Business models with inherent human rights risks

Shift has released it ‘Business Model Red Flags’ resource, as part of its Valuing Respect Project. The resource finds that certain human rights risks are embedded in decisions about how a business will create value – for these businesses, it is impossible to mitigate risks to people at the operational level. Without this understanding, companies “risk wasting time and valuable resources on efforts to address issues at an operational level when the reality is they are wired for trouble.” Understanding these business model risks is necessary to in turn “foster sustainable business models that can be economically successful without exacerbating inequalities.”

Shift finds that there are three features of a business model that put people at risk:

1. The value proposition (what the company offers and to whom);
2. The value chain (how the company delivers value); and
3. The revenue model (how the business model is profitable).

Source: Shift, Business Model Red Flags (Valuing Respect Project, May 2020)

In a related resource, Shift provides a list of leadership and governance indicators to help evaluate a company’s progress towards building a rights-respecting culture. These indicators are important because typical indicators “focus on formal systems – codes of conduct, organizational structures, roles, responsibilities and incentives” which “miss the profound influence of senior leaders’ behavior on how things actually happen.” Organisational culture is key. These indicators build on four features of culture that are central to human rights respect, namely (1) the authenticity of commitment, (2) responsibility and accountability, (3) respect and empathy, and (4) organizational learning.

• Formal governance arrangements and processes: There are ten proposed governance indicators for the senior governing body and its sub-committees. These include reviewing the company’s business model as referenced above, having systems in place to regularly hear from stakeholders (workforce and external stakeholders), creating cross-functional processes and reviewing top management performance incentives.
• Key behaviours of senior leaders: There are twelve proposed leadership indicators for senior leaders at corporate, regional, country and business unit levels. These include ensuring insights of those leading internally on human rights are integrated into decision-making processes, collaborating with business peers and other stakeholders to address systemic human rights issues and encouraging the sharing of problems and setbacks, as well as progress and successes.

Shift is welcoming feedback on these documents (and the business model red flags in particular) at info[at]shiftproject.org.

For transparency, for those of you I haven’t met yet, I dedicate half of my time to Shift as a Senior Advisor.

“Our aim with these Red Flags is to help companies strive towards sustainable business models that are economically viable but also integrate respect for people into the core of how they deliver value.”                      

Caroline Rees, President of Shift, Business Model Red Flags (Valuing Respect, May 2020)

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