G7 and OECD Call on Boards to Mitigate Environmental and Human Rights Risk
The regulatory landscape around these issues is changing, and company leaders need to know.
In 2015, regulators expressed two expectations of which both executive board members and directors should be aware.
First, at the June 2015 G7 Summit in Germany, the leaders of the G7 made a declaration that they “strongly support the UN Guiding Principles on Business and Human Rights” (UN Guiding Principles). They added that they “urge private-sector implementation of human rights due diligence.” (...)
Second, the G20/OECD Principles of Corporate Governance (the G20/OECD Principles), an important global standard, have recently been updated to incorporate environmental and human rights risks. (...). They refer explicitly to environmental and human rights issues in the context of disclosure, board responsibilities, and internal controls. (...)
Why do these regulatory expectations matter for board members? They matter because it is the responsibility of boards to carefully chart the company’s journey through the ever-evolving risk landscape. Research shows that many board members are not aware of how material soft and hard law requirements pertaining to environmental and human rights issues have become. In 2013, for instance, and BCG’s joint Global Executive Study and Research Project stated bluntly that “issues such as human rights… fall to the bottom of the list of social sustainability concerns.” The principles put forth by the G7 and G20 statements make it clear that this must change.
It is important to understand that both actions and omissions are seen as activities. Owing to the importance of environmental and human rights risks today, board members are at risk of being seen as negligent — and therefore potentially accountable — if they fail to act. Therefore, they need to make sure that they take the lead and, at minimum, ensure that their companies comply with the requirements of the G20/OECD Principles, as well as those of the standards to which the Principles refer.
To read the article in full go to:
https://sloanreview.mit.edu/article/environmental-and-human-rights-assume-a-new-urgency-for-boards/