Transparency in Human Rights Due Diligence
- Bennett Freeman, Senior Vice President, Sustainability Research and Policy, Calvert Investments, Inc.
- Lauren Berry, Director, Social Performance, Kosmos Energy
- Faris Natour, Director, Human Rights, BSR (Moderator)
Session Title: Transparency in Human Rights Due Diligence
Companies face more pressure than ever before to disclose the findings from their human rights impact assessments (HRIAs) and human rights due diligence. Investors, consumers, governments, and many other stakeholders are demanding access to company data and information.
Excessive disclosure can create risks for companies, can harm the stakeholders that an HRIA is meant to protect, and may affect or implicate the governments of host countries. Companies must learn how to balance transparency and confidentiality.
HRIAs are meant to be flexible and can take many different forms. Ideally, they should be conducted as part of a long-term relationship in which a high level of trust has been established.
“The company, whether it does [an HRIA] on its own or commissions outside consultants to do it, must do an absolutely 360-degree, comprehensive, unsparing … and that’s the key word, unsparing … assessment of the risks.” —Bennett Freeman, Calvert Investments, Inc.
“Before you can be transparent around government engagement, there has to be a really trusting relationship developed with the government so that you can have honest, open conversations about really difficult issues.” —Lauren Berry, Kosmos Energy
“The 21st century is the century of transparency. We’ve got to find ways to manage transparency and disclosure so that it doesn’t have negative effects.” —Bennett Freeman, Calvert Investments, Inc.
The question of transparency is critical when performing human rights impact assessments (HRIAs), and in CSR, where transparency is key, we often take the more-is-better approach. However, the issue is more complicated when it comes to human rights and HRIAs in particular. There are expectations about transparency, but companies tend to be hesitant given these issues’ sensitive nature, the volatile situations these assessments are conducted in, and the potential legal risks. This session focused on the challenges related to transparency and explored the root causes of this debate.
The session began by unpacking why transparency presents such a daunting challenge when it comes to human rights, both currently and historically. Lauren Berry, Director of Social Performance at Kosmos Energy, confronts issues of due diligence in oil exploration in the complex territory of the Western Sahara, a territory under the control of Morocco, its de facto government. Such a highly difficult, tense political situation requires significant government engagement and an understanding of how to leverage your own company’s influence and communicate transparently.
Bennett Freeman, Senior Vice President of Sustainability Research and Policy at Calvert Investments, offered a very different perspective as a creator of one of the first HRIAs in 2001 as a consultant for BP. Back then, when he realized due diligence could fill a critical role in developing and supporting ongoing projects, there were no models or guidance for creating a model; he started by thinking through a roadmap for risk assessment, which foreshadowed HRIAs as a tool.
The conversation then transitioned to the internal challenges that companies face. Freeman spoke about the company’s accountability and struggle to decide how much to disclose, since many sensitive local and governmental issues must be considered. There is often debate about whether to disclose the full assessment or a summary of key findings and recommendations. In the interest of accountability, he believes that a frank assessment and summary are adequate; plus, there may be tradeoffs, especially when handling sensitive security issues.
Berry referred to the internal legal challenges due to liability and potential for lawsuits. For her, the key component is mitigation. Much of what a company is documenting is outside its control; therefore, it needs to demonstrate that it has appropriately assessed the risk, has communicated with the government, knows what it is up against, and has drafted a management plan. Beyond creating documentation, companies must build confidence in their assessments by accompanying them with a plan.
Building on the conversation, both speakers emphasized the importance of trust, an integral component of the transparency and disclosure debate. Companies build trust over time by disclosing the fact that they have an HRIA, a broader due diligence framework, and extensive policy frameworks, as well as by engaging with stakeholders and shareholders. This trust stems from direct engagement and meaningful dialogue with real people. Establishing trust with foreign governments may be even more complicated and require several years of time and commitment. Kosmos Energy, for instance, created a joint declaration of principles for themselves and the government, which built confidence, committed them both to the project, and outlined their roles and responsibilities as a private company to respect human rights and benefit the local communities.
In the concluding Q&A portion of the session, an audience member asked whether the new standards and guidance are helpful for companies. Berry responded that although many companies find it helpful to have more-structured standards, it is not clear that they are driving company performance. A line-item reporting standard oversimplifies many complex issues and does not reference the deeper conversations hiding behind the data. However, the Reporting and Assurance Frameworks Initiative (RAFI) is beginning to address these extra steps.
The session wrapped up with a final question from an audience member about whether companies who want to begin to share their HRIA outputs will be perceived negatively and as “latecomers to the party.” Consistent with the rest of the session, both speakers and the moderator, Faris Natour from BSR, agreed that in general, any kind of disclosure will be seen in a positive light and that companies will get credit for engaging stakeholders. The appropriate level of disclosure requires being transparent on a broad range of components, including methodology, approach, the fact that a company is performing these assessments, legal and safety concerns, and stakeholder engagement.
November 4, 2014