The UN Development Programme, supported by the World Benchmarking Alliance, published Human Rights vs. Competitiveness: A False Dilemma? Data on the Financial Implications of Corporate Human Rights Performance (November 2025). The study is based on a five-year quantitative analysis of 235 global firms looking at their human rights performance and financial reporting.
Human Level’s Take:
- A striking new study is showing how corporate respect for human rights can be beneficial (or, at minimum, neutral) for companies’ financial performance and stability.
- Improvements in human rights performance, measured via company scores on the Corporate Human Rights Benchmark (CHRB), are linked to higher operational efficiency gains (Return on Assets or ROA). A 10% improvement in CHRB score corresponds to around 1% ROA increase. Companies that strengthen their human rights performance tend to improve operational efficiency, while declines in conduct correlate with lower returns — suggesting that the real competitiveness risk lies in inaction on human rights.
- The research also indicates that the costs of human rights due diligence do not erode profit margins; in fact, enhancing human rights performance can modestly contribute to stable or even increased core profitability. In addition, human rights performance has a neutral effect on cash flow, suggesting that that companies can pursue strategic investments without compromising cash flow.
- When it comes to market value, the study found that investors do not penalise companies for human rights investments. In fact, market valuations, future earnings expectations and shareholder returns are unaffected or slightly positive for companies with stronger CHRB performance.
- Ultimately, the research concludes that a traditional view of business value — based on minimising costs and maximising differentiation through superior value — is insufficient to meet today’s more complex, unstable operating context. Modern competitiveness requires resilience to systemic, non-financial risks, including legal, reputational and supply chain vulnerabilities.
- By refocusing on a broader conception of value, companies can also introduce broader societal and strategic benefits. HRDD enhances stakeholder trust, community relations, innovation, and long-term societal value, all of which can contribute to creating a stable workforce, stronger rule of law and a more predictable business environment.
- The top takeaway for companies, no matter where they are on their human rights journey, is that investment in meaningful, robust HRDD is worth the upfront costs: it can not only create long-term value for the company, but also bring more immediate benefits while avoiding short-term losses.
Some key takeaways:
- A positive link to operational efficiency: The study assessed companies’ human rights performance using data from the World Benchmarking Alliance’s Corporate Human Rights Benchmark (CHRB) and compared this with financial performance from public reporting. In contrast to previous studies, which have looked at static financial performance of high vs. low-scoring firms, the UNDP study examines how changes in human rights practices affect financial performance over time, assessing the five-year impact of demonstrated improvements. One key finding of the study was that improving a company’s human rights performance is linked to higher asset efficiency (measured by Return on Assets or ROA), indicating that the long-term operational gains from stronger human rights due diligence (HRDD) outweigh the initial costs. Companies that strengthen their human rights performance tend to improve operational efficiency and ROA, while declines in conduct correlate with lower returns. This suggests that the real competitiveness risk lies in inaction on human rights. Specifically, a company improving its CHRB score by around 10% is associated with around 1% increase in ROA. For example, one company that increased how many human rights elements it met from 35% to 44% saw its ROA rise from 3.8% to 4.7%, illustrating the link between improved human rights performance and financial gains. The study also looked at two other indicators of financial performance: core profitability (measured by its Operating Margin or OM) and cash generation (measured by the ratio of Cash Flow from Operations to Sales or CFO/Sales). In terms of OM, the research shows that human rights due diligence costs do not reduce profit margins; if anything, improving human rights performance slightly supports stable or higher core profitability. When looking at CFO, human rights performance had a neutral effect, indicating that companies could make strategic investments without weakening cash flow from their operations. Taken together, analysing ROA, OM and CFO showed that substantial improvements in corporate human rights performance do not lead to a detectable financial penalty, with no negative impact observed on medium-term operating profits.
- A neutral-to-positive market reaction: Contrary to the hypothesis that investors punish companies for “wasteful” spending on human rights, the study found that strong corporate human rights performance does not reduce market valuations, indicating investors do not penalise firms for such social investments. The study tested for a link between a company’s human rights performance in one year and its subsequent market valuation. While not statistically significant, the study showed that investors respond neutrally or slightly positively to better corporate human rights performance, suggesting that they may view human rights due diligence as neutral or value-preserving rather than damaging to intangible assets like brand reputation. In addition, there is no evidence of a market penalty in subsequent valuations of the company. When it comes to future growth expectations (measured by EV/EBIDTA or the ratio of Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortisation), the market did not apply a lower valuation to companies with stronger human rights performance, which could suggest that investors do not believe future earnings will be lowered by the costs of ongoing HRDD. And when looking at shareholder returns (measured by Total Shareholder Return or TSR), the authors found no evidence that the perceived costs of HRDD generate a tangible financial loss for shareholders.
- How sustainable competitiveness creates tangible value: According to the study, the traditional competitive advantage model which is focused on minimising costs and differentiation (and is the basis of debates about competitiveness that sparked backlash to the EU CSDDD), is outdated. Rather, today’s more complex environment requires a framework that incorporates resilience to systemic, non-financial risks amid stakeholder scrutiny, legal pressures and fragile supply chains. The report identifies several interconnected pillars showing how sustainability can create tangible value. First, it can enhance enterprise resilience and mitigate risk. Proactively embedding human rights due diligence mitigates financial, operational, legal and reputational risks, enhances brand value, employee performance, stakeholder trust, and access to capital, making it essential for sustainable long-term corporate value. The report notes that responsible purchasing practices, in particular, can pay off over the long term. While investments like moving away from aggressive price negotiation, longer-term contracts and certified materials represent upfront costs, in fact companies that adopt these practices see higher operational efficiency and ROA, showing that long-term benefits from resilient, collaborative supply chains outweigh short-term margin pressures. A second pillar is securing stakeholder trust and social legitimacy, ensuring social license to operate. Strong community relations and human rights–based supply chains reduce operational risks and create a stable investment environment. Third, sustainability can drive innovation and long-term value creation. Robust HRDD can give companies deep value chain visibility, making it easier to identify and neutralise risks. Finally, it can help reframe what “value” means in the corporate context. Responsible business conduct can create significant benefits for society which are key to a successful economy, including a more stable, skilled workforce, stronger rule of law, and more social cohesion — together resulting in a more resilient and predictable operating environment for all companies.
