Legally Binding Instrument to Regulate Business & Human Rights on its Way. 6 Areas to Monitor

The Guiding Principles on Business and Human Rights have guided corporate action since 2011. A legally binding instrument to regulate, in International Human Rights Law, the activities of transnational companies has now been in discussion for 5 years across United Nation processes. Process is making progress under pressure from NGO coalitions as well as governments and several trade agreement considerations at stake. Here are 6 areas any stakeholder interested in business and human right should closely monitor to ensure business properly respect human rights across operations.

Guiding Principles on Business & Human Rights – A Long Journey

The UN Guiding Principles on Business and Human Rights are a set of guidelines for States and companies to prevent, address and remedy human rights abuses committed in business operations. The Guiding Principles have clearly been successful to build more trust as well as more constructive approaches to managing human rights across businesses. Dated 2011, business world, related regulations as well as expectations from multiple stakeholders have changed over time.

That being said, many governments have recognised that voluntary measures – while important – are insufficient to ensure companies’ respect for human rights. Therefore, in July 2014, the UN Human Rights Council first voted to begin negotiating a legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises.

“In context of massive distrust in the benefits of global trade and globalization reinforced by inequalities exacerbating across OECD economies, the questions of tax avoidance, poor transparency on practices and lack of remedial avenues exacerbated when companies hide behind corporate structures to basically evade legal liability for the human rights impacts of their subsidiaries are under strong scrutiny. This is of course aggravated by digital transformations changing complexity and scale of potential human right abuses at stake.”

The following considerations are clearly calling for revamped approaches respecting human rights:

  • Whether and how companies pay taxes is clearly a source of litigation. How transnational companies can claim to respect human rights if not properly paying a decent amount of taxes where they manufacture or sell their products and services? In context of growing inequalities and digital transformations, tax evasion has doubtless become increasingly part of core human rights agenda
  • Whether and how companies activities are ruled using bilateral investment treaties and related access to investor-state dispute settlement (ISDS) or similar system generates poor trust in decision transparency, and actual capacity for companies to respect human rights and provide effective remedy and justice. The prevailing lack of remedial avenues is exacerbated when companies hide behind corporate structures to basically evade legal liability for the human rights impacts of their subsidiaries. 
  • Whether and how companies are collecting, using or sharing data from their clients, employees or business partners has generated new considerations to properly uphold human rights. There is clear connection between ignorance and insufficient respect of human rights. Data collection attached to digital transformations clearly generate new areas of ignorance where privacy, freedom of expression, surveillance or other human rights may be massively infringed by systems of business partners basically unaware of implications of how tech applications may generate new fronts for human rights

The discussions shaping the legally binding treaty are not fully completed yet. We have closely monitored discussions for years. We have clear understanding of stakeholder positions. The following 6 areas are clearly at stake no matter what, and shall be closely monitored to assess business practices respecting – or not – human rights in the years to come.

3 Areas Directly Impacting Business Practices to Respect Human Rights

Multinational companies will be increasingly strongly challenged by multiple stakeholders on whether and how they have conducted serious due diligence to know their potential impacts across operations, joint ventures and supply chain activities. They need to demonstrate understanding of vulnerable groups to genuinely mitigate risks at their level. They also need to translate environmental impacts into potential human right violations to make decisions accordingly. Climate, water or biodiversity depletion generate risks of human right violations.

1. Comply with Mandatory Transparency and Human Rights Due Diligence Including Operations, Joint Ventures, and Supply Chains

In Europe, the UK and France spearheaded the movement with their Modern Slavery Act in 2015, and duty of vigilance law in 2017. The Dutch Child Labor Due Diligence Law requires companies to determine whether child labour occurs in their supply chain. Other countries including Germany, Switzerland, Finland, or Austria are considering similar initiatives. The Finnish Government – currently holder of the EU Presidency – has committed to exploring mandatory human rights due diligence legislation and to raise it at EU level

Since 2011 and the structuring of human right impact assessment activities enabling companies to conduct due diligence, map risk areas, develop action plans and verify impact on right holder groups at stake, it is clear that growing regulations combined with growing convergence of soft law with hard law are calling companies to seriously explore, document, demonstrate impact on the following activities

  • Define Corporate Approach to get prepared for mandatory human right due diligence
  • Understand how investments, operations, products and services, and related supply chains may infringe a broad and holistic review of human rights
  • Explore how to strengthen pertinent aspects of management systems to mitigate those risks, document good faith efforts defined and deployed to improve risk mitigation, and demonstrate impact decreasing risk exposure

This is big, complex and challenging. Multinational companies are not at ease engaging in this long journey. But there is no choice as mandatory regulations will increasingly get imposed and generate legal duties.

2. Develop Granular Understanding of Vulnerable Segments, and What Makes Respecting Their Human Rights Specific

Multinational companies which have developed some work on human rights tend to understand this field as part of their risk management activities. This is a mistake for the following reason:

  • A risk management activity explores how external factors may impact operations. An earthquake or a cyber attack are no doubt risks expected to be properly addressed by risk management activities.
  • A Human Rights programs must take a different perspective, and explore how business may impact human rights of people in a broad sense. The starting point is not related to the protection of assets. Instead, the starting point is clearly related to the protection of people, called right holders

Employees, customers, contractors, communities living close to company sites may be a good starting point to explore perspective of right holders and how their rights might be infringed by corporate activities. But this remains broad and generic, whereas actual risks may be aggravated for more specific vulnerable segments. Here are a few examples:

  • Vulnerable customer segments might include: teenager and children or other segments likely easier to manipulate with marketing activities
  • Vulnerable employees or contractors might include: migrant workers, gender, less educated workers or other segments likely less comfortable about knowing and exercising their rights in their business context
  • Vulnerable communities might include: minorities, poorest or less educated segments, not necessarily well represented by local institutional stakeholders like municipalities or local authorities

The following may sound obvious. Respecting human rights is calling for respecting human rights of everyone. The more a segment of people can be considered one way or another to be more vulnerable, the more this segment should be provided greater scrutiny to ensure it can benefit from appropriate attention respecting its rights. In context of #Metoo, mandatory due diligence on supply chains or growing distrust by local communities in large industrial projects impacting their communities, it is increasingly obvious that engaging in a human right journey is calling for close and granular understanding of human rights with a vulnerable lens on it.

3. Human Right Responsibilities Derived From Environmental Business Impacts

Youth is increasingly challenging every business on climate and its climate impacts. This is not going to decrease and might become even more conflictual in the years and decades to come. Fast growing nonviolent civil movements calling for disobedience like Extinction Rebellion are also increasingly challenging multinational companies on their duties to act on climate in a much more radically transformative manner. Listening closely to many concerns, youth and disobedience movements are asking governments and companies to protect and respect their human rights in very fundamental terms. They want governments and corporations to protect and respect their right to live and have a future.

The very same trend applies across the following environmental business impacts: water depletion, air pollution, biodiversity and artificial lands, plastics and other wastes for instance. Across these multiple environmental impacts, businesses will increasingly have to connect with a human right agenda.

3 Areas Where State and Business Cooperation is Increasingly Critical

States are expected to Protect human rights. Companies are expected to Respect human rights. Sounds obvious in theory. Devil is in the details. Legally binding instrument to regulate, in International Human Rights Law, the activities of transnational companies, is also converging on critical areas where more cooperation between States and Businesses will doubtless be needed to uphold human rights.

1. Role and Protection of Whistle Blowers

Business and Human Rights portal is tracking a long list of almost 2,000 killings, beatings, threats and other forms of intimidation against human rights defenders working on business-related issues. People protecting forests. People protecting people. People flagging serious concerns for health and safety of patients based on what they can see across pharmaceutical clinical trials. People flagging misuse of data infringing privacy and freedom of expression of other people. And so on. Let’s not be candid. Whistle Blowers and human right defenders are taking risks. Their lives dramatically change the day they decide to stand up.

They need protection. Their role needs to be further defined. Regulatory environment remains weak to date, but will doubtless strengthen in the years to come. A whistleblower EU Directive was adopted in 2019 and is now being transposed across EU member countries regulations. In the US, the Federal Whistleblowing Law dated 1989 has recently proven to be not good enough to ensure good enforcement.

Think about major scandals like: Cambridge Analytica, Dieselgate, LuxLeaks, and the Panama Papers. Business case for companies to protect whistle blowers is crystal clear. This is how business can demonstrate high governance standards and build trust with stakeholders.

  • Companies will have to comply with whistle blowing regulations, and they indeed also need to cooperate and encourage such laws
  • Companies need to clarify role, process, protection and remedy of whistle blowers operating to protect workers or other right holders

2. Land Development and Free Prior and Informed Consent (FPIC)

We have worked on multiple projects showing insufficient public consultation in land development led by relevant authorities, prior to asking companies to erect infrastructures, wind farms, factories or other businesses. This has multiple implications for State and their representatives as much as for companies.

  • Land development, not driven by good public consultation, often leads to conflictual situations
  • There are multiple regulations encouraging FPIC (e.g.: Canada, Philippines). This has proven to encourage ownership of local people with the future they want for the land they live on
  • When foreign investors discover they are expected to invest with strong local resistance and develop programs based on poor prior consultation, their trust in local authorities deceases. Their interest to invest more is also decreasing significantly

Corporations are generally squeezed between what they commit to do as part of tender processes and discussions led with authorities on the one hand, and what they discover on the ground and the actual level of stakeholder engagement activities they may need to manage to deploy their programs on time on the other hand. That can become a tedious nightmare.

Legally binding instrument discussions are putting a lot of emphasize on FPIC because this concept has proven to be important yet insufficiently enforced. Business and other stakeholders need to watch closely the regulatory developments to expect here. The more there will be regulations encouraging States to lead professional consultations and genuinely respect FPIC principles, the more business will find it easier to respect human rights and benefit from State owned sovereignty to develop land with respect of people – including vulnerable groups – living there.

3. Bilateral Trade Agreements Treaties and Access to Effective Remedy and Justice, both Nationally and Extraterritorially

ISDS and other bilateral vehicles enabling companies to benefit from significant tax incentives or poor legal responsability and accountability are under close scrutiny of stakeholders. Legally binding discussions are exploring solutions to increase transparency and ensure that States and companies can provide effective remedy and justice.

There are multiple precedences in place. For instance, tourists caught for crimes of sexual abuses on children, no matter where this happens, may be prosecuted under the juridiction of their citizenship. This is good example where crime in Madagascar can be remedied with Justice in the UK for British tourists. Similar developments can extend to a much broader scope of human right abuses, and apply to corporate entities.

Companies willing to demonstrate good faith taking responsibilities and respecting human rights must proactively manage these regulatory developments. They can commit to the following leadership principles:

  • Pay taxes where they operate
  • Provide clear and transparent avenue enabling right holders seeking for remedy and justice to access solution no matter local legal entity or joint venture operations
  • Define juridiction of reference to use no matter location or case calling for remedy and justice

Conclusion: Converging Regulations Calling for Business to Take Responsibilities Respecting Human Rights

6 areas to monitor are clearly calling for more proactive commitments from companies to elevate their understanding of how their operations, product and services may impact human rights.

And business case is very strong: acceptability, cost, risk mitigation.

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Author of several books and resources on business, sustainability and responsibility. Working with top decision makers pursuing transformational changes for their organizations, leaders and industries. Working with executives improving resilience and competitiveness of their company and products given their climate and human right business agendas. Connect with Farid Baddache on Twitter at @Fbaddache.

1 thoughts on “Legally Binding Instrument to Regulate Business & Human Rights on its Way. 6 Areas to Monitor

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