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.

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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.

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References

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