Business and Human Rights: the story so far and what next?
This is a guest post by Sean Molloy, who is a Principal’s Development Scholar at the University of Edinburgh, where he is completing his PhD at the School of Law. Sean edits the Global Justice Academy newsletter, which you can subscribe to by clicking here.
In March of this year I attended a roundtable at Chatham House on the issue of business and human rights. Comprised of state officials, civil society organisations, academics, and corporate representatives, the focus of the event was on the extent to which (or not) a consensus is beginning to form on how to operationalise and implement the UNGP. In this post I wish to convey some of the discussions of that meeting in attempting to articulate the current position, the obstacles remaining and potential solutions going forward. Firstly, a little background is required.
Business and Human Rights: the Story so far
Writing on this area twenty years one would no doubt have to have begun by outlining the salience of this issue and substantiating the necessity of engaging with the relationship of business to human rights. Writing in 2015, however, it is well known that businesses, from multinational corporations to community level enterprises, can violate the whole spectrum of human rights. They can be directly involved in violating labour rights, eroding social and cultural rights, stifling trade union movements, denying freedom of expression, and engaging in discriminatory practices against individuals and/or groups. Indirectly, many businesses have also been accused or found guilty of acting in complicity with repressive states and armed groups in causing egregious human rights violations. From employing state security services to protect their oil explorations, to contributing either financially or through the provision of finances, goods, and services to oppressive regimes, businesses have also helped to sustain human rights violations.
From the early 1970’s numerous attempts have been made to regulate corporate activities in regards to human rights abuses. These efforts have included attempts at the international level to impose direct obligations on corporate enterprises (i.e. UN Norms) and softer approaches aimed at promoting CSR (Global Compact); expanding the web of extra-territorial civil liability (i.e. Alien Tort Statute) and attempts to introduce corporate criminal liability for gross human rights violations (See Frances position during negotiation phase of Rome Statute); from recalling and attempting to reinforce the primary obligations of the state to protect against human rights violations at the regional level (i.e. IACtHR), garnering best practices and guidelines at the industry and sector specific levels (i.e. the Extractive Industry Transparency Initiative and Voluntary Principles on Security and Human Rights), and developing multi-lateral and multi-stakeholder initiatives (i.e. OECD Guidelines and IPECI) to inform and direct the actions of corporate entities.
Despite these growing attempts to regulate business activity a persisting feature of the business and human rights terrain has been the impunity of corporate human rights violators and the question of what, if any, human rights obligations business entities have under international law. The rejection of the UN Norms in 2003 led to the appointment of Professor John Ruggie as Special Representative to the Secretary General (SRSG) on the issue of business and human rights. During his 6 year mandate (extended from three years to six in 2008) Ruggie developed the respect, protect, and remedy framework, and later the United Nations Guiding Principles in 2011.
The Principles are a polycentric model unanimously adopted by the UN General Assembly on the 21st March 2011. They seek to operationalize the respect, protect and remedy framework and refer explicitly to both the obligations and responsibilities of states and businesses respectively. Pillar one outlines the state’s legal obligations to protect against corporate human rights violations. This requires preventative policies, regulations and adjudication. Pillar two encompasses the responsibilities (distinct from obligations) of businesses to respect human rights. In particular, this pillar advances and develops the practices of human rights impact assessments to encompass processes of due diligence and prioritisation of immediate and significant risks both in regards to supply chains and their own proximate operations. Pillar three includes the legal obligations of states to provide remedies- both judicial and non-judicial and the responsibility of businesses to remedy victims of corporate abuse when they occur. In the words of Professor Ruggie the UNGP represent the ‘global standard on the issue of business and human rights.’
Four years on, the question which now arises is whether and to what extent the same consensus which led to their adoption exists in regards to their implementation? I will approach this question from two primary perspectives:
- Consensus at the state level; and
- Consensus at the Business level.
Consensus at the state level?
Perhaps the first place to look at whether or not a consensus is emerging amongst states in regards to the implementation of the UNGPs is the National Action Plans (NAPs) produced thus far. Essentially, NAPs outline the approaches which states are taking to implement the provisions of the UNGP. To date, however, only a few (exclusively EU) countries (namely UK, Spain, Italy, Denmark, Finland and the Netherlands) have produced these documents. While a number of other states such as the US, France, and Ireland have undertaken to produce NAPs, the proportion of UN member countries even contemplating doing so is worryingly low. Most notable is the almost complete disregard for the UNGP in developing and transitioning states. As an initial indicator, therefore, the lack of NCP progress suggests that the UNGP have some way to go before anything resembling a consensus can be said to exist.
Another possible area which might suggest consensus is around the issue of extra-territoriality and the possibility of home state liability for the actions of businesses domiciled in home states but operating globally. That is, notwithstanding the poor record of NCP’s, are states beginning to move towards imposing liability on parent companies for the actions of their subsidiaries as suggested under GP 2? Globalisation, the spread of neoliberalism and market economies, along with the increasing activities of multinational corporations which has followed, has sparked increasing attention at the role of home states in regulating the activities of corporate entities in unwilling or unable ‘host states.’ Rather than evidencing a consensus around this possibility, however, it is more accurate to note that general state practice evidences a consensus on the lack of and continued unlikeliness of extra-territorial practices. In particular, the curtailment of cases justiciable before Circuit Courts in the US following the Supreme Court decision in Kiobel has been a significant set-back for ET liability.
One welcome progression derives from the distinction made between ET liability and ET accountability by Professor Ruggie and Dr Jennifer Zerk in the consultation process leading to the UNGP. While the former possibilities appear to have made little headway, significant developments have been made in regards to home state requirements of corporate reporting. For example, U.S. persons with aggregate new investment in Myanmar over $500,000 are required to report on a range of policies and procedures with respect to their investments including human rights. Similarly, section 1502 of the Dodd Frank Wall Street Reform and Consumer Protection Act, contains a disclosure requirement that calls on companies to determine whether their products contain conflict minerals – by carrying out supply chain due diligence – and to report this to the Securities and Exchange Commission (SEC). In France a proposal to require human rights due diligence was narrowly rejected and has been referred back for further consultation. The proposed legislation could mean that civil and criminal liability for business enterprises’ human rights abuses could be imposed. Last year the European Council Directive 2014/95/EU on disclosure of non-financial and diversity information by certain large undertakings and groups amended the Accounting Directive 2013/34/EU. It now requires companies concerned to disclose in their management report, information on policies, risks and outcomes as regards environmental matters, social and employee aspects, respect for human rights, anticorruption and bribery issues, and diversity in their board of directors.
Business and Human Rights Treaty as a Hindrance to the UNGP or possible solution?
One possible reason for the slow uptake of the UNGP at the state level, particularly among developing countries may be said to derive from renewed discussions (spearheaded by countries such as Ecuador, South Africa, Bolivia, Cuba and Venezuela) around the possibility of a business and human rights treaty. This initiative was adopted by the UN Human Rights Council in June 2014 and led to the formation of an intergovernmental group to conduct ‘constructive deliberations on the content, scope, nature and form of the future intergovernmental instrument.’ It has been suggested by supporters of the principles that as a result of this process, focus has been redirected from the implementation of the UNGP at the state level to discussions on the mode, substance, and legal standing of such a treaty. Those in favour highlight the perceived inadequacies of the UNGP in regards to regulating corporate entities.
The voting breakdown on the treaty itself shows the geographical disparities which exist around the question of a business and human rights treaty. For example, 20 votes were cast in favour of a treaty (mainly from BRICs and developing countries), while 14 voted against (mainly countries of the OECD) and 13 abstaining. It is difficult to see how such a treaty would be adopted without the support of the countries such as the US, UK, and Canada. When questioning the likelihood of a business and human rights treaty in the future there is also a need for greater understanding about why the UNGP have not been implemented at the domestic level. If, for example, the reasons derive from judicial incapacity, economic dependency, and political reluctance, as in many developing states, it is difficult to see how the imposition of direct human rights obligations on business would have any discernible effect. Yes it is true that such obligations would have the possibility of requiring businesses, irrespective of the approach to human rights in the state in which they are operating, to adhere to internationally proclaimed human rights standards, but who would impose these obligations? If host states have been unwilling or unable to implement the UNGP as a result of the dependency on, for example, the jobs and revenues which companies create, imposing direct obligations on businesses will be futile without the appropriate forums to enforce these duties.
Two possible solutions may exist in the form of renewed calls for ET liability under the treaty and an international court on business and human rights to enforce it. In regards to the former option, it is unlikely that states opposing the treaty would agree to this. One could argue that the UNGP were so successful in adoption due the weak stance on extraterritorial liability in the first place. Imposing such obligations by way of a treaty is likely to further distance opposing states from engaging with the process. In regards to some form of court for business and human rights, it is difficult to imagine how this would operate in a practical sense. One need only look to the cases litigated before circuit courts in the US under the ATS to conclude that litigation against corporate entities is a long and complex task. How would such a court cope with the likely high levels of cases brought before it? It may look to international criminal law for direction. For example, it may assume jurisdiction only when a ‘host state’ is unwilling or unable. In reality this is likely to include the vast majority of cases. Similarly, it may apply only to the ‘most serious’ of crimes or perpetrators. This is perhaps the most feasible solution but if so, rather than viewing the UNGP and treaty as diametrically opposed, they would in fact have to be mutually supportive in the sense that only a small number of cases would be heard and so the state pillar of the UNGP would be all the more important and relevant.
One final area to look out for will be the nature of human rights obligations in the proposals for a treaty. For example, academics such as Deva and Bilchitz have been vocal in their condemnation of the constrained approach to corporate responsibility to respect. Finding support amongst political and moral philosophers and business and management theorists, they advocate for a more proactive role for businesses in fulfilling human rights.
It remains to be seen how these issues will play out and it is difficult to comment on the possibility of a treaty without knowing its substance. Given the intractability of state responses to implementing the UNGP, along with the various uncertainties and power dynamics surrounding a business and human rights treaty, it is obvious that much work remains to be done at the state level.
Consensus at the Business level?
One of the most progressive aspects of the UNGP is without doubt the due diligence requirements under pillar 2. In short, this asks business to ‘know’ what effects their operations have on human rights and to ‘show’ this to the wider public. They are further asked to prioritise and mitigate risks, both in regards to their own operations and through using their leverage to help prevent human rights abuses within their supply chains. Upon violating human rights businesses should also seek to remedy victims and instil appropriate mechanisms throughout the business in order to do so. Like the state duty to protect, however, responses to the corporate responsibility to respect have been mixed. A recent report issued by the Economist on the Road from Principles to Practice shows that while progress has been made, significant impediments remains. The report draws on two main sources for its research and findings: a global online survey of 853 senior corporate executives carried out in November and December 2014 and 9 in-depth interviews with independent experts (including specialists from Harvard, Human Rights Watch, Institute of Human Rights) and senior executives of major companies (including Coca-Cola, UBS, Anglo American). Amongst the finding of the report were:
- 83% agree that Human Rights are a matter for business
- 44% say that the CEO is most likely to take the leading role in Human Rights (followed by CSR – 34% and Human resources – 24%)
- Top 3 drivers are: sustainable relationship with local communities, brand reputation and employees’ expectations
- Close to a third think that make reporting on human rights a mandatory requirement for companies would help them respect human rights
But a number of impediments remain:
- Surprisingly 17% agree that Human Rights are NOT a matter for business
- Only 21% say that a clear business case is driving their Human Rights policy
- A majority has no explicit policy statement that references Human Rights
- Top 3 barriers are: lack of understanding, lack of resources and lack of training and education
- 79% do not see a clear business case for committing on human rights (risk-benefit analysis, competitive advantage…)
- Jan Klawitter, government relations manager, Anglo American: “We have to acknowledge big corporations need time to change. It is not an excuse for doing nothing: it is just a reality.”
While the importance of human rights to businesses is perhaps beginning to emerge, there are clear disparities between those businesses which have advanced their own policies and those which have not. Furthermore, focus to date appears to be on the large MNC’s overlooking the need to engage with Small to Medium size enterprises and the human rights violations which they can and do cause.
A further issue regarding the corporate responsibility to respect human rights, and one which will affect the landscape of protection at the business level relates to defining the contours of human rights. For example, do human rights encompass tax evasion, climate change and/or corruption? It was noted during the roundtable that one possible problem relates to expanding what we mean by human rights so much so as to become meaningless. Referencing the historic marginalisation of social issues in comparison to, for example, environmental concerns, it has been the suggested that the recent focus on human rights has enabled other areas of social concern to gain prominence in recent years. This, however, has come at a cost. As Ford has noted:
‘If business and human rights is to gain traction as a universal legal project, advocacy cannot credibly recruit international human rights law in support of everything it wants to see reformed.’
On the other side of this debate, one could argue that by failing to address issues which are inextricably linked to human rights violations such as corruption, ensures that notwithstanding improvements in corporate behaviour in relation to some areas, the systemic violations which businesses can play a significant role in will remain unaddressed. Going forward it appears necessary to differentiate between what it is that businesses are to respect on one hand, and those which pertain to other areas and which must be addressed through other initiatives.
What is the way forward?
While it is difficult to identify any consensus on the approaches of businesses and states in regards to implementing the UNGP, it is perhaps possible to identify a consensus on how best to move forward. The first and obvious approach is to continue to muddle on and hope that as time progresses more and more states and businesses will begin to act on the principles. This can be seen as the long term approach. In regards to the medium to short term, the consensus which I would identify is one which recognises the need to look to alternative regimes, players, and methods of advancing the business and human rights project.
Indeed, as the UNGP highlight, a number of existing frameworks have the potential to regulate the actions of businesses in respect of human rights but only recently have they been viewed through a human rights lens. These alternative regimes may also require us to view the role of states through their involvement in various regimes and through atypical lenses.
For example, investment regimes are increasingly recognising the necessity of human rights due diligence requirements. In 2011, the OECD Guidelines on Multinational Enterprises were updated to include a specific chapter on human rights while the IFC’s Performance Standards have been updated to account for human rights. Other areas to look at in the future will be the role of Export Credit Agencies, Bilateral Investment Treaties, Stabilisation Clauses, and the role of development and commercial banks in advancing human rights due diligence. Furthermore, there is increasing calls for the strengthening of OECD National Contact Points to hear cases against corporate entities which violate human rights. States have a crucial role to play in these areas as either members of multilateral organisations, participants in multi-stakeholder initiatives and contracting parties of investment treaties.
Another significant progression has been the increasing attention focused at the issue of business and human rights in both business and law schools. It is perhaps axiomatic that educating potential future directors, corporate executives, and owners of companies on the salience of human rights and the effects of businesses on them, can play a crucial role in how they run or require their businesses to be ran as either agents or principals. In regards to the role of lawyers, initiatives such as those of the international bar association, the American Bar Association, and Advocates for International Development, are illustrating the importance of educating legal counsel on the issue of human rights when advising businesses. Going forward it is of paramount importance that the salience of business and human rights continues to be taught at levels of higher education.
Finally and often overlooked, the adoption of the UNGP led to a wave of civil society organisations focusing specifically on the regulation of businesses and the implementation of the UNGP. Examples include SHIFT, the Institute for Business and Human Rights, Nomogaia, and the Centre for Research on Multinational Corporations. These bodies are playing a number of crucial roles including holding businesses to account (e.g. Institute for Human Rights and Business Corporate Human Rights Benchmark), working with states to develop policies and best practices (Myanmar Centre for Responsible Business), and collaborating with businesses to advance their knowledge on human rights and how to effect due diligent processes (SHIFT Business Learning Program). The continued effort of such organisations to keep the business and human rights agenda alive and moving forward will be crucial in the years to come.
It can be seen that consensus on the issue of business and human rights is far from being achieved. At the state level the poor response of governments to the UNGP indicates the extent of the challenge. Contemporary debates on the possibility of a business and human rights treaty underline further the perceived dissatisfaction for many with the UNGP. However, one must be realistic about what such a treaty could achieve and should look beyond legal arguments to political and economic realities. Businesses are arguably making some headway and it should be acknowledged that for companies whose operations span multiple jurisdictions and cover numerous areas, adapting internal policies is a significant challenge and one which takes time. However, there are significant gaps forming between those businesses which have acted on the UNGP and those which have not. From this lack of consensus, however, it may be the case that another form of consensus if beginning to emerge. This is one which underlines and recognises the importance of looking to alternative regimes, players, and methods. These can include investment regimes, educating future business participants and corporate lawyers, and multi-stakeholder initiatives or industry led projects. Moreover, significant advancements are being made by civil society organisations, often directly funded by states themselves. More attention, recognition, and support should be directed towards these organisations which are quietly and optimistically advancing the business and human rights agenda with little or no recognition of the importance of their work.