Managing business relationships

It’s no longer enough for a company to avoid causing harm to people itself. Stakeholders – and key international standards – also expect companies to manage the human rights challenges they're involved in through their business relationships.

This can be easier said than done. Gone are the days when simple, vertically-integrated corporate groups were the norm. Many companies now have vast, complex value chains, and are embedded within extensive, multi-tiered networks of business entities. Large numbers of contractors, suppliers, service providers, clients and customers are common. And then there are relationships with licensees, franchisees, joint venture partners, syndicates, wholly and part-owned enterprises, banks and investors.

Finding practicable ways to prioritise and manage human rights challenges in a company’s business relationships is not just about respect for human rights. It’s also good for business. It helps build a more stable operating environment. Reduce disruptions and legal risk. Identify like-minded partners. And improve access to markets and capital.

Ways to identify human rights risks associated with a business relationship:

• Undertake a high-level mapping of key human rights risks in the company’s value chain to help prioritise further due diligence. 
• Integrate human rights considerations into merger and acquisition (M&A) and procurement processes. 
• Incorporate human rights considerations into audit processes and remediation/action plans. 

Ways to integrate human rights-related expectations into a business relationship:

• Use contractual negotiations and agreements to set expectations and gauge a partner's understanding of key issues. 
• Ensure the company will have access to information about human rights issues – and that concerns will be heard. 
• Think proactively about how to align ways of working and address any identified issues following a merger or acquisition. 

Ways to address human rights issues that arise in connection with a business relationship:

• Discuss the situation with the business partner to understand the issues and develop a response. 
• Offer training and capacity-building support to the business partner and build common expectations and ways of working. 
• Use your company’s influence – or leverage – to encourage the business partner to address the issue (see Using Leverage for more). 

The UN Guiding Principles on Business and Human Rights, or UNGPs, emphasise the importance of integrating human rights considerations into how companies manage their business relationships.

Importantly, the UNGPs adopt an expansive definition of “business relationships” that goes beyond direct, first-tier and contractual relationships. This definition includes relationships with business partners, entities in a company’s value chain and entities directly linked to the company’s operations, products or services. See the Commentary to Guiding Principle 13 for more.

Additional key guidance on managing business relationships includes:

• Companies should avoid contributing to adverse impacts and use leverage to seek to prevent or mitigate those that are directly linked to their operations, products or services by their business relationships.
• Human rights due diligence should be initiated as early as possible in the development of a new relationship, because human rights risks can be increased or mitigated at the stage of structuring contracts and may be inherited through mergers and acquisitions.
• Companies should identify general areas where the risk of adverse impacts is most significant and prioritise these for human rights due diligence where the number of entities in the value chain makes it unreasonably difficult to conduct due diligence across all entities.
• Assessments of human rights impact should be undertaken prior to entering into a new relationship and periodically through the life of the relationship.

See Guiding Principles 13 and 17 – 19 for more.

Managing human rights challenges in business relationships is key to how a company implements its own responsibility to respect human rights. It’s also a way in which leading companies raise the bar amongst their peers and partners, and build common standards.

Places to start include:

1. Strengthening shared understanding of complexities: We need to better understand the complexity of global value chains and business relationships. Could each industry develop an infographic showing a typical value chain to help everyone understand how that industry works? See how Trafigura approached this in Commodities Demystified: A Guide to Trading and the Global Supply Chain.

2. Overcoming challenges of scale and complexity: We all know that it’s not as easy as cascading expectations down a supply chain. New ways of thinking and collaborating are needed to more effectively identify risks - and generate commitment to respect for human rights across the value chain. We can build on lessons and insights from industry-level collaborations and the efforts of individual companies.

3. Focusing on trust-building with business partners: In discussions about how to integrate respect for human rights into business relationships, there is often – importantly – a strong focus on processes, prioritisation and tools. However, practitioners consistently emphasise that the trust that exists (or doesn’t) between a company and its business partners is a critical factor in achieving outcomes.