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Human Rights Disclosure Gains Momentum
By Michael Schweibinz

Human rights issues are of great interest and concern for many businesses and stakeholders. Why, then, has mandatory reporting of material human rights issues not been incorporated into accounting and reporting standards? The International Corporate Accountability Roundtable (ICAR) has posed this exact question to the Securities and Exchange Commission (SEC).

On October 9th, ICAR launched a report “Knowing and Showing: Using U.S. Securities Laws to Compel Human Rights Disclosure.” The report calls upon the SEC to direct businesses towards reporting material human rights information in their disclosure reports—and suggested a concrete implementation strategy.

ICAR’s recommends that:

1)    Given its authority to issue interpretive guidance, the SEC should provide such guidance in order to explain how material human rights information should be incorporated into existing securities reporting items.

2)    Given its authority to promulgate new regulations for the public interest or the protection of investors, the SEC should promulgate a new rule specifically requiring disclosures of human rights information, organized in a new reporting item for periodic reports or proxy disclosures.

At First Affirmative, we view ICAR’s proposal as a win-win scenario—that is, if it ever becomes a new rule promulgated and enforced by the SEC. Such a rule would require companies to provide information that investors, in turn, would use to hold companies accountable for their impacts on people and communities around the world. Consequently, capital resources would drive corporate responsibility, as increased transparency would likely cost irresponsible companies, and reward more responsible corporate citizens.

There is a great deal of evidence suggesting that “employees, customers, and client preferences can change dramatically upon the discovery of human right risks.” More readily available public information on human rights would pressure companies to improve their practices in order to stay competitive and satisfy investors.

Now more than ever, companies cannot undervalue public perception. More and more consumers are making conscious choices to buy from companies that “utilize an ethical supply chain and are not complicit in human rights violations.”

 

Mention of specific companies or securities should not be considered a recommendation to buy or sell that security. Past performance is no guarantee of future results.

 

Posted: November 4, 2013