Are Corporate Human Rights Practices Up to Par?

The Zicklin Bright Index evaluated 150 corporations and their human rights practices in 2023, revealing key challenges that are hindering progress.

In May, a U.S. Senate committee revealed that vehicles made by BMW, Jaguar Land Rover, and Volkswagen contained parts from suppliers banned in the U.S. for employing forced Uyghur labor in China. “Automakers’ self-policing is clearly not doing the job,” said Democratic Senator Ron Wyden.

This report underscores the increasing concern over corporate human rights practices — concern that is leading to heightened scrutiny of companies’ societal impacts. It is in this context that the Zicklin Bright Index (ZBI) becomes a crucial tool for any organization wanting to become a better corporate citizen.

Established by Wharton’s Zicklin Center for Governance and Business Ethics in 2023, ZBI ranks companies from Colombia, Ecuador, and Peru using publicly available information and self-disclosure, focusing on transparency rather than direct human rights performance.

The first edition of the ZBI — led by doctoral candidate in law Víctor Cabezas Albán in collaboration with Wharton professor William Laufer — sheds light on current corporate progress and best practices.

Current Progress on Corporate Social Responsibility

Cabezas Albán highlights several key insights from the ranking. First, companies across industries and the Andean Community (Colombia, Ecuador, Peru) have varying interpretations of human rights responsibilities. “There is a lack of uniformity in what corporations understand by human rights,” he said. “A banking company and an oil company in Ecuador do not have the same understanding.”

Second, the level of corporate responsibility correlates with the socio-political climate. “Firms in Colombia tend to have as much as three times the corporate social responsibility performance compared to those in Ecuador, which has a less extensive history of internal conflict,” said Cabezas Albán. This suggests that the external environment significantly influences corporate priorities and practices related to human rights.

Third, companies in the financial sector are excelling in human rights practices, even though this sector isn’t typically linked with significant human rights risks. Conversely, the more high-risk agricultural sector massively lags, with none of its companies reaching the three tiers of the ZBI based on their disclosure practices.

Challenges in Human Rights Transparency and Disclosure

Companies in all industries face several challenges in improving human rights transparency and disclosure.

One of the primary obstacles is the political and cultural sensitivity of incorporating language around human rights into corporate discourse. This is particularly difficult for industries like oil and gas, which often operate in regions with weak governance, political instability, or conflict; this makes human rights violations more prevalent and difficult to address.

“For a fossil-fuel company, merely talking about human rights can be uncomfortable, so many shy away from public discourse on the issue,” explained Cabezas Albán. The hesitancy to engage can hinder meaningful progress and open dialogue.

Another major challenge, across sectors, is establishing robust grievance mechanisms. Companies must ensure that individuals suffering from human rights violations can file claims and receive reparations, Cabezas Albán stressed. “Having adequate grievance mechanisms is something corporations are still struggling with,” he said. “What happens if a person is suffering from a human rights violation inside a labor camp? How can this person speak out?”

Moreover, many companies struggle with monitoring and controlling their sprawling global value chains. “Supply chains are where the most sensitive human rights issues are, but this area is largely overlooked,” noted Cabezas Albán. Supply chains are often complex and span multiple countries, making it challenging to ensure that all suppliers adhere to human rights standards.

How to Improve Corporate Human Rights Practices

Based on the insights from the ZBI, companies can adopt several practices to improve their human rights performance.

Conducting thorough due diligence processes that address specific human rights challenges is essential, said Cabezas Albán; the best-performing companies in the index demonstrated a direct link between robust due diligence and high-quality disclosure.

This involves identifying potential human rights risks, implementing measures to mitigate these risks, and regularly reporting on progress and outcomes.

Additionally, Cabezas Albán added that companies must ensure their public statements on human rights practices are genuine. This means avoiding greenwashing, where companies falsely present themselves as environmentally friendly or socially responsible without substantive actions to back up these claims.

Good reporting practices not only enhance transparency but also reduce legal risks associated with false claims. “Companies that have good reporting practices face fewer legal challenges; when you say you do something publicly, that creates a legal risk if you’re not actually doing it,” Cabezas Albán explained.

He offered three additional takeaways for companies. First, view your sustainability reports as communication mechanisms with customers and shareholders. “Stop seeing it as just another bureaucratic document and focus on making it evidence of the company’s fulfillment of public commitments,” he said.

Second, display your risks and weaknesses. “The best practices for policy dissemination start with an assessment of the situation. Showing risks makes the mitigation measures and reported actions more credible and consistent.” And third, he said to present your initiatives with simplicity and a pedagogical approach.

Ultimately, the Index underscores the importance of a systematic and transparent approach to human rights in business. Companies that prioritize human rights not only contribute to a more just and equitable society — they also build trust with their stakeholders and enhance their long-term sustainability.