Is the ethical consumer a myth?

Can informed, motivated ethical consumers act as human rights 'regulators'?

What design assumptions underpin models for regulating business human rights risk through mandated reporting?

Last week Australia's house of representatives debated the Modern Slavery Bill 2018, which would require larger Australia firms to report annually on steps taken to ensure their operations and supply chains are not tainted by human trafficking and forced labour.

The government's model would not include statutory consequences or penalties for non-compliance (non-reporting). Based as it is on s. 54 of the UK's 2015 Modern Slavery Act, the model is premised on the idea that businesses that do not report 'will be penalised by the market and consumers and severely tarnish their reputations' (Minister's 2nd reading speech, Sept. 2018).

The model is defensible in principle and regulatory theory, as I've blogged (etc.) elsewhere.

Yet as the Senate's August report noted (Recommendation 3.97), we need to 'test the proposition that reputational risk is a sufficient motivator' for widespread and meaningful reporting, and for continuous improvement in related internal due diligence practices.

A research agenda exists here since it is not obvious that consumers are likely to be effective at policing compliance with human rights performance by corporations. (Investors, insurers and other market actors may play this role more effectively, but that's not the issue in this post).

In addition to the fact that not all industry sectors face reputational risk in the same degrees or ways, we know from existing scholarship that it is not obvious (i.e. the empirical evidence is thin) that consumers will behave more ethically if they only have more information about the provenance and socio-enviro conditions under which things are extracted or made.

That is, the ethical consumer may be a 'myth' (e.g. Devinney et al 2010; Carrington et al 2010). There is an attitude-behaviour gap (Boulstridge and Carrigan 2000): even consumers who say, when surveyed, that ethical considerations matter to them do not necessarily change their consumption behaviours. Nor do they become activist consumers holding firms to account.

If so, we need to explore regulatory models premised on the idea that an informed, motivated mass consumer public will effectively hold corporate actors to account on statutory disclosure of human rights risk.

Jo

See too this previous post on modern slavery, on consumers as regulators (influencing behaviour of commercial actors): here.

Law and power, law as power

The potential and limits of law and legal analysis are questions about social, economic and political power.

My current Masters (LLM) students are in Week 6 of their fully online 'Business and Human Rights' course. We are currently discussing barriers to accessing an effective remedy for alleged business-sourced human rights violations. Much of this discussion revolves around transnational torts litigation, and the doctrinal + practical barriers to claimant groups.

In the discussions we have canvassed criminal law 'remedies' and I referred students to a news item about allegations against a French cement giant for its subsidiary's conduct in war-torn Syria (here). In one commentary on that news, the author says: 

"Human rights cases are rarely a question of law alone, they are about power."

This is an apposite for all students of 'Business and Human Rights' (BHR, and we are all students thereof!).

BHR scholars repeatedly self-profess that theirs is a  'cross-disciplinary' field that is nevertheless dominated by legal scholars. The field's maturation will require a far more systematic and contextualised engagement with the political economy and power dynamics of everything from transnational litigation to supply chain transparency.

Law can be powerful, even emancipatory; but power differentials and dynamics that constrain and distort this transformative potential need greater and more context-specific analysis by all of us working in this field.

Jo 

Has 'Business & Human Rights' lost its way?

Does 'business and human rights' risk becoming about everything, and so nothing?

What comprises the BHR 'field' is not neat and defined. It is evolving, as is the multi-faceted (but still gap-riddled) regulatory 'ecosystem' that governs business-human rights responsibility and remedy.

This lack of neatness, this open-endedness, is on one view both inevitable and desirable. We should not and probably cannot seek to be prescriptive about what 'counts' as a BHR issue.

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.

This post is prompted by a claim this week (here), related to litigation to this effect, that Unilever is somehow responsible for remedying the terrible human suffering of former employees resulting from post-election ethno-political violence in Kenya on the basis that some of the victims of this very complex, nation-wide violence were Unilever employees.

If by 'remedy' in BHR we really mean situations such as this, arguably BHR advocacy is over-reaching. If a demonstrably progressive firm like Unilever is accused of merely 'illusory' support for the UN Guiding Principles, how are we to foster meaningful engagement with other firms?

There are serious questions to be asked about how subsidiary corporate structures hamper access to forums for seeking effective remedy. Still, the underlying claim (that Unilever is responsible for compensating employee victims of violence that shook a whole country) has little basis in tort law, let alone human rights law. Championing this sort of speculative litigation (of all the BHR issues one could profile) shows a mindset that thinks the BHR phenomenon is far better established, far-reaching and powerful than it is. Ambition is fine; over-reach can just expose how under-developed things really are.

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?

BHR is about the many things potentially involved in preventing, minimising and remedying business-related human rights abuses (as well as encouraging and appropriately enrolling business in positive efforts at greater rights fulfilment and enjoyment). A central challenge in all this is to engage the attention of business and finance sector actors, informing and advising as well as accusing and chastising.

BHR is not just about the UN Guiding Principles or a narrow legalistic framing around the jurisprudence of international human rights law. Yet if websites or email updates on BHR become about listing all sorts of things that happen to involve companies, we have lost some powerful opportunity.

If BHR becomes about pretty much everything -- precarious work contract patterns; climate change and its governance; tax evasion and avoidance; corruption; mass political violence in east Africa -- it risks undermining itself. It risks alienating or confusing business audiences -- or being dismissed by them. It risks losing a vital connection with a credible, universal set of normative guarantees (human rights).

A related challenge is to remember that while BHR is somewhat in fashion in the field of human rights, it is still (tiringly and never-endingly) the state which must answer for the vast majority of human rights problems.

Jo

See an earlier articulation of some of the possible coherence challenges of the BHR field (2015, pp 6-7), here. See also this sceptical blog-post on linking the BHR phenomenon to climate change activism, here.

Compliance risk in 'modern slavery' reporting

The 'business and human rights' phenomenon is about much more than just 'modern slavery' in corporate supply chains.

The potential for modern slavery practices to 'taint' the supply chains of formal, regular business is one form of 'business and human rights' problem.

This post makes a brief point about a form of 'compliance risk' that may not be fully appreciated as we move, in Australia, into the process of legislative enactment and implementation of reporting requirements for larger firms around the risks of modern slavery within their operations or supply chains.

By 'compliance risk' I do not mean familiar ideas such as the reputational, regulatory, legal or other risks possibly associated with non-reporting, poor or inadequate reporting, misleading or deceptive reporting (e.g. relative to internal processes of due diligence on the reportable risk).

I mean a risk that might emerge even if a firm has very commendable due diligence and reporting practices relating to the potential for modern slavery in its business and business relationships.

The 'compliance risk' I mean is a form of unintended blindness to human rights risks in the business's sphere even though these may not be modern slavery risks.

Thus the potential problem is that once firms are actively reporting on the risks of modern slavery within their operations or supply chains (since that is what legislative requirements relate to), those firms might pay less attention to other forms of human rights risk in their business models, forms that may have nothing to do with supply chains, or with forced labour or human trafficking.

Firms (and policy-makers, and civil society) will need to keep framing these overall issues more broadly than just the current 'hot topic' of modern slavery in supply chains, and principally by reference to the 2011 UN Guiding Principles on Business and Human Rights.

The 'business and human rights' phenomenon is about much more than just 'modern slavery' in corporate supply chains. In Australia, a focus on a possible Modern Slavery Act has obscured or may come to obscure (including in business's perspectives) the whole range of ways in which business might unwittingly or otherwise cause, contribute to or be linked to human rights problems.

I made this point in a March 2017 post on this blog, here, shortly after the Australian government announced its consultation towards a possible Act. 

Jo

@fordthought

See a recent post (May 2018) here on defining 'supply chain' in the Modern Slavery Act reporting context, and general comments in this post from October 2017 and this one from August 2017.

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.