Friday, 16 October 2020

Business and Human Rights: the Future

How powerful is a 'human rights' framing in terms of the overall 'responsible business' agenda?

Next year will be a decade since the rare unanimous endorsement by the UN Human Rights Council of the UN Guiding Principles on Business and Human Rights (UNGPs / BHR).

The UN Working Group on BHR has set up an open consultation to take stock of the impact and implementation of the UNGPs and -- in very UN-speak -- chart a 'roadmap' for the UNGPs over the next decade to 2030.

Much could be written about the UNGPs including on the extent or otherwise of their uptake over the last decade.

For one thing -- as some previous posts have hinted at, and as my next post will cover -- they really do not appear to have gained particular traction in terms of the search by governments, Big Tech, civil society and others for suitable and legitimate frameworks for the governance of responsible AI and other new technologies.

Here I will limit my observations to one impression from the consultation concept note. I wonder whether this puts too great an expectation on the transformative, emancipatory, or remedial power of 'human rights' as a vector for governance and change.

The concept note mentions the UNGPs in the context of 'sustainable development and stability' (notably climate change), rising inequalities and pervasive corruption; rapid technological change... widespread fragility, conflict and violence...'. It includes a call to embed the UNGPs more concretely in climate change and sustainability debates. It is one thing to draw attention to complex inter-linkages (e.g. the UNGPs with the SDGs), but it may be another to envisage that human rights-based approaches and arguments ought to be at the heart of the range of issues raised in the note. For one thing, business may be daunted enough by the scope of the UNGPs agenda even narrowly framed, and wary of 'responsibility creep'.

Others have written on the secular decline of 'human rights' as a powerful framework for socio-political action (e.g. Hopgood 2013, Posner 2014; Moyn 2010+; compare e.g. Sikkink 2018).

Yet one doesn't have to subscribe to the 'end-times / twilight of human rights' school to recognise that while there are obvious intersections with issues such as climate change or corporate taxation, it remains far from obvious that simply re-framing those debates in human rights terms suddenly gives them far greater urgency, appeal, traction ... it is not obvious that business (or government) actors suddenly sit up just because a familiar claim is suddenly made in human rights terms, and the contrary can be true ... 

For my part, an 'ambitious roadmap' for the UNGPs must proceed, at least in part, from a recognition that framing an issue in terms of human rights -- especially individual rights claims against the state, or business -- is not necessarily conceptually persuasive nor a panacea in advocacy / strategy terms.

In a previous (2018) post I was deliberately provocative in asking if BHR had 'lost its way': here.

There among other things I wrote this, and reading the 2020 concept note I have the same reaction, really, and will put this out there:

"Yet the question arises whether we should be a bit more strategic about what is likely to gain traction as a BHR issue, and about how widely we frame BHR, and about what we think corporations and other enterprises really have a meaningful responsibility for.

... Just how useful and effective is the 'human rights' paradigm / lexicon in shifting business (and state) behaviour around social impact? However tempting it is to invoke it in support of all manner of worthy societal campaigns, is it really that effective?"

Friday, 18 September 2020

Investors and human rights risk

How is the investment community -- especially institutional investors -- dealing with human rights risks in investment portfolios? What do they need most in order to pursue this agenda?

Most attention in the 'business and human rights' field is on the operations and supply chains of firms of various sorts. Until recent years there has been somewhat less attention to the all-important entities in the financial sector that invest in (or indeed insure) corporate activity.

Such actors are capable, in principle, of exerting very considerable influence over the behaviours of fundee businesses -- that is, preventive and remedial conduct in relation to human rights impacts of business activities. Indeed if there is to be some notable transformative shift corporate social (and enviro) impact it is perhaps more likely to come from what investors do or require than from other stakeholders (governments/regulators, or consumer/citizens -- accepting these groups shape each others' conduct).

Today was the deadline for submissions to the UN 'Principles for Responsible Investment' consultation on a framework (here) for shaping and guiding how investors implement respect for human rights into their pre-investment, portfolio management / screening / engagement, and exit processes.

My own submission covered a range of issues on which investors -- who of course vary significantly as a broad class -- will continue to need further practical guidance, including stuff tailored to the very different types of finance and investment entities and products.

  • Some of that guidance must be drawn from / shared by responsible financial sector actors themselves as they implement, learn from and refine their practices on human rights risk. For example, it is remarkably difficult to find publicly available model examples of instructions on screening investees for human rights risks, although these do exist, and investors can resort to tools such as Parametric's one on forced labour (using the MSCI basis).
  • Among other things, my submission suggests PRI and others can do more work to develop practical examples, model provisions, case studies, hypotheticals. The consultation paper reads as a very conceptual piece but the aim is to inform and equip investment sector actors: the more practical examples (from / for different investor types) the better.
  • The aim is also to persuade investment sector actors. People in corporate responsibility talk a lot about the 'business case' for respecting human rights (in addition to the principled basis for doing so). We see expansive claims that conducting human rights due diligence (HRDD) is an effective proxy for generic commercial and business disruption risks. The PRI paper likewise says that HRDD will "often pick up issues that, left unaddressed, would go on to become financially material..." and that "assessing a company’s human rights due diligence process can therefore also be a good way to assess its overall governance and potential future financial risk..." This is potentially persuasive. But where is the evidence, the examples, the compelling 'business case'? This 'risk proxy' argument needs more meat to engage effectively with financiers and investors as a discerning and analytical group of people.

There is one issue I think will continue to trouble investors and their advisors, and which the 'business and human rights' field (scholars, activists, etc) has not itself perhaps quite come to terms with. This is the perennial vagueness -- or is it constructive ambiguity -- around terms such as 'adverse human rights impact' or 'negative human rights outcome'. The PRI paper talks of investors avoiding activities that 'remove or reduce someone's ability to enjoy a human right'. I can get my head around this -- but I am a law professor. This language strikes me as incredibly broad in ways that is potentially unhelpful for those trying to make investment decisions. Many things one does can impact rights or reduce enjoyment thereof yet not necessarily provide a coherent basis for responsibility let alone liability. I do wonder whether the credibility (for want of a better word) of the business and human rights project is undermined by these sorts of open-ended potentially very wide-ranging terms: how are investors to work with them?


For some primer resources on investors and human rights, see Investors for Human Rights and this guidance for institutional investors (on the OECD scheme). A range of more specific guidance exists, e.g. within Australia's superannuation sector, or on particular human rights risks (e.g. modern slavery).

Thursday, 3 September 2020

'Due Diligence' and Human Rights Risk

Whether or not there truly is a 'new social contract' between business and society, the trend towards grounding 'business and human rights' principles in national-level legislation continues to strengthen.

This week came news that over 20 significant companies and business organisations issued a joint statement welcoming the European Commission's April announcement that it is committed to exploring the introduction of mandatory corporate human rights (and environmental) due diligence laws.

There have been various calls for such laws, and some EU member countries have introduced or are exploring them.

No doubt this supportive, engaged stance by business actors is partly driven by the desire by leading firms both to cement their advantage and for a more level playing field: larger established firms (especially brand-sensitive ones) can only benefit requiring competitors or putative competitors to adhere to and invest in the same enviro, social and governance (ESG) standards as the incumbent players do. There are other incentives and drivers, not least the need for firms to incorporate systems to respond to the increasing orientation of institutional and other investors (e.g. see here). Some firms are also supportive out of a sense of inevitability: such laws are inevitable, we may as well have pan-EU coherence rather than a patchwork of national legislation. Some firms accept research that ties ESG performance with protecting or even increasing a firm's value.

Yet one question I ask my 'business and human rights' Masters students online this week is whether it matters, ultimately, if business / investor support for or engagement in legislative schemes is motivated by 'instrumental' (rather than 'intrinsic' value) considerations or purposes.

I ask this since a critical perspective might be that legislated 'due diligence' requirements (and perhaps more so mere reporting requirements that only imply undertaking internal due diligence processes) do not necessarily transform internal corporate management culture. At least, we remain unsure about the conditions under which this internalisation of values might take place, while such schemes can risk becoming process-oriented rather than preventive and problem-solving in nature.

There will be a robust debate about how such laws deal with penalties, and with remedy for affected groups -- but my ever-practical students are probably right in seeing support for such a regime as a very positive development.


See for example this blog series on mandatory human rights due diligence, and here for the recent comprehensive study in part underpinning the Commission's approach.


Monday, 27 July 2020

Regulatory culture: punish or persuade?

How do we design 21st century regulatory schemes for responsible business? Regulatory culture must shift, not just corporate culture.

How do we design viable, principled but pragmatic regulatory systems that engage with business in pursuit of goals but are legitimate and trusted by all societal stakeholders?

In particular, what mix of 'enforcement' and 'guidance' is appropriate and effective on the part of the regulator?

The prompt for this post is the interim report on the EPBC Act, Australia's principal federal legislative scheme for environmental protection.

I study 'business and human rights' (social impact) but this emerging field has not done enough to learn from the bitter experience of the conservation and environmental movements and the history of regulation there. (The social and environmental are/ought not so easily be distinguished).

The EPBC Act review has various lessons of interest in my field (e.g. on recent reporting schemes on 'modern slavery' in supply chains), from federal/state coordination to questions about the adequacy and quality and availability of reported data. But what stands out are the lessons in the review about designing enforcement aspects of regulatory schemes where corporate activity may impact on public wellbeing and public interests.

The review condemns federal regulators for settling into a regulatory 'culture' of not using available enforcement powers, and for their over-reliance on a 'collaborative approach to compliance and enforcement' that is 'too weak'.

Last year in a related post on the Royal Commission report into the banking sector I noted the same pattern:

"The lesson is that regulators -- even where they have these powers -- appear reluctant to use them, and so err on the side of 'engagement' where sometimes demonstrative penalty seems more appropriate..."

There are many merits (as I wrote in that 2019 piece) to a regulatory approach that is judicious about the use of enforcement powers, and that privileges cooperative approaches that guides and educates and harnesses companies' own resources (etc) in pursuit of the public policy goal. Moreover, the regulator's dilemma is always 'when to punish and when to persuade'.

But the credible threat of non-negligible punishment may be vital to any strategy of dialogue and engagement. Moreover, enforcement is a form of 'guidance'. Theorists who promoted dialogic and collaborative problem-solving engagement made clear how such regulatory strategies to explain and foster compliance were defensible, but only where the regulated entities know the consequences of non-compliance or perfunctory compliance. A credible pattern of using punitive powers and a reputation for fair but decisive use of enforcement powers is, in this theory, inseparable from the other more 'cuddly' bits about cooperation. Australian regulators have only embraced the latter.

Parking inspectors and fines come to mind. I used to remind my eager 'business and human rights' students -- believers in regulatory capability -- that the Oxford city council has more parking inspectors than the staff at the UN HQ office in New York coordinating the [voluntary] UN Global Compact with business (not an inspector / enforcement entity). The interim review of the EPBC Act shows that since 2010 the total fines issued for breaching environmental approvals is less than the annual amount of traffic fines levied in a typical small local government area in Australia ...

From environmental impact to responsible banking to modern slavery in supply chains, public trust in the regulation of responsible business may require that 21st century regulatory models have some supposedly old-fashioned 'sticks', and use these to incentivise compliance and engagement. This doesn't require that EPBC-type regulators have the blunt 'revenue-raising' approach that parking inspectors do: there is more to regulation than this. 

Schemes like the EPBC Act have a wider purpose as part of efforts to shift behaviours towards socially responsible ones. But the judicious use of enforcement powers clearly has a place in such a scheme.


Here is the related post on regulatory culture.

Wednesday, 24 June 2020

Law and regulation in (and of) crisis

What lessons on the governance of corporate responsibility fall from states' varied COVID responses?

COVID has prompted various reflections on how law is used (and abused) during crises*.

This blog-site focuses on the regulation of responsible business conduct, but this post reflects on more general, higher-order questions about the nature of any regulatory undertaking. (I would like to think my 2015 book was doing the same!).

What strikes me most about the COVID-law-regulation nexus is not the patterns we can see about how powerful state and corporate actors 'never waste a crisis' to pursue all manner of agendas calculated to entrench, advance or indeed obscure that power. Many colleagues'* response to the COVID crisis is, in effect, plead at this time for adherence to legal frameworks e.g. for global cooperation. This is perhaps a plea for law's 'regulatory relevance' (Findlay 2017), yet too often insufficiently couched in analysis of how law is used to regulate crisis -- but selectively or in service of non-inclusive agendas.

This brings me to what strikes me most about law and regulation w.r.t COVID.

This is the huge diversity in the regulatory postures or responses of national governments to what is, after all, a pan-global phenomenon, a pandemic of a virus that itself is non-diverse in that it is essentially the same virus everywhere. (The extent to which those responses rely on law-based rather than other forms of regulation is a separate issue).

Haines has written (2019) on how and why regulation does / does not change in the face of crisis. (She happened, incidentally, to be writing on responses to a factory fire tragedy -- a 'regulation of responsible business' issue).

Her concept of 'regulatory character' is related to what strikes me most about regulation + COVID: how legitimate and effective regulation (and related institutions) is typically not simply about the right technical models and frameworks and standards. It is about underlying economic, social and political idiosyncracies. These shape how regulation actually looks and works. Cultural context shapes regulatory design and response. It is 'responsive' at least in that sense (although, as above, power dynamics shape regulation too, of course!).

Some states have regulated COVID social distancing fairly lightly (e.g. without deploying criminal penalties). In those cases, some of those governments have regulated lightly apparently confident that they can rely and draw upon something relative intangible in the national 'character' about voluntary compliance, cooperation, self-regulation, social cohesion and responsibility -- without necessitating sanctions and penalties.

If I am right, these societal characteristics provide what I might call a regulatory 'resource'. This means the regulator's toolbox (including in crisis) does not just comprise various models and approaches with various merits, trade-offs, etc. It also potentially comprises the repository of societal compliance (etc.) characteristics and inclinations. These must be decisive not only in whether any regulatory intervention gains traction or purchase, but also in how one designs the regulatory response (here, to crisis) in the first place.

Elsewhere (e.g. here) I have reflected -- in the context of regulating responsible business conduct -- that existence and degree of a critical mass of ethically-minded consumers is a principal regulatory 'resource' for regulatory design. Indeed without it, it may not matter how sophisticated (etc.) the regulatory regime otherwise appears.

COVID strikes me that I was potentially onto something. That's all! Scholars of responsible business and its regulation ought perhaps pay more attention to regulatory 'character' and cultural context, including -- in strategy terms -- to better identify the nature and extent of regulatory 'resource' that proposed governance models might seek to take advantage.


* = see here (for example) some short essays by ANU Law colleagues on (international) law and the COVID crisis.

[This is the first post after a 6-month hiatus].