Why working on human rights in China is good for business

Today, October 25, the state visit to China of the Dutch King and Queen officially started. In the run-up to this state visit, the discussion on whether or not the King and Queen should talk about human rights in China in their meetings with Chinese counterparts intensified again. This is a regular recurrence ahead of any high-level event between the Netherlands and China. It is also not unique to the Netherlands. I have read similar discussions in the past week while President Xi visited the United Kingdom.

As usual, the state visit is accompanied by a large trade delegation. And sometimes the question about human rights in China also gets asked of Dutch entrepreneurs: Do you talk about human rights when doing business in China?

The answer often is: We’ll leave that to the politicians.

At first glance, this makes sense. For example, when talking about the Chinese government’s attitude to human rights’ defenders, which is often part of this discussion. How can a Dutch business do anything about this? Let business people focus on running their business.

More than freedom of expression

What is forgotten here is that human rights are many more than only the rights referred to in the above context, such as freedom of expression. The Universal Declaration of Human Rights also includes others such as freedom from slavery, the right to a fair wage and the right to join a trade union, to name a few. These are the type of rights that should have the attention of business. After all, business has an impact on what people earn, under what conditions people work and on the environment (clean or polluted) people live in.

This gives businesses a responsibility to respect these rights and to ensure that their business operations do not have a negative impact on them (on the rights of employees, but also on the rights of people living near a factory, for example). The United Nations Guiding Principles on Business and Human Rights are the framework that outlines this responsibility. The Guiding Principles are also integrated in international standards such as the OECD Guidelines. These Guidelines are the foundation of policies on international corporate social responsibility as developed by the Dutch government: Dutch companies are expected to follow these Guidelines in their international operations.

In some countries the discussion on business and human rights has already led to legislation: this year, anti-slavery legislation came into effect in the UK and as of this month, as part of this law, large corporations are required to report on the steps they have taken to ensure slavery does not exist in their supply chain.

An opportunity for business

Over the last decades, China has achieved remarkable progress on eradicating poverty. This is a commendable achievement but unfortunately not all problems are yet solved. Regularly, multinationals headline international media with news on unsafe labour conditions or on toxic materials used on their production locations in China. International supply chains are often long, complex and non-transparent: it is difficult to know everything that occurs in the many links that connect that supply chain. But by not knowing, a company exposes itself to a lot of risk.

It is not all bad news. In addition to the ethical argument that a modern business should take responsibility for the societal impact of its business operations (aside from only financial impact), companies increasingly show that it can be good for a company to do so.

In-depth knowledge of what happens in your supply chain and executing due diligence, ensures that a company can act faster on issues that might otherwise only show after causing a problem. This means that a company can manage its supply chain risks better and can prevent unnecessary disruptions to production.

Transparency about a company’s policy on human rights and CSR increases access to finance, from banks or investors but also when applying for funding from the Dutch government (which requires following the abovementioned OECD Guidelines). That transparency also leads to increased trust from clients: when supplying business clients it means that you are also reducing risk for them. But also consumers are increasingly asking questions about where and how products are being manufactured. Being able to provide answers to those questions can give you access to a loyal new group of customers.

How does your business work on human rights in China?

Taking the above perspective, it almost seems strange that companies who do business in China (or any other country) don’t get that question more often. Within their value chain, this is something a company has influence on: human rights are not only relevant to politicians but also to business. Positively using that influence, sets a company apart from its competition and makes it better positioned for future business success.

Does this sound complicated? That first step is easier to take than you might think: take a good look at your business operations and your (international) supply chain and use that as your starting point. Knowing your supply chain and identifying the main risks is key. Go from there for your next step.

Are you wondering if you should even be active on the Chinese market because of the government’s human rights track record? Then also consider that even if you cannot influence government policy, you can make a positive impact through your own activities and your supply chain.

This blog was first published in Dutch on www.china2025.nl