected and do not always act in predictable ways.

However many organizations are continually disturbed in their practical and structured implementation of many CSR components. The current governance angle of CSR is the UN Guiding Principles (UNGP). It can be yet another element of CSR disturbance, if it is not integrated, embedded and automated in the more risk based approach to CSR compliance.

The principle behind UNGP's second pillar is aimed at businesses. This component is fundamentally an issue for companies to ensure an implementation process(es) that enable the operations to identify human rights risks and document that the company is taking steps to mitigate them (a so-called "know and show" process).

On the other hand, many CSR surveys have identified six key CSR risks that most international companies are facing and have to mitigate (1) :
- Reputational risks: The damage to corporate reputation and perception if caught doing something generally unacceptable.
- Competitive risks: Impacts of all market dynamics including the uncertainty of supply, price volatility and international crisis.
- Legal risks: Exposure to any potential legal action including incl. regulatory, oversight and ESG issues.
- Regulatory risks: The continuous global changes to the regulatory landscape e.g. Bribery and Corruption compliance.
- Physical: Damage to assets and supply chains from physical impacts e.g. climate change issues, water shortages.
- Social risks: Conflicts, social unrest, community/worker protests, labor shortages, refugees, etc.

Advancing social sustainability with global business

However due to the current focus on the UN Guiding Principles on Business and Human Rights (UNGPs) many claim that the UN guiding principles are to be considered as internationally endorsed standard on CSR. In accepting that, the company takes a governance approach to ensuring that the company is a good corporate citizen with the primary focus on addressing adverse impacts on human rights linked to business activity, wherever in the world such impacts occurs (2).

The UN Guiding Principles is further claimed to be an authoritative global standard for CSR. The three pillars of principles concerning the UN Guiding Principles on Business and Human Rights requires that it is the responsibility of the State to protect human rights, while the corporate responsibility is to respect human rights, and access to remedy for victims of human rights abuse within their jurisdiction.

- Identify and clarify standards of corporate responsibility and accountability for businesses and human rights;
- Clarify the implications for businesses of concepts such as “complicity” and “sphere of influence”;
- Develop materials and methodologies for undertaking human rights impact assessments of the activities of transnational corporations and other business enterprises (3).

Global CSR reality

Be it as it may, depending on the-tone-at-the-top companies can start by assessing the current CSR policies and processes and map these to the UNGPs. However with an added focus on UNGP as an internationally endorsed standard on CSR you end up being entangled in addressing a whole bunch of human rights issues all over the world and the risk angle to CSR is on the back burner.

The structured and practical Copenhagen Compliance framework on CSR/ESG (4) recommends that the implementation of UN Guiding Principles on Business and Human Rights is one component in the CSR engine room while continuous assessment and monitoring of all CSR activities is based on the accepted principles of CSR and not the UNGP perception of CSR as a stand-alone project.

The framework addresses the CSR/ESG exposure and monitors the various CSR components. The foremost function of the structure is to determine the roles, define and describe the duties, and helps avoid duplication of the CSR efforts. The sum of these activities should ensure that critical CSR issues that form the overall picture of the sustainability mega forces are not overlooked. The Copenhagen Compliance Framework is developed to assist with the execution of the core CSR actions and to provide structure to strategies, policies and processes in the global CSR reality.

(3) Ibid

Kersi Porbunderwalla is the founder and CEO of Riskability®, Copenhagen Compliance® and Copenhagen Charter®.
After his early retirement from ExxonMobil, Kersi has been involved in several Global Good Governance, Risk Management and Compliance (GRC) Projects for multinationals like IBM, Shell, BP, Volvo and others.
He continues to implement GRC journeys for a variety of clients to develop custom tailored GRC folder that includes methodologies, roadmaps, and specific solutions to assignments, training and certification.
Kersi conducts workshops, seminars and conferences that focus on developing and implementing GRC applications & frameworks into operational environments.
He is a consultant, instructor, researcher, commentator and practitioner on 4 continents.

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Jeudi 20 Mars 2014