2017 Holiday Reading to Blow Your Mind (and expand your perspective)

In November, I mentioned that Peter Drucker thought of management as a liberal art. Last year I already recommended some contemporary philosophy to broaden your horizons (see, Holiday Reading to Blow Your Mind).  In 2017, I picked up some history books that give grand sweeping views of how we ended up in this day and age. Again, as in 2016’s holiday reading list, I tried to put the books in some kind of broad structure (see the photo directly above). It might give you an indication of what you want to read next after finishing one of the central books in the photo.

The two central books of this year’s list (note: not written in 2017, just read by me this year) are Fukuyama’s The Origins of Political Order and Harari’s Sapiens.

The Origins of Political Order. Francis Fukuyama. One of the first things I learned from glancing through the chapter headings of this book was that political institutions as we know them do not start with democracy in Greece. Instead, Fukuyama shows us the Chinese already gradually built a successful bureaucracy to govern vast lands from the 8th to the 3rd century BCE. The premise of the book is deceitfully simple: countries, empires, republics, etc. that work, have a couple of things in common: successful state building, rule of law, and accountability of governments. Fukuyama takes us on a tour of world history to show us where each of these three concepts first originated. He also shows us many examples of states that do not function because one or more of the three components are missing. Another thing I got out of this book is that I’ll never again take my country’s institutions for granted. In a way, these institutions have been shaped by an evolutionary process on societal level, to hand us working bureaucracies, rule of law and accountable government. If you won’t take my word for it, here’s what The Spectator wrote about this book of big ideas:

The Origins of Political Order is a magisterial work by an influential scholar, drawing on massive research in the social sciences as well as history and evolutionary biology. It provides a powerful and provocative analysis of the origins of the modern state, of relevance not only to historians and political scientists, but to anyone wishing to understand the nature of democratisation in the modern world and how it is to be achieved.

Sapiens – A Brief History of Humankind. Yuval Noah Harari. Harari takes us both further back in time than Fukuyama does, and into the future. This is a book with as broad a scope as you can imagine. Harari tries to answer the question why homo sapiens came to rule (and possibly will destroy) the world. One of his key proposals is our capacity for thinking in concepts that exist outside immediate reality:

(…) the truly unique feature of our language is not its ability to transmit information about men and lions. Rather, it’s the ability to transmit information about things that do not exist at all. As far as we know, only Sapiens can talk about entire kinds of entities that they have never seen, touched or smelled.

Concepts such as democracy, human rights, and religion are all put in a new light:

Yet none of these things exists outside the stories that people invent and tell one another. There are no gods in the universe, no nations, no money, no human rights, no laws and no justice outside the common imagination of human beings. People easily understand that ‘primitives’ cement their social order by believing in ghosts and spirits, and gathering each full moon to dance together around the campfire. What we fail to appreciate is that our modern institutions function on exactly the same basis.

This is a thought provoking book. You might not like or agree with some of the things Harari has to say, but he surely makes you see the world in a new light.

Reading Sapiens, I couldn’t stop thinking about another great book a read some years back:

The Mating Mind. Geoffrey Miller. One of the questions that to me always seemed unresolved, is why homo sapiens evolve in such a peculiar way. Or, better put, why do our ideas, concepts and ideologies (think human rights, democracy and religion for instance) evolve faster than the snail’s pace of biological evolution? Miller thinks he has the answer. He compares the human brain with a peacock’s tail. For every species, a different trait evolved to be the mechanism of natural selection. For the peacock, it was the feathered tail. For humans, argues Miller, it was the mind. Thus: our capacity for concepts that sit outside direct reality (cf. Harari);  our capacity for creating and telling stories our capacity to come up with things like democracy and human rights. In Miller’s words:

Once sexual choice seized upon the brain as a possible fitness indicator, the brain was helpless to resist. Any individuals who did not reveal their fitness through their courtship behaviour were not chosen as sexual partners. (…) By opening up our brains as advertisements for our fitness, we discovered whole new classes of fitness indicators, like generosity and creativity. (…) The healthy brain theory proposes that our minds are clusters of fitness indicators: persuasive salesmen like art, music, and humor, that do their best work in courtship, where the most important deals are made.

This is one of those books whose central idea will stay with you. Like Fukuyama’s idea of state building, rule of law, and accountability. And like Harari’s view on concepts existing outside of direct reality.

The other book that I kept thinking about while reading Sapiens, was:

23 Things They Don’t Tell You about Capitalism. Ha-Joon Chang. This book is a bit of an outlier in this list. A lot of big ideas and concepts are discussed in Origins and Sapiens, and on some of these ideas have been written wonderful little volumes. One of these is 23 Things. It is not a history (therefore an outlier in this list), but it deals with a concept that features prominently in Sapiens: capitalism. In Sapiens, you are told things like:

Ask a capitalist how to bring justice and political freedom to a place like Zimbabwe or Afghanistan, and you are likely to get a lecture on how economic affluence and a thriving middle class are essential for stable democratic institutions, and about the need therefore to inculcate Afghan tribesmen in the value of free enterprise, thrift and self-reliance.

Where Sapiens looks at capitalism as an ideology and even a religion (you will feel a natural response to protest against this ‘sacrilege’), 23 Things will give you all the more arguments to see what Harari means. Ha-Joon Chang, formerly with the World Bank and now at Cambridge University, explains why we need to think differently about capitalism, and why some truisms repeated over-and-over by world leaders and big institutions alike, might actually not have any truths to them. An important book. Not in the last place because it shows us how we are lured into stories. For the record: I’m not saying we should abandon capitalism; I’m saying we should see it for what it really is. And 23 Things is indispensable in being able to do so.

So, Sapiens triggered me to think about books that were already familiar to me (The Mating Mind and 23 Things). In contrast, Fukuyama triggered me to pick up some new books from my ‘to-read-pile’. Fukuyama makes an impressive case for religion having meant more to societies than just religion. An even more thorough case is made in:

The Evolution of the West: How Christianity Has Shaped Our Values. Nick Spencer. One of the few books I have ever (knowingly) read by a religious writer. Echoing Fukuyama, Nick Spencer argues that Christianity was instrumental in creating individualism in the Western world. Christianity, according to the writer, also shaped rule of law (cf. Fukuyama), humanism, human rights, capitalism, science, atheism, ethics, and democracy, to name just a few concepts covered in this beautifully written book. Warning: this is a rewarding read, but not an easy one. The Economist seems to agree:

It is not a popular thesis but, like a prophet crying in the post-modern wilderness, Mr Spencer provokes reflection that goes far beyond the shallow ding-dongs of the modern culture wars. He wants to make sure Westerners know where they came from as a way to illuminate where they are going.

Another book on the to-read-pile, that seems an obvious follow-up to Fukuyama, is:

Why Nations Fail: The Origins of Power, Prosperity and Poverty. Daron Acemoglu & James A. Robinson. I did not read this one yet. But I’m curious if Fukuyama’s three concepts of state building, rule of law and accountable government also play a prominent role in this book. From the back cover:

Based on fifteen years of research, and answering the competing arguments of authors ranging from Jeffrey Sachs to Jared Diamond [more on him next], Why Nations Fail blends economics, politics and history to provide a powerful and persuasive way of understanding wealth and poverty.

Finally, Sapiens and The Origins of Political Order evoke strong images of:

Guns, Germs and Steel. Jared Diamond. In its scope and grand sweeps, and trying to answer big questions, this is certainly a classic of the genre of big history, big questions, and big answers. I’m sure most of you have already read this book a long time ago. If not, it is probably enough to say that Jared Diamond’s books are in the bibliography of Sapiens, The Origins of Political Order, The Mating Mind, and Why Nations Fail. Harari speaks about Diamond when he says ‘[he] taught me to see the big picture’.

Happy holidays, and happy reading!

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What every manager should know about (2/5): Human Rights

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As your organization is getting ready for the implementation of EU guideline 2014/95/EU on the disclosure of non-financial information, I hand you a series of blog posts on non-financial topics that business managers might be less familiar with. My aim for this series of posts is twofold. First, to give you insight into concepts that are integral to non-financial frameworks on reporting, such as the Global Reporting Initiative (GRI) framework. Second, to show why and how you should integrate these specific non-financial disclosures into your overall business and risk management strategy.

The first blog in this series discussed climate change. You can read it by following this link.

The second blog of the series will discuss the aspects of human rights you should be familiar with as a business manager. I will discuss what human rights are, what the key drivers for respecting human rights are and, finally, how you can build a supply chain that respects human rights.

Defining Human Rights

What should the relationship between business and human rights be? The United Nations (UN) defines the role of business as respecting human rights; as opposed to states, that must protect human rights. Paragraph 12 of the UN Guiding Principles on Business and Human Rights (UNGP) states:

The responsibility of business enterprises to respect human rights refers to internationally recognized human rights – understood, at a minimum, as those expressed in the International Bill of Human Rights and the principles concerning fundamental rights set out in the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work.

Both the International Bill of Human Rights and the International Labour Organization (ILO) are part of the broader human rights movement that arguably started with the Enlightenment. In the table below, the Bill of Human Rights and the ILO are put into historical perspective. I highlight the texts which are referred to in this post (i.e. Bill of Human Rights, ILO, and UNGP) in blue:

table-complete

As we can see from this non-exhaustive timeline, human rights are ever evolving and expanding. In the words of Andrew Clapham in Human Rights: A very Short Introduction:

The human rights catalogue will continue to expand as new challenges emerge and new constituencies find it helpful to frame their claims as issues of human rights.

To list all articles in both frameworks (International Bill of Human Rights and in the ILO’s Declaration on Fundamental Principles and Rights at Work) will not be very helpful for managers to develop a first understanding of business and human rights.  Instead, I use clusters of human rights introduced by The Economist Intelligent Unit (EIU) in a report on the ‘challenges for business in respecting human rights’ (ranked in the order in which companies scored them as relevant to their activities):

clusters-of-rights

Not all rights are the same explains Clapham. We distinguish between:

  • Absolute rights: genocide, crimes against humanity, slavery, and torture are international crimes which are prohibited at all times.
  • Rights limited through legal restrictions designed to protect a defined legitimate objective: rights to liberty, fair trial, freedom of expression, belief, assembly, association, and property; any restriction on these rights has to be justified as proportionate to the aims pursued by the restrictions.
  • Rights that have built-in limitations: free speech and privacy.
  • Social, economic and cultural rights (sometimes called ‘aspirations’ instead of rights): food, education, health, housing and work.

Now that we have an understanding of the historical background of human rights, relevant clusters of human rights for business, and awareness that rights can have limits; we turn to the business drivers of respect human rights that go beyond mere compliance.

Drivers for Implementing Human Rights Policies

Besides compliance (a primary driver), there are a number of reasons why your company should have proper human rights policies in place. These include the protection of the company brand and reputation. Reputational risk is especially high if a firm has complicated supply chains. A 2015 article in the Journal of Business Ethics explains:

Social issues become relevant in supply chains because of the involvement of multiple suppliers who directly affect the reputation of the buying firm. Additionally, an enlightened stakeholder (both internal and external) holding the firm accountable for social issues in supply chains forces the firm to take responsible supply chain actions.

Two examples that are known throughout the business and human rights community are the Rana Plaza disaster and the Rohingya case in Thai fisheries.

In the Rana Plaza disaster in 2013, over a 1,000 garment workers died in the collapse of a factory building in Bangladesh. The EIU report rightfully links it to a failure of respecting human rights:

Spectacular failures of human rights protection still claim headlines. To cite just one of several recent examples, the tragic collapse of the Rana Plaza commercial building in April 2013 led to renewed questions about the quality of companies’ oversight of their suppliers’ human rights practices as well as the role of government in protecting such rights.

How events like these can hurt your companies’ reputation was shown by the bad news coverage Primark, a low cost British garment label, received when it was linked to the disaster (see for example the article Disaster at Rana Plaza in The Economist).

Another example that shocked the world in 2015, was the enslavement of Rohingya (an ethnic people from Myanmar) aboard Thai fishing boats. The Guardian reports:

Rohingya migrants trafficked through deadly jungle camps have been sold to Thai fishing vessels as slaves to produce seafood sold across the world, the Guardian has established.

The seafood was traced to individual leading supermarkets worldwide that had to take immediate action to manage their reputation.

External and internal stakeholder pressure is often mentioned as another driver to implement human rights policies. NGO’s, local communities, investors, and employees can all pressure the corporation into doing more on human rights topics. Risk management might be a fourth driver for implementing human rights policies and procedures. Risks to manage are, apart from the reputational risk already mentioned, risks that stem from disruptions in the supply chain because of issues with human rights (e.g. strikes, bad quality of products, or drops in productivity, etc.). A final driver, which is sometimes overlooked when it comes to human rights policies, is performance improvement. Workers that are well taken care of tend to perform better, which will, in turn, lead to higher output or higher quality of products in your supply chain.

With these five sets of drivers (i.e. compliance, protecting the company reputation, external and internal stakeholder pressure, risk management, and performance improvement) there is surely a business case for implementing human rights policies in your supply chain. We will now discuss how to do just that.

Implementing Human Rights Policy in Your Supply Chain

From all the ESG-topics that firms try to grasp, human rights might prove to be the most difficult one. The head of government relations at Anglo American, a mining corporation, says (in the EIU report):

the notion of human rights abuses is an alien and scary one among technical functions who are more used to ‘impacts’ and structured, technical processes to address them, as opposed to legal ones.

John Ruggie (who drafted the UN Guiding Principles), also in the EIU report, agrees:

It takes time. It takes training. Things have to be translated into operations-speak if they are going to be effectively internalised by people on the ground.

Concluding that implementing human rights policies is not easy, one of the key strategies in implementing those policies is to team-up: involve NGO’s and maybe academia and regulators. In the words of a study published in the Notre Dame Journal of Law, Ethics and Policy:

Human rights are ever evolving so there is a need for open dialogue with government, social groups, NGOs and other stakeholders.

Taking all this into considerations, I propose an eight step approach to implementing human rights policies in your supply chain. This approach borrows insights from the Canadian Network for Business Sustainability, William Bradford’s comprehensive article Beyond Good and Evil: The Commensurability Of Corporate Profits and Human Rights, and Yawar and Seuring’s literature review Management of Social Issues in Supply Chains.

Step 1: Analyze and prioritize. First, perform a risk analysis and determine where your priorities need to be. An example from the EIU report:

Coca Cola conducted a human rights risk analysis of its entire value chain, which identified seven priority risks, ranging from employment and health and safety issues, through to land rights, compliance with transparency and due diligence requirements.

Bradford advises along the same lines:

Corporations should independently perform a rigorous “social audit” to ascertain the current status of their human rights protective practices, the threats to human rights within their spheres of operation, and the internal procedures available to respond to change and rapidly emergent threats.

Step 2: Engage stakeholders. Engage widely with stakeholders and formalize the dialogue. The engagement should lead to a decision on a compliance strategy: a code of conduct or certification scheme that has the support of your stakeholders. Prioritize. Depending on the size of your operations, it might very well be impossible to implement ‘everything everywhere’. On engaging stakeholders, Bradford argues:

With the inputs from NGOs, corporations will be able to further refine their practices and enhance their capacities for compliance while reducing the risks of litigation and injury to reputation.

Step 3: Select suppliers. Select suppliers that are willing to work on respecting human rights. An implementation of virtually anything in your firm can never be just about ‘ticking the box’. Select suppliers that understand what you are trying to achieve and that will work with you in a longer term relationship.

Step 4: Develop KPIs. Develop KPIs together with suppliers and other stakeholders. Again, use the knowledge of your stakeholders. But do not forget to design processes and systems that can actually deliver on your KPIs.

Step 5: Evaluate. Evaluate your suppliers on a regular basis. Since you are implementing something that is also challenging for your firm, you should follow-up frequently to see if expectations are being met and evaluate progress.

Step 6: Enhance performance. Use supplier development strategies to enhance performance. Implement collaboration and training programs at the supplier, invest in assets, or offer technical and financial assistance. Informal evaluations and audits could encourage suppliers to take initiative.

Step 7: Report. Communicate your efforts and results according to the compliance strategy you chose in step 2 or integrate the results in your current ESG-report. Reach out to all stakeholders involved in step 2 and get their feedback.

Step 8:  Review. Set-up a quarterly review board. Make sure it is composed of in-house professionals and external academic, NGO expertise, and worker unions. Review performance evidence quarterly to identify patterns and explore possible solutions. Such formal review sessions might prove invaluable to organizations according to Bradford:

Over the last decade, formal and ongoing dialogues have developed wherein corporations, NGOs, government officials, academics, labour representatives, and community leaders meet to discuss issues of common concern, including monitoring of, and compliance with, CCCs [Corporate Codes of Conduct] governing the protection of human rights. Such dialogues afford corporations valuable and low cost information as to the social expectations of important stakeholders in a setting that enables the ongoing (re)negotiation of the details of broadly-based norms and principles that constitute civil partnerships. In exchange, NGOs acquire additional social status, wealth, prestige, and access. Through dialogues, corporations can calibrate their practices, learn how best to uphold their agreements, and retain the material advantages of identification by NGOs as socially responsible.

As I already argued in my blog post The Business Case for Non-Financial Reporting, disclosing non-financial information can lead to insights on how to update your business strategy or improve stakeholder relations. The discussion on implementing human rights policy – as part of the discussion on disclosure of non-financial information – has shown again that implementing sound ESG-strategies can boost your risk management, manage your reputation towards stakeholders, and enhance performance in your supply chain.

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