Sustainable corporate governance and human rights: Policies and alleged infringements in the garment industry

Frame of the research: Despite the growing diffusion of corporate human rights policies, evidence on their effectiveness in preventing infringements remains scarce and mixed, and little is known about how policy quality shapes their impact. This study addresses this gap by disentangling policy adoption from policy quality. Purpose of the paper: This study investigates whether, and under what conditions, corporate human rights policies, that is, public corporate documents that formally articulate a firm's commitment to respect internationally recognised human rights and specify expectations for employees and business partners, function as effective sustainable corporate governance (SCG) mechanisms. Methodology: To test our hypotheses, we create a novel longitudinal dataset of 156 fashion companies. First, we examine the effect of policy introduction using a Difference-in-Differences approach. Next, we adopt a two-stage selection model to investigate how policy quality heterogeneity is associated with corporate infringements. Findings: Contrary to expectations, policy adoption alone is not associated with fewer subsequent human rights infringements. Accounting for policy quality reveals a different pattern. Higher-quality human rights policies, that is, those embedding governance sponsorship, operational guidelines, and credible communication, are associated with fewer infringements. Research limits: The study relies on Business & Human Rights Resource Centre (BHRRC)-reported incidents, which may be affected by visibility bias. Additionally, it focuses on a single high-risk industry, limiting generalisability. Practical implications: Results underscore the need for sustained investments in policy development, updating, and integration to ensure SCG is effective. Regulators should define minimum quality criteria to avoid symbolic compliance. Originality of the paper: The study disentangles policy adoption from policy quality, providing quantitative evidence of their distinct effects. Additionally, it introduces a replicable measure of human rights policy quality for SCG and Business and Human Rights (BHR) research.