The topics ESG (Environmental Social Governance) and CSR (Corporate Social Responsibility) have recently become widespread. In the course of globalization and the growing awareness of social issues, the demand on business enterprises to fulfil their social responsibilities with regard to human rights (ESG, CSR) is becoming ever louder. This is where risks hide, which can have reputational, liability, financial and regulatory consequences. But there are also opportunities (competitive advantages through fair trade; attractive corporate culture). The reporting of ESG criteria is also becoming increasingly important for the rating of (listed) companies and thus relevant for the value of the company.
What's at issue?
As standards and norms relating to CSRs are developing, companies are exposed to integrity risks. In this context, CSR means not only the avoidance of the direct impairment of human rights by certain activities (e.g. child and forced labor, mistreatment, discrimination), but also the avoidance of indirect effects by business partners (supply chain). Respect for human rights is the responsibility of companies regardless of their size, business environment and structure, although the measures required may vary in each case.
Which rules are relevant for companies?
The starting document are the UN Guiding Principles on Business and Human Rights, adopted by the UN Human Rights Council in 2011. These - very generally formulated - guidelines essentially comprise the following obligations:
the obligations of companies to assume their responsibilities and respect human rights by avoiding the impairment and counteracting adverse human rights impacts in which they are involved;
reparation in the event of infringement (through appeals, apologies, restitution, elimination of consequences, financial or non-financial compensation and punitive measures, as well as prevention of damage, for example through injunctions and non-repetition guarantees).
Subsequently, and on the basis of the UN Guiding Principles, numerous other soft laws were enacted, and initiatives were taken at the multilateral level or by NGOs. The variety of rules is confusing. We have filtered out the following most important decrees:
the OECD Guidelines for Multinational companies
European Commission Green Paper
Modern Slavery Act 2015 (UK)
Loi de Vigilance (France)
UNO Global Compact, which holds companies and government equally responsible.
The Swiss Confederation also became active and published two documents:
Position paper and action plan on corporate social responsibility (CSR) (1 April 2015)
the National Measure Plan on Economy and Human Rights (NAP) (9 December 2016)
The Group Responsibility Initiative (“Konzernhaftungsinitiative”) is pending.
What are the concrete measures to be taken?
We recommend the following steps:
1. Development of company specific policies
Rrisk analysis by the top management (VR/GL): Determination and evaluation of actual and potential risks
Fundamental decision of the company's top management (resolution of the board of directors; mandate to management to develop a code of conduct and policies)
Preparation of clear and concise documents (governance: code of conduct/policies; contractual documents for the supply chain; risk-based approach)
Implementation of the measures (e.g. sample contracts for the supply chain) in the affected business units
2. Implementation of a suitable due diligence process
3. If necessary: Measure plan (e.g. adjustment of the supply chain)
4. ESG / CSR Reporting in the annual report
MME will be happy to assist you as a legal partner and support you in fulfilling your responsibilities as a business company. We have worked out a pragmatic standard package that we can efficiently adapt to your specific needs and risk profile. Our governance and compliance specialists will not only assist you with paperwork, but also with the introduction and further development of CSR within your business process.