How should we account for the vulnerable?
11 September 2020: If this pandemic has taught us anything, it is that human beings are more vulnerable than we often think and that the human condition is relevant to business success or failure. So how do we account for the vulnerable?
Whatever the shape of the COVID recession, the crisis delivers an opportunity to take stock and do things differently. Recent years have brought increasing attention to how business uses and impacts on natural resources such as fossil fuels, water or habitats in the push to make a profit.
However, that other resource – human resource – had received far less attention until COVID struck and human capital started to look incredibly challenged.
Do business with respect for people
Caroline Rees is the President and Co-founder of Shift, a New York-based non-profit organisation that helps companies embed respect for human rights into daily business conduct, based on the standard set out in the UN Guiding Principles on Business and Human Rights. In essence, Shift is a centre of expertise on what it means to do business with respect for people.
“The issues around climate and the climate crisis have gained political traction over the last five to 10 years,” says Rees. “In many ways, the people side of the equation has lagged quite far behind.”
She points out that we have all been witness to moments of crisis in which a residential building collapses on workers who could never have worked there safely, or a dam collapses and the tailings engulf entire villages – and then comes some analysis.
Rees likens these moments to the tip of an iceberg above the waterline. They represent the tiny pieces of visible evidence of risk and vulnerability, but the bulk remains hidden below the surface.
“There are ways in which business is done that externalises risks onto people, very often the most vulnerable people. These could be the poorest paid workers or the local communities whose views are dispensed with,” she points out. “All of this remains under the waterline, but we treat the bit above the waterline as shocking.”
The bit that we can see is not a freak occurrence; rather it is “the natural consequence of all of those practices – some of them a product of corporate culture – that occur day to day”. COVID has raised more of these issues above the waterline.
A new language for people in the workplace
In fact, COVID has given us a new language around people in the workplace for whom we have new respect once forced to recognise how much we depend upon them. The terms “essential workers” and “key workers” were meaningless to most before lockdown. Now we all know what they mean. We were perhaps less aware of how important people on minimum wage or zero-hours contracts are in a crisis and how dispensable many of our top earners are when faced with the pandemic. Whether this thinking will remain or be a temporary diversion is still unclear.
The value of key workers has not changed because of COVID – they are performing the same tasks as they always have; they were simply not recognised for their value before the pandemic. “People are the lifeblood of value,” says Rees, adding that the worry is that, as COVID is brought under control, the people element of business goes back under the waterline in the fight to control costs.
Global standard for change
Do we know what it takes to make change? “Yes,” says Rees. “We have a global standard on this.” She points to the UN Guiding Principles (UNGPs) on Business and Human Rights. “The UNGPs set out a blueprint for what companies can reasonably be expected to do to prevent and address impacts on people. The language of human rights just sets a threshold – it points out that, at a minimum, companies should tackle risks connected to their business that would undermine people’s basic dignity and equality. We see the standard of the UNGPs embedded in the UK’s Modern Slavery Act.”
No one denies that understanding and tackling human rights risks all the way along a supply chain or employment base is difficult. “And it may take some upfront investment to get this right,” Rees points out, “if we are going to stop pushing the most vulnerable into taking increasing levels of risk. But the upside is clear: for brand and reputation, workforce recruitment and retention, the resilience of supply chains and more. The case for human rights is now, more than ever, a business case.”
When asked whether we are dividing “doing the right thing” into two separate streams of endeavour – climate and people – to the detriment of progress, Rees says both “yes and “no”.
“These are quite different disciplines,” she says. “Dealing with the environmental challenge has a lot of science behind it. Dealing with impacts on the climate requires different expertise, language and experience compared with dealing with impacts on people.” The question around vulnerable people often arises in relation to supply chains and procurement or parts of the workforce who aren’t formally employed, which are managed by different teams within a corporation. This has largely led to the separation.
The role of accountancy in doing the right thing
The reality is that doing the right thing by the planet and doing the right thing by people are irrevocably intertwined. “These things are absolutely interwoven and mutual,” says Rees. “You can’t get to the potential for tackling climate change without tackling inequalities and you can’t get to the potential for tackling inequalities without tackling climate change.”
So, what brings these two siloed disciplines together and what is the role of the profession? “We need to be careful about reducing human dignity to dollars,” she says. “But, at the same time, there are certain things that are catalytic for respect for people that can lend themselves to the scrutiny of the accounting profession and, taking that step, can bring them into the forefront of consciousness in a way that they are not presently.”
Rees offers two examples of ways in which the profession can make a start on accounting for people: the living wage and land.
As an organisation Shift is developing a project with the Capitals Coalition to enable accounting for progress towards living wages: as Rees points out, so much vulnerability flows from not paying a decent wage. “Paying a living wage can become a very powerful proxy for respect for people,” she says.
Rees continues: “The corollary of that is the nature of work.” This brings us on to short-term contracts, zero-hours contracts, the gig economy and so on. The impacts of employer-advantaged employment methods can extend beyond the financial impact of low and/or irregular wages to affect people’s mental and physical health.
She then moves on to land use – another area that is catalytic for respect for people, to which the profession can relate. Rees says the commercial use of land that is contested by local communities and indigenous peoples is frequently evidence of disrespect for human dignity. Holding a legal licence to develop land is not the same as a social licence to operate, and poor communities are often marginalised and pushed out of their livelihoods and heritage in the effort to attract investment or develop new projects. Agri-business, wind farms, construction – these are all sectors that have been guilty of exploiting contested land for business gain.
“There is so far that we could go, even with just those two areas,” she points out. These are the sorts of access points for the profession to engage with the realities of business impacts on people’s basic dignity.
Rees is emphatic that if we are serious about stakeholder capitalism, tackling inequalities and the Sustainable Development Goals, we must be much more laser-focused on the vulnerable. She concludes: “Those are the people that matter if we are to have a sustainable world.”