If firms fail to protect children in the supply chain, they risk harm to their bottom line.
Today is the UN’s Universal Children’s Day. Held on 20 November every year, this occasion recognises the welfare of children around the world and commemorates the adoption of the Declaration of the Rights of the Child in 1959, and the Convention on the Rights of the Child (CRC) in 1989, both of which were signed on this day.
ACCA (the Association of Chartered Certified Accountants) believes children’s rights matter for business, for finance directors and for accountants. To mark the occasion, we are due to publish a briefing paper called Accounting for children: implementing child rights for better business.
As we know from media reports and the campaigning work of the UN, charities and NGOs, children around the world remain vulnerable and are still exploited. How corporations support children’s rights and manage their impact on them could affect long-term shareholder value and is a fundamental factor in determining their future success.
Finance directors and their accounting teams need to be aware of this important issue because it is of direct relevance to them. It has repercussions for corporate risk, corporate governance and corporate reporting. ACCA believes that demands for audit, measurement and transparency will only increase when it comes to child rights.
DEVELOPMENT AND DISRUPTION
Childhood is a time of physical, mental and emotional development – the quality of the food, water, affection and education that children receive can impact on their subsequent lives and their potential to become engaged and productive citizens. Economic, social and physical disruptions can be defining events in a child’s life – and these disruptions can potentially affect them far more than they would adults. Children often lack a public voice: they cannot vote or form trade unions; they cannot influence companies through the purchase of stocks and shares and by attending shareholder meetings. As such, businesses have a responsibility to consider their impacts on children’s rights.
IDENTIFYING THE PROBLEM
With an estimated 168m children working as child labourers, and 85m children involved in hazardous work, there is still a long way to go. Sectors most at risk from child labour are agriculture and services, including hotel work, manufacturing and restaurants, retail trade, motor vehicle repair and maintenance.
Perhaps the most infamous cases of child labour exploitation are linked to the retail industry, especially clothing. Retailers sourcing goods and raw materials from around the world face numerous challenges in relation to children’s rights, especially as production is often based in developing economies, where there is a high risk that child labour will be involved at one or more points in the supply chain.
The financial services sector is not immune from the impacts of child labour – not through the direct employment of children, but through the financing of businesses and activities that could be involved in child labour or the abuse of young workers. Financial institutions can find themselves under pressure to perform proper due diligence on potential investments. This is perhaps an effect of globalisation, where supply chains lengthen and control and oversight lessen.
THE BOARDROOM DECIDES
The impact of child labour and provision of decent work for young workers should be addressed in every business’s boardroom. Every board should be asking and addressing a series of fundamental questions about child labour and working conditions, from “how do we know that we are not employing children under the legal minimum working age?” to “how do we know we are not providing poor working conditions and pay, making it impossible for parents to provide supportive environments for their children?”
The boardroom is instrumental in defining a company’s policy and its direction. Board members need to be mindful that implementing policies on children’s rights can bring many advantages, especially at a time when leading companies are looking to enhance their business models by integrating long-term planning into their core business strategy. It is fundamental for company boards, especially those from the specific sectors and countries we highlight, to look deep into their supply chains and ask themselves the difficult questions and implement immediate solutions where rights are violated.
THE RISK OF INACTION
Even where companies have in place policies and procedures designed to minimise the risk of being involved in child labour, cases can and do still arise. Legal action, negative media coverage, reputational damage, loss of business and reduced investor support could follow as fall-out.
There are also signs that shareholder groups are becoming more interested in the issue of children’s rights. Members of the Interfaith Center on Corporate Responsibility (ICCR) and other Facebook shareholders, for example, have questioned whether the company’s advertising and privacy policies adequately safeguard children. Nestle has been questioned at its AGM by Baby Milk Action about its marketing of breast milk substitutes in developing countries. Many investors are also taking a proactive line – Scandinavian fund manager Swedbank Robur has published its position on children’s rights, setting out its fundamental values and views, and the consequences for its investments.
TRANSPARENCY IS THE BEST POLICY
Some businesses are already going beyond the minimum required for addressing their business impact on children’s rights by supporting projects to improve children’s educational opportunities. Some are also looking at the income-earning opportunities of the families in which these children live. Such businesses may even be able to launch new brands directly associated with their children’s rights and sustainability activities.
Acting alone can have limited impact. Businesses have increasing opportunities to work with NGOs and charitable organisations, and to join forces with other corporate entities in sector-wide initiatives. This is why the accounting profession needs to be aware and be prepared, especially as globalisation extends supply chains and operations across borders. This expansion increases the risks of a business’s association with potential violations of children’s rights.
Protecting children’s rights is fundamental to good business. The reality is that, if business and finance leaders fail to take account of children’s rights, they run ethical, reputational and legal risks that affect the bottom line.