Business and Human Rights Part I--Thoughts on the Corporate Responsibility to Respect Human Rights

This Blog Essay site devotes every February to a series of integrated but short essays on a single theme.  The Ruminations Series in 2009 produced a month long series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope was that, built up on each other, the series would provide a matrix of thoughts that together might lead the reader in new directions. 

For 2010, this site introduces a new series--Business and Human Rights.  The series takes as its starting point the issues and questions raised by John Ruggie, the United Nations Special Representative of the Secretary-General (SRSG) on business and human rights, in a global online forum 

The U.N. "Protect, Respect, Remedy" framework is made up of three pillars: the State duty to protect against human rights abuses by third parties, including business; the corporate responsibility to respect human rights, which means to avoid infringing on the rights of others; and greater access by victims to effective remedy, judicial and non-judicial.  The forum is currently focused on the corporate responsibility to respect human rights, the second pillar of the framework. The forum is divided into sections, each of which contains multiple topics with space for discussion and comment.

New Online Forum for U.N. Business and Human Rights Mandate, United Nations Press Release, New York and Geneva, Dec. 1, 2009. Each of the Essays will consider one of the topics raisedin the online consultation.  My hope is to help generate discussion and to encourage further discussion of the issues within the framework fo the consultation  framework.  . 

Part 1:  Foundations--The Corporate Repsonsibility to Respect Human Rights

The SRSG, John Ruggie, has described the nature and scope of the corporate responsibility ot respect human rights within the proposed three pillar "protect, respect, remedy" framework for in the following terms:

In June 2008, the Human Rights Council welcomed the "Protect, Respect, Remedy" framework that the SRSG proposed, affirming that there is a corporate responsibility to respect all internationally recognised human rights -- in other words, not to infringe on the rights of others.  
Most companies are focused on the requirements of their legal license to operate, but are slowly discovering that in many situations those requirements alone fall short of the universal expectation that they respect human rights—especially, but not only, where laws are inadequate or not enforced.  The corporate responsibility to respect applies to all companies in all situations; in some countries it is reflected in domestic legislation, but it exists independently of state duties and variations in national law.
While many companies state that they respect human rights, the SRSG has found that few companies have systems in place to support such statements.  What is required, therefore, is an ongoing process of human rights due diligence for companies to become aware of, prevent, and mitigate adverse human rights impacts arising from their activities and relationships -- and demonstrate that they are meeting their responsibility to respect human rights.  This is by definition a positive responsibility, not a mere analogue to a “negative duty”.
Companies may undertake additional human rights commitments voluntarily or as a matter of philanthropy.  However, while such undertakings may be desirable for companies in particular circumstances, they cannot offset a company’s failure to respect human rights anywhere in its operations.

United Nations Special Representative of the Secretary-General on business & human rights, The Corporate Responsibility to Respect Human Rights, Online Consultation.  Let's parse through foundational statement.    In the most general terms, this section outlines the parameters within which the relationship of corporate behavior to human rights is to be developed and applied. We start with the understanding that the emerging framework governing business and human rights is not  a free floating endeavor.  It arises within the operations of an international organization whose members include virtually all of hte members of the community of nations.   The framework is thus well grounded in public law.  The scope of the responsibilities of corporations within this framework is also defined in both descriptive and principled terms.  In descriptive terms, the scope of the corporate responsibility is bounded by all internationally recognized human rights.  In terms of principles, the corporate responsibility is framed by the principle "not to infringe on the rights of others."  The relationship between principle and description is clear--the principle, to avoid infringing the rights of others,  acquires substance only by reference to its descriptor, that is, to internally recognized human rights.  That construct--principle and descriptor--serves as a fundamental ordering element of the "responsibility to respect" pillar. 

 

The responsibility to protect, thus understood, does not exist as a free floating obligation with an ambiguous relationship to public international law or to corporate obligations imposed by the domestic legal orders of states in which corporations operate.  The responsibility to protect exists independent of a corporation's obligations to comply with the law of the states in which they operate.  The responsibility is defined by reference to norms in international norms, but is grounded in the social license of corporations.  Corporations are legitimated as creatures of law by complying with the requisites of the law applicable to their organization and operation.  Legitimation provides a corproation with certain rights under the domestic law of a state--legal personality, limited liability, the right to access the formal system fo dispute resolution and the like.   Corporations are legitimated as economic entities by the actions of their principal stakeholders--investors, customers, employees, trade creditors, ocal governments and the like.  That legitimation is effectuated by stakeholder action--investors purchase securities, customers purchase products, employees work, trade creditors extend credit, and the like.  A corporation cannot exist as a viable entity in the absence of either legal or social  "validation."  The expectations of stakeholders as well as those of states, bind corporations as amatter of law and economics.  Human rights touches on the relationship of the corporation to its stakeholders in the context of the social license within which they operate. Those rights, sourced in global norms developed as consensus among the community of nations, apply beyond the particular laws of a state.  In some contexts, corporations face compliance with a multiple set of norms--state law and social license norms (the responsibility to protect).  In other context, especially where corporations operate in states with weak of ineffective government, or where corporations operate in conflict zones, the only norms that may guide corporate behavior may be those arising from their social license (and grounded in human rights). 

 

Compliance with the law of states is relatively easy.  States tend to develop methods of enforcement that make it relatively easy to comply.  In addition, the police power of states provides direct incentives to comply.  But compliance with social norms are a more difficult matter.  There is no state government apparatus.  Stakeholders have no public power.  They may cease to invest, purchase, lend or work, but those options are ineffective in the absence of knowledge of corporate compliance.  Critical, then, to social nprm compliance  are systems of monitoring and disclosure.  Yet, corporations tend to disclose only if complelled.  States can compel through instruments of conventional law.  Social norm disclosure becomes compelling only if states are willing to make them so, or  they may cease to invest, purchase, lend, etc., unless corporations disclose.  But in the absence of the coercion of law or of negative economic effects, corporations have little incentive to change their behavior.  Still, the social-econmic power of stakeholders, if directed, may be enough.  That. certainly has been the great lesson of the corporate social rtesponsibility movement to the extent it has seen limited success over the last decade.  Yet here one confronts the great issue-question of the responsibility to protect pillar--the responsibility to respect canbe understood as effecting a power shift from corporations to stakeholders.  To some extent it also shifts a measure of responsibility onto stakeholders--only those willing to ensure corporate compliance with social norm obligations may benefit from its imposition.  The social license aspects of the second pillar suggest that corporate passivity in the face of possible human rights implications of its actions, will be a function of stakeholder passivity in the face of corporate unwillingness to disclose or correct violations.  The role fo the state in connection with the independent and autonomous responsibility to respect, and stakeholder obligations to protect their rights, remains one of some ambiguity.    

 

More important, perhaps, in the absence of monitoring, corporation would be unable to comply with their responsibility to respect.  In this sense, human rights due diligence serve the same essential function as financial due diligence.  Human rights due diligence ought to operate in a manner that is similar to internal financial management, and for the same reasons--in both cases corporate financial performance is a function of maximizing knowledge of performance (financial or human rights) providing the corporation with the power to effectively mitigate adverse effects that in either case will have a substantial impact on its financial performance. To some extent, corporations understand this.  It is well known that "economic enterprises have begun to harvest and disclose vast amounts of information on their corporate behavior, well beyond that required by domestic law."  Larry Catá Backer, From Moral Obligation to International Law: Disclosure Systems, Markets and the Regulation of Multinational Corporations. Georgetown Journal of International Law, Vol. 39:591-653 (2008) at 631.  Everyone from credit rating agencies to investment bankers and consumer groups receive substantial amounts of information about a company and ts operations.  That this information is carefully crafted to the benefit of the corporation goes to the quality and use of the informaiton rather than to the capacity of a corporation to generate, harvest and distribute such information.  

But the notion of compliance with a corporation's social license--now understood by reference to a corporation's responsibility to respect human rights as defined by a normative framework grounded in public law principles--is not co extensive with the entire possible range of corporate activity.  Responsibility is understood as minimums in the way that compliance with law is understood as threshholdsfor behavior above which the state  has nothing to say.   But the willingness of a corporation to do more than comply with the bare minimum imposed by law in one respect cannot be used to absolve corporate failure to comply with law in other respects.  In the same way, a corporation's willingness to do more than the minimum to comply with its social license obligations (responsibility to respect) with respect to one aspect of human rights does not absolve a failure to respect human rights in another respect.  

Thus unpacked, the basic framework of the responsibility to protect can be understood in its essential terms.  The responsibility to respect is grounded in law based norms, but not those of domestic legal orders.  Instead they represent norms about which at least a rough consensus exists among the community of nations.  These normative rules exist independent of the state and its government apparatus.  It is intimately connected to the relationship between the corporation and its principle stakeholders rather than the connection between the corporation and the state.  This relationship is economic rather than legal, in the sense that human rights obligations inform the nature of the relationship between the corporation and those actors who are affected by corporate activity.  This relationships are well known and understood by corporations.  Adopting a language of human rights deepens an understanding of those relationships rather than changing their fundamental terms.In future posts I will turn to an analysis of the particulars of this construct.