Government’s Role

Regulate First. Ask Questions Later.

02 February 2018

By Mark Taylor, Trustee and International Advisory Council Member, IHRB

There is a remarkable lack of concern on the part of policy makers about the dearth of evidence for the effectiveness of the international standards they push at business.

So it was with some anticipation that I read Roel Nieuwenkamp’s recent IHRB blog. As Chair of the OECD Working Party on Responsible Business Conduct, and an active advocate for responsible business, Roel is a prominent representative of our policy making elite on this question.

Evidence of Effectiveness is Scarce

Roel makes a vital point: we don’t know what effects international business and human rights standards are having on business conduct.  

We don’t know what effects international business and human rights standards are having on business conduct.  

One recent study cautiously suggests there has been little impact. But Roel wants to know how many businesses are aware of, have adopted, and implemented standards, such as the OECD Guidelines for Multinational Enterprises, and whether this is generating respect for human rights.

Roel says the Corporate Human Rights Benchmark (CHRB) only scratches the surface. This is to be expected, given the scale of the task of benchmarking responsible business performance in a field that is literally as vast as the global economy.

The CHRB is only part of the solution and it is woefully under-funded (are you listening donor countries?). But the CHRB answers many of Roel’s questions by looking at policies, procedures, responses, transparency, etc. In fact, it represents an excellent proof of concept – yes we can develop a measure of corporate compliance with international standards and, yes, that measure can be used by markets to assess company performance.

The CHRB is only part of the solution and it is woefully under-funded (are you listening donor countries?)

Still, Roel is right to be concerned.

There is a lack of evidence about the effectiveness of international standards. We – policy makers and citizens – literally have no way of knowing if international standards are effective in reducing human rights violations. After serious progress in setting global norms like the UN Guiding Principles on Business & Human Rights and the alignment with them of the OECD Guidelines, there has been a near total absence of investment in testing the effectiveness of those norms.

Limited Investment, Limited Answers

There is no doubt that we could answer most of Roel’s questions with a serious investment in business and human rights research. But there are limits on what we could say.

One such limit is the scarcity of relevant data. There is a lack of independently generated social and economic data linking company activity to human rights phenomena over time.

One such limit is the scarcity of relevant data.

Think of the prevalence of child labour in a particular sub-national locality for example. As far as I know, states do not collect such data in relation to company activities. And if business collects such data, there are limits to what businesses will make public.

Without such data there is no way to know whether changes in business practice – such as those identified by benchmarks like the CHRB – correlate to changes in the status of human rights.

Except by investigating.

Unfortunately, there is also a serious lack of investigative capacity. National regulators of labour markets or environmental authorities rarely if ever investigate the global value chains of their domiciled companies. Even criminal prosecutions for human rights crimes committed abroad are few and far between. And while policy makers claim to rely on civil society and investigative journalists to be the ‘watchdogs’ of corporate behaviour, governments refuse to fund that work. And while NGOs and the media often do great work with few resources, it is not always useful as the basis for a systematic assessment across sectors and countries.

There is also a serious lack of investigative capacity. 

These practical obstacles to generating evidence about the effectiveness of international standards must be solved if the business and human rights norms embedded in the UNGPs and OECD Guidelines are to retain their legitimacy.

Evidence of the Problem is Ample

But nothing in the present state of knowledge requires us to delay the move to “hard” regulation or actively pursue a treaty on business and human rights.

Roel would have us wait a bit with regulation, or a business and human rights treaty, until we can respond to these problems of knowledge and better understand what’s working and what’s not with respect to international standards.

But evidence of effectiveness is rarely the source of political will for new regulation – evidence of a problem is.

But evidence of effectiveness is rarely the source of political will for new regulation – evidence of a problem is. 

While we may not have evidence about the effectiveness of international standards, we have ample evidence of business misconduct. That evidence is historical, systemic, well documented and need not be repeated here.

It is that evidence of misconduct that creates constituencies for legal regulation within civil society, as well as among businesses that do not want to be tarred with the brush of guilt by association with poor performers. In fact, the demand for regulation is a demand to solve very real and very visible social and environmental problems arising from business activity.

The divide is not, as Roel suggests, between “believers and non-believers” in legal regulation. It is between those who trust business versus those who prefer to act on the basis of evidence.

Trust must be earned. Some business leaders are struggling to find ways to build trust. A good place to start would be with business and human rights research and metrics that cast an empirical light on business respect for people and the planet.

But with plenty of anecdotal and systematic evidence of a lack of respect of international standards, a healthy scepticism about business’ willingness to meet international standards amounts to little more than common sense.

Regulating is Not New

Given the evidence we have, holding off on new, binding rules would be illogical. It would also ignore governments' duty to respond to those problems, to regulate to protect human rights and the environment.

This is how the existing bodies of business regulation came about. Rules that protect against corruption, or violations of labour rights and environmental harms, were not put on hold until their effectiveness was determined. Neither was the entire regime of trade and investment liberalisation.

Once in place, these rules became the focus for research, including into effectiveness. In fact, that's the way the OECD recommends its member states should assess the effectiveness of regulation.

In other words, the experience of regulation at the national level indicates that the sensible approach would be for states to regulate first and ask questions about effectiveness later.

The experience of regulation at the national level indicates that the sensible approach would be for states to regulate first and ask questions about effectiveness later.

The solution lies in starting with what we know: governments regulate to protect people and the planet from business related harms.

This is not new and it is not something that usually waits for scientific assessment. Governments responds to constituencies who demand regulation (or at least they should) and the researchers and technocrats tweak those regulations later.  

We also know that governments make treaties amongst themselves to ensure the global harmonisation of the norms that go into such regulation.

Yes, we need reporting, metrics, benchmarks, and investigations: all are necessary to generating the evidence needed to assess the effectiveness of international standards. And we know that all of those things need financial and regulatory support by governments.

So what are we waiting for?

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