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Guiding Principle 21

In order to account for how they address their human rights impacts, business enterprises should be prepared to communicate this externally, particularly when concerns are raised by or on behalf of affected stakeholders. Business enterprises whose operations or operating contexts pose risks of severe human rights impacts should report formally on how they address them. In all instances, communications should:

(a) Be of a form and frequency that reflect an enterprise’s human rights impacts and that are accessible to its intended audiences;

(b) Provide information that is sufficient to evaluate the adequacy of an enterprise’s response to the particular human rights impact involved;

(c) In turn not pose risks to affected stakeholders, personnel or to legitimate requirements of commercial confidentiality.

Commentary

The responsibility to respect human rights requires that business enterprises have in place policies and processes through which they can both know and show that they respect human rights in practice. Showing involves communication, providing a measure of transparency and accountability to individuals or groups who may be impacted and to other relevant stakeholders, including investors.

Communication can take a variety of forms, including in-person meetings, online dialogues, consultation with affected stakeholders, and formal public reports. Formal reporting is itself evolving, from traditional annual reports and corporate responsibility/sustainability reports, to include online updates and integrated financial and non-financial reports.

Formal reporting by enterprises is expected where risks of severe human rights impacts exist, whether this is due to the nature of the business operations or operating contexts. The reporting should cover topics and indicators concerning how enterprises identify and address adverse impacts on human rights. Independent verification of human rights reporting can strengthen its content and credibility. Sector-specific indicators can provide helpful additional detail.

What National Action Plans say on Guiding Principle 21

[accordion clicktoclose=true tag=h3] [accordion-item title="Belgium"]

PLANNED ACTIONS:

Action point 16, Promouvoir les rapports sociétaux, droits de l’Homme inclus [Promote social reporting, including human rights] is the main action point covering the issue of non-financial reporting. The NAP explains that given the adoption of the new EU directive 2014/95/EU, some major companies will be required to disclose non-financial information in their annual report relating to the environmental, social and human resource issues, respect for human rights and the fight against corruption and bribery. Companies that meet the conditions for making such a non-financial statement but that do not have a policy on one or more of the above-mentioned issues will be required to provide a clear and reasoned explanation of the reasons for this choice and to include it in this non-financial reporting.

Belgium’s actions will include:

Firm transposition of the directive 2014/95/EU so that it is quickly and clearly established what is expected from companies as part of the non-financial reporting.
Consult with stakeholders on this issue. In collaboration with employers’ organizations, clear communication will be put in place to inform large companies about the new obligations that will enter into force from 2017 onwards.
Insist within the European Commission on support measures, for large enterprises that are obliged to publish reports on this issue, as well as for small and medium-sized enterprises and other organizations that wish to do so on a voluntary basis.
Regarding reporting by public services, the federal public services will have to draw up a social report every second year, with the objective of cross-cutting sustainable development in management of contracts. This report should be prepared in accordance with the guidelines of the Global Reporting Initiative. The reports will be published, inter alia, through the website: http://www.rs.belgium.be/en/

In the context of Action point 15, Intégrer le principe de « diligence raisonnable » au sein des organismes de gestion de l’entreprise, également en matière de droits de l’Homme [Incorporate the principle of “due diligence” into the management of the company, also in the terms of human rights] the NAP explains that “the OECD, and the EU, wants to make more non-financial information available. In this context, companies are encouraged to make public their policy on corporate ethics, social affairs, human rights, including, where applicable, in their supply chains, the human rights risks identified, their action plans to prevent any negative impacts and to remedy if necessary, and the measured impact of these action plans.” Alongside the federal government, the Wallonia, Flemish and Brussels governments are committed to encouraging the publication of non-financial reporting by large companies.

Pillar II. The Corporate Responsibility to Respect Human Rights

Strand 3: Report in the field of human rights [pages 56-57]

The Guiding Principles stress the importance of the State in terms of encouraging business enterprises to communicate the way they address the risks of adverse impacts on human rights -through reports or other means. Sustainability reports may contain information about the way the business enterprise had identified and addressed risks in the field of human rights.

3.1. The Ministry of Economy will: o Encourage the development of a Guide about the duty of public enterprises regarding human rights. o Foster the use of reporting mechanisms about human rights between public business enterprises.

Promote, through the Division of Associativity and Social Economy, strategies and mechanisms of accountability and non-financial reporting for cooperatives, which will include the potential risks of their businesses on human rights. To encourage the use of this practice, an electronic template will be developed in 2017, free of charge and freely available, for these bodies to report to the State and their different target audiences.

Pillar I. The State Duty to Protect

Non-financial reporting [pages 21-22]

Implements Principle 3d

Reporting on the activities of large companies works to the benefit not only of business partners and shareholders, but also other stakeholders. With this in mind, companies are increasingly reporting not only on their financial position, but so on the non-financial aspects of their operations. Information on the impacts that companies’ operations have on the environment, social aspects, human rights and the protection thereof is disclosed in separate non-financial reports or as part of the annual report.

Many companies already engage in non-financial reporting entirely voluntarily because this is regarded as a matter of prestige and an opportunity to improve their market position. Nevertheless, the European Union, having decided to coordinate non-financial information, has issued a Non-financial Reporting Directive.

The non-financial reports drawn up by certain large entities could become an important tool for transparency. The auditor examines whether an entity has drawn up non-financial information and disclosed it in the annual report or consolidated annual report, or whether it has produced a separate report. As non-financial reporting shoulders entities with a heavier administrative burden and extra costs, it is not compulsory for smaller entities, who will be able to decide for themselves whether or not to publish a non-financial report.

Current state of play:

The Czech Republic has transposed the Non-financial Reporting Directive into Act No 563/1991 on accounting (in particular Part Eight thereof). Non-financial information will be disclosed by large public-interest entities with more than 500 employees. Information on respect for human rights will be a mandatory part of the report.
The European Commission (DG FISMA) has produced general guidelines for businesses on how to apply the Non-financial Reporting Directive.

Tasks:

Publish the European Commission’s general guidelines on the websites of the National CSR Portal, the Ministry of Industry and Trade and the Ministry of Finance, and in Finanční zpravodaj (“Financial Bulletin”).

Coordinator: Ministry for Human Rights, Ministry of Industry and Trade, Ministry of Finance

Deadline: 31 December 2017

Provide information on the guidelines as part of training courses or in guidance and informational materials on non-financial reporting.

Coordinator: Ministry of Finance

Deadline: Running

Pillar II. The Corporate Responsibility to Respect

Voluntary non-financial reporting [page 38]

In the European Union, large companies are required to publish certain non-financial information, including information on human rights matters. Small businesses, however, may report voluntarily, especially if they are active in sectors or in countries where there is a heightened risk of encroachment on human rights. Transparency is highly self-regulatory and makes it easier to appoint a responsible person in complex corporate structures. It enables a business to evaluate and map out risks, while making it clear to the public that the company does not underestimate them.

What should be included in a report? Human rights standards, as opposed to financial reporting, which is governed by sophisticated and internationally reputed respected standards, are still inchoate. Even so, the following information should not be left out of a report:

Whether a human rights commitment has been made, how it has been devised, whose rights it affects, how it is communicated, and whether and how responsibility for compliance is addressed within the business.
A specification of key issues, i.e. areas viewed by the company as operationally risky, or in which it is most involved. Information about how such issues have been identified and, if the company has operations in multiple countries, information as to which countries are affected.
Information on how these risks are addressed and what measures have been taken.
Significant events that have occurred in the past year.

A business may publish periodic non-financial reports in numerous forms, either as part of the annual report or entirely separately. In any case, they should be posted online on the business’s website. The non-financial report should not be drawn up just for show, but should shed light on significant information relevant to an impact assessment of the business’s operations. On the other hand, it should remain brief and concentrate on matters of relevance. Parent companies should include information on the activities of their subsidiaries.

Human rights commitments cannot always be assessed with precision. Businesses should retain the option of evaluating commitments according to their own internal schemes and criteria. Nevertheless, where possible standardised indicators, including historical developments, should be used. The application of internationally acknowledged standards for non-financial reporting is recommended. These include:

Non-financial reporting standards based on the Guiding Principles on Business and Human Rights
Global Reporting Initiative, an independent international organisation specialising in the reporting of the impacts of business operations in the fields of human rights, the environment and corruption
Integrated Reporting (IR)

Documents and sources of information

The Office of the Government of the Czech Republic collects model documents, guidelines and materials intended for businesses to improve the performance of tasks in this chapter, and posts them on the National Corporate Social Responsibility Portal: http://narodniportal.cz/

2. State Duty to Protect Human Rights

2.3 Actions taken

Reporting requirement on human rights impact [page 14]

“Another priority for the Danish Government has been to strengthen the existing legal reporting requirement for the largest Danish companies and all state-owned companies (GP 3d). Since 2009, large companies including all state-owned companies and institutional investors in Denmark have been required to report on their work on corporate social responsibility. This means that while Danish businesses are free to choose whether or not they wish to have a CSR policy there is a statutory requirement that they must take a position on CSR in their annual reports.

If the company has a CSR policy, the company must account for this policy in their annual reports, including any CSR standards, guidelines or principles the company employs. Secondly, the company must report how these policies are translated into action, including any systems or procedures used. Thirdly, the company must evaluate what has been achieved through the CSR initiatives during the financial year, and any expectations it has regarding future initiatives. If the company does not have any social responsibility policies, this must be reported.

In June 2012, this reporting requirement was expanded so that the largest Danish companies from 2013 expressly must state in their reports what measures they are taking to respect human rights and to reduce their impact on the climate. This means that if a company has a policy on human rights or climate issues, it must report according to the existing structure; what is the policy, how has the policy been translated into action and what has been achieved through the initiatives. If the company does not have policies for human rights or climate issues, this must also be disclosed. The purpose is to further strengthen Danish companies’ activities in relation to human rights and climate change which will be beneficial to society overall, but also to the individual company.

Three years after the reporting requirement was introduced, analyses show that companies generally appear to have been encouraged to report on CSR. In the course of the first three years of the legal requirement’s existence, nearly 50% of the companies reported on CSR for the first time. Secondly, there have been significant improvements in reporting practices in a number of areas. There is, nevertheless, still room for improvement as regards reporting consistency and reporting on the results of the CSR work.

3. Corporate responsibility to respect human rights

3.3. Actions Taken

Expectations to companies and other stakeholders to respect human rights [page 18]

In order to fulfill their requirements companies need to be able to know and show that they respect human rights. The Government therefore wants to create more transparency about the CSR efforts of both private companies and public authorities. It is only through increased transparency that CSR can become a key parameter for consumer choices. Danish legislation thus requires major Danish companies

to report on social responsibility in their annual reports including what specific measures they have taking to respect human rights and reduce their adverse impact on the climate (GP 3d). For more information on the legal reporting requirement on human rights see section 2.3.

Evaluation of CSR reporting in large and listed Danish companies

In 2008, Danish Government introduced a legal requirement for large companies in the Danish Financial Statements Act (see section 2.3 page 6 for more on the reporting requirement). Since the statutory CSR reporting was introduced a survey on the effects of the legal requirement has been conducted in three consecutive years. The surveys were based on a rolling group of participants, meaning that the same group of companies has been surveyed the previous years. Since the group has been subject to the reporting requirement for three years it includes – in the last survey – very few companies reporting for the first time. As expected, there have also been few changes in the choice of topics and content in the reports.

In the financial year 2010, a significant increase in the number of companies reporting actions relating to human rights (38 % compared to 16 % in 2009) and labour rights (35 % compared to 16 % in 2009) was noted. In the 2011 financial year, these reporting topics were as common as in 2010. Due to recent developments in international CSR principles (in particular the development of the UN Guiding Principles on Business and Human Rights), an increased focus on human rights, in particular, can be expected in the future.Following the latest amendment of Section 99a of the Danish Financial Statements Act, companies thus have to report on the topics of human rights and climate with effect from the 2013 financial year.

“Award for best non-financial report”

The Danish trade organisation of auditing, accounting, tax and corporate finance, “FSR – Danish Auditors” annually announces the company with the best CSR report both for large companies and SMEs. The reports are judged by a panel of selected representatives from Danish businesses organisations, financial sector, educational institutions, etc. As part of the evaluation the judges look at whether companies also report on difficult subjects such as adverse human rights impacts.

Section 2. Current legislative and regulatory framework

Non-financial reporting [page 15]

The EU directive on disclosure of non-financial and diversity information (2014/95/EU) 9 entered into force in December 2014. It requires certain companies known as ‘public interest entities’ to include a declaration in their annual management report containing information stating material data related to the environment, social affairs, human rights, and prevention of corruption. This directive will shortly be transposed into Irish law.

Section 3. Actions

II. Initial priorities for the Business and Human Rights Implementation Group

The Corporate Responsibility to Respect Human Rights [page 18]

Encourage engagement with human rights reporting standards, such as the UN Guiding Principles Reporting Framework, the global Reporting initiative or the Business Working Responsibly mark.

3. Results of the consultations and government response

3.4 Transparency and reporting [pages 28-29]

During the consultations, various parties pointed out that companies should be encouraged and/or required to report on their human rights policy and the results achieved. At the same time, they stressed that level of reporting should be proportionate to what it yields, and that account needs to be taken of the administrative burden on the business community. The UN Guiding Principles devote attention to the importance of transparency and reporting. The responsibility to respect human rights calls not only for internal processes to identify and mitigate risks of adverse impacts (‘knowing’), but also for communication on these risks with the parties directly involved and other stakeholders, such as investors (‘showing’). In this way, companies can account for their policies and facilitate dialogue with all stakeholders.

Transparency and stakeholder dialogue

Transparency and stakeholder dialogue are essential elements of CSR and the government sees it as its task to promote both. Companies are expected to show that they respect human rights. They can do so in various ways, for example in meetings or consultations with stakeholders, or by issuing formal, public reports. For the government, it is important that the information requested leads to effective communication with the relevant stakeholders.

The voluntary CSR agreements which will be reached with the sectors selected through the Sector Risk Analysis project will focus on transparency, dialogue with stakeholders and monitoring of agreements.

Reporting

As it points out in its policy letter ‘CSR Pays Off’, the government supports the European Commission’s proposal to amend accounting legislation in relation to non-financial reporting. Large companies will be required to disclose information on human rights, environmental matters, social and employee-related matters and corruption. The proposal affects some 600 companies in the Netherlands, which together account for considerable social impact. The new Directive will ensure a level playing field at European level. What is more, it will place a limited administrative burden on the business community, since it is non-prescriptive as regards information provision, and works on the basis of the ‘apply or explain’ principle.

The Netherlands pursues an active policy of encouraging social reporting through the transparency benchmark. This benchmark is carried out every year on the instructions of the Ministry of Economic Affairs to give the 500 largest Dutch companies a rating for transparency on sustainability and CSR. The benchmark’s criteria have been updated and brought in line with international developments such as the UN Guiding Principles and the European Commission’s proposal for a new Accounting Directive. The Transparency Benchmark will now apply to the 600 companies referred to in this proposal.

2. The State duty to protect human rights

2.1 The state as legislator [page 18]

The Accounting Act

Under the Accounting Act, large enterprises have been required to submit reports on CSR since 2013. The provision stipulating that enterprises must take account of human rights is considered to be in line with the Guiding Principles concerning the independent responsibility of enterprises to ensure that they respect human rights.

Amendments to EEA legislation

Small amendments to Norwegian legislation may be necessary in order to implement the expected new EEA rules corresponding to the new EU Directive (2014/95/EU) on disclosure of non-financial and diversity information by certain large companies and groups, which includes CSR. In this context it will be appropriate to look to other international developments, such the new UN Guiding Principles Reporting Framework.

3.3 External communication and reporting [page 34]

The 21st principle deals with internal and external communication. The Guiding Principles also provide further details on how companies should address the human rights impacts of their operations. It is the company itself that decides how to communicate and report on this in the light of its situation and target groups. We recommend companies to use international reporting frameworks, and to have their reports verified by an independent auditor or other expert. It is also important to publish the reports in the language of the country where the company operates. The company itself chooses the most appropriate reporting framework, and the Norwegian authorities can advise on this.

BOX: International Reporting Standards [page 35]

The UN Guiding Principles (UNGP) Reporting Framework was launched in February 2015. It evolved from the Human Rights Reporting and Assurance Frameworks (RAFI) and is co-facilitated by Shift and Mazars. Business was actively involved in the development of the reporting framework, and many companies began using it during the development process. The High Commissioner for Human Rights (OHCHR), and the Working Group on the issue of human rights and transnational corporations and other business enterprises, have expressed their support for the project but are not involved in it. Norway has supported the project. www.ungpreporting.org

United Nations Global Compact requires its members to report on their efforts to implement its 10 principles in four areas: human rights, labour, environment and anti-corruption. Enterprises’ reports are graded as GC Advanced, GC Active or GC Learner (minimum requirement). Norway supports Global Compact. www.gcnordic.net/ www.unglobalcompact.org

Global Reporting Initiative (GRI) is the most widely used standard for reporting on CSR, and includes human rights indicators. There are three levels of reporting, from A, the most advanced, to C, the least advanced. Independent auditing/verification of the report earns a plus, making A+ the highest level. Norway supports GRI. CSR Norge maintains an overview of Norwegian companies that follow GRI, and regularly holds GRI Certified Training courses. www.globalreporting.orgwww.csrnorge.no

Pillar II. The corporate responsibility to respect human rights

3. Non-financial reporting: implementation of Directive 2014/95/EU [page 30]

Since January 2017, it has been mandatory for a certain group of companies to disclose information regarding the application of human rights policies in business practice in connection with the transposition of Directive 2014/95/EU into Polish law.

Directive 2014/95/EU on disclosure of non-financial and diversity information by certain large enterprises and groups came into force on 6 December 2014. EU Member States had two years to transpose the directive into national law.

It is estimated that the provisions will affect about 6,000 entities in the European Union, while in Poland some 300 enterprises may be required to disclose non-financial data. In Poland, the Ministry of Finance was responsible for the transposition. The Act of 15 December 2016 amending the Accounting Act was published on 11 January 2017 in the Journal of Laws (Journal of Laws 2017, Item 61) as a transposition of the above-mentioned Directive with respect to disclosure of extended non-financial information. The Act came into force on 26 January 2017 and will apply for the first time to reports prepared for the financial year beginning on or after 1 January 2017.

The implemented provisions of the Directive aim to increase the transparency of information with respect to corporate social responsibility (CSR) presented in management reports (in the form of a statement) or in separate reports as regards environmental, social, and occupational issues, respect for human rights, and anti-corruption measures. New reporting obligations are addressed to large entities and generally include those that primarily operate in the financial sector, including banks, insurance companies, issuers of securities, and large capital groups.

Under the Directive and its transposed law, the companies subject to this obligation may apply any national, EU, or international reporting standards or guidelines, including their own rules.

Annex: Measures planned

Regulations and legislation [page 27]

The interim report Implementation of the EU’s new accounting directive (Swedish Government Official Reports 2014:22) proposes enhanced transparency regarding payments made by some companies active in the extractive industry and in the logging of natural forests. The provisions will require companies to publish annual reports on payments made to authorities in the countries in which they operate. The aim is to combat corruption.
The EU has adopted a Directive amending the Accounting Directive on disclosure of non-financial and diversity information. Corporate disclosure of sustainability and diversity policy (Ministry Publications Series 2014:45) proposes that certain companies prepare a sustainability report providing information on, for example, respect for human rights and anti-corruption activities. It is also proposed that the corporate governance reports of certain listed companies disclose the diversity policy that applies to their board.(…)

Annex: Measures planned

How can the State support the business sector? [page 28]

The Government Offices is prepared to consider continued support to the Shift Project 29 for its development of the Reporting and Assurance Frameworks Initiative (RAFI). Companies are encouraged to use the UNGP’s Reporting Framework developed by Shift and Mazars.

5. National Action Plan on Business and Human Rights

5.7 Pillar 1: state duty to protect

5.7.2 Operational principles: legislative and information policy measures [page 19]

Guiding Principle 3

PI12 Sustainability reporting standards

Reporting on the action taken by a business enterprise to respect human rights is an important element of due diligence under Pillar 2 of the UNGP.

In line with the Grüne Wirtschaft [‘Green Economy’] report (2016) and the Federal Council’s national action plan on corporate social responsibility54, the federal government campaigns at both national and international levels for the promotion and harmonisation of corporate sustainability reporting. This also covers human rights. Switzerland is a member, among others, of the Group of Friends of Paragraph 47 (GoF47), which promotes sustainability reporting internationally. Within the GoF47, Switzerland works in particular with the Global Reporting Initiative (GRI) and the United Nations Environment Programme (UNEP).

The Federal Council will continue its work within the GoF47. It also supports the drafting of sector-specific guidance and practical examples.

PI13 Corporate sustainability reporting

The EU decided at the end of 2014 to introduce mandatory sustainability reporting. Member States have until the end of 2016 to put this obligation into effect. EU Directive 2014/95/EU determines that certain large undertakings and groups must publish non-financial information on respect for human rights, diversity, and combating corruption and bribery in connection with environmental, social and employee matters. According to the comply or explain principle, business enterprises must also disclose why they have not published certain information. The Federal Council is closely monitoring developments with regard to the legally binding reporting of non-financial information in the EU. It is prepared to examine possible action, which would be as congruent as possible with international regulation, and intends to draw up a consultation draft on sustainability reporting that will be based on the EU instrument56. Work will begin when more is known about the way in which EU Member States intend to implement the Directive.

Swiss business enterprises are not obliged to report on sustainability issues. However, in line with the 2030 Agenda and its Sustainable Development Goals (SDGs), which were adopted by all UN Member States, and in particular to achieve SDG 12.6, companies are encouraged to introduce sustainable practices and to include sustainability information in their reporting.

Accounting legislation requires all companies that are subject to an ordinary audit pursuant to Article 727 of the Swiss Code of Obligations (CO) to include a general assessment of risk in their management report. This also includes human rights risks, where these are present. Listed companies are also obliged by Article 53 of the SIX Swiss Exchange Listing Rules to report on human rights matters where these might affect the company’s share price. The Federal Council recommends incorporating the human rights risks which business enterprises identify in their due diligence processes, for example, in their sustainability reports.

Actions taken to support business implementation of the UNGPs

UNGPs Reporting Framework + Unilever human rights report [page 17]

The FCO’s Human Rights and Democracy Fund supported Shift to develop the UN Guiding Principles Reporting Framework. This is the first comprehensive guidance for companies to report on human rights issues in line with their responsibility to respect human rights. In today’s ever more transparent world, companies are under increasing pressure to show that they respect human rights throughout their operations and value chains. There is increasing demand for greater formal reporting by companies on their human rights performance, including from regulations such as the EU non-financial reporting directive and the UK’s Companies Act and Modern Slavery Act reporting requirements.

The UNGPs Reporting Framework provides companies clear and straightforward guidance on how to answer these questions with relevant and meaningful information about their human rights policies, processes and performance. We are pleased to see UK companies at the forefront of best practice in reporting on human rights. Unilever became the first adopter of the Framework when they published their groundbreaking human rights report in July 2015.