Reflections on the 8th U.N. Forum on Business and Human Rights--Part I, "Does Lesotho Exist?"

I was pleased to have been able to attend a portion of the 8th Annual UN Forum on Business and Human Rights.  Perhaps because it has become fashionable to trash all things American, with the complicity of some sector of the American intelligentsia, the Forum this year took place immediately before the US Thanksgiving holiday, which requited some to make a difficult choice between public duty and family life.  One hopes that a greater sensitivity will be exercised in future years and that the choice e this year was the product of difficult choices among unpalatable alternatives. In any case many of us were able to attend at least the first 2 of the 3 days reserved for the conference.

Relevant U.N. officials with authority over these matters describe the function of the UN Forum in these terms:

The UN annual Forum on Business and Human Rights is the global platform for stock-taking and lesson-sharing on efforts to move the UN Guiding Principles on Business and Human Rights from paper to practice. As the world’s foremost gathering in this area, it provides a unique space for dialogue between governments, business, civil society, affected groups and international organizations on trends, challenges and good practices in preventing and addressing business-related human rights impacts. The first Forum was held in 2012. It attracts more than 2,000 experts, practitioners and leaders for three days of an action- and solution-oriented dialogue.

The theme of the Forum this year was an important one--Time to act: Governments as catalysts for business respect for human rights. For me, the theme produced a substantial irony, an irony that serves as the focus of the brief comments offered here on the state of the art in business and human rights and the perversity that it appears to foster as it lumbers along propelled by its own quite incomprehensible internal logic (at worst perhaps comprehensible in the sense that it fails to understand the consequences of the choices it appears to favor). It reminds us that ideological stances produce some time quite absurd results. And absurdity was the order of the day, at least for the positions taken by some of the leading states in this field.

What follows includes my brief reflections on one portion of the Forum. It is divided into two parts.

This part considers drive toward the legalization of the 2nd Pillar corporate responsibility actually produces a new sort of imperial system with human rights at its center and a confederation of --wait for it--states which formed the family of "civilized nations" as they were constituted in 1900 again appear take a leading position. For all other states there is, well, nothing.  They disappear in the shadows of the sunshine cast by this Olympian cartel of states.

Part 2 (Reflections on the 8th U.N. Forum on Business and Human Rights--Part II, "'Falling in Love Again:' 'Smart Mixes' and the De-Centering of the State Within Private Compliance Governance Orders") then considers how the framework for this imperium actually has a far more interesting effect. Rather than returning power to the human rights imperial cartel states, it has the effect of dissipating that authority.  States, effectively incapable of actually managing human rights through law, transform the role of law as a constituting element of legal orders that are actually delegated to enterprises (or better put delegated to the global production chains). As a consequence, the state itself will disappear  within the logic of the structures of its own approach to law into the vast data driven compliance machinery that the vanguard states have been furiously constructing (with the complicity of the largest enterprises) over the last generation.

My object is to briefly sketch out one of the great absurdities of the current approach to the regulation of business and human rights--the great campaign of national regulation the results of which accelerate the process of privatizing law by governmentalizing the largest enterprises--delegating to them the functional  role of the state in the management of the human rights effects of economic activities within global production.  Perhaps that is as it should be.  But in the process, and in an effort--essentially reactionary--to revitalize the state as the source of control, and law as the language and structure through which such obligations are implemented, these "leading forces" of human rights change have essentially produced a mechanism through which the core power of the state will be obliterated, all the while preserving an increasingly fragile facade of state power.   

Additionally I have posted below the Summary of the report of the Working Group on Business and Human Rights to the General Assembly, October 2018 (A/73/163)   In addition, the Report by the UN Working Group on Business and Human Rights may be accessed here – "Policy coherence in government action to protect against business-related human rights abuses"

Part I: The Obliteration of the State, or, Does Lesotho Exist?

The Working Group's theme this year was laudable indeed.  And it was also very much needed. States have been so busy pushing human rights responsibilities onto enterprises that they have managed to deflect for more than a decade any serious scutiny of their own duty to protect human rights except in the most mealy mouthed and pathetic ways.  But that waste be expected.  The UN, after all, is a member driven organization,.  And most organizations tend to like to export challenges and import successes.  States, within the UN system, are no different.  And so one has had to tip toe around the issue of state failures to comply with their own human rights related duty int he context of their economic policies, even as we all join in a loud chorus of hosannas every time a large enterprise bends the knee to human rights regimes and recounts its own brave tale of embedding such responsibilities into its operations. 

Even within the cynical construct within which some efforts at moving forward a human rights (or perhaps eventually better put, a liberties and protection from harm), the theme was the 8th Forum makes fro good reading. 

Time to act: Governments as catalysts for business respect for human rights

A key message from the 2018 UN Forum on Business and Human Rights was that governments must step up their action and leadership. Currently, they are not doing enough to meet their duty to protect against business-related human rights abuse. While important legal developments are evolving in some jurisdictions, and the number of countries developing national action plans on business and human rights continues to grow, the effectiveness of current efforts and the lack of wider action are being called into question.

The lack of government leadership, reflected in governance gaps and a lack of policy coherence at all levels – national, regional and global – remains a fundamental challenge to ensuring that the human rights and dignity of all are upheld in the context of business activities. These gaps have been a recurrent theme at all Forums since the first edition in 2012, and a key reason for the development of the UN Guiding Principles on Business and Human Rights, which provide the main reference for Forum discussions.

At the Forum, civil society organizations, affected stakeholders and business alike have called on States to step up action, through strengthened regulation, improved policy coherence, and through leading by example in the various roles States have as economic actors.

The 2019 Forum will focus on the need for all governments to demonstrate progress, commitments and plans in implementing the State duty to protect and strengthening accountability. As the Guiding Principles clarify, ensuring access to effective remedy is also a part of the State duty to protect against business-related human rights abuse, and discussions on government action need to address the full spectrum of measures from prevention to remediation. 

The Forum agenda will look at what governments need to do to foster business respect for human rights, including by getting their own house in order and by setting clear expectations and creating incentives for responsible business conduct. In doing so, the agenda will consider the Guiding Principles’ call for “a smart mix of measures – national and international, mandatory and voluntary – to foster business respect for human rights” and what this can mean in practice.

The problem starts with a close reading of the text. The focus is government--but the statement never identifies which. Moreover, the statement does not suggest the ways in which governments are to act as catalysts.

However, at least for me, one got a very good sense of the meanings ascribed to these insights by the leading forces of states in the context of human rights at some of the panels. The one that struck me hardest involved what amounted to a bragging session of successes around the utility of sovereign wealth funds to discipline the recalcitrant. From that I can piece together a story that serves as the insight unveiled:

The story (of my own making but derived from a synthesis of what was discussed) was recounted by the Norwegian Pension Fund Global and served up the following story to evidence its great success (on behalf of its own clients and their internationalist political agendas) in fulfilling the call to action of the 8th UN Forum theme.

(Pix credit here)

It is entitled--

Does Lesotho exist?

And it goes something like this:

The Pension Fund Global (or at least some elements within its organization structure) became concerned for reasons of their own about the state of human rights in the manufacture of textiles in Lesotho. Let us assume they had the best of all motives—the desire proactively to carry out the will of the Norwegian people expressed through law and delegated to the Norges Bank and its Ethics Council facility. The consequences, of course, is the production of law-based compliance overseen by an administrative apparatus within which the laboring oar of government is delegated to the enterprises now responsible for compliance. That structure and its consequences is the subject of Part II of this essay (and see my earlier work to this point here, here, and here).

But in any case, the Pension Fund Global could proudly be pointed out as a good example of states leading through a “smart mix”. And so they were right to point proudly to this instrument of mixed measure (Norwegian) state leadership. And it could also point out just how well aligned were Norwegian law and the Pension Fund Global’s Ethics Guidelines with the spirit of the UNGPs and international law generally of which the Norwegian state apparatus proudly reminded others, especially in international fora.

For some time, so this story goes, the good fathers and mothers of the Pension Fund Global apparatus experiemced a growing concern with the potential bad behavior of Asian participants in production chains.  They were particularly concerned that the proper values of human rights relating to gender might not be as carefully observed where the home state of the production chain was China (and in this case the region of Taiwan) than when operated by others (for an observation on this point, see, e.g., here). To the ends of satisfying its curiosity it commissioned a study about textile manufacturer in Lesotho. 

The three garment factories are owned by the Taiwan-based global jeans manufacturer, Nien Hsing Textile Co., Ltd. (“Nien Hsing”) and collectively employ roughly 10,000 workers. The factories are known as C&Y Garments (“C&Y”), Nien Hsing International, and Global Garments. Nien Hsing also operates a textile mill in Lesotho, Formosa Textile Company, and has recently opened a fifth facility,called Glory International. All of the facilities are located in the Thetsane Industrial Area in Maseru, the capital of Lesotho. (Worker Rights Consortium Report (2019), p. 3).

Now, of course, in this age of piece work, of the so-called Gig economy and of an NGO sector increasingly putting its employees adrift, the Pension Fund Global or its instrumentalities could not be bothered doing the work themselves. But Norway is rich, rich especially from profits derived from its substantial contribution to climate warming and environmental degradation, which it appears to celebrate in "some of the highest levels of resource use and CO2 emissions in the world." But why be fussy when here one encounters a state that can lead by example in the imposition of legal and compliance regimes far from its shores?!

And so they were able to commission a third party—the US-based organization Workers Rights Consortium--to conduct what ultimately became a two year study (see, e.g., here). It doesn’t matter who they were or whether they profited in the profit (consulting) or nonprofit (NGO) sector. It is enough to know that there is now a healthy enough industry whose economic activity is centered on analysis of the economic activity of others within the construct of the human rights effects of economic activity. More to the point, this industry now represents a substantial, and markets based, privatization of what had traditionally been the enforcement activity of states. And it is an industry that, true to the logic of the markets in which they are embedded, might be understood to need to please their clients in order to survive. Not that there is anything wrong with this, of course. Nor is this to suggest that the report misrepresented the situation in any way.  It is merely to suggest that in the context of this story of the grandeur of governments leading by example through a smart mix, it is necessary to situate that smart mix within the context, including the context of delegation, offshoring, and privatization, in which the "new" government as catalyst" framework operates. In any case, it  adds to the spice in the story of a European sub-national financial entity projecting the domesticated international project of the state that owns it, projecting that project through a US third party contractor into Africa. 

And off this third party provider went. After two years, the Workers Rights Consortium produced a set of findings--findings which it delivered to the Pension Fund Global (see, here). And probably to one one’s surprise, the findings described the most dreadful sort of rampant sex harassment in the textile industry in Lesotho that cried out for response. Indeed, the findings suggested that the conditions were made worse in part because of the way in which the Taiwanese company effectively striped workers of any sort of institutional apparatus for preserving their liberties against the personal depravities of those individuals who asserted control over their lives as well as their working conditions.

As described by the storyteller,  before the findings were finalized and circulated in August 2019, it went first to the bosses at the institution that had paid for the work.  The consensus at the Norwegian Pension Fund Global was to exclude the offending textile companies from its investment universe--the ultimate penalty for human rights bad behavior measured against the Ethics Guidelines. And that, indeed, would certainly have been an appropriate course of action to take. 

But, it seems, the Workers Rights Consortium had a better idea.  To exclude the companies involved in failing to prevent these activities might make the good folks at the Pension Fund Global sleep better for having acted in a morally (and legally) righteous way. However, righteousness might not contribute to ameliorating the conditions faced by these women in the Lesotho factories.And, indeed, they noted that "C&Y, Global Garments, and Nien Hsing International, supply denim garments to Levi Strauss & Co.(“LS&Co.”), The Children’s Place (“TCP”), and Kontoor Brands (“Kontoor”)."(Worker Rights Consortium Report (2019), p. 3).

Rather than use the Pension Fund Global's market power (exercised through exclusion), or resort to the legal system (hardly on the radar, and in any case whose legal system?), WRC suggested that  it might be more effective to rely on the UNGP's 2nd Pillar mechanisms. In the language of the story it might have gone something like this: When the brands find out about the activities, and the likelihood that these conditions will be widely reported, they will go ballistic. Why don't you let the brands do your work for you? After all, they already have in place a full complement of 2nd Pillar private law governance structures that give them substantial leverage (should I dare use that word) over their down stream supply chain associate. 

So rather than rely on law, and administrative compliance forms, the Worker Rights Consortium suggested that markets might work better--that is, that the regulatory mechanisms of the societal sphere, governed through the systems of private law that have been constructed around private systems for responsibility to respect compliance  might be more effective.  And so the Pension Fund Global was persuaded that rather than making a large splash with the distribution of the report within the performance tropes of exclusion, that instead the brands purchasing product from these textile factories ought to be approached first.  The objectives were quite transparent--if the brands were informed that garments they sold were manufactured under conditions of severe gender harassment, then they might be induced to better police their own internal law of production (their supplier codes of conduct and the like), to motivate the offending textile factories and their Asian owners, to do the right thing.

Yet at the same time, WRC noted two significant factors that drive the shaping of the use of this tactic.  First was the difficulty of ensuring effective 2nd Pillar structural mechanisms for compliance (and implicitly underlining the possibility that human rights due diligence were not working as well as they could be in part because they lack effective incentives to aggressively monitor).

The abuses outlined herein are grievous—and it must be noted that the brands sourcing from Nien Hsing’s Lesotho factories did not detect them via their voluntary codes of conduct and monitoring programs, which allowed the abuses to continue.It is relevant to note, in this regard, that workers, in offsite interviews, testified that Nien Hsing managers concealed their actual conditions and treatment from brand auditors, including by pressuring employees not to speak truthfully to brand representatives who visit the factory. (Worker Rights Consortium Report (2019), p. 7).

Second, they also understood that private law governance regimes that mark 2nd Pillar Human rights governance systems within supply chains were only as effective as they were legally enforceable.

And thus the need to look to workable approaches.

In developing proposals for corrective action to address GBVH at Nien Hsing in Lesotho, the WRC was informed by 1) our recognition of the fact that the management responsible for the existence of a culture of sexual harassment and coercion in a workplace does not suddenly develop the will and capacity to eliminate the problem through its own managerial efforts; 2) our experience with the generally inadequate approach of global brands to improving labor conditions at their contract factories,via their existing auditing systems; and 3) the promising track record, by contrast, of enforceable labor rights agreements between brands and organizations representing workers in their contracted supply chains. These include the Accord on Fire and Building Safety in Bangladesh (which has transformed the physical infrastructure of Bangladesh’s enormous garment industry and radically improved safety protection for more than 2.5 million workers) and the Fair Food Program in Florida (which has largely eradicated sexual harassment and coercion, and many other labor rights abuses, in an industry that is among the most poorly regulated in the United States). (Worker Rights Consortium Report (2019, p. 5).

The Pension Fund Global agreed. And, indeed, that was the course of action undertaken. The brands, indeed, it might have been reported, "went ballistic." They immediately undertook to remediate, remedy and put in place agreements and other matters to prevent these sorts of conditions at factories from which they sourced their product.   The consequence was also predictable under the logic of the UNGP's 2nd Pillar--and then began a program of intense monitoring and correction (Worker Rights Consortium Report (2019), described pp. 5-8).

What a story!  What a fantastic tale of success! How good all of the stakeholders must feel for the improvement in the condition of the people whose human dignity had been so thoroughly abused!  Yes.

Yet from the perspective of the 8th UN Forum, and especially for the advancement of its great theme for the year, the story proved a horrible and utter failure.  And not just a horrible and utter failure, but one laced with the sort of North-South arrogance that unmasks the reality of the failure of the fundamental principle on which the post 1945 state system was created--the horizontal parity of states. 

From that perspective, it might be useful to read the story a very different way.  It is the story of the obliteration of Lesotho, and of its utter irrelevance int he context of both public and private international actors who, dominating the global scene could afford to treat the sovereign and independent state of Lesotho as if it did not exist.  Just as Bangladesh essentially disappeared in the story of the aftermath of the Rana Plaza factory building collapse--as powerful states, powerful brands, powerful NGOs, and international organizations took over the project of setting things right (for a discussion see here: Are Supply Chains Transnational Legal Orders?).
 

It is in this context that the irony of the Forum theme begins to resonate in ways that ought to worry (unless of course one is already nicely embedded within those rarefied corridors of power in the most powerful state and their public and private institutional instrumentalities.  

What did the government of Lesotho do? How were they involved?

The story as related at the 8th Forum makes it clear that Lesotho was nowhere to be found in this story.  Let me suggest all of the questions that perhaps ought to be considered in rethinking the positive values of this story from a state-centered approach:

1.   Did the Pension Fund Global seek to advise the government of Lesotho of its concerns before acting?

2.  Did the Pension Fund Global seek to work together with the government of Lesotho?

3.  Where, if anywhere did the Pension Fund Global (or more to the point given national ambitions and the harvesting of "good state" points harvested by the Kingdom of Norway in this affair) did the Norwegian state offer to provide any capacity building support or funds to support governmental "smart mixes" undertaken by the Lesotho government?

4. How did the national labor unions or the brands involve the host state in its negotiations? To what extent did they play an active role in protecting national interests in the management of this small portion of larger global production chains?

5. To what extent will these binding agreements be litigated or enforced in Lesotho or through its courts?

6.  Where was Lesotho involved in the construction of the legal framework within which such issues would be subject to a revised and more effective legal structure within Lesotho itself.

7. And where, if anywhere, were the officials of the Taiwan region n the context of the story?

One gets the point.  The story about Lesotho--like that of Bangladesh after Rana Plaza--highlights the great contradiction of the movement to strengthen the 1st Pillar duty of states.

Make no mistake, the story of the triumph of brands and unions overcoming the horrific conditions of sexual harassment in those textile factories is indeed a story of a great success.  But it is not the story of the success of law, or of the state system, or of smart mixes, or of any of the themes outlined in the lofty language around which the 8th Forum was organized. Indeed, the contrast between the story of Lesotho and the 8th Forum thematic ideals could not be more stark:

The 2019 Forum will focus on the need for all governments to demonstrate progress, commitments and plans in implementing the State duty to protect and strengthening accountability. . . . The Forum agenda will look at what governments need to do to foster business respect for human rights, including by getting their own house in order and by setting clear expectations and creating incentives for responsible business conduct. In doing so, the agenda will consider the Guiding Principles’ call for “a smart mix of measures – national and international, mandatory and voluntary – to foster business respect for human rights” and what this can mean in practice.

Instead of movement toward this ideal, what the 8th Forum revealed was the reality of something quite different.

1.  States are now dividing along "class" lines.  Rich, powerful, and "leading social forces" states--the modern form of the late 19th century "Family of Civilized states" will now play a leading role--directly or through their instrumentalities--in projecting legal and governance mechanisms abroad.  I have suggested the plausibility of this trajectory of evolving globalization more than a decade ago (see, Economic Globalization Ascendant and the Crisis of the State: Four Perspectives on the Emerging Ideology of the State in the NewGlobal Order).

2.  For Norway and large international NGOs this means both bragging rights, and a sort of entitlement to project their authority. There was a sort of context to the choice of a ficus on Lesotho.  The international community had already targeted Lesotho for what was deemed to be an unacceptable level of sexual violence (see e.g., here).  More importantly, it produces an entitlement to bypass the sovereign state governmental apparatus in whose territories they are seeking to do good. But by doing good in this way might they also be doing bad? Sovereignty is not a matter of convenience--nor should it be reserved to the largest and most powerful states.  At least that is what we have been taught to believe.  The story of Lesotho reminds us that these are stories we might relate to our impressionable populations (to give them hope?) but that their connection to reality is at best tenuous.

3. For states like Lesotho and Bangladesh, the choices are substantially unpalatable, especially where they are dependent on others for connection to global production that produces at least some sort of political and economic stability. Either they can bend the knee and perfect the art of invisibility (being called out merely for whatever ceremony is used to assuage any possibility of guilty conscience among those powerful forces actually calling the shots).  Or they might (as was also hailed in the 8th Forum) paraded about as one of the class of grateful emerging states that, having received the wisdom of leading state forces have, under their tutelage, produced the sorts of forms and legal structures approved by them.  This strategic capacity building is meant not to provide capacity as much as it is directed toward compliance.

4.  This suggests that, for all intents and purposes, the 1st Pillar State Duty is in danger of being reduced to a state duty to protect human rights under the tutelage and subject to the approval and monitoring of the newly constituted Family of Civilized Human Rights States and their international public and private instrumentalities.  Barbarian states will either be colonized or co-opted. They will be rewarded for compliance along approved lines.  But they will not be invited to the table or taken seriously in the construction of global human rights in economic activity baselines.  That is to be expected in a world in which persuasive authority is a function of the control of the mechanics of global administration.

5.  It also suggests the extent of the absurdities of the current effort to develop a comprehensive treaty for business and human rights (for our own views of the effort in its current draft form, see HERE). The story of Lesotho and its place in the actual management, though the exercise of 1st Pillar state power, of business conduct in global production chains serves as a harbinger of the allocation of power within any such comprehensive legal instrument. At best, then, the small states that continue to advance its projects, might well understand its power not in the ability to manage, under law, the human rights harms of economic activity within their respective national territories.  Rather, they might come to understand its power as a means of acquiring a power to negotiate the delegation of such sovereign authority to the Family of Civilized Human Rights States in quid pro quo transactions.

6.  It is important to note, however, the extent of the great triumph that the story of the confrontation of gross sexual harassment cultures in Lesotho represents.  But it is not a great triumph of law or legal systems.  It is not even the triumph of regulatory extraterritoriality.  It is rather the great triumph of the private sector, of markets, and of the rising power of privatized law making within global enterprises, within global NGOs, and within globally involved state instrumentalities (SWFs and SOEs).  It is, in other words the great triumph of the 2nd Pillar and not the 1st.

7.  What is left to the 1st Pillar under what is emerging as its structural order? There are a number of "morals"  to the story of Lesotho.

First,  the power of the force of the 1st Pillar will lie in the willingness of the great powers to project 1st Pillar legalities through the production chains it controls.  One already saw this emerging int he structures of global financial regulation emerging after the economic crisis of 2006-8 (discussed in Private Actors and Public Governance Beyond the State: The Multinational Corporation, the Financial Stability Board and the Global Governance Order).

Second, emerging multilateral orderings of production--China's Belt and Road Initiative, the US America First Project (if it ever gets off the ground conceptually), and the European moral-regulatory project (of which the Pension Fund Global is an example)--are far more likely than a treaty to discipline and advance the state of the art ion controlling human rights affecting behavior in economic activities.  Whether, in fact, this is undertaken is likely the principal task facing the hopefully not oblivious UN apparatus.

Third, the old debates about extraterritoriality begin to assume an increasingly anachronistic character as international actors move from rogue elephant regulatory regimes projected abroad to coordinated efforts among more and more tightly banded groups of states.  This suggests, as well, the ultimate problem with the 8th Forum theme.  Hundreds of states legislating to their hearts content and with different content and effect (the movement toward all sorts of Modern Slavery Acts as an example) will not produce an efficient or useful regulatory environment (even if one were inclined to see in regulation the solution to the problem of business and human rights). Rather it will create the sport of regulatory forest that will invite strategic behaviors and conflict.

Fourth, the future appears to belong to private law. What the story of Lesotho really signals is that law is at its most useful when it is undertaken by the key stakeholders in global production.  In that context the state provides stability but not specific regulatory rules.

Fifth, as a consequence, the emerging partnership between business (global production) and international organizations (as the sources of substantive rules against which business conduct is measured) will be far more critical to the development of a robust human rights centered culture of economic activity than the encouragement of law making in all of its glorious variation by states embedded in parts of global production.  The exceptions, of course, are the emerging multilateral  production regimes identified above.

Sixth, none of this may matter in the face of the transformation of law from a set of written normative commands to a deeply embedded system of data based compliance.  In a word in which ratings based on measured activity, produced by an analytics grounded in an approved or privileged set of data may make all of this  structuring (and the theory underlying its controversies) little more than a historical artifact.  

__________

Summary of the report of the Working Group on Business and Human Rights to the General Assembly, October 2018 (A/73/163)

Corporate human rights due diligence: emerging practices, challenges and ways forward

Background and focus

The unanimous endorsement of the Guiding Principles on Business and Human Rights by the United Nations Human Rights Council in 2011 represented a watershed moment in efforts to tackle adverse impacts on people resulting from globalization and business activity in all sectors. They provided, for the first time, a globally recognized and authoritative framework for the respective duties and responsibilities of Governments and business enterprises to prevent and address such impacts.

The Guiding Principles clarify that all business enterprises have an independent responsibility to respect human rights, and that in order to do so they are required to exercise human rights due diligence to identify, prevent, mitigate and account for how they address impacts on human rights.

In its report to the General Assembly, the Working Group on Business and Human Rights* highlights key features of human rights due diligence and why it matters; gaps and challenges in current business and Government practice; emerging good practices; and how key stakeholders — States and the investment community, in particular — can contribute to the scaling-up of effective human rights due diligence.

What is corporate human rights due diligence?

Human rights due diligence is a way for enterprises to proactively manage potential and actual adverse human rights impacts with which they are involved. It involves four core components: (a) Identifying and assessing actual or potential adverse human rights impacts that the enterprise may cause or contribute to through its own activities, or which may be directly linked to its operations, products or services by its business relationships; (b) Integrating findings from impact assessments across relevant company processes and taking appropriate action according to its involvement in the impact; (c) Tracking the effectiveness of measures and processes to address adverse human rights impacts in order to know if they are working; (d) Communicating on how impacts are being addressed and showing stakeholders – in particular affected stakeholders – that there are adequate policies and processes in place.

Enterprises should identify and assess risks by geographic context, sector and business relationships throughout own activities (both HQ and subsidiaries) and the value chain.

The prevention of adverse impacts on people is the main purpose of human rights due diligence. It concerns risks to people, not risks to business. It should be ongoing, as the risks to human rights may change over time; and be informed by meaningful stakeholder engagement, in particular with affected stakeholders, human rights defenders, trade unions and grassroots organizations. Risks to human rights defenders and other critical voices need to be considered.

Increasing uptake at policy level

Since 2011, corporate human rights due diligence has become a norm of expected conduct. It has been integrated in other policy frameworks for responsible business, such as the recent OECD Due Diligence Guidance for Responsible Business Conduct that provides concrete guidance for due diligence in practice. The human rights due diligence standard is increasingly reflected in government policy frameworks and legislation, including mandatory disclosure of risks of modern slavery in supply chains. In the 20 national action plans on business and human rights that have been issued to date, Governments have reaffirmed the expectation that business enterprises exercise human rights due diligence.

A growing number of investors are starting to ask enterprises how they manage their risks to human rights. Also, among business lawyers there is a growing recognition that they should advise corporate clients to exercise human rights due diligence. In the world of sports, human rights due diligence processes have become an integral part of the selection process for mega sporting events.

Among business enterprises, a small but growing number of large corporations in different sectors have issued policy statements expressing their commitment to respect human rights in line with the Guiding Principles. Several such enterprises are developing practices that involve ongoing learning and innovation around the various components of human rights due diligence to prevent and address impacts across operations and relationships, including in supply chains.

Business practice: gaps and challenges

Assessments by benchmark and ranking initiatives highlight that the majority of companies do not demonstrate practices that meet the requirements set by the Guiding Principles. This may indicate that risks to workers and communities are not being managed adequately in spite of growing awareness and commitments. The Working Group notes gaps in current practice in corporate disclosure of risk assessments and human rights due diligence processes, as well as the “taking action” and “tracking of responses” components of human rights due diligence. Similarly, connections between human rights due diligence and the remediation of actual impacts are not being made in practice. Beyond a small group of “early adopters” – mostly large corporations based mainly, but not exclusively, in some Western markets – there is a general lack of knowledge and understanding of the corporate responsibility to respect human rights. Translating corporate policies into local contexts is a challenge across sectors.

Gaps in Government practice

A lack of government leadership in addressing governance gaps remains the biggest challenge. A fundamental issue is that host Governments are not fulfilling their duty to protect human rights, either failing to pass legislation that meets international human rights and labour standards, passing legislation that is inconsistent, or failing to enforce legislation that would protect workers and affected communities. While some home Governments have introduced due diligence or disclosure legislation, such efforts also remain patchy or uncoordinated. Governments are not providing enough guidance on human rights due diligence and support tailored to national business audiences, including small and medium-sized enterprises. A lack of policy coherence in government practice is part of the overall picture, and Governments are not leading by example in their own roles as economic actors.

Overall assessment

While a small group of early adopters are showing the way and good practices are building up, considerable efforts are still needed, as the majority of enterprises around the world remain either unaware of their responsibility, or unable or unwilling to implement human rights due diligence as required of them in order to meet their responsibility to respect human rights. The fundamental challenge going forward is to scale up the good practices that are emerging and address remaining gaps and challenges. That will require concerted efforts by all actors. Evidence of what constitute some of the strongest drivers for changing business practice suggests that governments and investors have a key role to play. For Governments in particular, addressing and closing market and governance failures is an inherent part of their duties.

Key message to business enterprises: just get started

In spite of slow progress overall, the good news is that effective due diligence can be done. Practice examples are building up, which can provide a starting point for a wider group of companies. This, together with the development of numerous tools and resources for business in recent years, means that enterprises can no longer cite a lack of knowledge as an excuse for not getting started.

Companies should just get started. The first step is to identify specific actual or potential adverse impacts related to an enterprise’s activities or its business relationships. Each potential impact identified will

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have to be assessed for its likelihood and severity. Every actual impact identified will need to be addressed. In terms of process, getting started requires leadership from the top to turn human rights policy commitments into reality.
Lessons from “early adopters” on how to get started, the journey of moving from policy to practice, and key milestones are compiled in a companion “practice paper” to the report. The companion paper also identifies good practice elements in relation to a number of aspects of human rights due diligence, including stakeholder engagement, transparency and meaningful reporting on human rights, integrating human rights in supply chain management beyond tier one, exercising leverage, addressing systemic issues and corporate engagement on the Sustainable Development Goals.

Recommendations to business (a) If they have not yet implemented human rights due diligence, enterprises should just get started, including by assessing their potential and actual impacts on human rights, assessing where existing

processes fall short and developing an action plan for putting in place human rights due diligence procedures for their own activities and value chains, in line with the Guiding Principles, including by learning from good practices emerging in their own industry and in other sectors. (b) If they have already adopted human rights due diligence policies and processes based on the Guiding Principles, enterprises should continue on the journey and seek to continuously enhance approaches by engaging with affected stakeholders, civil society organizations, human rights defenders and trade unions and by being transparent about the management of potential and actual impacts. (c) All enterprises should consider collective leverage approaches, especially when faced with systemic human rights issues.

Key message to the investment community: leverage can and should be used
Increasingly, investors are asking questions to companies about human rights policies and human rights due diligence. This practice has moved beyond the niche realm of socially responsible investors to become part of a wider trend of integrating environmental, social and governance considerations into mainstream investment decision-making. There is an increasing recognition of the responsibility of investors and financial institutions, and that proper human rights due diligence improves risk management overall and is good for both people and investments.
Key message to Governments: use all available regulatory and policy levers
States have a duty to protect people against business-related human rights impacts. They have a range of levers that they can and should use, such as: policy tools and frameworks, including national action plans in order to enhance policy coherence overall; legislation, regulation and adjudication; economic incentives in “economic diplomacy” and public procurement; lead by example in their role as economic actors; provision of guidance (including for SMEs); and promotion of multi-stakeholder dialogue. Recent developments show that action is possible in all these areas, and that government leadership from the top is a critical factor.

Recommendations to the investment community
Entities in the investment community should implement human rights due diligence as part of their own responsibility under the Guiding Principles, more systematically require effective human rights due diligence by the companies they invest in and coordinate with other organizations and platforms to ensure alignment and meaningful engagement with companies.

Recommendations to Governments The Working Group recommends that States use all available levers to address market failures and governance gaps to advance corporate human rights due diligence as part of standard business practice, ensuring alignment with the Guiding Principles, including by: (a) Using legislation to create incentives to exercise due diligence, including through mandatory requirements, while taking into account elements to drive effective implementation by businesses and promote level playing fields; (b) Using their role as economic actors to advance human rights due diligence, including by integrating human rights due diligence into the operations of State-owned enterprises and agencies that promote trade and investment, and into public procurement; (c) Promoting greater policy coherence within Governments, including by adopting or strengthening the implementation of national action plans on business and human rights; (d) Providing guidance to business enterprises, including small and medium-sized enterprises, on

human rights due diligence tailored to local contexts; (e) Facilitating multi-stakeholder platforms to promote dialogue on business-related risks to human rights, ways to address them and to strengthen monitoring and accountability, including in a sector context.

Links
Full report (available in Arabic, Chinese, English, French, Spanish and Russian):
http://ap.ohchr.org/documents/dpage_e.aspx?si=A/73/163
Companion paper I – Corporate human rights due diligence: Background note and elaborating on key aspects: www.ohchr.org/Documents/Issues/Business/Session18/CompanionNote1DiligenceReport.pdf
Companion paper II – Corporate human rights due diligence – Getting started, emerging practices, tools and resources:www.ohchr.org/Documents/Issues/Business/Session18/CompanionNote2DiligenceReport.pdf
Working Group’s thematic page on human rights due diligence:
www.ohchr.org/EN/Issues/Business/Pages/CorporateHRDueDiligence.aspx2018 UN Forum on Business and Human Rights: www.ohchr.org/2018ForumBHR
UN Guiding Principles on Business and Human Rights:www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf
The Corporate Responsibility to Respect: An Interpretive Guide (Office of the UN High Commissioner for Human Rights):www.ohchr.org/Documents/Issues/Business/RtRInterpretativeGuide.pdf
Endnote
*) The Working Group on the issue of human rights and transnational corporations and other business enterprises (known as the Working Group on Business and Human Rights) is mandated by the Human Rights Council to promote worldwide dissemination and implementation of the Guiding Principles on Business and Human Rights (resolutions 17/4, 26/22, and 35/7). The Working Group is composed of five independent experts, of balanced geographical representation, and it is part of what is known as the Special Procedures of the Human Rights Council. Special Procedures mandate-holders are independent human rights experts appointed by the Human Rights Council to address either specific country situations or thematic issues in all parts of the world. The experts are not UN staff and are independent from any government or organization. They serve in their individual capacity and do not receive a salary for their work.

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