Business and Human Rights: trends towards 2025

It is a decade since the UN mandate to develop what became the 2011 Guiding Principles on Business and Human Rights.

At the inter-governmental (Geneva) level, the consensus that existed in adopting the GPs in 2011 has not held. There is some sense of a return to the polarised, partly ideological debates of the pre-2000s on how best to regulate the impact that businesses may have on human rights.

Yet what happens in Geneva is only one part of what should be a range of regulatory, educative, advocacy, capacity-building, and other measures within countries, industry sectors and supply chains. Many of these will be driven by business leaders themselves and not necessarily premised on the idea that the only 'regulation' that counts is top-down legislative action.

These issues are summarised in a March report referenced in previous blogs on this issue.

This short post (from the Australian National University, where I work now) is simply to foreshadow a coming report in September, written as part of the Chatham House programme in international law. 

This report (see launch event spiel here) will look at the next decade of the broad 'business and human rights' field, based on analysis of current trends and their likely trajectory.

Jo

Extractive Industries and Conflict Risk

In what circumstances can the discovery and/or development of large-scale mineral resources bring countries or communities together, consolidating peace rather than driving conflict?

This question is the subject of the recently published Chatham House report 'Investing in Stability' (here).

As co-authors we found this a tricky subject area, filled with counter-factuals, definitional minefields, and serious methodological problems: how do we measure in what ways major resource projects increase or mitigate conflict risk? How do we attribute 'peace-positive' events or processes to the conduct of firms or others? How do we define 'peace' (net peace? local or national? etc) and who gets to do so? And so on.

The report proceeds on the basis that while energy and mining firms have increasingly clear responsibilities in ensuring conflict-sensitive operations and practices, the principal responsibilities are those of governmental authorities.

The tricky fact is that in fragile and contested states and situations -- the topic of this report -- governmental capacity is by definition very low or compromised. This increases the onus on responsible firms (and their financiers and insurers) to decide how, when and indeed whether to pursue large-scale projects in areas where the historical and political context makes it very difficult to see resource extraction and related revenues as capable of contributing to peaceful outcomes and processes. 

Jo

Rana Plaza: business, human rights and regulation

Where are energies best placed in closing the 'governance gap' on preventing and remedying human rights violations related to business activity?

This week came news from Bangladesh of murder charges brought against the owner of Rana Plaza (and some government officials) relating to the 2013 garment factory disaster, which claimed over 1,100 workers' lives.

Since such smaller, local businesses often supply global brands, the disaster gave some momentum to debates on the responsibilities of big brands for ensuring compliance with basic human rights, health and safety standards in their supply chains.

Such debates often ask 'who has responsibility' as if there must be one single actor accountable -- factory owners, local regulators in the production state, regulators in the retail state, brands and buyers (and their financiers), or consumers in more developed countries.

The boring answer is that a just and comprehensive and effective global system on business and human rights must inevitably involve a patchwork of differentiated but related roles and responsibilities.

(The standards against which these responsibilities can be gauged are fairly clear now, certainly in the global garment industry.)

The reasons for poor compliance vary; so must the strategies for promoting systemic practices of continuous improvement.

Unsatisfying as it sounds, a 'smart mix' of regulatory mechanisms and techniques will be required.

These must be grounded in public law, but also engage business actors in positive ways that go with the grain of commercial realities and seek to leverage a range of incentives beyond simple top-down legal commands.

In this context, events such as the Rana charges this week reveal, to my mind, at least three points:

1. Human rights need strong national laws: relying on industry self-regulation of labour standards in global supply-chains is not enough.

2. Global legal schemes for 'business and human rights' will only be as strong as the capacity and will of local authorities to uphold standards.

3. Consumers can be 'regulators' of business human rights compliance, and meeting minimum standards does not necessarily inflate costs.

The third point is a reminder that there is no necessary trade-off between being a responsible business and being a competitive one.

In an ideal world, and perhaps in the world to come (in some sectors, in some places), being a responsible business will be integral to being a competitive one.

If that is to transpire, for all the regulatory power in the world and for all the importance of having mandatory standards, there is no power quite like the power of the market to change business behaviour in society.

This puts the 'regulatory' onus on consumers, ultimately, in relation to human rights issues in retail supply chains.

That is not the same as saying 'let the market decide' without regulatory interventions. It is to recognise that the most powerful incentive for smaller business owners such as Mr Rana and family is a commercial one: comply or fail.

Jo

For previous posts on Business and Human Rights, see here.

Milton Friedman's ghost in Mombasa, 2015

The fashion at corporate responsibility summits is to mock Milton Friedman, the Chicago school economist.

I often wonder how many who do so have in fact read his late 1960s - early 70s doctrine before dismissing his famous line that '... the only social responsibility of business is to make profits...'

(Here it is in a nutshell, and by the way in its full explicit Cold War, capitalism-as-freedom context; a fair full quote would add what he did: '... so long as it stays within the rules of the game ...' engaging in free and fair competition without deceit, and compliance with the laws of the land.) 

Friedman's ghost has appeared a few times to me, in broad daylight too, here.

'Here' is downtown Mombasa, the heaving multi-ethnic port city that has long been the gateway to Kenya, and indeed to the entire east Africa region.

(Through its congested port comes everything from east Africa's oil supply to many of the small consumer goods sold by the region's ubiquitous street traders; too little that is Kenyan besides tea is exported in return -- and too much of its 'exports' consist of ivory poached for Asian markets, but that is perhaps another story ...)

In apparent contrast to Friedman's austere doctrine, we now tend to accept that 'the development challenge is no longer the preserve of government'. So reads an editorial by Kenya's deputy president in a local daily, following remarks he made at a conference in Nairobi earlier this week.

The remarks are an opportunity to reflect on what business the business community has in designing and delivering the development agenda -- globally, nationally and locally. 

There is no doubt, in my mind, that business (however we might define it) both has a significant role to play (within some important limits), and has clear interests in the development agenda succeeding.

The deputy president's remarks raise some consistent issues in topical debates on how the private sector can support development, and how supporting a vibrant private sector can have developmental dividends ... 

Some points he makes are hard to argue against. The private sector stands to benefit from developmental gains; its role goes beyond financing or co-financing projects that have development impact -- it is not just a source of resources; and so on.

And only purists will object to him using the term 'corporate social investment' (which can have a limited CSR-project meaning), where he really means a range of broader impacts that larger firms and funds can have beyond simply Friedman's approach of maximising profits while obeying the rules of the game, especially paying taxes and employee's salaries and complying with environmental and other laws.

Here in Mombasa there are initiatives, for instance, that reveal business groupings taking a more deliberate, engaged, do-not-wait-for-government approach to issues such as finding work for what Friedman called 'the hard-core unemployed'.

Yet call me a heretic, and accuse me of seeing ghosts: Friedman was not totally, as they say, 'on crack'.

In all my meetings with businesspeople here, including (in fact, especially) those with sincere longer-term developmental passion and vision, a message emerges that on its face is uncomfortable for all of us espousing a far greater explicit role for business in development.

This is the inconvenient truth that the greatest developmental impact business could have in places like this is for government to focus on allowing them to succeed as businesses. Not specifically as socially responsible or development-oriented businesses (although there's no trade-off necessary), but to succeed as law-abiding firms creating value, jobs, tax revenues, demand for better governance, and so on.

The developmental impact that a flourishing, open business sector could have in such places (within the natural resource and environmental envelope) perhaps compels one to turn from exploring alignments and partnerships (the current trend) to old-fashioned 'let tax-paying business succeed'.

The public policy issue then is far more about fostering enabling environments for core business activities, than persuading business to seek alignment with particular aspects of the development agenda. 

If so, it follows that contrary to the deputy president's (otherwise welcome) message, the role of government is not to help business identify where it can have maximum developmental impact.

Instead the role of government is to identify where it (government) can create maximum developmental impact by identifying where to help business do what business does best, while upholding the (evolving, more demanding) rules of the game ... cue Milton Friedman's famous quote.

Jo

PS -- this approach may of course assume that government has the regulatory, planning and other capacity in particular to tax business appropriately and to make use of those revenues.

Business, peace and regulatory approaches

This post comes from Oslo, ahead of tomorrow's 'Business for Peace' award and summit.

The award was initiated by the B4P Foundation to recognise firms and business leaders that have made a special contribution to promoting the prospects for peace, either locally or (I suppose) on a net global basis.

The summit itself seems largely devoted to much broader 'sustainable business' themes. Adopting a nerdy hat, i'd have to say that more research is needed to support the (intuitive) proposition that sustainability approaches are also peace-enhancing ones.

The idea of recognition and other positive incentives reflects a sound regulatory approach that does not simply conceive of business as a source of possible conflict risk.

Much of the literature on business + peace / conflict is on the negative impacts that investment or business activity can have on peacebuilding, for example directed to conflict links in global supply chains, for example in the mining sector.

This is only part of the story. Awards like the Oslo one do not necessarily have significant impact, but the idea of recognition goes to the heart of a regulatory approach that seeks to harness the incentives, resources, etc of business in support of public policy objectives.

This approach informs my book Regulating Business for Peace (see link below) -- captured in this quote at the front of the book (Bardach and Kagan, 1982):

"[T]he social responsibility of regulators, in the end, must be not simply to impose controls, but to activate and draw upon the conscience and the talents of those they seek to regulate..."

The idea of measuring a business's net contribution to peace even in local settings, by the way, is a very complex one. This June sees the publication of our report from Chatham House exploring (in some factual scenarios) the merit of propositions that natural resource development in fragile states can have a 'peace-positive' effect.

This involves some tricky concepts, and for the most part business does not see a role in overt or explicit contributions to consolidating peace. It sees the scope of its proper role as efforts to 'do no harm', in terms of adopting conflict-sensitive approaches.

Public policy should be comfortable with that, while regulatory approaches should look to catalyse continuous improvement in business conduct -- social contributions well beyond mere compliance with minimum standards.

For some previous posts on this topic, and book link, see here. 

Jo