How Does Business Value Human Rights?

To what extent is there a global understanding of business's responsibilities for human rights?
I think there is a much greater understanding of corporate responsibilities with respect to human rights now than there was even four years ago, but that understanding is probably still limited to a small circle of businesses, NGOs, governments, and organizations that have been active participants in the debate.

After the media coverage of sweatshops in the 1980s and then, in the 1990s, some of the dreadful things that happened around some oil, gas, and mining projects, the general public started rightly paying attention to businesses' impacts on human rights.

While business has become global, there's no corresponding growth in government systems. Governments, by definition, are meant to oversee what goes on in a particular country, and their jurisdiction is confined by their territory. There's no robust international system of regulation. So, in response to that, some people started to suggest that because companies are so big and powerful, they should have the same responsibilities as governments with respect to human rights. That is to respect, protect, promote, and fulfill, to use the UN's language.

This became the basis for a proposal at the UN in 2003. Some campaigning NGOs thought this should be the basis for a new international law or treaty on business and human rights. You can imagine that some businesses reacted very differently. Governments largely stood aside.

So, this proposal bounced around the UN for a couple of years, and there was a pretty contentious debate over it, and then the Commission on Human Rights, which is now the Human Rights Council, in 2005 voted it down. But they recommended that the Secretary General appoint a special representative on the topic of business and human rights to bring some clarity to this debate.

They appointed a Kennedy School professor named John Ruggie to do that. He started by asking, "What are the human rights abuses that have been linked to corporations? Where are they happening? How are companies being held accountable?"

John has had multi-stakeholder consultations with businesses, with NGOs, and with governments in dozens of countries. Through all that work, he realized what was missing, and that was an overarching conceptual framework to manage business and human rights. If we couldn't agree on the fundamental principles, how on earth could we go forward and develop specific solutions?

The framework he presented to the Human Rights Council last year consists of three pillars: protect, respect, and remedy.

The first one, protect, concentrates on government duties. It's about the state duty to protect people against human rights abuses that are linked to corporations. That's a fundamental part of the human rights system. But what we found is that that duty has not been consistently or rigorously applied to corporations. Either Western governments don't want to regulate their companies' operations overseas, saying it's not in their jurisdiction, or host governments don't want to be ungracious hosts when they're getting foreign direct investment.

So you get this policy incoherence where governments sign up to human rights conventions but don't implement them consistently.

The second pillar, respect, is about the corporate responsibility to respect human rights. It's pretty clear that at minimum there is a societal expectation, even if there's not a clear legal expectation in many places, that the company shouldn't infringe on people's rights. Most companies now at least say that they respect human rights, and that's all well and good, but do they have any systems in place to demonstrate that they're meeting that claim?

The third pillar is about greater access to remedy for victims of corporate-related abuse. If people feel like they've been negatively affected by business, what are their options? If you're an Ecuadorian villager and you're trying to sue the Ecuadorian subsidiary of a company that's headquartered in Europe and listed on the New York Stock Exchange, do you really have much hope for justice?

Image: Brendan McDermid / Reuters

If you're an Ecuadorian villager and you're trying to sue the Ecuadorian subsidiary of a company that's headquartered in Europe and listed on the New York Stock Exchange, do you really have much hope for justice?

The remedy pillar is looking at all sorts of things from factory- and project-level grievance mechanisms, all the way up to national human rights institutions and international mechanisms. For instance, the International Finance Corporation of the World Bank has an ombudsman whose job it is to investigate complaints by people that have been affected by IFC-funded projects.

This “protect, respect, remedy" framework was put forward to the Human Rights Council last year, and in a rare show of unanimity, the council welcomed Ruggie's work and gave him another mandate for three years to operationalize the framework and provide some practical guiding principles for all parties.

There's been a tremendous amount of consensus around this framework last year, so I think there is much greater understanding on these issues. The challenge remains getting the word out and trying to look for ways to bring this framework to life.

Is there a downside to broad consensus? Is the framework weaker than it might be, for example?
I suppose that when some people hear that the baseline responsibility of companies is simply to respect human rights that might seem like a low standard. But I need to clarify what that means. What John Ruggie has suggested is that companies need to undertake human rights due diligence to make sure they're not infringing on the rights of others. This isn't a passive responsibility; it requires proactive steps, which to undertake thoroughly is actually quite a high bar.

Also, John Ruggie was brought in to solve a particular problem, and that is to try to prevent people getting hurt by corporate activity. He's trying to ensure that there is a floor where there was none before. There are certainly some leadership initiatives, like one called the Business Leaders Initiative on Human Rights, that have stepped up to try to play an active role in promoting human rights and development. That is terrific, but that serves a different purpose. To continue with the house metaphor, if John Ruggie's providing a floor, the leadership initiatives are trying to raise the roof. There's a whole lot of space in between.

What kinds of initiatives have been successful to date at moving these issues forward on a global scale?
It's become clear through this work that there's no single tool for improving businesses' performance with respect to human rights. We have to look at the whole spectrum of ways in which corporations are held accountable for human rights.

If companies are involved in the worst kinds of human rights abuses — international crimes like genocide or torture — they can be held legally accountable, for example, as countries that already provide for criminal punishment of companies ratify the International Criminal Court statute. Then you can look at national law. Then you have multi-stakeholder initiatives, which have been an important soft law tool. For example, there are initiatives that are usually sector-based, like the Fair Labor Association, which has brought together companies and NGOs to try to improve labor conditions in apparel manufacturing. Then there are voluntary actions by companies.

The framework John Ruggie has proposed could affect this whole spectrum. You might see governments enacting new requirements, as some have started to do, that companies report on their nonfinancial risks. You might see more investors include human rights issues as part of their due diligence or as a requirement for lending.

Is the goal to make these considerations a more integral part of the regular course of business?
Absolutely. I think the point is that it shouldn't be a siloed exercise; it should be just as important as any other issue that a company would consider.

I can give you an example from my own experience. When I graduated from SOM, I joined BP, and I moved out to Indonesia. BP had just taken over Arco.

There was one liquefied natural gas project that they were building in West Papua, called Tangguh, meaning strong and resilient in Indonesian. Technically, it was a pretty straightforward project. BP's built LNG plants all over the world. It was the social and environmental issues around the project that started to give some people pause, and this project really had every social and environmental tripwire for disaster. It was in one of the world's largest intact mangrove forests, certainly very sensitive. But that also meant the land around the gas site was quite swampy, so there were only a few patches of solid ground where you could build a $2 billion plant, which meant that there were only a few places where it was conceivable to live. There was a village that was to be resettled, and that obviously has a tremendous social impact. BP would have to, by law, work with the Indonesian military to protect its facilities, but the Indonesian military is not known for its good community relations.

We were doing a government-required environmental and social impact assessment, but that clearly wouldn't get at some of the broader human rights issues that were going to be of concern to both the local residents and the international observers who were keeping an eye on this project.

People were talking about human rights, but to be honest, we didn't really know what that meant. We didn't have a framework. So we commissioned a specific human rights impact assessment, and we brought in experts to talk to stakeholders and provide recommendations for how we might mitigate human rights concerns. And what they came up with was really helpful. It was a different lens with which to frame how we were thinking about the project.

We embarked on a process of engagement and consultation, trying to involve local residents so they had as much of a stake in the security and stability of the project as we did. We engaged local people to serve as our community liaison officers. We instituted a community-based security program, so that instead of building a big fence, which has been proven not to work very well and, in fact, creates more community resentment, we didn't build a fence at all. We employed local people as security guards, but on the whole tried to be part of the community.

I'm really proud of the fact that the project has gone relatively smoothly, and hope that it will prove to be a good thing for the region and the country over time. I hope it's clear why there is a business case for human rights, if the moral case is not strong enough.

Is part of your argument that this is a more sustainable business model?
Exactly. To me, this is not at all discretionary. We're talking about issues that are really fundamental to these companies. A lot of the governance gaps that enabled human rights abuses related to business are the same governance gaps that led to this whole financial crisis. There hasn't been sufficient international coordination and attention by everyone — by governments, as well as by companies — to the broader implications of what they do. These issues are central to the debate the world needs to be having.

I think also that the role of governments can't go away. Often in looking at human rights abuses that are related to business, a lot of people blame the companies. Then the companies say, "If governments were doing what they are supposed to, you wouldn't be putting all this onus on us." The point of looking at these pillars separately is that, regardless of whether governments are falling down on the job, companies have a responsibility to respect human rights. Similarly, whatever companies are doing, governments must fulfill their duty.

It seems that in the more globalized environment, there are always going to be governments that are not as strict or are corrupt in practice. Is that a problem?
The point of a global framework is that there are no law-free zones. Particularly if a country is recovering from or in conflict, the state-based human rights regime can't possibly be expected to function as it should. That's no excuse for companies to come in and take advantage of it. And most of them don't want to. I come from a company background, and I know full well that companies are not full of evil people. Human rights problems that link to companies are often through third parties. A company hires a security firm and doesn't do adequate due diligence. Or a big clothing brand hires a contractor and does audits on those factories, but doesn't realize that the subcontractor has subcontractors that are not abiding by the same standards.

Is globalization making this harder, in that it's probably harder to follow through on all the due diligence on a plant 8,000 miles away from headquarters?
That's particularly true on the subcontracting issue. Wal-Mart has something like 70,000 suppliers. To think about doing audits just on their first-tier suppliers is a massive responsibility, and then to even think about going one step further, you need a different kind of system. Companies all through the chain have to recognize their responsibilities.

What about the challenges of working on a global scale with a quintessentially global organization?
The UN Human Rights Council giving its stamp of approval carries a lot of weight, but what is even more powerful is that John Ruggie has developed this framework with so much outreach and engagement and consultation. Regardless of what the UN does with this, it becomes a kind of global normative standard. For instance, the International Chamber of Commerce has gotten behind this mandate, as have many major human rights NGOs. It becomes a normative expectation of what you should be doing with respect to human rights. That has much more power than any single treaty or statement of the UN.

Trying to figure out who all the different players are, and what role they can play in an international community where there is no one single system of governance is really interesting — it's complex and it's multifaceted.

[This article has been reproduced with permission from Qn, a publication of the Yale School of Management http://qn.som.yale.edu]