Does Your Business Need a Human Rights Strategy?

Companies must be prepared to meet their moral and business obligations when operations bump up against labor abuses — or worse.

Reading Time: 20 min 

Topics

Permissions and PDF

Image courtesy of James Fryer/theispot.com

Swedish fashion giant H&M’s commitment to “operating with respect to human rights across the value chain” recently cost the company $74 million and the wrath of its third-biggest — and fastest-growing — market.

In late 2020, H&M, along with other well-known fashion brands, publicly announced that it was no longer sourcing cotton from China’s Xinjiang region due to concerns over the use of forced labor among the country’s minority Uyghur population. When a website highlighted the announcement in March 2021, the Chinese consumer backlash was fierce. The company’s brands disappeared from Chinese e-commerce sites, landlords in parts of China forced many of the brand’s stores to close, and Chinese customs officials issued a warning alleging that H&M’s cotton dresses contained “dyes or harmful substances” that could endanger a child’s health.1 By the time the company’s quarterly results were announced in July, there was little surprise that sales had fallen by 23% from March to May.2 At the time, chief executive Helena Helmersson said the situation remained “complex” and expressed H&M’s commitment to regaining the trust of its customers and partners in China.3

H&M was hit hard by the Chinese reaction. However, with customers, employees, and activists paying increased attention to human rights, businesses that turn a blind eye to violations that occur in their sphere of operations face the risk of being exposed as morally complicit as well as vulnerable to legal action and reputational harm. That’s why it’s critical for companies to have a human rights strategy and proactively consider when and how to take the action needed to fulfill their moral obligations; meet shareholder, customer, and employee expectations; and keep other stakeholders satisfied.

Drawing on our research in business ethics and sustainability — including discussions with managers and human rights groups, and a close examination of how businesses have addressed these issues in the past — we’ve created a framework to help companies develop a business and human rights strategy that is applicable to their situations. The framework we provide offers tools to help companies gauge their vulnerabilities and identify approaches and tactics that will assist them in meeting their social and commercial responsibilities.

Topics

References

1.H&M Stores Shut by Chinese Landlords as Xinjiang Fallout Grows,” Bloomberg, March 29, 2021, www.bloomberg.com; and S. Ray, “China Accuses Nike, H&M and Others of Selling Goods That Could Be ‘Harmful to Children’ Months After Xinjiang Cotton Backlash,” Forbes, June 3, 2021, www.forbes.com.

2. S. Woo, “H&M Pays Price of Upsetting Beijing as China Sales Drop,” The Wall Street Journal, July 1, 2021, www.wsj.com.

3.H&M: Fashion Giant Sees China Sales Slump After Xinjiang Boycott,” BBC, July 2, 2021, bbc.com.

4. G. Arbuthnott, D. Collins, and J. Calvert, “Britain’s Biggest Trafficking Gang Used Slaves to Supply Top Supermarkets,” The Sunday Times, July 7, 2019, www.thetimes.co.uk.

5. K. Steiner-Dicks, “‘We Know Most Global Companies Have Modern Slavery in Their Supply Chains,’” Reuters, Aug. 6, 2019, www.reutersevents.com; A. Crane, “Modern Slavery as a Management Practice: Exploring the Conditions and Capabilities for Human Exploitation,” Academy of Management Review 38, no. 1 (January 2013): 49-69; and A. Crane, G. LeBaron, K. Phung, et al., “Confronting the Business Models of Modern Slavery,” Journal of Management Inquiry, Feb. 25, 2021.

6.Caterpillar Group Boycotted for Selling Bulldozers to Israel,” New Zealand Herald, April 15, 2005, www.nzherald.co.nz.

7.EU Companies Selling Surveillance Tools to China’s Human Rights Abusers,” Amnesty International, Sept. 21, 2020, www.amnesty.org.

8. A. Navalny, “Labs Found Novichok in and on My Body, Says Alexei Navalny,” The Guardian, Sept. 22, 2020, www.theguardian.com; “Action Brief: ‘The Report’ and CIA Torture,” PDF file (New York: Amnesty International, 2017), www.amnestyuse.org; L. Millar, “Australia’s Asylum Seeker Policies Heavily Criticised at UN Human Rights Council Review,” ABC, Nov. 10, 2015, www.abc.net.au; and N. Gaouette and J. Herb, “US Intelligence Report Finds Saudi Crown Prince Responsible for Approving Operation That Killed Khashoggi,” CNN, Feb. 26, 2021, www.cnn.com.

9. I. MacDougall, “How McKinsey Helped the Trump Administration Carry Out Its Immigration Policies,” The New York Times, Dec. 4, 2019, www.nytimes.com.

10. M. Posner, “How McKinsey & Co. Fails as a Global Leader,” Forbes, Dec. 18, 2018, www.forbes.com.

11. F. Wettstein, “CSR and the Debate on Business and Human Rights: Bridging the Great Divide,” Business Ethics Quarterly 22, no. 4 (October 2012): 739-770.

12. T.M. Jones, “Ethical Decision-Making by Individuals in Organizations: An Issue-Contingent Model,” The Academy of Management Review 16, no. 2 (April 1991): 366-395.

13. J.J. Kish-Gephart, D.A. Harrison, and L.K. Trevino, “Bad Apples, Bad Cases, and Bad Barrels: Meta-Analytic Evidence About Sources of Unethical Decisions at Work,” Journal of Applied Psychology 95, no. 1 (January 2010): 1-31.

14. K. Hodal, C. Kelly, and F. Lawrence, “Revealed: Asian Slave Labour Producing Prawns for Supermarkets in US, UK,” The Guardian, June 10, 2014, www.theguardian.com.

15. B. Palmstrom, “Forced to Fish: Slavery on Thailand’s Trawlers,” BBC, Jan. 23, 2014, bbc.com.

16.The Ogoni Issue,” Shell Nigeria, accessed Oct. 1, 2021, www.shell.com.ng.

17. P. Lewis, “Blood and Oil: A Special Report; After Nigeria Represses, Shell Defends Its Record,” The New York Times, Feb. 13, 1996, www.nytimes.com.

18. E. Pilkington, “Shell Pays Out $15.5M Over Saro-Wiwa Killing,” The Guardian, June 9, 2009, www.theguardian.com.

19. N. Wongsamuth, “Titans of Thai Fishing Collaborate to Tackle Slavery,” Reuters, Oct. 10, 2019, www.reuters.com.

20. A.O. Hirschman, “Exit, Voice, and Loyalty” (Cambridge, Massachusetts: Harvard University Press, 1970).

21. N. Craig Smith, “Morality and the Market: Consumer Pressure for Corporate Accountability” (London: Routledge, 2014).

22. C.J. Levy, “Microsoft Changes Policy Over Russian Crackdown,” The New York Times, Sept. 13, 2010, www.nytimes.com.

23. F. Hossain, “Search Ends in Bangladesh; Death Toll Put at 1,127,” Associated Press, May 13, 2013, www.apnews.com.

24. T. Webb, “Essay: Governance and Institutions — Big Brands’ Capacity-Building Success,” Reuters, June 16, 2008, www.reutersevents.com.

25. “Launch of the Fair Cobalt Alliance,” Fairphone, Aug. 24, 2020, www.fairphone.com.

26. C. Cloutier, “Limburg-Based Company Does Not Supply Grass to Qatar: ‘Sometimes You Have to Make a Decision on Ethical Grounds,’” Netherlands News Live, March 10, 2021, https://netherlandsnewslive.com.

Reprint #:

63225

More Like This

Add a comment

You must to post a comment.

First time here? Sign up for a free account: Comment on articles and get access to many more articles.