Progress in Corporate Accountability

04 February 2013 | by John Ruggie

Last week Human Rights Watch released its 2013 World Report. It includes an essay by Senior Researcher Christopher Albin-Lackey decrying the hard won and widely adopted UN Guiding Principles on Business and Human Rights (GPs) as being “woefully inadequate.”¹

The Guiding Principles were endorsed unanimously when they were presented to the Human Rights Council in June 2011.

Author’s pride aside, I still prefer my own description. When I presented the GPs to the Human Rights Council in June 2011 and asked for its endorsement, I said: “I am under no illusion that the conclusion of my mandate will bring all business and human rights challenges to an end. But Council endorsement of the Guiding Principles will mark the end of the beginning.”

The Human Rights Council did endorse the Guiding Principles - unanimously. This represented two firsts. It was the first authoritative guidance the Council had ever issued on how to meet the complex global challenges of business and human rights; and it also was the first time that the Council or its predecessor, the Commission on Human Rights, had ever endorsed a normative text on any subject that governments did not negotiate themselves, a text I developed and drafted over six years and nearly fifty international consultations.

At the same time, I indicated that more granular work would be required in order for governments, businesses and other stakeholders to turn the GPs into rules and tools for specific industry sectors and operating contexts, different scales of operations, various forms of financial intermediaries, and so on. I added that this would include legal measures, though “as precision instruments” not some idealized global command-and-control regulatory regime.

In short, where discord among states, businesses and civil society had paralyzed prior international efforts to encompass corporate conduct within the international human rights regime, there is now a common platform on which to build and authoritative benchmarks against which progress can be assessed. Albin-Lackey’s view risks turning the clock back rather than moving us forward.

Expanding the international human rights regime to encompass business conduct runs smack into some the most prominent features of the current world polity and global economy: national sovereignty; competition among states for markets, investments and access to resources; the emergence of new global powers with their own views about both business and human rights; weak or corrupt governments in many countries; competition among firms for profits and market share; the corporate law principles of the legal separation between parent company and affiliates, coupled with investors’ limited liability; asymmetries of capacity and influence between large companies and many governments; large swaths of conflict zones; few and highly contested bases of extraterritorial jurisdiction - the list goes on.

In this already difficult context, two illusions had added to the challenge of providing more effective protection to individuals and communities against corporate-related human rights harm: that this objective is best achieved by seeking to subject the entire bundle of business and human rights issues to some overarching binding international legal instrument; or that the combination of voluntary initiatives, new management tools and the dissemination of best practices on its own will generate enough momentum for companies themselves to truly move markets.

But neither can do what it promises: the first because it expects too much from the system of international public governance; and the second because it permits too little.

In contrast, the Guiding Principles are intended to generate a new regulatory dynamic under which public and private governance systems—corporate as well as civil—each come to add distinct value, compensate for one another’s weaknesses, and play mutually reinforcing roles—out of which a more comprehensive and effective global regime can evolve.

• For states, the focus is on the legal obligations they have under the international human rights regime to protect human rights abuses by third parties, including business, as well as policy rationales that are consistent with, and supportive of, meeting those obligations.
• For businesses, beyond compliance with legal obligations that vary across countries in their applicability and enforcement, the Guiding Principles focus on the need to manage the risk of involvement in human rights abuses, which requires acting with due diligence to avoid infringing on the rights of others, and to address harm where it does occur.
• For affected individuals and groups, the Guiding Principles serve as a basis for further empowerment through prescribed engagement with them by business enterprises, as well as greater access to effective remedy, both judicial and non-judicial.

Simply put: states must protect; companies must respect; and those who are harmed must have redress. The Guiding Principles stipulate how.

Let’s have a quick look at some of the major developments that have occurred since June 2011, building on the GPs. Their core elements have been incorporated by numerous other international and national standard setting bodies, each of which has its own implementation mechanisms, as well as by businesses and other stakeholder groups. Examples include:

• The new OECD Guidelines for Multinational Enterprises, which have a human rights chapter drawn from the Guiding Principles, and which provide for national complaints mechanisms in the forty-two adhering states concerning the conduct of multinationals operating in or from those states.
• New provisions in the OECD Common Approaches for Export Credit Agencies, which affect access to capital at the national level.
• The new International Finance Corporation Sustainability Principles and Performance Standards, which affect access to international capital—amplified manifold because they are tracked by 80+ private sector lending institutions.
• ISO26000, which energizes a world-wide army of consultants eager to help companies come into compliance.
• In the European Union, the Commission has asked member states to submit national plans for implementing the Guiding Principles, and the Commission itself is developing additional guidance for several industry sectors and for small and medium-sized enterprises.
• In the United States, the concept of human rights due diligence, a central component of the corporate responsibility to respect human rights under the Guiding Principles, found its way into Section 1502 of the Dodd-Frank Wall Street Reform Act, in relation to conflict minerals procured in the Democratic Republic of Congo.
• The U.S. government also has referenced the Guiding Principles as a benchmark in a new reporting requirement for U.S. entities investing more than $500,000 in Myanmar, now that most economic sanctions have been suspended.
• ASEAN is exploring ways to align its new business and human rights program with the Guiding Principles; the African Union is on a similar track.
• The number of companies developing human rights policies, due diligence procedures and grievance mechanisms is rising significantly.
• International business associations and labor federations have issued user’s guides to the Guiding Principles; civil society groups invoke them in their work, as do National Human Rights Institutions.
• The American Bar Association has formally endorsed the GPs and “urged” not only governments and the private sector but also law firms, as businesses in their own right, “to integrate [them] into their respective operations and practices.”
• The GPs have even featured in a critical U.S. Supreme Court case, Kiobel v. Royal Dutch Petroleum, brought under the Alien Tort Statute, in which I filed an amicus brief correcting mischaracterizations of my mandate’s findings by Shell’s attorneys that they used to bolster their argument against corporate liability under international law. To avoid all doubt, I have also recommended that an intergovernmental process reaffirm the applicability to companies of international standards prohibiting gross human rights abuses, potentially amounting to international crimes.

My developing the UN Guiding Principles was based on a working hypothesis: that we can achieve significant progress in the area of business and human rights by devising an innovative normative platform that transcends the stale mandatory vs. voluntary dichotomy, while drawing on both; having its elements widely incorporated in public governance and private management systems; and then for the major stakeholder groups to build on it, using the full array of instruments available to each. The evidence to date suggests that this scenario is far less hypothetical today than it was when the Guiding Principles process was launched.

Footnotes:

1. “A Failed Approach to Corporate Accountability”