Business and Human Rights: legacy and trajectory

Is there an unstoppable meta-trend towards greater corporate responsibility and accountability for human rights impacts?

In my Masters course on 'Business and Human Rights' (BHR, currently afoot), I offer students a timeline of BHR. This begins with colonisation (where private listed companies sometimes led) up to the current Geneva UN negotiation towards a BHR treaty. I ask them, among other things, the question above.

The most significant positive event on the timeline, without doubt, is the unanimous endorsement in 2011 by state members of the UN Human Rights Council of the Guiding Principles on Business and Human Rights, based on a related 2008 Framework of differentiated responsibilities. This was a remarkable achievement given the difficulties of erecting a global normative framework and narrative for business responsibility, and decades of toxic, divisive ideological debate in UN forums on the issue. 

Professor John Ruggie, who led the process that produced the Principles, has sadly died.

Of the many tributes and comments circulating among BHR scholars and others, these two below best capture, to my mind, the significance of Ruggie's achievement in 2011, especially given the legacy of inaction and division before 2005-2011. In particular, the significance of his work lay in the consciousness that there is no silver bullet for closing the 'governance gap' between corporate impact and corporate responsibility: a mix of measures is needed, drawing on the inputs and incentives of various actors within this regulatory ecosystem, but without obscuring that states are the ultimate duty-bearers, their national legal systems the foundation of regulatory action.

We all mourn and will miss him.

Comment 1 (Muchlinski)

A great reformer has passed. John understood what should be done and, so importantly, what could be done. As a result we have moved forward hugely in the field of business and human rights. I am old enough to remember times when talk of business having human rights obligations would be treated with polite disdain. That changed in the 1990s leading to the first international iteration of business responsibility for human rights in the UN Global Compact, of which John was one of the leading architects. Then came the impasse over the UN Norms. John was called upon by Kofi Annan to unblock the situation. He started from first principles and concrete evidence based assessments of what should, and could, be done. He was motivated by an understanding of how different methods can be used together to move forward change – formal regulation, civil society pressure and self-regulation. He has been criticised for not going far enough. That’s not the point. He got us further than anyone might have hoped in 2005. We have much to learn from his wisdom and genuine moral commitment. Thank you, John, for an outstanding lifetime of scholarship and public service.

Comment 2 (Orentlicher)

I can’t imagine a world in which those working on business and human rights are unable to turn to John for guidance. After seeing news of his passing, I re-read e-mail exchanges from the early period of his work as [UN Special Representative on BHR], and was reminded how astonishingly different this space was when he began his mandate—which is to say, I was reminded anew of how profoundly he transformed it. In an e-mail from November 2005, John aptly captured the prevailing state of play when he described a then-recent extractive industries consultation, noting “it proved impossible to have a serious discussion about standards because for the NGOs that meant the Norms and for business the Norms meant warfare.” From this starting point (and ongoing necessary debates notwithstanding), John managed to forge a remarkable measure of consensus around a brilliant core of actionable insights—standards that provided a foundation for the immense work that remained/remains to be done.

'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.

Jo

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.

  

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.

JF

Here is the related post on regulatory culture.

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.

JF

* = 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].

Responsible AI: governing market failure

If society seeks or needs responsible development and use of AI technologies, how is this best achieved?

This month the Australian government published its analysis of public submissions on its April 2019 proposed 'Ethical AI Principles', and published a revised set of principles: here. 

In my April submission (in this repository) among other things I put three points, which I summarise here as I believe they remain 'live':

1. A national conversation

The first point was about processes, such as the public enquiry, of arriving at and promoting such lists of principles (whatever their content). This process or that of the Australian Human Rights Commission are no substitute for a genuine, scaled national conversation, indeed a global one. As I submitted, that conversation is not about 'what should our ethical AI principles look like' but (if AI is truly as transformative as we think) about the more fundamental question 'how should we live [and what role do we want and not want for technology in that attempt at flourishing]'.

2. The missing governance piece

The second point was to ask how the listed principles are intended to take or be given effect, which is a question not of ‘principles for ethical AI’ but of ‘the governance of principles for ethical AI’. Every major government and tech company has or is producing such lists. What are the mechanisms by which, in various contexts, we think they are best given effect? Since they are 'ethical' principles, I hesitate to say 'how are they complied with' and 'what are the consequences of non-compliance'. Which leads to my third point.

3. Ethics vs law / regulation

The third point was to suggest that the real question (in seeking submissions) ought not to be whether the 8 listed principles in the Australian framework are the ‘right’ or best or most complete ethical principles. Some ethical AI frameworks have more (e.g. Future of Life's 23), some have less (e.g. the OECD's 5, or Google's 7). The prior question ought to be whether responsible AI development and use is best approached as a question of ethics rather than as a question of law and regulation.

I reflected on this third issue in a previous post (here): there is a very live law and regulation aspect here (as useful as ethics-based approaches are, and complementary to law).

This month's revised approach notes:

• "The framework may need to be supplemented with regulations, depending on the risks for different AI applications. New regulations should only be implemented if there are clear regulatory gaps and a failure of the market to address those gaps."

This is, on one view, a remarkable proposition, if not an outright abdication of governmental responsibility for promoting responsible AI. 

It is a proposition, unless I am mistaken, that in relation to AI -- which the Australian framework process explicitly states is so fast-evolving, so profoundly transformative, so pervasive -- posits that:

(a) law and regulation is only a 'supplement' to ethics-based approaches; and

(b) the market [whatever that means!] should be left to address 'compliance' with ethical principles, and the people's elected law-making bodies should only have a role where gaps [whatever that means!] are 'clear' .

For one thing, by the time we diagnose that there has been a market failure to encourage or enforce responsible AI development and use, it will be rather too late to start asking law-makers to get out their legislative drafting pens and address 'gaps'.

Lawyers and law-makers can stand down: we are not needed here, or now. Australia, that sophisticated regulatory state, has decided that the market -- which of course has proven soooo socially responsible hitherto -- can regulate this issue just fine.

Jo 

Modern Slavery reporting laws: a study

One way in which the 'business and human rights' agenda is manifesting in national-level laws is through legislation -- most recently in Australia -- to require larger firms to report periodically on risks of 'modern slavery' within their operations and supply chains.

We have produced a report on how Australian firms appear to be preparing to reporting under the 2018 Modern Slavery Act.

Is the Act at risk of become a mere tick-box exercise, or will it help drive a more fundamental transformation of approaches to human rights risks in supply chains:

"... Despite mixed levels of awareness, a common refrain in interviews was that the reporting requirement was a ‘conversation starter’ (including, importantly, within firms) even if not a ‘conversation changer’, although for some it had achieved the latter..."

Here is a link to the report (with M. Azizul Islam and Justine Nolan).

Jo

Ps: for some recent blogs on reporting laws on Modern Slavery, see this post (and links within).

Modern slavery reporting: what it is/not

Some legislative schemes have unforeseen consequences on the upside. They achieve far more than their particular remit, and capture or catalyse a wider shift.

Others generate unreasonable expectations: laws can only do so much, even in developed regulatory states, and especially without the accompaniment of more profound and clear messages from markets and people about the kinds of behavioural and cultural changes they want companies to exhibit.

Australia's Modern Slavery Act came into effect this year. It requires larger firms report annually on whether and what steps they are taking to manage these human rights risks within their operations and supply chains.

Last week the government released draft guidance for reporting entities (here).

In this context I attempt 3 propositions about what this statutory scheme may represent, and 3 things that it doesn't necessarily represent: what is it not?

'What it maybe is'

1. The Act is -- like its UK predecessor and whatever its shortcomings -- a landmark achievement in bringing to corporate boards across Australia a new awareness of the human rights risks sometimes associated with mainstream business and financial activity, and the extent of regulatory intent that exists around these.

2. The Australian Act can be seen as part of a wider pattern, at least in OECD countries, of statutory requirements to undertake human rights due diligence or at least report on such activities -- even if domestic and other regulatory manifestations of the UN Guiding Principles on Business and Human Rights are still very piecemeal.

3. Engagement with the Act by corporations (and their advisory firms) on this particular human rights risk may drive wider awareness and uptake of the fuller 'business and human rights' agenda, but will not necessarily do so.*

'What it perhaps is not'

1. The Act is one corporate reporting mechanism among many for big firms (and modern slavery is only one class of business & human rights issue): as the Act beds down there are no guarantees that this will remain a distinctive high-profile issue ...

2. An external reporting requirement (even one with board-level sign-off) is no guarantee that firms and funds will take and sustain effective internal procedural, operational and cultural changes relevant to preventing and remedying modern slavery risk.

3. Even fulsome corporate compliance with the Act (and internalisation of its purpose) will not necessarily have a discernible or material effect on the prevalence of modern slavery in our region.

That last point is a reminder of the risk of such legislation becoming an Australian regulatory salve for our own consciences (here).

There are many other things one could add about what the Act is not. The Act is not a panacea. The Act is not mere pandering to corporations. The Act is not victim-focused or remedial in nature.

And so on. For one thing, advocates and academics in 'business and human rights' often talk of these corporate reporting models as new. They are not. They are only new to this field, which would benefit from more research couched in lessons about what reporting requirements, and non-penal ones in particular, can and cannot do to drive progress on the underlying issue with which they deal. 

Jo

* In 2018 research with Justine Nolan and M. Azizul Islam (publication forthcoming) we observe that many corporate officers and others see the Act as, at very least, a 'conversation starter' within firms and more widely.

See here for a recent post on compliance risk under the Act, and here for a different take (modern slavery approached in verse...).

Business, human rights and responsible innovation

We are increasingly governed and influenced by algorithms and predictive analysis.

The use by governments and businesses of artificial intelligence / machine learning (AI/ML) platforms can impact on human rights in myriad ways.

We have moved from debating whether governments need to regulate AI's potential discriminatory (etc.) effects, to questions of how best to do so in a legitimate, effective and coherent way: enabling innovation while protecting fundamental values and interests.

The nexus of 'new tech' and 'human rights' is presented as an emerging issue. Yet the rate of change and the implications of AI (etc.) across so many aspects of life suggest that it is only a regulatory consciousness that is still 'emerging'. All else is well underway.

Yes, we are far from the shallows now (as Lady Gaga / Bradley Cooper sing in A Star is Born (2018)): we are well in the deep waters now of how best to regulate for responsible innovation. And those deep waters are fast-moving ones, far faster than most regulatory and legal systems have moved.

This post relates to my hasty and under-cooked submission last week to the Australian Human Rights Commission / WEF 'White Paper' on 'AI and Human Rights: Leadership and Governance', itself related to a wider consultation (2018, ongoing).

One point made in that submission was a reflection on big tech firms' approach to the regulatory question. (This post is confined to that reflection -- the responsible innovation regulatory agenda is a far bigger and more complex one.)

The Commission's reports detail how influential CEOs -- from Microsoft to Amazon to Facebook -- are all now calling for or conceding the need for governmental regulatory frameworks on ethical AI / social impact / human rights (and these are not all the same thing, as my submission notes!).

These CEOs thus recognise the shift to the 'how' question, and are partly behind that shift, calling for regulation. Salesforce's CEO said at Davos last year that the role of governments and regulators was to come in and "point to True North".

Now most commentators have welcomed this. Like the Commission, they add this CEO's call to the chorus ('at least they are not resisting regulation' and 'business is inviting government to lead and steer'. A good thing).

Yet is it only me who finds something hugely troubling about this statement?

It is this. Is big tech so lacking in moral substance that it needs government to point out 'True North' (a set of general principles to guide AI design and use)? 'True North' is by definition universal and fairly easy to establish. Non-discrimination, user privacy, access to review and reasons for adverse decisions. These were basic societal values last time I looked at western democracies. They do not require governmental steer or compass reading for business. Get on with it, already.

Governments must lead the responsible innovation agenda, not least because their own use of AI is a key issue. Yet on the Salesforce CEO's statement, if industry cannot arrive at these values of its own accord, we truly are far from the shallows. As Lady Gaga sings, how will we remember ourselves this way -- before AI made life unrecognisable? 

Jo

Ps -- see an earlier blog here on 'big data' and human rights, and this one from November last year putting some of these themes into a short poem... !?

Corporate culture: capital vs social capital

Australia is this week absorbing the final report of the Royal Commission into 'misconduct in the banking, superannuation and financial services industry'.

What is at the heart of the disregard shown by retail banks and finance houses for regulation aimed at protecting consumers from the excesses of the pursuit of profit motive?

As ANU's John Braithwaite has said, a core dilemma of regulation is "when to punish and when to persuade" (1992+).

Command and control-style punishment and sanctions are not the only way to regulate. There are many reasons for non-compliance, suggesting that regulators sometimes need to preference dialogue and engagement over knee-jerk automatic punishment. There is a strong case to be made for regulatory designs and institutional approaches that privilege engagement, persuasion, education, capacity-building. Braithwaite's 'responsive regulation' theory would suggest that regulators hold punitive powers in reserve while making overtures to regulatees and seeing how they respond to non-punitive approaches. The regulator then adjusts its own approach. This will be perceived, the theory goes, as more fair and so legitimate. Entities will internalise the regulatory goal, compliance will improve and the regulator can let compliant entities essentially self-regulate, and indeed exceed what is required in pursuit of the social goal underlying the regulation.

What is a lesson from the Royal Commission?

It is that this approach, as influential as it has been, needs to be revisited. Or at least the theory needs to be fully implemented if it is to work. Not surprising, that.

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. The issue is whether the regulated entities are responding to signals to change. If they are not, another more intrusive approach is warranted from the regulator.

Standing back, the key word is in the first sentence above: motive.

Incentives matter: we can talk all we want about 'values not just value' and 'engendering a shift in corporate culture'. But when all is said and done, market actors respond to incentives, and clear, credible and consistent signals and actions from regulators about the consequences of non-compliance.

And those consequences sometimes need to be severe.

As Commissioner Hayne wrote, "misconduct will be deterred only if entities believe that misconduct will be detected, denounced and justly punished..." It is not deterred -- for such profitable entities -- by requiring those found to have done wrong to "do no more than pay compensation." It is certainly not deterred by the issue of infringement notices in the hope that the market or consumers will respond to those incidents by withdrawing or conditioning their custom or financing.

Responsive regulation remains a highly appealing theory, if properly implemented. It is bound to fail -- as Braithwaite and his disciples have always said -- if only partially implemented. If all the cuddly dialogic bits are followed, but not the hard and punitive bits. Regulators can and should talk to their regulatees about how to improve compliance. But they are not mere consultants to business. They are regulators. Braithwaite would insist that the regulatee must know that the regulator can escalate things, where fair and appropriate and where there is no response to overtures to comply. They must know and see that the regulator can make life very difficult.

As Braithwaite once wrote, dialogue, engagement and capacity building must take place "in the shadow of the axe".

Australian regulators need to have the axe, even if they need to be smart and fair about when to keep it in the background and pursue a more engaged approach.

This is true from banking conduct in the retail sector, to emerging models on supply chain reporting in the context of modern slavery, on which see earlier posts on this blog.

Jo

Who is 'business and human rights' for?

Who are those doing 'business and human rights' (BHR) stuff, and for whom are they doing these things?

This post offers two reflections on the BHR 'movement'.

(I'm conscious that I'm at risk of over-thinking things about the BHR movement or 'field'. Examples of this include posts asking 'has BHR lost its way?' or one reflecting on what the field itself comprises.)

The first reflection I've used since 2016 in my Masters (LLM) course in BHR, to stimulate student thinking. It might be framed as who 'does' BHR?

The second reflection is one I offered at a recent talk at ANU's RegNet, my doctoral alma mater. It might be framed as who is BHR for?

Who 'does' BHR?

Many students study human rights with a view to 'making a difference'. Most of my students accordingly focus on classic public law and public international law subjects.

Yet -- and this is what I leave my students with each course-end -- perhaps the most effective BHR lawyers of the future will not be steeped in conventional human rights skills and knowledge. They will be people who understand contract law, corporate law, fiduciary duties of institutional investors, international trade and investment law and negotiations... they will also be students who have grasped that understanding the significance of local political economy dynamics is as important as fluency in the UN Guiding Principles on BHR: law and power, law as power.

BHR could do with more reflection, for example, on expertise, who is doing it, on how 'power law and expertise shape the global political economy' in a David Kennedy (2016) sense.

Many activists (and academics) in this field appear not only not to understand business or corporations, they sometimes seem not to want to understand them. Business and investment is something that happens out there, by some people who are probably not as nice or worldly as us.... Yet one has to question BHR strategies grounded in knee-jerk distaste for the very entities that one needs to understand (and sometimes engage with!) in order to transform problematic patterns.

Who is BHR 'for'?

Two of the BHR topics that perhaps dominate in Australia at present are (i) data, new technology and human rights; and (ii) corporate action on human rights risks in the supply chain under the intended Modern Slavery Act.

Both are important, complex, etc. Yet both, in different ways, have the effect of focusing very much on 'us' (in the first world) rather than 'them' (places where the aggregate of serious, systemic adverse BHR impacts occur).

Take the supply chains focus, which is one I'm part of. (An earlier post linked above noted that BHR is about a lot more than just 'modern slavery', as current and important and hard as that problem is).

There is a possible critique that the orientation of our current 'modern slavery' enquiries is parochial or inward looking. Its dominant vein is as follows: we must act to ensure we -- and our jurisdiction, our supermarket shelves, our wardrobes -- are not 'tainted' by association with modern slavery risk. That is not the same as saying 'we must tackle this phenomenon wherever it occurs'.

Have we succeeded if, through altered purchasing and procurement patterns (etc.) we rid Australia of any tainting trace of modern slavery, even if the phenomenon is alive and well in our region?

At least on Modern Slavery Act matters, is BHR as a movement (and so to a degree BHR scholarship) at risk of framing things as 'what can we do to rid ourselves of this human stain?' rather than 'what raft of measures will best address this topic in its own right?', that is, what works irrespective of how it affects our space?

This second reflection might be viewed as a bit unfair. After all, we (in Australia) are simply looking for ways, within our sphere of influence (so to speak), to address a global problem. And it is natural for analysis to 'begin at home' and focus on such issues. Still, its just a reflection.

Jo

Modern slavery in supply chains: definitions?

What are ideal viable regulatory models for public authorities to address the serious human rights risks that might exist in a business’s operations or supply chains, especially abroad?

This post simply pastes in the summary of a paper I've produced (here).

The paper isolates one regulatory design issue on prevailing models of statutory requirements for certain firms to report on human rights risks in their supply chain: how, if at all, should such legislation seek to define ‘supply chain’? This paper argues that this is not a narrow or merely technical question:

-          First, it affects the scope of commercial activity to which any ‘compliance’ notion will relate, and associated issues of regulatory clarity, certainty and coherence.

-          Second, the approach to defining (or not) ‘supply chain’ can be seen a metaphor for more general design philosophies or approaches. These how questions of design go to more profound questions about what ‘transparency models’ (or, more accurately, reporting models) seek to achieve. The wider public policy objective is eradicating modern slavery by engaging business and civil society in cooperative pursuit of this grand challenge. This goal ought to guide and inform all design decisions.

Some firms argue that any reporting obligations should be limited to ‘first tier’ suppliers only (direct payment relationships); many activists argue that peak firms atop particular supply chains should be obliged to report more comprehensively, i.e., full traceability reporting, on suppliers’ suppliers too. This paper argues that a future Australian Modern Slavery Act should not seek to define ‘supply chain’ at all in legislative form, nor in ancillary regulations:

·       Consistent with Pillar II of the 2011 UN Guiding Principles on Human Rights, firms have a responsibility to respect human rights by (among other things) identifying and address priority human rights risks in their business operations and relationships: leaving ‘supply chain’ undefined helps avoid artificial categorisations that might obscure this ongoing exercise of self-analysis and prioritisation. The ‘how many tiers’ debate misses the point: from risk management, reputational and other perspectives too, the focus of enquiry should be the severity (scale, seriousness, etc.) of human rights risks across business relationships. Instead of responding to prescribed compliance indicators, as might happen with a defined approach, the internal corporate process of needing to self-define what one’s ‘supply chain’ will include for reporting purposes might hold value: it may help to trigger important corporate self-reflection on the extent of one’s influence or responsibility as a firm.

·       Prevailing reporting models are premised at least in part on external market, consumer and civic stakeholders ‘regulating’ corporate performance on human rights issues. In a model that does not define ‘supply chain’, these actors can always signal that a firm’s framing of its ‘supply chain’ is too narrow or otherwise misconceived. Legal, audit or assurance entities advising larger firms might be key agents in a conceivable ‘race to the top’ (at least within market leaders in some consumer-facing / reputation-exposed sectors) in terms of the quality of reporting, including the scope of a firm’s choice of what its ‘supply chain’ comprises.  

·       Reporting requirements may not actually be appropriate and adapted to the wider objective of preventing and addressing modern slavery. Nor do they necessarily produce transparency. Nevertheless, they are the model under consideration. This being so, the legislation should attempt to encourage fulsome business cooperation from a premise of trusting large Australian businesses to do the right thing in the first instance. An overall tone and message that the legislation is not unduly prescriptive on such issues as what constitutes ‘supply chain’ will probably help to generate proactive business engagement. Such cooperation is vital to the ‘bigger picture’ objective. Even the most capable regulatory state cannot ‘fix’ modern slavery in supply chains without the cooperation of the businesses that use these systems:

-          Supply chains, like business sectors, are hugely diverse, not static, and often very complex, but firms are also typically far better-placed than regulators to see or know issues within their supply chains. In a scheme premised on business uptake and cooperation, these facts suggests that legislation avoid being unduly prescriptive.

-          The point of this legislation is to help identify, prevent and resolve human rights problems in supply chains. It is not, as some activists would appear to frame it, an opportunity to target larger businesses with highly prescriptive statutory duties accompanied by punitive sanctions out of a belief (for example) that such firms, as a species, are insufficiently transparent or accountable in our society generally. The legislation is one element in a broader policy approach around finding ways to incentivise and support Australian firms to systematically identify and so prevent or address the underlying human rights risks. All design questions should turn on ‘what will best help solve the problem of modern slavery in globalised supply chains?’ and ‘how can we best involve business itself in solving these problems?’

-          Yet this cooperative dialogic approach is only justifiable if a clear signal is given that regulation will become more demanding in future if reporting compliance is perfunctory or not improving modern slavery patterns in (Australian) supply chains.

Non-binding formal policy products produced in parallel to this legislation should provide guidance to firms on the considerations involved in how they seek to define the scope of their due diligence (and so reporting) on these issues. This needs to go a lot further than the UK guidance that ‘supply chains’ under the 2015 Act has its ‘ordinary meaning’. Government should engage civil society and consultancy / assurance / audit firms in helping to produce and progressively refine such guidance.

[This is a summary from my May 2018 paper]

Jo

See a recent post on this blog on this topic here.

Regulating the Future: 'private sector, public role'

One ought not get too categorical about distinguishing the public and private sectors when thinking about the wider 'sustainability' and 'social impact' agendas.

This blog's name plays off the differences we apprehend between public and private actors and activity, from principles (e.g. differing legitimacy levels as between corporations and public authorities) to drivers (e.g. differing incentives and audiences) to practicalities (e.g. different tools and techniques even where the ends are common).

But in many socio-enviro responsibility & sustainability contexts, the public-private distinction may be difficult to make. Or it may be not useful to dwell on, where it blinds us to the significant governance contributions of private actors towards what are ultimately public goals.

Past posts have dwelt on this, but this one (the first for 2018) is prompted by three recent things that I see as connected in relation to this enduring public-private debate.

The first is my delight this week in meeting my new PhD student here at ANU, who will study the financial sector as a significant source of influence on the human rights impact of business more generally. (See recently in this regard the Thun Group of Banks view on one aspect of this, here).

Who is a 'regulator' and what counts as 'regulation', and what are appropriate and effective contributions that those policing bottlenecks in the economy -- such as financiers and insurers -- can play in furthering regulatory objectives? How does formal Regulation (with a big R) or other policy interventions (regulation with a small r?) leverage these contributions?

The second is that I recently returned from a sustainable development symposium at the University of Indiana, Bloomington on balancing freedom vs security in the regulation of cybersecurity. Given that (mostly privately owned) tech firms dominate much activity in cyberspace, they will surely play an outsize role in the governance of that space relative to public authorities.

With this influence comes elevated levels of responsibility on the part of private actors (and expectations of increased accountability about how that power and influence is used).

Which brings me to the third prompt for this post: a Twitter thread from @KateAronoff about a meeting (to which the media were not invited) between Canadian Prime Minister Justin Trudeau and Amazon CEO Jeff Bizos, described by a CBC journalist as a 'bilateral' meeting. Now technically it is bilateral if two parties are involved. But Aronoff's point was to get us to pause and consider the implications of a world where the language of diplomacy is seamlessly used in this way. Normally, only heads of state have bilateral meetings... but then Amazon does 'run' a large part of the world in net terms.

 

Surveys suggest many consumers/citizens trust (private) big brand firms and business leaders more than they trust public institutions and elected political leaders. Trust is a key component of regulatory legitimacy and effectiveness. Yet as we design societal impact regulatory models for the globalised (and virtual) economy, and make use of -- or just acknowledge as real -- private governance contributions, we need to think about the authority and legitimacy and other qualities that only public institutions ultimately have.

Jo

@fordthought

Regulating modern slavery in supply chains

What viable but principled regulatory model is best suited to regulating business supply-chains to ensure that they do not tolerate or promote forced labour, human trafficking, etc ('modern slavery')?

Does legislation that requires corporate reporting on measures taken within one's supply-chain to address these risks -- but which does not imposes statutory consequences for not complying -- have a place here?

Many activists argue 'Not'.

I would disagree. One can be highly motivated about addressing modern slavery in business supply-chains, yet support legislative models that others dismiss as 'undemanding'.

Australia is proposing a legislative model on this issue, drawing on s. 54 of the UK's 2015 Modern Slavery Act. The consultation on the proposed approach closed last week. (See the Consultation Paper here).

Last week I made a lengthy submission to that consultation.

Here is the gist...:

• If the aim is to foster business engagement in preventing and solving the underlying problems, a model that give businesses space to address its operations and supply chains (which they know better than any regulator could), that is not prescriptive about reporting, and that does not impose penalties for non-compliance is defensible ... 

... but only ....

• If the model clearly signals to business that more demanding / intrusive regulation is conditionally being held in reserve for a period, and will be implemented if the uptake by business is merely perfunctory and the reporting patterns do not indicate proper engagement in due diligence and other processes to identify, prevent, resolve and remedy human rights risks...

The current proposed model does not include penalties for non-compliance with the reporting requirement. Yet it makes no overt or explicit signal to business that there may be more demanding legislation in future if business uptake and response is weak.

This is from the intro to that submission, making the above points:

"... The point of all this is not the adoption of ‘tough’ regulatory postures for their own sake (even if these were politically viable): instead the point is to find ways to incentivise and support Australian entities to systematically identify and to prevent or address the underlying human rights risks...

... many features [of the proposed legislation] which this submission supports (such as refraining from any statutory consequences for non-reporting) are ultimately only justifiable, or likely to be received as legitimate by civil society, on a certain condition. This is that there ought to be a clear, signalled government message to business that government ... is prepared in future to consider more intrusive, demanding legislative measures if it is found that the proposed approach is not engendering meaningful engagement with the problem..."

JF

See previous posts on 'modern slavery' and its regulation (in Australia and generally), most recently here.

Responsible business in a Trump era (III)

Just how compelling is the 'business case' for firms and funds to adopt and implement human rights policies?

Here I mean planning, self-assessment and reporting policies and systems that are explicitly framed in human rights terms -- not the wider idea of a 'business case' for being socially responsible.

Among the outgoing Obama administration's last actions in December 2016 was to shepherd in a US 'National Action Plan' on 'Business and Human Rights' (BHR).

The evidence so far shows clearly that a Trump-led US federal government will not lead, in policy, messaging and regulatory terms, in the BHR area. Indeed it will evidently not do so on the responsible or even sustainable business agendas more broadly.

If that is so, it may nevertheless happen that in the US and beyond, big business and the financial and insurance worlds drive parts of this broad agenda itself, not waiting for a national government lead.*

With important caveats, I have recently blogged on this possibility.** These blog-posts were offered in the search for a 'silver lining', from a BHR perspective, to Trump's election. Of course European governments + the EU (and others) might lead in America's stead. But the US matters.

If it happens that business does not wait for such a lead, it may be because there is a perceived 'business case' for it (even if part of that case is just longer-term anticipation by business of a degree of reversion in regulatory trends in a post-Trump presidency).

The 'business case' concept in the BHR field derives from the wider corporate accountability / responsibility field. It is a familiar feature of the CSR field, in particular. 

'Business case' is of course shorthand for the idea that whatever the ethical, moral or legal reasons for mitigating a business's social, enviro and governance impact, it makes good commercial sense, especially in the longer term, to embrace this agenda.

We need to be cautious about a 'business case' at the broad level: business sectors and sub-sectors -- and individual firms within these -- may have very different incentive structures (etc.) in responding to or anticipating social impact issues. The 'business case' concept is a more sound one when describing how those incentives etc might be approached in particular contexts, making a case each time.

For years the CSR and then emerging BHR fields spent considerable energy on articulating a general 'business case'. Yet in recent years BHR advocacy has sometimes appeared to proceed on the basis not only that the business case for acting on human rights risks is self-evident, but that it is or will go further and become an important driver of uptake by business of the BHR implementation agenda.

The thrust of the current post is to suggest that the Trump era will now put to the test claims made in recent years about the strength and obviousness and appeal of the business case for self-starting action on human rights risk.

Put another way (and partly for provocation's sake), it is easy to assert the existence of an obvious business case for business to be pro-active about addressing human rights impacts, but we need to be careful about assuming that this has some sort of self-executing logic to it.

At very least, it seems unlikely that all aspects of BHR will advance at equal pace and degree. Parts of some sectors in business may go with some aspects of the BHR agenda (eg 'modern slavery' in supply chains), while not on others; we may see uptake on some measures (eg human rights due diligence in larger listed firms and financial houses), but little movement in areas such as access to remedy.

Of course many would argue that because human rights are universal non-negotiable normative imperatives, emphasising the commercial advantages of investing in a human rights-consistent business is a wrong starting-place to 'motivate and justify' corporate engagement in human rights implementation.*** This is partly the thrust of a recent Harvard Business Review article entitled 'We shouldn't always need a business case to do the right thing'.

I think there is unarguably a business case for some kinds and sizes of firms to take the BHR agenda seriously. Demonstrating empirically that such action protects or creates commercial value is more difficult.

Jo

* This comment relates to the federal government: the same reactionary approach to promoting sustainable and responsible business conduct is not necessarily true of state-level governments in the US, some of them major economies in their own right, such as California.
** My previous posts on 'responsible business in a Trump era' are here (February 2017) and here (November 2016).

*** See Posner and Baumann-Pauly, 'Making the Business Case for Human Rights', in Baumann-Pauly and Nolan 2016, section 1.2.

Corporate supply chains and modern slavery

What are some factors in regulating corporate action and transparency on human rights risks across supply chains?

Today I present* to an Australian parliamentary enquiry into whether the country should adopt legislation similar to the UK's Modern Slavery Act 2015, in particular s. 54 of that Act, which requires larger UK firms to publish a statement on whether they've taken steps to address human trafficking and forced labour in their operations or supply chain.

I've included a link below to the full written submission that I speak to (and 200 or so other submissions from government, businesses and industry groups, civil society and others).

This post is to make 5 general reflective comments, briefly:

1. 'Great expectations': many submissions over-state the regulatory reach and effect of both a government such as Australia and large companies in respect of their supply chains. While advocates want to draw the 'business and human rights' paradigm into service in addressing many of the imbalances and inequities of the globalised production system, we need to keep perspective. Legislation addressing 'modern slavery' in Australian corporate supply chains is important and can have some practical and messaging effects. But the phenomenon reflects deep governance capacity and incentive problems in developing countries. Such problems cannot be 'fixed' by even the most comprehensive and sophisticated regulation in investor-sending countries.

2. 'Definitions matter': while many submissions address problems in labour conditions here and abroad, 'slavery' is not a term to be bandied about in the hope of larger reform to such conditions. It reflects the oldest, strongest-pedigree norm in international human rights law. It is not to be diluted, tempting as it is to recruit the rhetorical power of 'human rights' in service of all sorts of campaigns.

3. 'Government lead': any requirement that large firms address these risks in their supply chains should arguably also apply to at least large federal government procurement behaviours, if only because government must lead by example. This much is clear from Pillar I of the 2011 UN Guiding Principles on Business and Human Rights, unanimously adopted by UN member states on the Human Rights Council.

4. 'Compliance tunnel vision': we should aim at regulation that encourages and incentivises all stakeholders to work together to prevent and remedy these complex problems. Legislation that creates highly process-focused requirements has the risk of diverting attention to narrow procedural cultures of compliance, which become 'rituals' of their own (Charlesworth and Larking 2010-2015, developing John Braithwaite's work) and become the point of the exercise -- rather than solving the underlying problem.

5. 'Messaging': related to (3) above, it is cost-free for government simply to state its expectation that businesses will comply with human rights standards and remedy their breach where established. This does not sound like 'regulation', but such messaging may be the most importand and influential form of influencing corporate conduct, and signalling the possibility of intervention in future.

Jo

* I present also on behalf of Justine Nolan, co-author of our joint submission to the enquiry and a leading scholar in this field. That submission can be found on the Enquiry's website, here. For the Enquiry's Terms of Reference, see here.

PS: for a recent blog post I did on this issue in the Australian context (but making more general points), see here.

Modern slavery: consumers, regulators, companies

"... Debate continues over whether 21 or 40-plus million people live and work in slavery-like conditions. Either number is unacceptably high in the 21^st century.

Yet addressing modern slavery is not only a job for government or bigger businesses: a critical mass of informed proactive consumers will surely be as significant as law-making..." 

So I argue in a blog-post on another forum, on Australia's moves towards a Modern Slavery Act, incorporating corporate transparency requirements of one form or another.

Here is a link to that blog-post.

https://www.policyforum.net/consumers-must-join-business-government-addressing-modern-slavery/

JF

ps -- see previous blog-post on this issue on this blog, that 'business and human rights' is about more than corporate supply-chains, modern slavery, and transparency legislation ... even tho these are big enough in themselves: here.

Business and human rights: 'the field'

Does focusing on a singular high-profile issue advance or distort efforts to promote responsible business more generally?

Those who write and work on 'business and human rights' (BHR) tend to describe this as an 'emerging' field, although it is not self-evident what the field comprises or ought to comprise.

The question of the proper or ideal parameters of a field seems highly academic. I have argued elsewhere* that there are some downsides to the attempt to frame many wider challenges of sustainable and responsible business in the language and logic of 'human rights'. In an earlier post, for example, I questioned whether the BHR paradigm was an appropriate or useful one for addressing income inequality.**

The question of wide or narrow framing also has some very practical aspects.

In Australia, much of whatever BHR-related momentum exists in government and some business circles is increasingly coming to focus on human trafficking and 'modern slavery' issues (which are not the same thing), mainly relating to larger Australian-listed firms' overseas supply chains. For instance, a parliamentary sub-committee enquiry is afoot to assess the suitability for Australia of a legislative model based on the UK Modern Slavery Act, which includes some basic supply-chain disclosure obligations on bigger businesses.

This trafficking/forced labour focus is not the totality of the BHR conversation in Australia, but it seems to represent an increasingly and, one could argue, disproportionately big chunk of it.

To some extent, this may be true of the BHR phenomenon well beyond Australia, or at least in some circles in the United Kingdom (where many BHR conversations quickly become conversations about the Modern Slavery Act, which while an important development is merely one intervention in one set of problems in one jurisdiction.)

On one hand this elision between 'BHR' and 'trafficking/modern slavery' is to be welcomed:

• trafficking and forced labour issues are objectively important in their own right;
• 'focus' on them is not necessarily something narrow since even seen in isolation this is a big complex problem to face;
• focus on these issues aligns with Australia's reputation for innovation and commitment in addressing human trafficking through criminal law provisions and policy work;
• and a focus on this set of issues can conceivably act as a proxy for BHR issues more generally, including in sensitising business to wider BHR-related issues, increasing the scope for business to be receptive in future to initiatives that go well beyond supply chains and trafficking + forced labour issues.

This last factor is not unimportant: unless you subscribe to the overly-enthusiastic idea that the BHR paradigm has had a 'magic' effect in galvanising business engagement***, one can recognise the value of any initiative (such as one on corporate supply chains and trafficking / forced labour) that reassures yet challenges business to action even if this is action only on one aspect of BHR problems.

[In any event it may be inevitable that any Australian BHR attention focus on such overseas issues: without trivialising BHR issues arising here at home, objectively those prevalent in settings abroad are of far greater scale and seriousness. Trafficking and modern slavery issues abroad also happen to have an influential business leader, so again the special focus relative to other BHR issues may be inevitable. It may also be natural for advocacy, policy-making and business to be content to ride with one (objectively important and complex enough) set of issues: it gives advocates a sense of something happening; it gives policymakers an example of Australia's commitment to human rights; it gives big business a readily understandable and identifiable issue, target or problem-set (whereas acting on 'human rights' generally covers a very wide area of possible activity).]

Yet on the other hand, BHR is about a great deal more than human trafficking and forced or slavery-like labour. Even the sphere where 'labour rights' and internationally protected 'human rights' overlap comprises many more issues than is suggested by a focus just on corporate supply chain human rights dynamics, and then within that on human labour trafficking (etc) within supply chains.

If there is anything to this observation, it may create something of a dilemma for those interested in an overarching BHR advocacy strategy, as well as those (for example, within government agencies) interested in or required to give content to Australia's implementation of the UN Guiding Principles on BHR more generally: does one direct energies to an issue that is attracting at least some attention and interest, hoping that it will not displace other important BHR issues and themes?

'BHR' on one had comprises more than the 'modern slavery' agenda. Yet at the same time BHR (at least understood as a distinct set of claims grounded ultimately in international legal standards with, in that sense, relatively narrow application) is not necessarily equipped or suitable as the framework for tackling and resolving complex issues such as forced labour and associated human movement. 

Jo

* On the idea that some contributors sketch the field of BHR too broadly, see here, pp 6-7.

** On the income inequality question, see here.

*** On this supposed 'magic' transformation see the 'Alchemy of BHR' blogs.

Private Law, Public Goal: contracting human rights

Might a 'private law' instrument (a commercial contract) in some cases hold more regulatory potential, in human rights terms, than a 'public law' instrument such as a treaty or related legislation?

We know a lot about the compliance gap in the mainly treaty-based international human rights system, which does not apply directly to business actors.

In this context, one way to innovate on promoting compliance with these standards, at least where business actors or commercial relationships are involved, is to find ways to frame human rights obligations as contractual promises.

If the pitfall of human rights compliance is the existence of sanctions or some enforcement mechanism, the attractiveness of using private law mechanisms is the potentially more tangible commercial consequences of a material breach of contract.

There's a whole literature on this sort of thing (eg Hugh Collins' Regulating Contracts, 1999), and some practice evident in (for example) incorporating reference to the Voluntary Principles into extractive industry contracts.

Here now is another practical manifestation of it.

This week my attention was drawn* to the fact that the International Olympic Committee (IOC) has recently amended its standard 'Host City' agreement to incorporate reference to the 2011 UN Guiding Principles on Business and Human Rights.

The procuring power and commercial influence that a body such as the IOC might bring to bear in this way would seem to offer one important way to influence human rights compliance by those supplying, sponsoring and indeed hosting mega sporting events.

More broadly, one has a glimpse of the potential to steer or influence commercial behaviour by finding private law means to public law ends.

Already there is some work being done on the scope for building human rights compliance mechanisms (or at least reporting / disclosure ones) into government procurement from private suppliers and contractors: see here (Danish Institute for Human Rights).

Advocates can move beyond repeated claims of 'human rights violation' to something that might resonate more effectively or in different ways, with specific consequences, now framed as 'contractual breach'.

On one view, the human rights law student or lawyer of the future might be someone who specialises in contract negotiation or studies International Commercial Arbitration, rather than the very public-law focused discipline of human rights as it exists today.

Jo
@fordthought

See news stories on the IOC move from Human Rights Watch, and the International Trade Union Confederation.

See here this previous blog of mine on mega-sporting events, business, and human rights (Rio Olympics 2016), and these resources on that topic:

https://www.ihrb.org/focus-areas/mega-sporting-events

https://business-humanrights.org/en/major-sporting-events

* Thanks to Justine Nolan