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Business and Human Rights Newsletter

No.2 【Human Rights Reporting and Assurance Frameworks】

The Leaders' Declaration issued at the G7 summit held in Germany in June emphasized the commitment by the G7 nations to respect human rights. It called for efforts by governments to set up National Action Plans in line with the UN Guiding Principles on Business and Human Rights ("Guiding Principles") and encouraged enterprises to enhance transparency and accountability by implementing human rights due diligence and promoting labour rights and environmental protection in their global supply chains. The international momentum around respect for human rights was further accelerated by the release in February of the Human Rights Reporting Framework developed by RAFI(*1). The Framework, by which companies disclose their human rights activities by reference to the Guiding Principles, was discussed in the previous edition of this newsletter. In this newsletter we highlight corporate implementation of the Reporting Framework, as well as the recently initiated discussions on the development of a Human Rights Assurance Framework - to be released in 2016 - that will operate as a guide to independent assurance of companies' human rights reporting based on the Reporting Framework.

*1 RAFI (Human Rights Reporting and Assurance Frameworks Initiative) is "a global, multi-stakeholder project facilitated by Shift (the leading center of expertise on the Guiding Principles) and Mazars to develop reporting and assurance frameworks in line with the Guiding Principles."

Implementation Status of Human Rights Reporting Framework

Several leading companies are already utilising the Human Rights Reporting Framework. In April, Ericsson issued its first report based on the Framework. Unilever is also piloting the Framework and is due to publish its first report this summer. Three other early adopters - H&M, Nestle and Newmont - are also partnering with Shift to apply the Framework to their 2015 reporting. Shift reports that over 30 companies in total have begun using the Framework, whether for their external reporting process, or to improve their internal human rights management systems. The drafters of the Reporting Framework expect that it will both assist individual companies to report beyond minimum legal requirements and, more broadly, contribute towards the dissemination of corporate best practices in respect for human rights. In the context of the ongoing inter-governmental discussion around a legally-binding international instrument on business and human rights, reporting initiatives such as this one play a key role in highlighting the effectiveness of the Guiding Principles and improving public recognition of responsible corporate activities. Furthermore, as more stock exchanges and socially responsible investors express their interest in the Reporting Framework, it moves ever closer to becoming the standard for human rights disclosure.

Development of Human Rights Assurance Framework

Concurrent with the drafting and release of Human Rights Reporting Framework, discussions have been ongoing with various stakeholders to develop a Human Rights Assurance Framework based on the Reporting Framework. In June 2015, consultations took place to discuss the key components and desired overall direction of the Assurance Framework. Following the development of the draft framework and the preparation of a pilot version within 2015, the final text of the Assurance Framework is envisaged to be released in early 2016.

Challenges for Human Rights Assurance Framework

The final Assurance Framework will be the basis upon which independent external assurance providers express their assurance opinions as to whether a company has adequately prepared its human rights reporting in accordance with appropriate standards (in this case, the Human Rights Reporting Framework). Therefore, companies being assured need to disclose relevant information meeting minimum requirements as set out in the Reporting Framework, including the company's commitment to respect human rights and its efforts to meet such a commitment, the company's "salient" human rights issues (that is, the human rights at risk of the most severe negative) and how they were identified. A company is further required to report on its policies and stakeholder engagement, impact assessments related to these salient issues as well as measures to address such issues, assessment of their effectiveness, and how remedy is provide, where relevant. Assurance providers provide assurance opinions on the content of the company's reporting (management assertions), but do not provide, in principle, opinions on actual or potential impacts on human rights (including the reduction of such potential) and likelihood of their occurrence.

The Vision for Human Rights Assurance ("Vision") released by RAFI in April sets out the purpose of and key challenges envisaged for human rights assurance. It states, among other things, that providers of assurance opinions will need to give "fuller and more insightful information on the assurance process and findings", that is, a reasonable level of information about the assurance process, the key issues identified and recommendations made to the company. The opinion should also reflect any material omissions or misstatements in the company's report. To this end, the Vision notes that assurance providers must be those companies/individuals with demonstrated knowledge, skills and capacity to conduct a human rights assurance, with general assurance skills and technical expertise in the relevant industry. Providers will start with "limited assurance" but move towards "reasonable assurance" where possible.

The Vision also states that meaningful assurance will need not just verify whether a company's reported human rights policies and processes exist, but also consider whether they are "effective". However, how to assess such effectiveness remains one of the challenges for human rights assurance and the subject of ongoing discussions, in which representatives of EY are participating.

Team profile: Yuko Koike

写真Yuko Koike, a Manager in our CCaSS Tokyo team, is responsible for research in the fields of business and human rights, sustainability and integrated reporting. She has experience in the development of human rights policies and the establishment and implementation of human rights due diligence mechanisms, as well as project management and quality control. Her particular focus is on the human rights reporting and assurance issues discussed in this newsletter. As a certified public accountant, Yuko has extensive work experience in audit and assurance engagements, internal control system architecture for listed entities and public interest corporations in Japan, the implementation and preparation assistance of CSR and integrated reports, non-financial information assurance services, supply chain audits and stakeholder engagements.