Business and Human Rights Part XII--Elaboration; Applicability to All Business

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 XII: Human Rights Due Diligence--Elaboration:  Applicability to All Business.

The SRSG has has forcefully and correctly suggested that the Second Pillar responsibility to respect is not subject to threshholds of size or operation.  "The corporate responsibility to respect human rights applies to all business enterprises regardless of size, industry, region or ownership.  The scope of the responsibility to respect human rights is determined by a company's activities and relationships, not its revenues or number of employees.  All companies have a responsibility to respect human rights, which requires human rights due diligence; but the resultant company activities will vary depending on the particular context and circumstances." United Nations Special Representative of the Secretary-General on Business & Human Rights, Elaboration: Applicability to All Business.

Yet, the SRSG conceeds that such a broad extension of the responsibility to protect raises special issues in at least two cases.  The first are issues special to small and medium sized firms.  The second are to state owned enterprises (SOEs).  I would add two additional categories.  The first are sovereign wealth funds, especially those taking a substantial position of shares of companies that themselves might encounter human rights issues in the operations. The second are small and medium sized enterprises whose operations do not cross borders.  Lastly, it might be important ot consider issues of "reverse flow."  It is well understood that larger corporations' responsibility to respect human rights extends downstream through the supply chain.  Less well understood is the possibility of reverse obligation--that is of the responsibility of local companies, for example companies in host states, to respect human rights extending upwards in their relationships with larger enterprises.

It has become increasingly clear that the supply chain responsibilities of multinationals under the Second Pillar are to some extent better understood as regulatory chains. The multinational corporation effectively must use its own governance tools, principally contract based, to enforce human rights norms not only within its own operations, but also in the operations of entities with respect to which it has a strong economic relationship—not merely a legal one. This is an idea pioneered and developed to a sophisticated level by the OECD through its enforcement of its Guidelines for Multinational corporations. For a discussion in two recent specific instances, see, Larry Catá Backer, Case Note: Rights And Accountability In Development (Raid) V Das Air (21
July 2008) And Global Witness V Afrimex (28 August 2008); Small Steps Toward an Autonomous Transnational Legal System for the Regulation of Multinational Corporations, 10(1) Melbourne Journal of International Law 258 (2009), available http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1427883.

The Second Pillar is organized on the assumption that the supply chain responsibilities of corporations run only in one direction—from the multinational corporation down to the smallest and most remote supplier. That parallels the understanding of the way power relationships run between multinationals and other enterprises with which they deal in the construction of non-state governance relationships. See, Larry Catá Backer, Economic Globalization and the Rise of Efficient Systems of Global Private Law Making: Wal-Mart as Global Legislator, 39(4) University of Connecticut Law Review 1739 (2007), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=953216. Yet, it is not clear that such supply chain governance relationships ought to run solely in one direction. That approach encourages an unhealthy passivity in downstream entities. It also reinforces single vector chains of power relationships that might be embellished with a neo-colonialist or interventionist character, to the detriment of the Second Pillar project. 

 

Moreover, unidirectional obligation in supply chain contexts are inefficient. Just as the largest multinational corporation must internalize and promote human rights with all firms with which it deals, so ought all entities down the supply chain embrace the same responsibility. In this sense, downstream supply chain entities may be among the most important corporate stakeholders for the internalization of human rights issues at the multinational level. That relationship, though, might benefit from a specific institutionalization and privileging. Downstream supply chain entities might be accorded a privileged role in the construction of human rights due diligence at the multinational level. They might also be entitled to a broadened right to receive compliance information. They might even participate in the monitoring of human rights compliance throughout the supply chain. That sort of human rights integration is already understood as foundational within the Second Pillar.