10 Lessons from a Decade in Business & Human Rights: Part 1
This June 2021 is the 10th anniversary of the UN Guiding Principles on Business and Human Rights (UNGPs). In celebration of this milestone and to chart the course for the next 10 years, the UN Working Group on Business and Human Rights has launched the UNGPs10+/NextdecadeBHR initiative.
I've worked in the business and human rights field since the launch of the UNGPs in 2011. It's been a steep learning roller-coaster that's taken me from starting my own one-person consulting company, to a State-based human rights and business department, and finally to a couple of large multinational companies running their human rights programs. I thought the UNGPs 10th anniversary would be a good time to reflect on and share my own personal journey in this constantly evolving, never-a-dull-moment field. I hope you enjoy this series of posts. Here's Part 1of 3 ...
#1: Business and human rights is full of contradictions – often there are no good responses, just less bad ones.
Theoretically, human rights are interrelated and indivisible. They are supposed to be mutually-supporting, meaning that the realization of one supports the realization of the others. But in reality, human rights are sometimes in conflict - realization of one results in violation of another. And while the UNGPs say that positive impacts cannot be used to offset or justify adverse ones, this guidance isn't helpful in addressing these real-life dilemmas. Can't a tradeoff of positive impacts against adverse ones ever be justified? If so, what is an acceptable balance, and how does one determine the point at which the costs outweigh the benefits?
For example, how should one assess China's "economic miracle", which lifted 400 million Chinese out of dire poverty over the past four decades? This undeniably positive human rights impact came at the cost of significant adverse ones, including involuntary relocation, “left behind children”, environmental impacts, "one-child" female infanticide, etc., involving State-owned and private enterprises. Could've this major advance in the realization of the human right to an adequate standard of living been achieved as quickly, or at all, in the absence of these adverse impacts? But, what about the infringements on the human rights of China's Uyghur minority, again with the active involvement of business? Does this cross the line, even if one accepts the government's position that its actions are simply directed at the promotion of positive human rights objectives of poverty alleviation and (national) security?
The only job worse than a sweatshop job is no job at all.
What about the development of Bangladesh's apparel sector? It was founded on the backs of young women working in sweatshop factories. While controversial, the view that the only job worse than a sweatshop job is no job at all is not so easily dismissed. In a developing country with limited employment and educational opportunities for women, whose main competitive advantage is cheap labor costs, these jobs allow many poor rural women to get a foot on the first rung of the economic ladder, to transition to higher-paid formal employment, and in some cases, fund their higher education for better quality jobs.
And what about child labor in Pakistan, which is endemic due to high levels of poverty and inadequate opportunities for decent work for caregivers? Even the ILO emphasizes that not all work done by under 18 year-olds is illegal. So, is a "zero tolerance" child labor policy always the best response by companies? What about the best interests of the child, such as orphaned children or children whose caregivers can’t adequately support their families? Won’t prohibiting them from doing non-hazardous and legally-permissible work, that doesn't interfere with their educational, moral and physical development, simply drive them into worse forms of child labor? And if right thinking companies that are committed to conducting business responsibly exit challenging markets, won’t less scrupulous companies simply fill the void? These challenging on-the-ground realities raise awkward situations for human rights, such as balancing the human right to food and housing vs. the prohibition against child and forced labor, for which there are no “one size fits all” perfect solutions.
#2: Don't put lipstick on a pig – it won't hide the truth.
Tell senior management what it needs to hear, not what you think it wants to hear. All companies want to hear that they aren't connected to any adverse human rights impacts. As a consequence, human rights teams are often asked whether the company is “in compliance” with the UNGPs.
That's the wrong question. In my experience, few, if any, companies are in compliance with the UNGPs, least of all large multinational enterprises with complex global supply chains. The better question is to ask human rights teams, "what keeps them awake at night?" in terms of issues that the company knows or ought to know about that are currently not being addressed in a manner that is defensible from a "reasonable due diligence" perspective.
There's no shame in admitting that you can't confirm your company is risk-free if you don’t have concrete evidence to demonstrate that it is. The greater risk is not advising management that it needs to conduct more due diligence.
Sophisticated stakeholders, including investors and NGOs, aren't fooled by being told only the good news.
As corporate human rights programs become more mainstream, they become subject to "narrative shaping"as part of a company's communication strategy. While communication and reporting are key due diligence requirements under the UNGPs (in order to ensure accountability to rights-holders), transparency is critical. In fact, building trust with society – i.e. earning a social licence to operate – is impossible without it. And, in the hyper-transparent world of digital communication, where information moves at the speed of light, honesty is the best policy. Sophisticated stakeholders, including investors and NGOs, aren't fooled by being told only the good news. Most don't expect perfection from companies operating in challenging human rights contexts. What they do expect, and what will earn their trust, is openness about the challenges a company faces and demonstrable evidence that it has taken those challenges seriously. A company can provide this by putting in place a reasonable due diligence process to identify and address its human rights risks, and remedy its impacts.
#3: Voluntary corporate virtue is dead – it' s naive to think companies will do what’s right without a business case.
One of the main conclusions of the 2020 UN Forum on Business and Human Rights is that voluntary corporate self-regulation regarding human rights has run its course. While the UNGPs may have been necessary, they are not sufficient for ensuring corporate respect for human rights. It's now time to move to mandatory human rights due diligence.
A [human rights due diligence] regulation without sanctions is not a regulation.
This appears to be the conclusion of the European Commission, which has committed to bringing in a directive in 2021 requiring member States to implement mandatory corporate human rights due diligence, backed up by sanctions for non-compliance, since in its words, "a regulation without sanctions is not a regulation".
A good case study to demonstrate the effectiveness of mandatory and enforceable due diligence for the efficient allocation of corporate risk management resources is anti-bribery and corruption (ABC). The significant financial and other business sanctions that back up legislation, such as the UK Bribery Act and U.S. Foreign Corrupt Practices Act, more than justify the significant resources allocated to ABC due diligence by most multinational enterprises.
Implementing the necessary due diligence to ensure responsible business conduct is easy when there is a clear business case. Unfortunately, the current voluntary nature of the UNGPs fails to provide one.
Ultimately, being a truly ethical company means doing what's right even when there is no business case, and especially when it hurts your bottom line. While many companies claim to do this, few walk their talk. So while we wait for a clear methodology for justifying business respect for human rights (e.g. social impact valuation), or for ethical business conduct to become the rule rather than the exception, mandatory due diligence regulation, backed by sanctions, may be the best currently available business case.
Stay tuned for 10 Lessons from a Decade in Business & Human Rights, Part 2: Lessons #4-6, coming soon:
#4 - Supply chains are like icebergs.
#5 - You get what you pay for.
#6 - A journey of a thousand miles begins with the first step.