Business and Human Rights Part VIII--Assessing Impacts and Elements of Human Rights Due Diligence

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 raised in 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 VII: Human Rights Due Diligence--Elements of Human Rights Due Diligence; Assessing Impact.

The SRSG has identified four core elements of human rights due diligence:

• Statement of policy
• Assessing impacts
• Integration
• Tracking and reporting performance 

United Nations Special Representative of the Secretary-General on Business & Human Rights,  Assessing Impacts. 

I have suggested that assessment is a critical function of due diligence, adding a critical judgment aspect to the basic function of data selection and gathering.

Data is inert until used. Though the identification and harvesting of knowledge implicates judgment (and use), that use remains contingent until the active element is introduced. That active element blends time and agency. Data can sit for long or short periods of time—subject to the technologies of preservation and retrieval. Information use is contextual—who uses it in what cultural context colors the importance and character of the information at the moment of its deployment. That use is not merely consequential—it serves as the essence of the governance element of surveillance. This characteristic of making judgments and deploying those judgments within the community under observation can be understood as governance.

Larry Catá Backer, Global Panopticism: States, Corporations and the Governance Effects of Monitoring Regimes. Indiana Journal of Global Legal Studies, Vol. 15, 2007.  The assessment function can be broken down into four important components: (1) verification; (2) management; (3) exposure; and (4) and confession.  Information can be used to corroborate or confirm a condition, effort or the authenticity of factual assertions.  Assessment is vital to the management of an enterprise or of problems with respect to which data harvesting is focused.  Exposure touches on disclosure--assessment is critical to the task of determining what set of harvested facts  are to be disclosed and how they to be organized for transmission. Assessment can also have a confessional aspect--it can acknowledge a condition or action. Certification, acknowledgment of compliance with law or policy statements, common to American securities laws, nicely illustrate the confessional element of the assessment function.    

The SRSG focues assessment on the verification and management functions of assessment.  He notes

Often problems arise because companies fail to consider the potential implications of activities and relationships before they begin -- or because complacency sets in once they're established. Companies cannot know whether they are meeting their responsibility to respect human rights if they don't take proactive steps to understand how existing and proposed activities may affect human rights.  

United Nations Special Representative of the Secretary-General on Business & Human Rights,  Assessing Impacts. For that purpose, a set of assessment tools are put forward.  "Specific tools such as “human rights impact assessments” are one means to achieve this purpose (see the SRSG's 2007 report on the topic), but the important thing is the activity, not the form or tools by which the assessment is achieved. "  Id.  Though the "tools" issue is important for assessment, it is far more important as a collection issue, and consequently on the ideology underlying determination sof the sort of data to be collected and the sort of information to be ignored. Thus, for example, if it is believed that “race” is constructed, then it doesn’t exist as a fact. See, e.g., Ian F. Haney Lopez, The Social Construction of Race: Some Observations on Illusion, Fabrication, and Choice, 29 Harv. C.R.-C.L. L. Rev. 1, 6 (1994). And data on race actually monitor the aggregate assumptions of those who use a variety of  assumptions about classification to sort people. The data is actually a proxy for the judgment. to support an ideology about race and race sorting The  controversy over the extent of reporting of executive compensation is a case in point. Though corporations report financial data, that reporting may focus on some areas and ignore or hide others. That produces incentives and opportunities to engage in strategically advantageous behavior. See, e.g., Roel C. Campos, Commissioner, SEC, Remarks Before the 2007 Summit on Executive Compensation (Jan. 23, 2007) (“I'm sure that some are hopeful that the new disclosure rules will have the effect of lowering CEO compensation, and that might be the case, but I'm not sure. Laws and rules have curious unintended consequences.” Id.).

Lastly periodicity is important to the aseessment function.,  Like assessment and siclosure under national securities laws regimes, periodic assessment and reporting are critical to the success of an assessment function.

Moreover, human rights situations are dynamic and pre-existing conditions will change with the entry of a high impact business operation.  Therefore, the assessment of impacts should take place regularly throughout the life of a project or activity, whether triggered by project milestones, regular cycles (e.g. periodic performance reviews), or changes in any of the issues related to the scope of a company's responsibility to respect human rights: context, activities, and relationships.

Id. It is not clear whether there is an exposure and confessional aspect to assessment.  Certification might prove useful under the human rights due diligence exercise undertaken as part of a corporation's responsibility to respect.  Certifications, affirmations, and other swearing mark the principal documents used to register securities, to periodically report on the financial status of the registrant, and especially under the provisions of the Sarbanes Oxley Act, to attest to the financial condition of the company and critically, under Section 404 of the Sarbanes Oxley Act, to attest to the functioning of the internal system of surveillance from which data is drawn for both private purposes (participation by private stakeholders) and public purposes (regulatory control by the state). See Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745, codified at various places in 15 U.S.C.  See, Larry Catá Backer,  The Sarbanes-Oxley Act: Federalizing Norms for Officer, Lawyer and Accountant Behavior. St. Johns Law Review, Vol. 76, pp. 897-952, 2002.  

Likewise, the exposure elements of assessment might prove problematical for corporations.  It might be useful to develop assert of principles governing the scope of disclosure.  Disclosure control has an upstream and downstream vector. The upstream vector implicates internal control mechanis.

The upstream vector encompasses elements of internal institutional control—that is, of self-control. The object is internal discipline. The beneficiaries of this form of surveillance are the internal stakeholders of the organization—employees and officers or organizations—or political subdivision—the bureaucrats and other staff that work for the apparatus of state.  

Larry Catá Backer, Global Panopticism: supra.  In this form, not all information harvested ought to be 

disclosed because the focus of information harvesting and assessment is internal.  Yet, there is also a strong downstream vector to disclosure.

The downstream element encompasses elements of external control by/through others. The object is external discipline. The beneficiaries of surveillance in this form include a number of actors. One class of beneficiaries are political communities—home state, host state, local communities, and supranational communities. Control systems originate in statute. Another group of beneficiaries includes outside stakeholders, including labor, lenders, and trade creditors. Downstream control systems originate in contract. The contract basis of observation permits the participation of a host of private actors.

Id.The disclosure element is strongest here.  But disclosure does determine what information ought to be disclosed.  Perhaps the contextual principle of the Second Pillar responsibility ot respect might help in that regard.  But application of that principle might suggest that all information harvested and used internally might not necessarily be available for downstream diligence.  Outside stakeholders, of course, would disagree.  And resolution might require agreement by the corporation and outside stakeholders. The differences might be explained by the notion that insiders seeking information for the attainment of management goals will understand data in a way different from insiders seeking information for the attainment of production goals.