Companies are expected to operate with respect for human rights – and construction firms that show they do so will be well-positioned for future challenges.
It’s five years since the Guiding Principles on Business and Human Rights were endorsed by the United Nations (the UNGPs).
And with new legislation placing greater human rights transparency and reporting obligations on businesses, companies within the construction sector are facing increasing scrutiny over their human rights commitments.
Well-publicised human rights breaches and complicated supply chains mean the question of human rights should not be considered as simply one of legality, but of reputation and ethics.
Concerns in the sector around the use of potentially vulnerable migrant labour (particularly with large global infrastructure projects), extensive subcontracting and long supply chains do exist.
In terms of human rights business standards, as well as the UNGPs, new soft and hard laws include the UK Modern Slavery Act, EU Non-Financial Reporting Directive, US Dodd-Frank Act and California Transparency in Supply Chains Act.
France and the United States have draft laws in progress which, if passed, will add human rights due diligence duties.
“Failure to comply with the UNGPs could lead to businesses facing significant reputational damage and a consumer, employee and investor backlash”
The UNGPs have shifted the onus from organisations simply reacting to human rights problems, to proactively ‘knowing and showing’ (ie identifying and disclosing their human rights risks).
Failure to comply could lead to businesses facing significant reputational damage and a consumer, employee and investor backlash. Despite this, progress in terms of managing human rights risk so far seems slow.
Our recent report found just a third (33 per cent) of businesses publicly report progress on human rights and only 8 per cent of board directors believe they have responsibility for managing human rights risk in their organisation.
However, in the absence of global, legally-binding human rights law, strong ethical leadership is critical to human rights success in the sector.
To strengthen senior commitment to human rights, a board member or dedicated board-level committee should be allocated responsibility. Setting the ‘tone from the top’ is vital in the creation and enforcement of human rights policies and practices.
“In the absence of global, legally-binding human rights law, strong ethical leadership is critical to human rights success in the sector”
For the construction sector, amending policies and contracts will rarely be enough to prevent human rights abuses.
Instead, risk assessments and due diligence of subcontractors and business partners is necessary to proactively monitor working conditions where risks exist. Businesses should also make it possible for workers to blow the whistle anonymously or raise grievances and have them properly investigated, without fear of reprisal.
Supply chain issues
But it’s not just working conditions: issues around the supply chain for goods used in construction should be risk-assessed – examples include factories using unsafe working conditions and child labour, or extractive companies harming the local environment.
If not managed correctly, the repercussions can be significant. The expectation that companies operate with respect for human rights and meet their legal responsibilities has become a global norm, particularly since the adoption of the UNGPs.
For some businesses, it may be seen as a competitive advantage and a way to reduce reputational and supply chain risks. It provides an opportunity to respond to customer and investor pressures, strengthen corporate governance, increase transparency or just “do the right thing”.
Those construction businesses responding positively to these challenges will become the brands, partners, investments and employers of choice.
Thomas Player is a partner at Eversheds