Trade

Brexit Shows ‘Corporate Responsibility’ can no Longer be a Niche Discussion Amongst the ‘Experts’

Commentary, 13 July 2016

By John Morrison, Chief Executive, IHRB

The result of the UK’s referendum on whether it should remain part of the European Union (EU) has left the country in a state of economic and political turmoil. One question we should be asking is, what does Brexit mean for ongoing efforts to advance the agenda of ‘responsible business conduct’ in the UK and around the world? That requires some soul searching as well as clear-eyed thinking on the path ahead. I offer the following ideas to move the discussion forward.

Drivers in the immediate term

First, we should acknowledge that short to medium term effects of Brexit on corporate social performance will be hard to calculate. 

A downturn in the UK economy will likely affect the amount of time and energy UK–based companies can spend on human rights due diligence and related issues. But this should not be overstated. For the largest companies, it is the global economy that really matters. The FTSE-100 has already recovered most of its pre-Brexit value. However, more nationally-focused companies that might see the business and human rights agenda as a receding soft commitment are in a trickier position.

There are important counter trends as well, not least the 2015 UK Modern Slavery Act, with mandatory supply chain disclosure for thousands of UK companies as well as for others trading here. The 2010 UK Bribery Act is another example of legislation that drives EU equivalents. It is arguable that these drivers – and others like them - will outweigh possible short-term cost-cutting measures.

Opportunities and risks in the medium term

Second, we shouldn't forget that the UK Government will continue to participate in most EU processes until the moment full exit occurs – theoretically sometime in the next two years.

How the UK will implement EU initiatives, such as the non-financial reporting requirements, remains unclear. What is certain is that we quickly move to uneven playing fields if the UK Government does not make an explicit commitment to benchmark against other European states on such issues.

Another worry, embassy level initiatives to raise awareness of human rights with companies – which the Dutch Government excelled at during its recent EU Presidency – will see less UK engagement. This will decrease leverage on host states to protect worker and community rights potentially affected by UK companies abroad, whether it be Qatar, Iran, China, India or any other trading partner.

None of this need be the case, but more explicit UK commitments will be needed to ensure it does not come to pass. The trouble is, this is needed just when there is a more populist political environment in which opinions of “experts” has been denigrated.

Finding an identity in the long-term

Third, beyond EU processes, the UK’s wider role in the United Nations, G20 or OECD, will likely face identity challenges as well.

Some point to Norway and Switzerland as examples the UK might follow – non-EU members but active on business and human rights (perhaps more than many EU member states). Yet parallels should not be over drawn. Neither Norway or Switzerland are permanent members of the UN Security Council. As a P5 member (and one that still projects military force in other parts of the world outside its role in UN peacekeeping), the UK cannot easily engage in the kind of diplomacy that Switzerland undertakes in Iran, or Norway in Colombia for example.

This does not mean, of course, that the UK cannot find its own political role within the UN on business and human rights or wider responsible business conduct issues. Let's hope it can again show the kind of leadership it did in 2005 when UK diplomats were critical in creating the UN mandate that ultimately produced the UN Guiding Principles on Business and Human Rights.

Resetting bilateral trade relations

A major implication of Brexit is that the UK will have to negotiate its own bilateral trade agreements. It would be wrong to think that requirements around social issues and wider sustainability will disappear – in fact they might come to the fore.

Whatever trade agreement is reached between the UK and the EU itself will need to be human rights explicit, as the European Convention on Human Rights (ECHR) is now embedded into the EU itself. This is perhaps one of the reasons why the next likely UK Prime Minister, Theresa May, has recently dropped her explicit anti-ECHR rhetoric. Leaving the Council of Europe would be a battle too far and counter to the UK’s political interests.

For trade agreements beyond the EU, such agreements won’t be scrutinised by the European Parliament (as the UK has done on the EU’s free trade agreements with Vietnam or Colombia/Peru for example). Instead, the UK Parliament itself will need to take up the role.  

In the US, labour and human rights components of bilateral agreements with countries such as Jordan or Colombia were driven in part by concerns that US jobs might be undercut by cheaper labour overseas. Projecting this to the UK context, one could see that populist politicians not known for their interest in human rights may develop a keener interest when voters raise protectionist concerns. This would indeed be a new dynamic – trade unions lobbying alongside nationalists – but it might well come to pass and in doing so raise the profile of one aspect of human rights within trade.

For those of us trying to raise political interest on human rights within UK trade relationships with emerging markets such as Iran, knowing that the UK will now have to negotiate its own trade deal might provide more leverage.

Moving forward

It will generally remain the case that the UK had more leverage to influence responsible business challenges as a member of the EU. Any future common market relationship with the EU will be, as some Norwegians call it, a “one-way fax machine from Brussels” announcing new requirements with no influence on how they are negotiated.

Despite this, the responsible business agenda will have to address the wider trend of nationalism and anti-establishment sentiment. One immediate example can be seen in rising discrimination against migrant workers in the UK and wider racism and hate speech. The murder of the MP, Jo Cox, who worked tirelessly on international development and responsible trade, was one symptom of this disturbing trend.

The irony is, the concept of responsible business conduct is in many ways a complement to the sentiments that drove many to vote ‘leave’. If presented in its fundamental elements, the responsible business agenda is about fighting the excesses of unaccountable capitalism and providing greater social and environmental protections for all people. This is especially the case for the most marginalised, including those reacting against the established order.

Perhaps the fundamental lesson for us all from Brexit is that we can no longer afford to keep the field of responsible business conduct as a niche discussion between 'the experts' and a few progressive companies, NGOs and politicians. It has to become a mainstream movement for change in all parts of Europe, and soon.

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