Business and Human Rights in Malaysia: Costs of Inaction and Starting Points for Malaysian Companies

Sustainability

Business and Human Rights in Malaysia: Costs of Inaction and Starting Points for Malaysian Companies

  • Business and Human Rights in Malaysia: Costs of Inaction and Starting Points for Malaysian Companies Businesses - including those in Malaysia - have come under growing scrutiny on their approach to labour management. What are the costs of inaction and what are the starting points for Malaysian companies?
  • Date: Feb 25, 2021
  • Category: Sustainability
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A growing spotlight on business and human rights in Asia

In recent years, businesses have come under growing scrutiny on their approach to labour management, regarding both employees directly under their charge and workers embedded deep within their supply chains. In the few months of 2021 alone, we heard of child labour in a Brazilian delivery app, an Apple factory
in India under probation after protests over unpaid wages
and allegations of harassment in a H&M factory in India. Closer to home, a number of Malaysian companies including Top Glove, Sime Darby Plantations and FGV Holdings were called out a few times in the past year by governments, investors and buyers for lapses in human rights.

Alongside the news headlines, the statistics show an equally stark reality. Today, more than 40 million people
continue to be victims of modern slavery – two-thirds of them in Asia.
152 million children are still in child labour globally, prompting the UN General Assembly to declare 2021 the International Year for the
Elimination of Child Labour
, calling for accelerated progress to eliminate child labour for good.

The COVID-19 pandemic has also brought business and human rights issues to a head. Migrant workers, already vulnerable before the pandemic, continue to face a range of challenges. In Southeast Asia, there are over 18 million migrant workers outside their country of origin, providing over $77 billion in remittances – a figure estimated by the World Bank to drop by 13% in 2020 due to the pandemic. According to the Institute of Human Rights and Business (IHRB), when lockdowns were imposed in Asia and migrant workers laid off,
many faced job loss or non-payment of wages, repatriations to their home countries in situations of debt or
left with no accommodation as they were unable to return home
. Poor accommodation conditions of migrant workers were also brought to light in countries such as Singapore, where infection rates soared among its migrant worker population.

What companies should look out for: The costs of oversight towards business and human rights issues

Against this backdrop, the spotlight on business and human rights issues is likely to further intensify. Thus, companies would fare well by asking themselves a critical question: How can these issues affect us?

Recent events have shown us that a failure to identify and respond promptly to human rights issues can lead to significant reputational damage, disruptions to operations, costly and disruptive legal action, investor divestment and ultimately, financial loss.

In 2020, the US government banned imports from a few Malaysian companies due to allegations of forced labour, including Sime Darby Plantation, Top Glove and FGV Holdings. Top Glove also faced scrutiny for failure to protect its workers from COVID-19 when Black Rock, the world’s biggest asset manager and tenth biggest shareholder in the company, called for the removal of board members for their lapses in oversight.

These incidents are part of a wider movement calling for companies to take action or face consequences, from the EU mandating human rights due diligence for its companies by 2021, to international investors
urging companies with poor performance on human rights to take fast and concrete action
.

What companies should do: The starting points

Here are two useful starting points companies can consider:

Adhering to the UNGPs as an overarching framework

For a start, companies should adhere to the UN Guiding Principles on Business and Human Rights (UNGPs) as an overarching framework. Released in 2011, the UNGPs are now considered the global standard setting the level of expectations on companies to respect human rights in their operations and value chains.

Under Pillar 2 (‘The Corporate Responsibility to Respect Human Rights’) of the UNGPs, companies are urged to implement the following measures:

  1. Policy Commitment: Having a policy statement on their commitment to respecting human rights, which is approved at the most senior level, is publicly-available and stipulates expectations on employees, business partners and others linked to the business.
  2. Human Rights Due Diligence: Conducting an ongoing process of human rights due diligence to identify, prevent, mitigate and account for how they address their impacts on human rights.
    1. Assessment: Conduct an assessment of any actual or potential human rights impacts across their business operations, informed by meaningful stakeholder engagement and drawing on internal and/or independent external human rights expertise.
    2. Taking appropriate action: Integrating the findings from their assessments to take action in response. This should include assigning responsibility to appropriate levels and functions and budget allocations.
    3. Tracking effectiveness of its response: Track responses based on appropriate qualitative and quantitative indicators and drawing on feedback (including from affected stakeholders).
    4. Communication: Formal external reporting on how actual/potential human rights impacts were addressed.
  3. Remediation: Providing adequate remediation to affected stakeholders where the company has caused or contributed to human rights impacts.

Paying closer attention to forced labour

While adherence to the UNGPs presents a useful first step for companies to establish an overarching framework, companies in Malaysia should also pay close attention to forced labour – highlighted as an area of high risk for the country.

This is in light of the recent spotlight on high profile allegations faced by Malaysian companies on forced labour, including on the nature and extent of protection accorded to migrant workers. In fact, this issue has been identified as a high-risk issue for Malaysia since 2015, in a Strategic Framework by Suruhanjaya Hak Asasi Manusia (SUHAKAM), Malaysia’s National Human Rights Institution.

Forced labour – sometimes referred to as modern day slavery – has been defined by the International Labour Organisation (ILO) as “work that is performed involuntarily and under the menace of any penalty”. Today, forced labour tends to exist in more subtle means such as debt bondage, retention of identity documents or excessive overtime. Thus, companies should consider the ILO’s 11 indicators of forced labour when assessing their business operations and supply chains.

To help companies take action to combat forced labour and trafficking, the ILO has also developed their
10 Principles for Business Leaders to Combat Forced Labour and Trafficking:

  1. Have a clear and transparent company policy, setting out the measures taken to prevent forced labour and trafficking. Clarify that the policy applies to all enterprises involved in a company’s product and supply chains
  2. Train human resource, compliance officers, and auditors in means to identify forced labour in practice, and seek appropriate remedies. ILO’s indicators of forced labour include retention of identity documents, withholding of wages and debt bondage.
  3. Provide regular information to shareholders and potential investors, attracting them to products and services where there is a clear and sustainable commitment to ethical business practice including prevention of forced labour
  4. Promote agreements and codes of conduct by industrial sector (as in agriculture, construction and textiles), identifying the areas where there is risk of forced labour, and take appropriate remedial measures
  5. Treat migrant workers fairly. Monitor carefully the agencies that provide contract labour, especially across borders, blacklisting those known to have used abusive practices and forced labour
  6. Ensure that all workers have written contracts, in language that they can easily understand, specifying their rights with regard to payment of wages, overtime, retention of identity documents, and other issues related to preventing forced labour
  7. Encourage national and international events among business actors, identifying potential problem areas and sharing good practice
  8. Contribute to programmes and projects to assist, through vocational training and other appropriate measures, the victims of forced labour and trafficking
  9. Build bridges between governments, workers, law enforcement agencies and labour inspectorates, promoting cooperation in action against forced labour and trafficking
  10. Find innovative means to reward good practice, in conjunction with the media

A wealth of resources are free and publicly-available for companies to help companies take stock of where they currently stand against human rights. Some useful self-assessments include:

  1. Human Rights Compliance Assessment: Quick Check by the Danish Institute of Human Rights
  2. Global Compact Self-Assessment Tool by the UN Global Compact
  3. Rapid Self-Assessment: COVID-19 and Human Rights Risks by the UNDP

Looking ahead, companies should anticipate greater emphasis on business and human rights, and begin ensuring that they have taken steps to respect human rights in their operations and across their value chain.

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Corporate Citizenship

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