ESG: It's not just Business, it's Personal

​​​​​​​​​​​A greater emphasis is being placed on the human rights obligations of businesses than before, with likely moves towards binding treaties.

Environmental, Social and Governance (ESG) considerations are becoming increasingly relevant across the spectrum: from investor and shareholder relations, brand and reputation management and data protection to business and human rights, corporate governance and fiduciary duties of companies and their directors. Businesses ranging from JSE-listed entities to your friendly neighbourhood stores are affirming their commitment to a better world for all. And so they should!

The concept of business and human rights

Recently, businesses have been re-focusing and re-evaluating their commitment to ESG and sustainability. There’s been an intentional shift in focus to the "S" goals, which were often overlooked in the past. The "S" goals include business and human rights.

Human rights imperatives for business are, for example, to protect individuals from unfair discrimination based on race or gender, or communities from being negatively impacted by business operations. While business interests are generally focused on profitability, it would be incorrect to assume they are at odds with human rights. In fact, there is an opportunity for mutual growth and convergence.

It is important for businesses to be aware of the framework which guides them on their responsibilities to respect and protect human rights. The United Nations Sustainable Development Goals (SDGs) are the starting point. They consist of 17 goals which call on all countries to take actions which ensure sustainability and include specific human rights-focused goals such as: no poverty, zero hunger, good health and well-being, quality education, gender equality, clean water and sanitation, decent work and economic growth, reduced inequalities, and peace, justice and strong institutions.

The SDGs exist at the level of principle or soft law. The UN has also released its Guiding Principles on Business and Human Rights (UNGPs). Although the UNGPs are not legally binding, they offer guidance on how businesses should embrace human rights and express their commitment to respecting and promoting human rights.

According to the UNGPs, the core of a corporation's responsibilities is to respect and protect human rights.This means that they should avoid infringing on the human rights of others and address adverse human rights impacts with which they are involved. Practically, this means that businesses should at least be incorporating the following strategies into their human rights initiatives, appropriate to their size and circumstances:​

  • A policy commitment to meet their responsibility to respect human rights;
  • A human rights due diligence process to identify, prevent, mitigate and account for how they address their impacts on human rights; and
  • Processes to enable the remediation of any adverse human rights impacts they cause or to which they contribute.

We expect there will be moves towards binding treaties which entrench the human rights obligations of businesses.

For example, recently​, a UN intergovernmental working group (which was established in 2014 after a resolution of the UN Human Rights Council sponsored by the governments of South Africa and Ecuador) met in Geneva to discuss the third draft of a legally-binding treaty on business and human rights. The purpose of the treaty includes clarifying the human rights obligations of business enterprises and ensuring businesses respect those obligations and are preventing and mitigating the occurrence of human rights abuses. This will be done through monitoring and enforceability mechanisms, and by ensuring access to justice and effective, timely remedy for victims of human rights abuses. The treaty is still in draft form, but once finalised and adopted by states, it is intended to apply to domestic and transnational business activities in signatory countries, and to cover all internationally recognised human rights and fundamental freedoms. In effect, through this treaty, the human rights obligations of businesses will become law.

The South African context

There is no specific binding legislation in South Africa which directly holds businesses accountable for human rights violations. At least, not yet. But ESG strategies must still encapsulate human rights considerations. These include, for example, equality and inclusivity in the workplace, fair labour practices, an environment that is not harmful – particularly for communities that may be situated near production or industrial sites - heightened corporate social responsibility (CSR) and sustainable supply chains.

South Africa's Constitution is one of the most progressive in the world. The Bill of Rights – a cornerstone of democracy – affirms the democratic values of human dignity, equality and freedom. It also enshrines the right to an environment that is not harmful to the health and well-being of the people, and several socio-economic rights, including the right of access to housing, health care, food and water.

The beauty of the South African Constitution is in its application. Not only must the State respect, protect and promote the rights in the Bill of Rights, but natural and juristic persons (ie, businesses) have these obligations too, to the extent applicable, considering the nature of the right and the nature of any duty imposed by the right.

The drafters of our Constitution were decades ahead of their time when they enshrined these provisions relating to socio-economic rights and the application of the Bill of Rights into the Constitution. And South Africa's unique history, coupled with its progressive Constitution, has placed it ahead of the curve on certain human rights issues such as equality in the workplace, including through transformation initiatives and B-BBEE legislation. This in turn assists with the promotion of socio-economic rights. The general sense, however, is that businesses are not doing enough. Even if they are doing something, they are not being held legally accountable for human rights failures.

Businesses that do not shift their focus to human rights are at risk. Key ESG-related risks include the risk of litigation, which involves not only the costs of legal services, but the potential costs of alienating the communities in which a business operates, its investors, consumers, and the public at large. For example, in the Netherlands in May 2021, a district court of The Hague ordered Royal Dutch Shell to reduce its global carbon emissions by 45% from their 2019 level by 2030. The litigation was launched against Royal Dutch Shell by various NGOs, who argued that the annual CO2 emissions of the global group were contributing to climate change and posed a threat to their human rights. There have also been reports that similar litigation is being considered by action groups in Germany against companies such as Volkswagen, Mercedes-Benz and BMW on the basis that the companies' excessive CO2 emissions will violate their rights to freedom, property and health. South Africa may well see similar claims soon.

The way forward

South African businesses would be well advised to take a deliberate approach to the advancement of human rights, both internally (employees) and externally (communities in which a business directly operates or indirectly affects). Properly implemented, whether through an internal or external ESG strategy or other CSR initiative, the advantages are obvious. Once people feel that their human rights are respected, the business gains public, investor and shareholder confidence, and greater employee engagement and dedication. All these advantages translate to greater innovation, access to talent, resources, and funding, and ultimately, profitability and sustainability.

At this point, it is not enough for businesses to indicate a willingness to respect, protect and promote human rights. They must take proactive steps to realise these objectives, including by implementing ESG strategies which must incorporate elements such as human rights, due diligences, impact assessments and compliance analyses. Perhaps most importantly, mechanisms must be put in place which empower affected individuals to hold a business to account when it fails in its human rights obligations.

This article was first published in Business Day.

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