Business and human rights - the growing pressure to engage Image

Business and human rights - the growing pressure to engage

Posted: 04/02/2015

Human rights mean different things to different people. Consequently, human rights have different implications and contexts not least because they belong to every person whatever their nationality, place of residence, gender, national or ethnic origin, colour, religion, language or any other status.

Universal human rights are often set out and guaranteed by law in the forms of treaties, customary international law, general principles and other sources of international law. However, international or national human rights laws regretfully do not prevent human rights abuses. The limitations of government means the role of socially responsible businesses then comes into sharp focus. But when a business examines the detail to engage effectively in human rights, it faces an increasingly complex and uncertain context.

How should business view human rights?

Human rights represent both risk and opportunity to business. Sometimes they are harnessed by pressure groups such as global trade unions to further their wider agendas which, not surprisingly, can make businesses wary.

The global context is a challenging one because labour practices and conditions vary significantly. For instance, developing countries are understandably under increasing scrutiny given recent tragedies like Rana Plaza in Bangladesh. Allegations have been made against a wide range of businesses for human rights abuses such as “sweatshop” factory conditions, especially in the retail and garment sectors; dangerous working conditions, such as those in the mining sector; and forced and child labour.

The spotlight shone by the media onto these businesses has had a detrimental impact not only on business reputation but also on sales reflecting an increased ethical and social awareness amongst customers and investors who are often quick to disassociate themselves from damaged brands.

A positive and engaged response to human rights such as ethical supply chain management and fair trade initiatives can help businesses to differentiate themselves to create real business advantage. CSR also plays a key contribution in aiding recruitment and improving workforce engagement in developing business opportunities.

The pursuit of growth and job creation invariably leads to a demand from business for certainty and clarity on the scope of legal and regulatory obligations. This is an understandable but often dangerous request as business also needs flexibility, especially when operating internationally.

Workers and social actors want certainty to understand what human rights actually provide. It also needs to be recognised that globalisation and development has not come about in a uniform way. The reality for business is that there is a range of positive and negative influencers on how businesses approach human rights which include:

  • Avoiding complicity in human rights abuses caused by other parties in the supply and value chain
  • Reputational risk if human rights concerns are publicised
  • Corporate social responsibility
  • Labour disputes and supply and value chain disruption causing legal risk
  • Being best in class and making a virtue of “doing the right thing”

The development of standards

In response, international bodies such as the UN have developed human rights standards and guidance for business with the aim of creating global minimum working conditions.

The International Bill of Human Rights contains the authoritative list of the core internationally recognized human rights. This consists of:

  • the Universal Declaration of Human Rights and the main instruments through which it has been codified: the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights
  • the principles concerning fundamental rights in the eight International Labour Organisation’s (ILO) core conventions as expressed in the Declaration on Fundamental Principles and Rights at Work. These are the standards against which other social actors assess the human rights impacts of business despite them being designed for governments not business. 

A fragmented framework

So where can business look for guidance? There is a historical context. In the 1960s and 1970s, the activities of multinational enterprises provoked strong debate that resulted in steps to draw up international instruments for regulating their conduct and defining the terms of their relations with host countries, mostly in the developing world.

Founded in 1961, the Organisation for Economic Co-operation and Development (OECD) is an international economic organisation of 34 countries. OECD Guidelines for Multinational Enterprises (MNEs) are recommendations that provide principles and standards for responsible business conduct for multinationals. The Guidelines are legally non-binding. Each adhering country, such as the UK, has set up a National Contact Point responsible for the promotion of the Guidelines on a national level.

In 1977 the ILO’s search for international guidelines in its sphere of its employment and social policy competence resulted in the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (MNE Declaration). The principles laid down in this universal instrument offer guidelines to MNEs, governments, and employers’ and workers’ organisations in such areas as employment, training, conditions of work and life, and industrial relations.

Business engagement in business and human rights has been increasing ever since. A number of large companies have joined the "Ethical Trade Initiative" (ETI), which has established corporate codes of practice implementing human rights, ethical labour practices and environmental protection standards.

In an address to the World Economic Forum in 1999, United Nations Secretary-General Kofi Annan challenged business leaders to join an international initiative – the UN Global Compact – that would bring companies together with UN agencies, international labour organisations and civil society to support universal environmental and social principles. Today, international labour and civil society organisations and hundreds of businesses from all regions of the world are part of the Global Compact. However, the UN Global Compact is purely voluntary which is a critical weakness for some.

Recent developments

Then there was the July 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. This contained two provisions intended to promote greater international transparency and sensitivity to human rights by oil, gas, and mining companies as well as companies that purchase minerals from the Democratic Republic of the Congo (DRC) and surrounding areas. Both provisions affect companies that file reports with the Securities and Exchange Commission (SEC). The level of transparency required had far-reaching implications not only for the oil, gas and mineral sector but also for companies that produce electronic devices such as cell phones, digital cameras, computers and DVD players, many of which may contain “conflict minerals”.

Against this US backdrop, in September 2010, California Governor Arnold Schwarzenegger signed into law the California Transparency in Supply Chains Act of 2010 (the Act), which took effect in January 2012. All retailer sellers and manufacturers doing business in California that have annual worldwide gross receipts exceeding $100 million are required to disclose their efforts to eradicate slavery and human trafficking from their direct supply chains for tangible goods offered for sale. 

In 2011 the United Nations Human Rights Council unanimously endorsed the UN Guiding Principles on Business and Human Rights, a set of guidelines for states and companies to prevent and address human rights abuses committed in business operations. This was a unique achievement. The UN Guiding Principles on Business and Human Rights developed are the authoritative global standard for businesses. Indeed, in recent years, respect for human rights has become a business imperative. 

Progress towards binding human rights legislation

More recently, there has been a growth in initiatives to better engage business. One such initiative is the Shift-Mazars initiative on a certifiable standard for human rights reporting. Their framework is the first comprehensive guidance for business to report on how they meet their responsibility to respect human rights in line with the United Nations Guiding Principles on Business and Human Rights. 

The Council of Europe is focusing on a non-binding standard on business and human rights. The Ecuador/South Africa-sponsored Resolution adopted by the UN Human Rights Council on 26 June 2014 established an open-ended intergovernmental working group with a mandate to elaborate an international legally binding treaty on business and human rights. The implication for business is that the treaty text could make the UN Human Rights Convention legally applicable to business.

The above aptly demonstrate that there is now a framework, albeit a fragmented one, of business and human rights initiatives being created that governments and business will find increasingly hard to ignore. Indeed, in September 2013, the UK Government was the first to set out its national action plan to implement the UN Guiding Principles. The Government called on businesses to give effect to this action plan in the pursuit of improved human rights and sustainable business environments the world over. As a result, businesses and their lawyers working across jurisdictions will increasingly have to deal with “human rights” issues.

A reminder of why engagement is important

The importance of effective engagement by business and lawyers is perhaps best demonstrated from the lessons learnt from the Rana Plaza disaster. When the Rana Plaza building on the outskirts of Dhaka collapsed, around 1,130 people were killed after they had been ordered back to work even after huge cracks were discovered in its walls. Subsequent improved inspection of factories organised by multinational retailers and brands has seen similar factories closed down.

ILO statistics indicate that there are 4.2m workers in the garment industry in Bangladesh and, as a result of the efforts of the last year, a quarter of them are now getting safer places to work. However, behind the progress is serious discord between European and US multinationals; and between the multinationals and Bangladeshi factory owners. This discord has seen multinationals splinter into two rival five-year initiatives doing their own inspections. There is the Bangladesh Accord on Fire and Building Safety, whose 150-plus corporate signatories are mostly European and the Alliance for Bangladesh Worker Safety, whose 26 companies are North American. They have agreed common standards on what constitutes a safe factory but diverge in their approaches to financing, accountability and legal liability.

The challenge

A uniform approach to minimum human rights standards is riddled with legal, social, economic, cultural and political implications that need to be sensitively worked through. This will be an evolving context which is especially challenging for business and lawyers because classic approaches such as global codes of conduct or framework agreements with trade unions to provide for minimum standards create challenges - particularly when there are subsequent political or legislative changes in the territories where businesses have their operations. The Guiding Principles recognise there is no ‘one size fits all’ for effective compliance. Instead, they emphasise the importance of three basic measures a company can take: 

  • clear policy statements and commitment by senior management to ensure the company respects human rights
  • a human rights-focused impact assessment of existing operations and ongoing monitoring, including human rights due diligence on business relationships
  • effective grievance mechanisms for individuals and groups.

The UN Guiding Principles recognise that independent, specialist advice will be critical for companies to develop the internal processes best suited to them. There remains little clarity on how business can improve their processes and practices in a way which is consistent with those expectations and provides room for a flexible and proportionate approach for the well versed.

This article was published in New Law Journal in January 2015.

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