Ethical Performance
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bringing human rights within a risk management framework

July 2005

How does a multinational company go about trying to integrate human rights in its operations? EP looks at the approach taken by Barclays Bank, which is a member of the Business Leaders Initiative on Human Rights

Human rights present a particular challenge for multinational companies. Any suggestion that a company is failing to observe them can rapidly diminish its standing and damage its prospects, but its responsibilities with respect to human rights, beyond obeying national laws, are not clearly defined.

The basic international covenant, the Universal Declaration of Human Rights, adopted in 1948, strictly speaking applies to nations, not companies. More recently, international initiatives such as the UN Norms on the Responsibilities of Transnational Corporations, currently kicked into the long grass (EP7, issue 1, p5), have put corporate practice in the spotlight.

Despite, or rather because of, these uncertainties, some companies are now beginning to consider their human rights obligations in a systematic way and to formulate policies for managing them. In 2003, a number of multinationals (see box below) came together in the Business Leaders Initiative on Human Rights to 'explore the ways that human rights standards and principles can inform issues of corporate responsibility and corporate governance'.

Philippa Birtwell, head of public issues at Barclays Bank, the sole financial services company involved, has overall responsibility for developing the bank's stance on human rights. For other companies thinking of going down this road, she offers two pieces of advice: do not underestimate the magnitude of the task, and go back to basics. 'Any big company is likely to face a large number of competing definitions and demands in relation to their human rights responsibilities,' she says. 'So start from fundamental principles.' In her case, this meant the Universal Declaration, which was the base document used to write the group's human rights statement. Birtwell points out that the Declaration, although useful for companies developing human rights policies, can only be a starting point because it is silent on certain key operational issues, among them bribery and corruption.

The biggest challenge, she says, is to relate the Declaration's lofty ideals to everyday business practice. Her approach was to produce a group statement on human rights and then apply it to the bank's different roles as purchaser, employer and lender. The statement, in which the group general counsel office was closely involved, 'aims to achieve a consistent, complete and recognizable approach to upholding human rights across the group'. It seeks to act as a guide for staff on their responsibilities, to aid compliance with legislation and standards, and to demonstrate to stakeholders that Barclays is managing its 'human rights impacts, risks and opportunities effectively'. In addition, it supports the bank's objective of being seen as responsible.

'The statement is really a policy of policies - almost a cultural thing,' says Birtwell. 'It sounds daunting at first, but once you start looking into it, many of the policies and monitoring systems may well already be in place, even if not branded as within the realm of human rights. I suspect this is the case for most companies, which are probably doing 90 per cent of it already.' This makes it important to avoid duplication, particularly when monitoring policy outcomes. 'In some areas, such as human resources, there are likely to be key performance indicators and targets already in place in different parts of the business. A further overlay brings no benefits,' says Birtwell.

The next step was to assess the extent to which the policies were currently implemented in different parts of the business. This 'gap analysis' identified areas for improvement in bank policies and management systems related to human rights, and pinpointed where training budgets could be most effectively spent. As a result, the bank has, among other things, brought its policies for sourcing and employing security services into line with UN guidance, and identified areas of priority for staff training in human rights. Barclays has operations in over 60 countries, including some assessed as Category A countries by Ethical Investment Research Services in its oppressive regimes list, among them Egypt and Zimbabwe.

But it is Barclays' role as a lender that has arguably been most affected by formal consideration of human rights. The chief mechanism has been the Equator Principles, which are social and environmental criteria for project finance transactions. Barclays was involved in drafting the principles in 2003 and has since put in place lending requirements that go beyond the minimum required by the principles. Its Mining and Metals and other project finance teams now review in detail the social and environmental impact of projects below Equator's $50million (£27.4m) capital cost threshold, and the bank applies the same screening 'to non-project financing where there is a known application of funds to an environmentally or socially sensitive development'. It has also revised its terms of reference for consultants who carry out the assessments. More generally, the work on human rights within Barclays and in association with the business leaders' initiative has strengthened links with pressure groups and government officials, particularly in relation to international debate on the UN Norms. 'It's hard to identify a direct causal link between the group of policies and a change in what the company does because this is about changing the culture,' Birtwell stresses. 'It's very much work in progress.'

At central policy level, there is now a framework for managing Barclays' primary human rights impacts, supported by executive accountability and regular monitoring. Progress is assessed by reference to the group's corporate responsibility board standard and overseen by the board-level Brand and Reputation Committee, which originally decided that the group needed an overarching human rights policy. In the longer term, human rights may be added to the company's established measures for ensuring the health of the Barclays' brand, bringing it within the wider governance system and subject to annual review.

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