Doing the right thing
Directors face new challenge
On Monday, 8500 copies of the ‘‘the director’s bible’’ will be posted out, and for the first time there’s a chapter on human rights.
The Four Pillars of Governance
Best Practice is the Institute of Directors’ (IoD) textbook for directors.
There is a digital version, but there’s still massive demand for printed copies, which will start landing in directors’ mailboxes from tomorrow.
The inclusion of a chapter on human rights marks a seminal moment in New Zealand corporate history, telling boards that the old days of ‘‘don’t ask, don’t tell’’ tolerance for human rights abuses in their supply chains are gone. Four Pillars of Governance Best Practice warns directors: ‘‘Respecting human rights is not about compliance, but rather human rights risk management.’’
Modern social media meant companies which do not ensure their global supply chains were free of human rights abuses, were taking significant reputation risk, said IoD chief executive Kirsten Patterson.
‘‘Distributing risk down to your supplier is not acceptable.’’
‘‘It’s consumer-led, both locally and internationally, right through the supply chain, you have a lot more line of sight,’’ said Felicity Caird, manager for the IoD’s Governance Leadership Centre.
But, managing human rights risk was not all about the bottom line.
‘‘Ethical behaviour and respecting human rights is about doing the right thing,’’ the textbook reminds directors.
The big risks for companies from failing to avoid human rights abuses were damage to reputation, damage to sales and share price, being sued or prosecuted, losing efficiency (as time is taken to deal with the fallout from a scandal), and having to meet ‘‘other costs’’ such as security and replacing staff who leave in disgust. Four Pillars of Governance Best Practice sets out five steps for boards to get on top of human rights risk management.
Boards need to embed respect for human rights into their company’s culture, knowledge and practices. They need to identify and understand their human rights risks. They need to address and manage those risks. They must tell stakeholders how they are addressing human rights risks. And lastly, they must report on those risks.
Overseas, human rights has become a big issue for companies, and New Zealand exporters have little option but to embrace it.
In 2015, the UK passed the Modern Slavery Act, which means big companies operating in Britain must report on their efforts to ensure there is no slave labour in their supply chains.
It also mandated the creation of an Anti-Slavery Commissioner.
The first is Kevin Hyland, who was flown to New Zealand by the Ministry of Business, Innovation and Employment for a roundtable meeting with large Kiwi companies in June including Countdown, Foodstuffs (owner of New World and Pak ‘n Save), Z Energy, NZ Post, Air New Zealand, and Zespri.
Three of the Roundtable participants - Z Energy, Air New Zealand and NZ Post - already required their suppliers to adhere to basic human and labour rights, and published supplier codes on their websites, IoD said in the September edition of its
Boardroom magazine. Actually, says James Walker from Countdown, make that four, though Countdown’s policy for ‘‘Promoting better labour practices’’ in its supply chain is actually on the website of its Australian parent.
Suppliers had to implement systems to ensure no human rights abuses, and there was some auditing to ensure they did, though that was ‘‘predominantly’’ for suppliers of Countdown’s own brand products.
Where there are specific issues, such as forced labour in the giant government-controlled Uzbek cotton industry, Woolworths could take action. It has told suppliers not to use Uzbek cotton.
Antoinette Laird from Foodstuffs said: ‘‘All of our suppliers are expected to adhere to robust food safety standards and the relevant legislation, including labour laws, in place in either New Zealand or their country of business.’’
Foodstuffs could ‘‘request’’ certification suppliers were clean of human rights abuses, and independent audits were provided some suppliers.
But, she said: ‘‘We are looking at how we can implement more robust processes to ensure our suppliers are compliant in this area.’’
Distributing risk down to your supplier is not acceptable.