The Business of Human Rights

Every time a disaster like the garment plant fire in Bangladesh occurs, the debate over the extent of corporate responsibility for the prevention, mitigation, and redress of human rights violations reopens. There is little awareness that this debate has already been laid to rest by the United Nations Guiding Principles on Business and Human Rights.  OpenCanada spoke to Dr. Alexandra Guáqueta, Professor of International Studies at Flinders University and one of five members of the United Nations Working Group on Business and Human Rights, about existing normative standards for corporate behaviour – where they came from, how they’re being implemented by states and businesses around the world, and why they need to be disseminated as widely as possible.

The UN Guiding Principles on Business and Human Rights state that corporations have duties to respect and protect human rights, and provide access to remedy. Where did these ideas come from?

The discussion about corporate conduct is an old one. It’s been going on for at least four decades. For the first while, it focused on a few large Western multinational enterprises and their influence on home and host governments to gain access to markets under advantageous terms.  The conversation took a different turn about 15 years ago as globalization expanded. Suddenly, there were a lot more companies operating in more varied environments. This expansion pushed the issue of corporate impacts on society to the fore. There were a couple of pivotal cases related to sweatshops, and to corporations in the extractive industry and the involvement of their security providers, public and private, in armed conflict. The international political conversation, now involving states, companies, and NGOs, centred on whether we should have a human rights treaty with obligations to companies, turned very divisive.

Were there any specific incidents related to globalization that really drove the conversation forward?

Some governments and businesses realized that foreign investment would have challenges if the adverse impacts of companies was not addressed. Globalization had not only liberalized markets, but had opened access to information – the CNN effect, the Internet – and empowered more people. But the divisive conversation was not offering solutions to anyone. Also, there was a lot of confusion regarding the actual roles of states and businesses on this issue. Some people thought businesses had the obligation to provide for people in impoverished and weak governance zones, or in other words, to replace the state.

And what about debate over the responsibility of states versus business on human rights issues?

There was real disagreement between states, transnational NGOs, and businesses on the scope of their individual responsibilities. Fortunately, despite the divisions among stakeholders, there was general agreement that something had to be done. There was also consensus that while corporate activities were indeed responsible for many negative impacts on workers and their communities, they also had positive effects, such as job creation, innovation, welfare, health care advances, and so on. But it was the broad acknowledgment of the negative impacts – how they were hurting business by compromising long-term investments, and hurting states by impairing their ability to perform the role of realizing social and economic rights of their own citizens – which cemented the idea that we needed some ground rules.

So states came to view human rights violations as impacting them in a negative way?  

I use the term “negative impact” to refer to the harmful effects that corporations have on people. For instance, if a corporation builds a shopping mall, the construction process may create jobs. But if during that process, the corporation does not ensure the health and safety conditions of the workers are adequate and the workers get injured or die, the workers have been negatively impacted. Those workers are citizens of a particular state, so the state feels that impact as well.

And what about the “negative impacts” felt by business? Would that include consumer backlash for poor human rights protection?

Corporation feel social backlash as a negative impact, but so does society as a whole when that backlash does not lead to dialogue. We’ve seen many waves of social backlash against corporations, especially in the wake of the global financial crisis and the behavior of certain banks. These waves will keep coming as scandals keep being uncovered, whether it’s the HSBC involved in money laundering for Mexican drug cartels, or Barclays and Libor. But blanket condemnations of business aren’t useful, because as consumers, we need entrepreneurship, jobs, and different services.

So, we have consumers and corporations both feeling these negative impacts, and wanting change. What happens next?

In 2005, former UN Secretary General Kofi Annan appointed Professor John Ruggie to clarify these roles. He then led a six year consultation process which led to the formulation of new standards, the UN Guiding Principles on Business and Human Rights, and most importantly their unanimous endorsement by the UN Human Rights Council, which had more than 50 countries. What changed about this soft-law making process, was that it involved businesses, as well as governments and civil society from across the globe. Rather than departing from legal theory, he involved the key stakeholders to identify realistic options that would at the same time help protect people and allow markets to be sustainable.

These Guiding Principles are key to creating the trust between the state, businesses, and individuals necessary to make real progress on human rights.

Wasn’t there a similar set of “Guiding Principles” set out in 2003?

The Guiding Principles endorsed by the UNHRC differ from the ‘draft norms’ that were articulated in 2003 in two ways.

The first is the way in which the 2011 Guiding Principles were formulated. They emerged out of a very robust global conversation involving multiple stakeholders ­­– big business, states, and civil society were all at the table.

The solutions offered by the 2011 Guiding Principles are grounded in existing international human rights law; they take the issue of human rights violations and access to remedy seriously; and, at the same time, they really speak to business management systems – that’s the beauty of them and what really distinguishes them from the 2003 effort.

The second way they differ is that they clarify what protecting human rights actually means for businesses, and they delineate the human rights obligations of the state versus business. Businesses need to respect human rights and more concretely, they need to do so by following human rights due diligence. These were things that had gotten a bit confused in the overall conversation about negative impacts.

Were businesses confused about what protecting human rights means?

The corporate social responsibility or CSR agenda, and the sustainability agenda more broadly, leads corporations to define CSR as doing a lot of positive social investment. Enlightened philanthropy, essentially. But the human rights piece often gets lost in this conception of social investment. There can be social investment that promotes human rights, certainly, but CSR is not typically centred around the idea of addressing adverse impacts on people. It focuses on creating public-private partnerships that generate inclusive jobs over the long term in an environmentally sound way, and not so much on the adverse impacts that may accompany those partnerships for workers.

The principles of CSR alone don’t tell us enough about the human rights obligations of states versus corporations. The Guiding Principles put that question rest, because during the drafting process for the Guiding Principles, there was found to be an abundance of international law on what the obligations of states are. Now the challenge is to learn how to interpret those laws in specific corporate contexts.  We know states have existing legal obligations to protect people in their territory from harm, including harm by business, but we have to figure out how these obligations can be fulfilled, working together with business.

What would fulfilling those obligations look like?

It would include protecting people from the potential impacts of business, and ensuring redress for preventable impacts that do occur.  States can do this in simple ways. For example, they can be very explicit in their expectation that companies operating on their territory conduct human rights impact assessments.

Protecting the human rights of their workers seems like a win-win concept—happy, healthy workers makes for a more sustainable business and therefore greater profits.  Do companies have legitimate reasons for not pushing ahead with implementing the Guiding Principles?

Corporations do have valid concerns. Cumbersome regulation that increases costs in an unhelpful way; the costs of creating a bureaucracy to deal with human rights issues; and the costs that may be passed onto clients because of these developments; make businesses wonder if higher human rights standards will make them less competitive. But the Guiding Principles are very pragmatic – they seek to define smart ways of protecting human rights so that doing so doesn’t create a huge bureaucratic burden. They don’t have to be a drag on performance.

Are there differences in how the message of the Guiding Principles has been received in Europe versus North America?

Progress in Europe is fascinating. Europe is going through a deep economic crisis that captures the time and energy of policymakers. Despite this, those same policymakers have shown an increasing understanding of the fact that addressing their broader economic concerns will involve creating more trust between society and business.

The European Commission issued an official document that changed the definition of CSR, which served as a very clear signal to states and corporations.  The document requires states to form national action plans on the basis of EU-wide principles. As of this past December, 17 European states had started to formulate their national action plans, including states with serious economic problems like Italy and Spain.

The OECD has taken a similar approach. They have updated the guidelines for multinational enterprises using the Guiding Principles. They also approved a new “common approach” for export-created agencies, which involves asking them to conduct due diligence on their potential partners and the impacts of them doing business – something which needs to occur before money is lent for a project. The OECD has yet to measure implementation across countries, but there is consensus around the guidelines themselves.

In North America, what general trends do you see in adopting these kinds of approaches?

The United States has given serious thought to the business and human rights agenda. They have been very engaged in following the activities of the Working Group on Business and Human Rights, which is the body of experts appointed by the Human Rights Council to disseminate the guiding principles globally.

The U.S. has done a few things that are quite notable. They’ve convened workshops where high-level policy officers from the State Department convey the message of the Guiding Principles to business leaders. That has huge political value. They’ve also conducted sessions with civil society to get a sense of their awareness regarding the impacts of U.S. corporations abroad.

One interesting initiative that’s still in the experimental phase is a reporting requirement that has been introduced for U.S. companies of a certain size wanting to enter into Myanmar. They’ve been asked to report on their land acquisitions, and how these will impact land rights and worker rights, as well the potential environmental impact. All the information they provide will then be posted online. The idea is that it will serve as a transparency tool – America has a vibrant civil society, so consumers will take corporations to task if they’re operating in a harmful way. It’s a policy experiment that Europe may also choose to test.

What about Canada? Is there a similar awareness and interest in the Guiding Principles?

There has been a lot of discussion about Canadian retailers in the aftermath of the collapse of the garment-plant in Bangladesh. Much of that discussion has centred on who is responsible, and what Canadian companies are obligated to do.

The Guiding Principles are very clear about what is to be expected from companies. That was their major contribution: the clarification of reasonable expectations for companies. The Guiding Principles point out that society is in consensus that it is reasonable to expect that corporations conduct impact assessments of the various entities in their supply chain. To say that what happens down the chain isn’t their concern simply isn’t valid.

There is no doubt that companies have, at a minimum, a responsibility to do this. And that means not just conducting the assessments, but also acting on their findings. If you find you are causing or contributing to negative impacts, if you have weaknesses in your local suppliers, you address them – you don’t just pull out immediately. You invest in capacity building, training, and improving informational awareness. You support the local workers, the supervisors, and the local institutions. Thanks to the Guiding Principles, there is no ambiguity around corporate responsibilities. If a risk continues without change, then companies will of course need to manage their reputational risk and consider divestment. The severity of the impacts needs to be part of their considerations.

So why are the Guiding Principles missing from the Canadian conversations on this issue?

I was surprised to see people in Canada debating whether or not there is an expectation that companies need to look into the practices of businesses in their supply chain. This element of the Guiding Principles is not a new idea – it draws on best practices observed in the market. The Guiding Principles just simplified the language around this expectation in order to apply it globally in a more harmonized way. The 2011 endorsement by the UN made the Guiding Principles the authoritative global standard on business and human rights. But the questions being asked in many public debates, not just the Canadian one, don’t reflect this.

What can be done to bring the Guiding Principles into mainstream conversations?

I would love to see the media do more to disseminate the Guiding Principles, but everyone – states, NGOs, regional organizations – can play a role. The working group has five people from different regions. In our home countries and everywhere we travel, we seek to translate these ideas into more concrete behavioural protocols, whether for members of the African Union or the OAS or the EU. Everyone can lend a hand in disseminating these standards, and the more they spread, the easier it will be to prevent tragedies like the one that happened in Bangladesh.