A/HRC/14/27 68. The challenge is more complex where national law conflicts with international standards and where legal compliance may undermine the corporate responsibility to respect. The classic case thereof was apartheid in South Africa. The Special Representative addressed this dilemma in his 2009 report.40 He is seeking further views and experiences on possible ways of dealing with it through his online consultation. 69. The second scenario is more complex. There are situations in which companies harm human rights and, in doing so, they may also be non-compliant with existing securities and corporate governance regulations. What is the connection? If companies are not adequately assessing and aggregating stakeholder-related risks, they are unlikely to be disclosing and addressing them, as may be required. Stakeholder-related risks stem from community challenges and resistance to company operations, typically on environmental and human rights grounds. Current evidence comes largely from the extractive and infrastructure sectors, especially where companies operate in conflict-affected or otherwise difficult contexts. However, similar internal control and oversight gaps are likely to exist in other sectors as well. 70. Such risks to companies include delays in design, siting, granting of permits, construction, operation and expected revenues; problematic relations with local labour markets; higher costs for financing, insurance and security; reduced output; collateral impacts such as diverted staff time and reputational hits; and possible project cancellation, forcing a company to write off its entire investment and forgo the value of its lost reserves, revenues and profits, which can run into several billion dollars in the latter case.41 71. A study of 190 projects operated by the international oil majors indicates that the time for new projects to come on stream has nearly doubled in the past decade, causing significant cost inflation. Delays are attributed to projects’ “technical and political complexity”.42 An independent and confidential follow-up analysis of a subset of those projects indicates that non-technical risks accounted for nearly half of all risk factors faced by these companies, with stakeholder-related risks constituting the largest single category. It further estimated that one company may have experienced a US$ 6.5 billion “value erosion” over a two-year period from these sources, amounting to a double-digit fraction of its annual profits. These are big numbers. 72. What appears to be happening is that such costs are atomized within companies, spread across different internal functions and budgets and not aggregated into a single category that would trigger the attention of senior management and boards. However, when added up, some of these risks could well count as being “material” even according to the narrowest definitions and, if unaddressed, could require disclosure under existing law. 73. This is a lose-lose-lose situation: human rights are adversely impacted, serious corporate value erosion occurs and disclosure requirements and directors’ duties may be breached. Clearly, better internal control systems and oversight are necessary. 74. The same is true for a third issue: managing the risk that companies may be implicated in human rights-related international crimes. This is particularly problematic in similar sectors and circumstances as the issues just discussed. Few reputable companies may ever directly commit acts that amount to international crimes. Yet, there is growing 40 41 42 GE.10-12629 A/HRC/11/13, paras. 66–68. See World Resources Institute, “Development without Conflict: The Business Case for Community Consent”, 2007. Available from: http://pdf.wri.org/development_without_conflict_fpic.pdf. Goldman Sachs Global Investment Research, “Top 190 projects to change the world”, April 2008. 15