Companies and governments are ignoring the "social" - read "human" – part of the ESG equation, argues Brent Wilton. That matters not just for people, but for our export-oriented economy.
Opinion: Have you read your company’s ESG statement lately?
Maybe you have. Environmental, social and corporate governance reporting is more mainstream than it’s ever been and is seen by many organisations as an integral part of efforts to improve sustainability and respond to enhanced calls for ethical practices.
But while we might be doing a reasonable job of ticking off the “E” and the “G” components of ESG, we’ve largely ignored the “S” - and the social impacts of business and state activity. We’ve overlooked our people.
Here’s how. Basically, our last few governments have largely failed either to address their own social responsibilities, or to provide guidance to companies navigating these issues.
A good example is New Zealand's response to the UN Guiding Principles on Business and Human Rights.
These principles set out expectations for governments to be proactive in safeguarding human rights and protecting people from harm.
They also set out how businesses can fulfill their obligation to respect human rights in how they operate, and how both government and business can remedy any harm caused to people by their actions and omissions.
These principles were endorsed by the UN Human Rights Council in 2011 and around the world governments have moved to establish national action plans to address how they might realise those expectations in both law and practice and how they might help companies with their obligations.
New Zealand has not.
Modern slavery legislation
For example, other countries have included human and labour rights in recent trade agreements. Not New Zealand.
And other countries are looking at legislation around issues like human rights due diligence and abuses. New Zealand has been slow here too.
The UK passed modern slavery legislation in 2015, Australia and the US in 2018. Here, more than a decade since the UN’s principles were introduced, and following lobbying from many, many quarters, New Zealand has taken its first tentative steps towards legislating against modern slavery.
A working group comprising top academics and community leaders is at last being established. Let’s hope we’re on track.
People are, by definition, at the very heart of human rights. And human rights are increasingly seen as fundamental to the wider sustainability debate. It seems while governments globally are legislating more in this area, New Zealand has to date missed a trick and put its team of five million at risk of exploitation, corruption and abuse. The evidence is in the many news reports – including from Newsroom - of workers being trafficked, harassed, coerced, paid rates well under the minimum wage, even having their passports confiscated.
International obligations
What’s more, we ignore the ‘S’ in ESG at our peril if we hope to enter or remain in export markets. Being able to prove that your company commitments around ESG and sustainability are real, not mere words, has never been more important, particularly as more countries and regions - including the EU - begin requiring compliance as a market entry prerequisite.
In the private sector, companies are now beginning to identify shortcomings in their own effort to treat workers fairly and with respect. Some are also requiring companies to which they are connected by a business relationship to undertake human rights due diligence of their own operations.
That includes identifying, mitigating and remedying any harm to people that might be occurring in their supply chains.
Protect one, protect all.
While the spotlight has fallen mainly on Governance (issues of bribery and corruption within business and governments) and Environment (behaviour around environmental damage and use of natural resource), we now need to make haste with regard to our social responsibilities.
It’s also critical that the “S” in ESG not be viewed in its own silo, separate from the “E” and “G”. All three need to be integrated across both company and government responses. Actions in one area impact across others and to act in one without thinking of the consequences more broadly weakness the effectiveness of those efforts.
Fortunately, New Zealand can learn from what others have done and use that knowledge to move quickly to address the issues.
It’s pleasing to see the work beginning, but the clock is ticking and New Zealand as an export orientated country is at risk of exclusion if it is not serious about addressing these gaps with urgency.
