For decades, acting in the best interests of the company has meant a focus on only short-term profits.

The Banking Royal Commission in Australia is just one example of how these best interests are increasingly being redefined to include obligations to act responsibly and ethically toward stakeholders. Stakeholders certainly include shareholders, but the obligation to act responsibly does not end there.

A corporation’s stakeholders potentially include its customers, people working with the business as part of the value chain and even the environment.

A clear example of stakeholder obligations extending beyond immediate customers and employees is the case of one bank’s US$1.3 billion penalty over multiple breaches of anti-money laundering and counter-terror finance laws. This included its failure to detect and report 262 customers who were making transactions consistent with child exploitation. The scandal understandably evoked rage and disgust from shareholders and the public.

The obligation to act responsibly is ongoing, not set and forget.

The ongoing lawsuit in Belgium and France brought by the Democratic Republic of Congo (DRC) is just one example. The DRC Government alleges that listed companies are using large quantities of tin, tantalum and tungsten (known as ‘3T minerals’) that, while sold as ‘conflict-free’ from Rwanda, are actually sourced from the DRC and illegally smuggled across the border.

Currently, European Union laws require companies using these 3T minerals to ensure that their purchasing decisions do not contribute to conflict or other related illegal activities. Conflict is dynamic, so it follows that corporate due diligence on assertions like ‘conflict-free’ would need to be dynamic and ongoing.

In the current court case, the DRC says that the current trade is linked to armed groups and human rights abuses, which puts these companies in breach of the OECD’s Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.

The risk of failing to manage human rights

The obligations of companies to ‘act responsibly’ toward people who are impacted by their business is not just a European trend. The United States’ Dodd-Frank Act has existed since 2012. The Uyghur Forced Labor Prevention Act in the United States is another way legislators are increasing pressure on companies not to import and sell products that were built by forced labor in another country.

And just because a business proposition meets the threshold for environmental protections, this does not automatically make it free from human rights risk.

As companies and investors push to transition to net zero energy, they must be aware that a failure to manage human rights presents a financial, reputational risk and legal as well as delays to projects and essential resource supply chains.

In the ongoing case brought by the Indigenous Osage Nation against a wind farm in Oklahoma, allegedly unauthorized mining and excavation occurred without obtaining a lease, the District Court ordered the removal of 84 wind turbines and scheduled a trial to determine damages.

In Brazil, a case involving a hydroelectric dam found severe environmental and socio-cultural impacts on Indigenous communities caused by 80 percent of the river flow being redirected. Ruling in favor of the seven Indigenous associations, the Supreme Court Justice ruled that Indigenous communities affected by the dam must receive a share of the royalties and that Congress needed to enact legislation regulating Indigenous participation in hydropower and mineral resource projects.

It has become increasingly clear that obligations to mitigate human rights risks are being mainstreamed to flow through a wider set of regulators and decision makers, all of which will have an impact on boards.

Reputation matters. Sustainable value creation matters, not short-term profit.

And laws around the world are imposing specific obligations on companies – environmental protection, safety and modern slavery risk. This means directors are required to comply with these obligations in the course of decision-making.

How to integrate human rights perspectives into decision-making

While compliance with regulations provides important guardrails, ultimately this comes down to a matter of values and culture. These are issues very much at the heart of the board’s remit.

As a board, your company or organization will demonstrate exactly the values that you promote or tolerate.

Think about modern slavery reporting requirements, in place from California to Australia and the United Kingdom. Some entities treat these reporting regimes as a compliance or ‘tick and flick’ exercise. But as a board, how does this align with your corporate values? Do you really want to tolerate the most vulnerable people in your supply chain being criminally abused and exploited?

You are responsible in the court of public opinion, and increasingly legally, for how your business impacts people, including any harms to people that your business causes, contributes to or is linked to through suppliers or relationships.

Today’s customers, investors and employees know that the way a company treats the most vulnerable people, the people with the least power in their supply chain or value chain, speaks volumes about what kind of company they are. This flows through to employee motivation, retention, brand and reputation, not to mention the risk of interruption to supply chains.

So, if there is any daylight between how your company says it will act and your actions on human rights, now is the time to fix this.

Questions for directors:

• How are you ensuring you have access to human rights expertise to support your decision-making?

• How are you staying across human rights-related risks in your operations and value chain?

• How are you staying across human rights-related innovations? For example, what do you know about worker voice programs or living wage?

• What criteria have been used to prioritize which human rights issues get first priority, second and so on?

• Have you tested your human rights grievance mechanisms through scenarios, either desktop or live?

• Who are you partnering with on human rights risk and value creation?

• What opportunities are there for value creation while strengthening human rights?

• How do human rights help us think about and make good decisions on sustainability in the sense of climate action?

Opinions expressed by The CEO Magazine contributors are their own.