Fight for your rights

Ericsson’s Stockholm-based chief legal officer and head of group legal affairs Nina Macpherson, and corporate counsel Lisa Edblom, describe how and why they designed a human rights-compliant due diligence framework for M&A transactions.

Nina Macpherson (NM): We are a truly global company and, as such, we do business in more or less every country of the world. In meeting the challenges of a global operation, Ericsson has a code of business ethics based on the UN Global Compact principles, which covers human rights, labour standards, environmental management, anti-corruption and so on.

The code of business ethics also includes a commitment to implementing the UN Guiding Principles on Business and Human Rights throughout our business operations. When we do business, we look at how we can minimise the risk of negatively impacting human rights. The idea is not to stop business, it’s to enable business – but in a responsible way.

Lisa Edblom (LE): Ericsson is part of the Shift Business Learning Program, in order to further strengthen our framework on human rights and ensure that our processes and procedures meet or exceed the UN Guiding Principles. [Shift is a non-profit organisation that assists governments, businesses and their stakeholders in implementing the UN Guiding Principles on Business and Human Rights]. Our sustainability and corporate responsibility unit is accountable for human rights issues within the Ericsson group, and is implementing them throughout our operations. One process we are focusing on for adding this human rights lens is M&A. We have designed a process that integrates consideration for human rights into Ericsson’s M&A transactions, in line with the UN Guiding Principles.

Human rights extends across all work streams and due diligence – it could relate to land rights in real estate, to labour rights, or to how a product is sold – ie to whom and for what use. We would look at labour rights and political rights such as freedom of expression, and right to privacy and security. We wanted to be able to identify, earlier in the process, what potential human rights risks there were. So, we would look at what country the target operates in, its portfolio and what customers and suppliers it has.

We have tried to build on existing processes. We didn’t want to add an extra layer which could slide when we are under time pressure; it had to be integrated into our existing ways of working. We also wanted to be able to conduct an informed due diligence – instead of setting up a separate process or needing to bring in a consultant in human rights.

Now we inform the due diligence team of the country – and the location-specific human rights risks to look out for in the review that they would do anyway for a deal. It’s very much competence-building and awareness-raising. For advice and information on specific countries, we use a third-party information source which conducts independent assessments, such as a risk consultancy.

We also found it important to incorporate the human rights assessment into the decision-making process, and to build our competence in designing responses, to gain the stakeholder perspective, as well as to include any findings in the documentation of the transaction if we decided to proceed.

image of prisoner in dusty cell

At the end of the process, we aim to track its effectiveness and ensure that improvements are fed into revisions by securing a feedback loop. We then hand over to an integration team so that any remedial action will be implemented.

Shift facilitated a very useful half-day workshop to stress-test our process, and the M&A stakeholders from group level and from business unit level attended. When we did this workshop, there was the question of whether we would have found human rights abuses, and at what stage. We all came to the conclusion that yes, we would have found them very early on, because being attuned to this was very much part of our culture. In implementing the UN Guiding Principles, we are now building on, and putting distinction to the concept, rather than doing something we haven’t done before.

As new people join the company or as colleagues take on new positions, we have to make sure that they are aware of the process. We have human rights expertise in the sustainability and corporate responsibility unit, and they are working on this issue, as well as other processes and procedures. From the legal level, we have covered the top project managers and the M&A community. Now, together, we will do outreach to the work-stream leaders and the line organisation to make sure awareness is raised. We need to get more and more test cases.

A challenge is that we mustn’t make human rights a lawyers-only concern, because it spans across many areas of our business. The due diligence process has been positively received by stakeholders in the business.

NM: Human rights risks are not the same in every country; you cannot put a definition on human rights risks. You have to make sure that you respect human rights within your own company, and then put the same requirements on the company you’re buying. But you cannot go to a seller and simply ask whether they respect human rights.

LE: The challenge is that human rights go beyond legal compliance. When the law of the target company’s country is not compliant with human rights standards, that’s when we, as a global company, have a greater responsibility than to just comply with the national law. We also have to respect human rights according to the UN Guiding Principles.

If we were to buy companies that didn’t have the best human rights record, we would remedy whatever problems there may be as part of the integration. From a legal perspective, it’s important to make sure that we are not exposed to historic liabilities and that we remedy whatever harm might have been done in the past.

NM: The legal department can identify risk when we are doing our normal business activities, such as supply, or sourcing, of products or services. We can also act as a good example as to how things should be done. For example, we can help a local company in a country where it’s unusual for women to work – maybe we can get permission to have women in the same workplace, or try to act as a good example in the society. I think the legal team can do various things to make it easier for the business as a whole to live up to our own culture and what we stand for.