Wednesday, February 10, 2010

Business and Human Rights Part X--Tracking and Reporting Performance in Elements of Human Rights Due Diligence

This Blog Essay site devotes every February to a series of integrated but short essays on a single theme.  The Ruminations Series in 2009 produced a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope was that, built up on each other, the series would provide a matrix of thoughts that together might lead the reader in new directions. 
For 2010, this site introduces a new series--Business and Human Rights.  The series takes as its starting point the issues and questions raised by John Ruggie, the United Nations Special Representative of the Secretary-General (SRSG) on business and human rights, in a global online forum 
The U.N. "Protect, Respect, Remedy" framework is made up of three pillars: the State duty to protect against human rights abuses by third parties, including business; the corporate responsibility to respect human rights, which means to avoid infringing on the rights of others; and greater access by victims to effective remedy, judicial and non-judicial.  The forum is currently focused on the corporate responsibility to respect human rights, the second pillar of the framework. The forum is divided into sections, each of which contains multiple topics with space for discussion and comment.
New Online Forum for U.N. Business and Human Rights Mandate, United Nations Press Release, New York and Geneva, Dec. 1, 2009. Each of the Essays will consider one of the topics raised in the online consultation.  My hope is to help generate discussion and to encourage further discussion of the issues within the framework fo the consultation  framework. 

Part X: Human Rights Due Diligence--Elements of Human Rights Due Diligence; Tracking and Reporting Performance. IN PROGRESS

The SRSG has identified four core elements of human rights due diligence:
United Nations Special Representative of the Secretary-General on Business & Human Rights, Tracking and Reporting Performance.  With this aspect of human rights due diligence, the SRSG focuses on two issues that are not necessarily related.  The first goes to the nature of information harvesting.  The second goes to disclosure in two respects--the targets of disclosure and the content of disclosure.  

The SRSG rightly suggests that human rights information, like financial information, is relatively useless in isolation.  Human rights data becomes more robust where it can be compared for changes over time.  It is even more effective when it can be compared against bench marked standards.   "As with any other business issue, tracking performance on human rights is essential to knowing whether policies are being effectively implemented and to driving improvement."  United Nations Special Representative of the Secretary-General on Business & Human Rights, Tracking and Reporting Performance

This is one theme that might merits substantially greater exposition within the Second Pillar framework discussion.   Human rights due diligence information might best be understood in the same was as financial statement information.  With respect to the latter, it has become a matter of common knowledge that a single simple exposition is not enough to provide an accurate picture.  Instead at least three "pictures" are needed.  The first is a picture of the financial condition at a moment in time (the balance sheet).  The second is a picture of the movement from one balance sheet to another across time, focusing on the key elements of movements (the income statement).   The third separates technical from substantive change sin position, focusing on corporate liquidity (the statement of cash flows). Human rights due diligence ought to produce an equivalent set of statements that, together, produce a picture of corporate compliance with human rights obligations in a manner that makes it possible to compare information between reporting companies.  That requires the production of a picture of human rights compliance at the end of the company's fiscal or reporting year (the balance sheet equivalent).  It also requires an assessment of the items that produced the change from one year to the next (the income statement equivalent), provided in both qualitative (identifying the particular rights affected and the source of those rights) and quantitative (the measurable effect of the action).  Lastly, human rights due diligence reports ought to provide an analysis of flow of human rights human rights events across the business (the statement of cash flows equivalent).   

The financial statement equivalents approach also suggests the need for more specific general principles ror reporting the results of human rights due diligence.  One of the basic lessons of accounting in a global context has been that information becomes less useful if it cannot be readily read and understood from year to year and across businesses.  The great genius of generally accepted accounting principles was its utility as a means of developing a common language for  targeting information for harvesting, and for assessing and digesting information.   The focus of internationally accepted accounting principles developed by an international body, is to make it possible for investors and others to produce a common language for financial reporting information globally.   The principles behind these efforts is both sound and applicable in equal measure to the project of human rights due diligence. 

But the great substance of this discussion is devoted to disclosure.  Disclosure of tracking information "creates a critical feedback loop for companies, and enables stakeholders to better understand and engage with companies and compare performance within and across industries."   United Nations Special Representative of the Secretary-General on Business & Human Rights, Tracking and Reporting Performance. The linkages between disclosure of tracking data and transparency issues in general is acknowledged.  "Some have suggested that tracking and reporting performance with regard to human rights should discuss both processes and outcomes; candor with regard to challenges, not just successes; quantitative as well as qualitative measures; and include stakeholder voices.  [See also the discussion of Transparency.]"  That linkage is also explored in Larry Catá Backer, Governance Without Law: Assessment and Transparency in the Construction of Social and Political Institutions, Law at the End of the Day, July 2, 209. Lastly, the from of disclosure is discussed--the focus is on faster reporting; the implication is that it is necessary to minimize the opportunity for reporting entities to game the system by choosing methods fo disclosure that effectively fail to provide timely information while appearing to conform to the letter of disclosure obligations.  "Companies are beginning to experiment with more dynamic formats of reporting than the traditional process of collecting data that gets printed in an annual report, for example online dialogues and stakeholder review panels.  While the SRSG would not prescribe or recommend particular formats, some of these methods may be worth noting for their potential to enhance participation and inclusion."  Id.

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