The 6 Types of 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 element for the sustainability of any business and plays a significant role in the board of directors and management responsibilities.
However, many organizations are continually disturbed in their practical and structured implementation of CSR. The current governance angle of CSR i.e. The UN Guiding Principles is yet another element of disturbance, when it is more advisable to take a risk based approach to CSR compliance. Before UN Guiding Principles it was the UN Global Compact which calls on business to support and respect the protection of internationally proclaimed human rights.
The UN Global Compact and the UN Office of the High Commissioner for Human Rights had to develop an explanatory note on the relationship between the UN Global Compact and the Guiding Principles. Global Compact participants, stakeholders, and the broader community are encouraged to review the note to learn more about the interconnectivity of these initiatives.
On the other hand, many CSR surveys have identified six key CSR risks that businesses encounter from social and environmental mega forces that most companies are involved in:
- 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
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.
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
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 recommends that the implementation of UN Guiding Principles on Business and Human Rights is simply one component in the CSR engine room. The primary focus of the framework is continuous risk based assessment and monitoring of all CSR activities, based on the accepted principles of CSR and not the UNGP or UNGC perception of CSR as a stand-alone project.
In short, the Risk based approach of the Copenhagen Compliance CSR framework includes the UN Guiding Principles, compliments the UN Global Compact by establishing a CSR framework that guides companies to creating value by fulfilling their commitment and respect for human rights
