Mazars LLP provides insight into how it approaches due diligence for human rights reporting, discussing its work with India-based steel manufacturer Jindal Stainless Ltd
The demand for more transparent and accountable disclosure of human rights risks and impacts has never been greater: business partners, investors, institutions and other stakeholders want corporate social responsibility (CSR) reporting that reflects companies’ consideration of human rights.
But for this reporting to have credibility it must be backed by rigorous due diligence processes. ‘Human rights reporting must be more than a marketing and communications exercise. It should reflect culture within a company, demonstrate its actions to mitigate against its human rights impacts, and be a fair representation of the company’s position in this area,’ says Richard Karmel, a partner at Mazars LLP UK and head of social performance and human rights reporting.
This is an area where the firm is a pioneer. Mazars has developed an assurance methodology on human rights, based on the United Nations Guiding Principles on Business and Human Rights that can help companies increase their accountability and transparency.
‘As part of the initial due diligence process we consider the formal policies, procedures and controls that a company has in place to assess its impact on human rights using five core indicators’, explains Karmel.
These indicators cover:
Mazars is co-leading on the Reporting and Assurance Framework Initiative (RAFI) to develop a twin set of frameworks for human rights reporting and assurance.
‘We are proposing that companies include human rights disclosures within their non-financial reporting and that auditors provide assurance on this,’ explains Karmel. ‘Although the intention is for this to address all five core areas, for many companies this would be a large undertaking to apply in one year,’
Many companies start by focusing on one core area or jurisdiction. ‘It is about engaging with stakeholders to identify where their greatest risks are and then moving to the next level,’ says Karmel. ‘The due diligence and the assurance are part of a journey.’
It’s a journey that Indian steel producer Jindal Stainless Ltd (JSL) started some years ago. As a signatory to the UN Global Compact (UN GC) Network and Global Compact Network India, JSL has championed the cause of human rights and it makes deliberate efforts to preserve the environment and respect communities.
Choosing to undergo a voluntary human rights review reinforces its commitment to being a socially responsible corporate. As time limitations prevent JSL from addressing all of the indicators simultaneously it began with one set at one location, although the human rights due diligence process included input from various geographies and visits by Mazars to JSL plants in Hissar, Jajpur and the firm’s corporate office in Delhi.
‘The indicator on communities and the environment were most relevant,’ confirms Brigadier Rajiv Williams, corporate head of CSR at JSL, as this supports the firm’s aim to include communities in its growth perspective.
‘It is important to ensure that communities in and around our plant locations and our area of influence are taken care of, by recognising the challenges surrounding them because of the manufacturing process and mitigating their problems in a proactive and sustained manner,’ explains Williams.
This includes the environmental impact on communities and the solutions found to address the associated issues. ‘The due diligence process has demonstrated our ethical practices,’ he says, and identified some gaps.
Williams describes the dialogue during the human rights assurance review as frank and fair. ‘The Mazars team was very forthright and convincing in their approach and the process,’ he says. ‘Some aspects were accepted by them and some by our team’, and actions are in hand to address some of the issues raised.
‘This exercise has been extremely beneficial in identifying areas which had been overlooked by us and helping us to do things in the right way,’ says Williams. ‘Such gaps as were identified will be plugged over time.’
Mazars delivers its limited assurance using ISAE 3000, an internationally recognised framework, to assess and report on performance data and control systems. It is a principles-based framework that can be applied to a range of underlying subject matters selected to reflect the needs of each engagement, meaning it can be used for assurance reviews of one set of core human rights indicators or all five of them.
Williams describes the human rights due diligence process as ‘a great experience’ that strengthened JSL’s commitment to being a socially responsible corporate. So the benefits of the human rights assurance and the resulting statement will extend beyond the company – and not just into the communities and environments around its plant locations.
‘Many others will receive the highs of the report through the websites of JSL, the UN GC and Indian ministry of corporate affairs,’ he says. It will also be used in talks and seminars, and shared with selected business schools, law colleges and human rights organisations.
Williams concludes: ‘It will support our lead role to try and do things not only the smart way, but to do things the right way.’
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