The Normative Battle Over Imperial Peripheries; From the Business and Human Rights Resource Centre--"Going out responsibly: The human rights impact of China’s global investments "

 

 Just getting around to posting about this most interesting report: "Going out responsibly: The human rights impact of China’s global investments " (Business and Human Rights Resource Centre, August 2021). The Report provides a wealth of data, arranged and interpreted through the lens of orthodox global-liberal democratic human rights principles. It makes its points convincingly form that perspective and world view. It also serves as a set of metrics against which outward performance beyond the Chinese heartland can be measured against the global standards that have emerged over the last several decades from public international law bodies.  It suggests the emerging shape of the normative-discursive battle over the control of the management of productive resources in those territories that lie at the outer reaches of global production directed from and to emerging global production centers--one liberal democratic and the other Marxist Leninist. The stakes are high--the control of the normative rules for global production. To that end both sides must marshal their forces and project effectively their power through their chains of global production.  This is just one front in a multi-front campaign.  (See e.g.,  here). One awaits the counter from the lens of Socialist Human Rights with its collective, development, and stability focus (See, State Council: Human Rights Action Plan of China (2021-2025) ; cf., here, here, here; and 中央企业境外投资监督管理办法 (Measures for the Supervision and Administration of Overseas Investment of Central  Enterprises)

The Executive Summary, Key Findings and Recommendations  (Report pp. 3-7) follows below. The Report may be accessed HERE.

Executive summary

Since the “Going Out Policy” was initiated in 1999 by the Chinese Government to promote Chinese investments abroad, the footprint of Chinese enterprises has expanded considerably This has been further accelerated by President Xi Jinping’s launch of China’s Belt and Road Initiative (BRI)1 in 2013, after which China committed to work “together with other countries to foster the environmentally-friendly and sound development of the Belt and Road, featuring peace and the exchange of wisdom, and to build a global economy more vibrant, open, inclusive, stable and sustainable”2 These efforts have facilitated a massive expansion of Chinese foreign direct investment (FDI), which is valuable as developing countries need FDI to boost their development. To support these overseas development goals, the Chinese Government, state agencies and business associations continue to issue a growing matrix of policies, regulations and guidelines to establish social and environmental safeguards for its FDI In regulating the diverse economic activities of private and state-owned enterprises overseas, these documents seek to reinforce social integrity, environmental protection, workplace and personnel safety, among many other goals.

As Chinese businesses – particularly energy, construction, and mining and metals companies – continue to
venture abroad3, civil society and the media have reported an unfortunate increase in social, environmental and human rights violations – particularly in Asia, Africa and Latin America (See Section 31) All FDI from any country must now be informed by and directed to meet the twin challenge of addressing worsening inequality of power and wealth, while also tackling the challenges associated with climate change. It is therefore important for Chinese companies to ensure they address these issues

Between 2013 and 2020, the Business & Human Rights Resource Centre (Resource Centre) recorded 679 human rights abuse allegations linked to Chinese business conduct abroad, and 102 company responses to these allegations. In analysing the data further, this report intends to support civil society organisations in host countries of Chinese investments to make informed decisions about their advocacy for responsible business conduct of Chinese companies. This report also presents data and analysis to assist businesses, investors, the Chinese Government and governments of states hosting Chinese investments to take further action to fulfil the development commitments related to China’s international economic cooperation4 and the responsible business conduct guidelines established through the years. 

Key findings

While there are many emergent positive developments from China’s businesses overseas, China’s aspiration to be a responsible great power could be undermined by the following:

Higher rates of alleged abuse in countries with weaker governance and where Chinese investments are dominant:

Myanmar had the highest number of recorded allegations (97), followed by Peru (60), Ecuador (39), Laos (39), Cambodia (34) and Indonesia (25) China is a major investor or trading partner in all these countries.

Many human rights concerns related to projects in Myanmar pre-dated the military coup, which is concerning With ongoing escalating challenges in the country, and the possibility for more Chinese investments being approved in this conflict-affected area, it is imperative for companies to implement robust human rights due diligence to ensure commitment to international standards on human rights and responsible business conduct

Higher rates of alleged abuse in extractive and construction sectors:

Our data showed human rights risks are particularly high in metals and mining (35% or 236 allegations), construction (22% or 152 allegations) and fossil fuel energy (17% or 118 allegations) Chinese renewable energy investments overseas have gained momentum because of China’s pledge to meet targets under the Paris Agreement and to build a green BRI However, human rights risks in the sector are also prominent, ¡with 87 allegations (13%) recorded. (i The Resource Centre recorded 679 allegations involving 1,690 identified issues linked to Chinese investment overseas. Each allegation may be linked to more than one issue or more than one sector.

Lack of corporate transparency and accountability:

Despite commitments to openness and transparency,5 Chinese companies had a very low response rate (24%) when invited by the Resource Centre to address human rights allegations made against their overseas operations This is lower than the Resource Centre’s overall response rate from Asian companies (53%), particularly companies from major economies such as Japan (68%), India (47%) and Indonesia (41%)

Chinese banks had a dismal 5% response rate Only one response was received from 20 invitations, indicating a general reluctance by Chinese banks to engage with allegations from civil society actors or to learn more about their impact and improve their social and environmental performance

Business associations and government ministries have developed guidelines and rules to promote responsible business conduct These inform business practice overseas Unfortunately, our data showed this guidance and its enforcement is not sufficiently effective. Chinese businesses continue to sideline rights of communities and workers. Our data indicated a prevalence of inadequate disclosure or environmental impact assessment (EIA) (31% of allegations recorded), followed by violations of land rights (29%), loss of livelihoods (28%), labour rights (19%), and pollution and health threat (18%).

Positive developments include:

Renewable energy companies had the highest response rate (36%), although all responses came from hydropower companies and none from solar or wind energy companies This is still low compared to the Asian company average, but higher than the Chinese company average Chinese companies can build on this enhanced performance to strengthen their contribution to a ‘just transition’ towards clean energy.

Companies listed on various stock exchanges are more likely to respond (with response rate of 27%), when compared with companies not publicly listed (18%) Various requirements by
stock exchanges (including those on information disclosure and governance), influence by investors, as well as a higher level of scrutiny of listed companies might play a part in persuading these companies to engage with civil society more often

State-owned companies (among which many are also listed companies) are more likely to respond to allegations, with an overall response rate of 27%, compared with privately-owned
companies (16%)

Key recommendations

Given the challenges illustrated in this report, there are great opportunities for companies, business associations, the governments of China and countries hosting investments to further strengthen the regulatory environment and its implementation by Chinese companies operating overseas Supported by legislation, comprehensive guidance and effective implementation mechanisms, actions should prioritise addressing heightened risks across countries and sectors through three key approaches:

Transparency

Chinese companies should:

Develop and implement strong institutional policies on transparency and disclosure, including the obligation to publish relevant information about projects and investments in their  exploratory, implementation and closure/end stages;

Report publicly and transparently on due diligence processes and disclose the results of impact and risk assessments using appropriate and accessible formats;

Actively engage with affected communities and civil society, communicate information publicly and transparently, such as mitigation plans and corrective measures Chinese banks and financial institutions (including policy banks and commercial banks) should create searchable, comprehensive and up-to-date databases on their proposed and current investments and projects, similar to those of the Asian Infrastructure Investment Bank and the World Bank, which include project-level information, the final reports from environmental, social and human rights impact assessments and contact information Stock exchanges should also require the same level of disclosure from listed companies The Chinese Government should develop a National Action Plan on business and human rights (NAP), including section(s) to guide lawmakers at different levels on how to integrate human rights into policies and regulations on economic development overseas

Human rights due diligence 

Chinese companies should:

Continuously identify and assess actual and potential human rights and environmental risks prior to beginning, investing or sourcing a project, and at regular intervals throughout, covering the entire value chain, both upstream and downstream;

Take measures to prevent and mitigate adverse impacts, including through reforms to business and purchasing practices, proactive meaningful engagement with business partners and suppliers, and concrete efforts to increase leverage if necessary;

Actively engage, consult and involve stake- and rightsholders at all stages in the due diligence process and remediation, and address possible risks and reprisals arising from their participation;

 Conduct enhanced human rights due diligence when operating or having business relationships in conflict- affected areas and take additional steps proportionate to those risks. Business associations, especially those in energy (fossil fuel) and renewable energy sectors, should develop guidelines on transparency and human rights due diligence, as well as provide capacity-building training for companies to strengthen the implementation of these guidelines on the ground The Chinese Government should consider introducing legislation with the requirements above for Chinese companies to undertake mandatory human rights due diligence Governments of host countries should also legislate, improve and enforce requirements towards mandatory human rights due diligence and comprehensive impact assessments

Grievance mechanisms and access to remedy

Chinese companies and financial institutions should:

Establish effective operational-level, non-judicial grievance mechanisms, including robust safeguards for human rights and environmental defenders and whistle-blowers who speak out against abuse;

Provide and cooperate in remediation for any proven cases of adverse human rights impacts, at a minimum those which they caused or contributed to Industry associations and government bodies overseeing Chinese businesses are also well positioned to establish sector-wide independent grievance mechanisms The Chinese Government should strengthen judicial and non-judicial mechanisms to provide effective remedy against business-linked abuses. Chinese embassies in host countries should also consider developing capacity and establish units and mechanisms to receive and process such grievances Host countries could also consider requiring companies to establish accessible and independent grievance mechanisms for affected individuals and civil society organisations.