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    Assessing, Managing and Remediating Business' Impacts on Human Rights: A Guide for Sustainable Entrepreneurs
    Assessing, Managing and Remediating Business' Impacts on Human Rights: A Guide for Sustainable Entrepreneurs
    Assessing, Managing and Remediating Business' Impacts on Human Rights: A Guide for Sustainable Entrepreneurs
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    Assessing, Managing and Remediating Business' Impacts on Human Rights: A Guide for Sustainable Entrepreneurs

    By Alan S. Gutterman

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    Recognized international human rights have traditionally been framed as creating duties and obligations for states under treaties and other instruments and elements of international human rights law and relatively little attention, if any, has been paid to businesses' responsibility for human rights.  Many clung to the argument that states had the exclusive responsibility when it came to human rights and that the role of businesses should be confined to complying with the laws and regulations promulgated by states with respect to workplace conduct, use of natural resources, and the like.  However, the day-to-day operational activities and strategic decisions of businesses inevitably have an impact, both positive and negative, on one or more universally recognized human rights, and there is a growing consensus that businesses have a duty to respect human rights, and governmental and intergovernmental bodies have attempted to establish guidelines that could serve as point of reference for the duties and responsibilities of businesses as they conduct their business activities.  The most well-known of these initiatives is the UN Guiding Principles on Business and Human Rights (endorsed by the Human Rights Council in 2011).  Governments have also been involved in multi-stakeholder initiatives to develop sector-specific guidance for human rights due diligence and have acted through various types of domestic legislation. 

     

    This book relies on the Guiding Principles to develop and explain a framework that sustainable entrepreneurs can use to effectively fulfill their emerging responsibilities to their stakeholders and society in general relating to respect for universally recognized human rights.  The book covers assessment, management and remediation of business' impacts on human rights and includes chapters on the evolving relationship of business and human rights; international human rights law, the Guiding Principles and other related standards developed by intergovernmental bodies; human rights policies and commitments; assessment of human rights impacts; integration and actions; measurement and tracking; communications and reporting; remediation; governance and management; engagement; rights at work: human rights and labor practices; responsible supply chain management; businesses' impacts on human rights; discrimination and protection of vulnerable groups; and human rights considerations in common business transactions.

    LanguageEnglish
    PublisherSustainable Entrepreneurship Project
    Release dateSep 29, 2024
    ISBN9798201401924
    Assessing, Managing and Remediating Business' Impacts on Human Rights: A Guide for Sustainable Entrepreneurs
    Author

    Alan S. Gutterman

    This book was written by Alan S. Gutterman, whose prolific output of practical guidance and tools for legal and financial professionals, managers, entrepreneurs, and investors has made him one of the best-selling individual authors in the global legal publishing marketplace.  Alan has authored or edited over 300 book-length works on entrepreneurship, business law and transactions, sustainability, impact investment, business and human rights and corporate social responsibility, civil and human rights of older persons, and international business for several publishers including Thomson Reuters, Practical Law, Kluwer, Aspatore, Oxford, Quorum, ABA Press, Aspen, Sweet & Maxwell, Euromoney, Business Expert Press, Harvard Business Publishing, CCH, and BNA.  His cornerstone work, Business Transactions Solution, is an online-only product available and featured on Thomson Reuters’ Westlaw, the world’s largest legal content platform, which covers the entire lifecycle of a business.  Alan has extensive experience as a partner and senior counsel with internationally recognized law firms counseling small and large business enterprises, and has also held senior management positions with several technology-based businesses including service as the chief legal officer of a leading international distributor of IT products headquartered in Silicon Valley and as the chief operating officer of an emerging broadband media company.  He has been an adjunct faculty member at several colleges and universities, and he has also launched and oversees projects relating to promoting the civil and human rights of older persons and a human rights-based approach to entrepreneurship.  He received his A.B., M.B.A., and J.D. from the University of California at Berkeley, a D.B.A. from Golden Gate University, and a Ph.D. from the University of Cambridge, and he is also a Credentialed Professional Gerontologist (CPG).  For more information about Alan and his activities, please contact him directly at [email protected], follow him on LinkedIn (https://www.linkedin.com/in/alangutterman/), and visit his personal website at www.alangutterman.com to view a comprehensive listing of his works and subscribe to receive updates.  Many of Alan’s research papers and other publications are also available through SSRN and Google Scholar.

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      Assessing, Managing and Remediating Business' Impacts on Human Rights - Alan S. Gutterman

      Copyright Matters and Permitted Uses of Work

      Copyright © 2024 by Alan S. Gutterman.  All the rights of a copyright owner in this Work are reserved and retained by Alan S. Gutterman; however, the copyright owner grants the public the non-exclusive right to copy, distribute, or display the Work under a Creative Commons Attribution-NonCommercial-ShareAlike (CC BY-NC-SA) 4.0 License, as more fully described at http://creativecommons.org/licenses/by-nc-sa/4.0/legalcode.  Version Date: 083124.  This Work has not been updated since the Version Date and any developments or changes occurring after that date are not reflected in this Work.

      Preface

      Recognized international human rights have traditionally been framed as creating duties and obligations for states under treaties and other instruments and elements of international human rights law and relatively little attention, if any, has been paid to businesses’ responsibility for human rights.  Many clung to the argument that states had the exclusive responsibility when it came to human rights and that the role of businesses should be confined to complying with the laws and regulations promulgated by states with respect to workplace conduct, use of natural resources, and the like. [1]  In recent years, however, the criticism of businesses that accompanied the globalization that dominated the last decades of the twentieth century has shifted more and more attention toward holding businesses, as well as states, accountable for human rights duties and obligations.  This trend was exacerbated and accelerated by highly publicized events like the chemical gas leak at Union Carbide’s Bhopal pesticide plant in 1984 that killed thousands in India, the Exxon Valdez oil spill in 1989, disclosures of child labor abuses among the supply chains of well-known global apparel and footwear companies, and the complicity of Western mining, oil, and gas companies in the violence of governmental security forces in developing countries. [2]

      The day-to-day operational activities and strategic decisions of businesses inevitably have an impact, both positive and negative, on one or more universally recognized human rights.  On the positive side, businesses play a unique role in society as the creators of wealth, sources of employment, deliverers of new technologies, and providers of basic needs.[3]  At the same time, however, businesses, fixated on profits as the main and often seemingly exclusive goal and purpose of the enterprise, have repeatedly treated their workers poorly, engaged in dangerous or corrupt business activities, polluted the environment, developed and marketed products and services that cause harm to consumers, and become involved in development projects that have displaced or marginalized communities.[4]  The concern about these negative impacts of business activities has increased as corporations themselves have grown in size to the point where many of them are larger than some nation states. 

      The standard view has always been that states are legally responsible for addressing the human rights of individuals within their boundaries, including setting and enforcing the rules on how non-state actors, such as businesses operating within their borders, impact the human rights of the state’s citizens, thus implying that the responsibilities of businesses with respect to human rights are those determined by the states.  A competing view is that businesses have responsibilities for human rights that are independent of the state, based on social expectations (i.e., a company’s social license to operate) or moral grounds.  This view is important in its own right, but it has become particularly relevant given the growth in size and influence of transnational corporations (TNCs), the difficulties that states have had in controlling them, and their impact on the environment and local communities, and holding them legally accountable for violations of their human rights duties. 

      A number of challenging impediments to enforcement have been identified and critiqued by human rights activists, academics, and policymakers, including the limited liability status for corporations, their subsidiaries, and their agents that makes it difficult to hold persons like their directors and officers responsible for their human rights violations; the ability and willingness of wealthy corporations to bribe state officials to avoid enforcement of local human rights laws; the difficulties in obtaining jurisdiction over corporations that do business in a particular country yet maintain their headquarters and assets outside of the country; and delegating responsibility for activities often associated with human rights issues by outsourcing those activities to unrelated foreign entities.  Wealthy TNCs can also exert outsize leverage in foreign countries by conditioning new projects, and the financial investments and local jobs that go with them, on local politicians supporting laws and regulations that are relatively weak (e.g., requirements regarding minimum wages and workers’ rights and benefits and/or environmental standards relating to the extraction of raw materials or manufacturing activities) and which keep the costs of doing business in those countries down for the corporation.

      Human rights activists have complained that states, particularly developing countries, are often unable or unwilling to enforce human rights obligations in treaties that they have ratified, including regulating activities of businesses.  They have argued that the only real hope is that businesses will assume human rights duties and responsibilities, either voluntarily or pursuant to some form of mandatory framework that creates business human rights obligations directly rather than through a state.  Arguably, the stakes are high for businesses including the possibility of reputational damage and/or disruptions to supply chains caused by human rights crises in foreign countries.  As such, there are real incentives for them to step in and take up the slack caused by a growing sense that environmental and social challenges are overwhelming the resources and regulatory tools of the public sector.  One commentator pointed out that businesses can no longer leave it to markets, governments or a relatively weak civil society to respond ... [and] ... [i]t’s in businesses’ interests to take an urgent and proactive role in delivering the transformational change required.[5]

      There is a growing consensus that businesses have a duty to respect human rights, and governmental and intergovernmental bodies have attempted to establish guidelines that could serve as point of reference for the duties and responsibilities of businesses as they conduct their business activities.  The International Labor Organization adopted the Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy in 1977; the Organization for Economic Cooperation and Development (OECD) adopted the Guidelines for Multinational Enterprises in 1976 as part of the OECD’s Declaration and Decisions on International Investment and Multinational Enterprises; and the United Nations has engaged in several projects to promote accountability of businesses for human rights including the UN Global Compact (adopted in 1999) and the Guiding Principles on Business and Human Rights (endorsed by the Human Rights Council in 2011).  Governments have also been involved in multi-stakeholder initiatives to develop sector-specific guidance for human rights due diligence and have acted through various types of domestic legislation. 

      The International Organization for Standardization (ISO) 26000 Guidance on Social Responsibility points out that the responsibilities of organizations with respect to human rights are independent of the duties and obligations of the state, which means that organizations must act regardless of whether the state is unable or unwilling to fulfil its duty to protect.[6]  ISO 26000 takes the position that states have a duty and responsibility to respect, protect, and fulfil human rights and organizations have the responsibility to respect human rights by identifying and responding to members of vulnerable groups within their sphere of influence.  At a minimum, organizations should avoid passively accepting or actively participating in the infringement of the rights of others, a duty that can only be discharged by undertaking due diligence.  Moreover, while the baseline responsibility for businesses and other non-state organizations is to respect human rights, they need to take into account stakeholder expectations that go beyond respect and may also want to make affirmative contributions to the fulfilment of human rights for their own sake.

      As governmental and intergovernmental bodies have begun to act, a number of other factors have been driving companies to undertake human rights due diligence:[7]

      A human rights crisis or scandal, often amplified by reports from non-governmental organizations and social media, that leads companies to realize they need to do better and put better human rights risk management and mitigation systems in place and that failure to do so is not only morally wrong but will expose them to reputational and operational risks.

      Increasing legal and regulatory standards driven by a convergence of legal and human rights risks.

      External pressure by financial institutions and the investment community including increasing investors’ expectations regarding ESG (environmental, social, and governance), questions from investors about human rights policy and processes for managing risks, the emergence of rating agencies and benchmarks assessing companies’ human rights policies and risk management procedures, shareholder activism and engagement, and conditions set by export credit agencies and development finance institutions.

      Business-to-business pressures including increased usage of supplier codes of conduct and contract clauses driven by a desire to achieve more sustainable supply chains in operational and commercial terms.

      Pressure from employees and trade unions calling on companies to adopt human rights policies and explain their approach to managing human rights issues in high-risk operations.

      Realization that adopting a human rights due diligence approach is simply the right thing to do, as the enterprise does not want to become involved in negative impacts on human rights.

      Many of the world’s best-known and otherwise respected brands have found themselves caught up in debates regarding their own human rights practices and/or those of their business partners, for example, Nike’s reliance on the sweatshop practices of its vendors that were prevalent throughout the global garment industry; Apple’s use of Chinese sub-contractors who repeatedly failed to adhere to even minimal fair labor standards; and questions regarding Internet companies’ policies relating to the protection, use, and sharing of the personal information of their users.  While the fallout from disclosures of actual or potential human rights issues has sometimes been devastating for specific businesses, others have been able to recover and use the crisis as a catalyst for establishing more reliable and productive processes in their supply chains that have become sources of competitive advantage and enhanced reputational value.[8]

      Probably the most highly publicized initiative relating to the relationship between international human rights and the operations of business enterprises has been the Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework (Guiding Principles), which were developed by the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises after extensive consultation and were endorsed by the Human Rights Council, the key independent UN intergovernmental body responsible for human rights, in its resolution 17/4 of 16 June 2011.[9]  The Guiding Principles were not intended to impose new legal obligations on business, or to change the nature of existing human rights instruments. Instead, their aim is to articulate what these established instruments mean, for both states and companies, and to address the gap between law and practice.[10]  Since they were first approved, the Guiding Principles have become the global standard for the respective roles and duties of states and businesses relative to human rights and have been integrated as central elements of other well-known international standards such as the OECD Guidelines for Multinational Enterprises, the International Finance Corporation Performance Standards and ISO 26000.

      Interpretive guidance to the Guiding Principles noted that enterprises recognize that their social responsibilities begin with legal compliance and that the responsibility of enterprises to respect human rights is itself often reflected, at least in part, in laws and regulations. However, the Guiding Principles define enterprises’ responsibilities to respect human rights to extend beyond applicable laws and regulations to include respect for all internationally recognized human rights wherever they operate.  In effect, enterprises are expected to include the risk of causing or contributing to gross human rights abuses among all the other legal issues they face in their operations and business relationships.  The Guiding Principles are intended to serve as a uniform standard that can be referred to in a variety of contexts for clarity and predictability including situations where there are no national laws or regulations to protect human rights or the content and enforcement of laws and regulations that do exist fall short of internationally recognized standards.[11]

      This book is intended to be a comprehensive introduction to the key topics relating to understanding how businesses can effectively fulfill their emerging responsibilities to their stakeholders and society in general relating to respect for universally recognized human rights.  The book follows the flow of the Guiding Principles and draws on a number of resources including the OECD Due Diligence Guidance for Responsible Business Conduct.  As such, readers will learn about each of the elements in the due diligence process such as developing human rights policies and commitments, impact assessment, integration, measurement and tracking, and communications and reporting.  In addition, the book includes chapters on a number of special topics such as businesses’ impact on human rights, governance and management, engagement, labor practices, supply chain management, and discrimination and vulnerable groups so that readers can develop a comprehensive approach to counseling that covers all areas of potential client issues. 

      Business and human rights, like corporate social responsibility, is an emerging topic that will soon be a lasting element of corporate governance, compliance, and risk management practice.  A number of the topics included under the umbrella of corporate social responsibility, particularly in the environmental and labor areas, already have developed their own rich collection of laws, regulations, case law, and practice tools, and the same will soon be true of business and human rights and other topics such as stakeholder engagement, social enterprises (e.g., benefit corporations), board oversight of sustainability, community development, and non-financial reporting.  In fact, given the growing number of societal and political issues that can reasonably be placed under the rubric of human rights, and the apparent inability of governments to deal effectively with those issues, it would seem that attention will inevitably turn to how and when businesses will deploy their substantial resources to develop solutions. 

      As I began working on this project, our world changed as the Covid-19 pandemic swept over us.  The UN High Commissioner for Human Rights described the Covid-19 outbreak as a serious threat to the right to life and to health of people everywhere and argued that the international human rights framework could provide crucial guideposts that can strengthen the effectiveness of the collective global response to the pandemic.[12]  A joint call issued by 60 UN human rights experts included a reminder that the response to the Covid-19 crisis should go beyond public health and emergency measures to address all other human rights as well and emphasized that the business sector in particular continues to have human rights responsibilities in this crisis.[13]  In a paper examining companies’ responsibilities for workers and affected communities in the time of the Covid-19 pandemic, the Institute for Human Rights and Business (IHRB) pointed out that companies that have the capacity to act (because of their assets or the resources at their command) can be expected to have a role to play in helping states meet their obligations to protect human rights and went on to say[14]:

      Companies have clear responsibilities towards their employees.  But it is also the case that they have a responsibility towards contractors and their employees (in particular those who work on premises) as well as suppliers, associates, and other partners, consumers, and wider society and the general public who are affected by a company’s presence and operations.

      Experts identified a range of key human rights concerns relating to the outbreak and management of the Covid-19 pandemic including the need to respect rights, include everyone and ensure access; protection of the vulnerable; focusing on the disproportionate impact of the crisis on women; elimination of racism and xenophobia; limitations on restrictions and surveillance; deployment and use of technology; and permitting dissent.[15]  According to the IHRB and others, businesses have a role to play in many of these areas[16]:

      Companies have a duty of care towards their workers during an emergency situation such as the Covid-19 pandemic that includes providing safe and sanitary work conditions in the workplace, protecting workers from exposure to the virus, assisting workers in working from home, providing flexible and generous leave benefits for workers who get sick or must take care of family members who are ill and acting compassionately when reducing staff due to pandemic-related drops in business

      Companies involved in the development, production and sale of devices and software that enable surveillance should be mindful of potential misuse of such technologies during the crisis and establish safeguards against such misuse through contractual obligations and other measures that reduce the likelihood of misuse

      Companies must be mindful of the surge in racism and xenophobia that has accompanied the spread of the Covid-19 virus and take steps to ensure that their goods and services are equally available to all users, regardless of their ethnicity, nationality or other distinguishing features, and that their workers are protected against racial discrimination in the workplace and from acts of customers and others with whom the company conducts business

      Companies that employ migrant workers directly, or that are aware of migrant workers in their supply chains, should be mindful of the special needs of such workers for security and safety due to the disruptions caused by the pandemic

      Companies need to be aware of the specific disproportionate impact of measures taken during the pandemic on women due to the jobs that they generally fulfill, the responsibilities that societies often impose on them as primary caregivers for their children and other family members and their often limited access to technology

      Companies need to ensure that workers are adequately informed about the risks associated with working during the Covid-19 crisis and that such workers are able to give their informed consent after taking into account issues such as literacy, language and age

      Companies that offer consumer credit, or essential goods and services, should develop special facilities and solutions to provide continuing access for consumers from poorer groups and consumers who have recently lost their jobs and are in need of support for managing their debt or purchasing power

      Companies should be aware of the human rights risks and impacts to consumers and other users of their goods and services resulting from potential exposure to the virus and contagion risk, provision of digital services and the continuity of the provision of basic goods and services

      Companies will be relying on technology for many aspects of their response to the Covic-19 pandemic and implementation of technological solutions must take into account potential infringement of the privacy rights of workers (e.g., health checks in the workplace and surveillance of productivity for remote working) and customers (e.g., protection of personal information collected as companies rollout digital alternatives for customer service)

      Companies should consider the impacts of their decisions and actions relating to the Covid-19 pandemic on the communities in which they operate such as the economic and social impact of reducing operations and laying off employees and provide communities with information on the steps being taken to strengthen health and safety measures in the company’s facilities

      Given all of this, I returned to the manuscript to include additional materials that illustrate how the principles and standards that have developed with respect to business and human rights might be applied by companies during and after the Covid-19 pandemic.  As I was making those changes, the world watched in horror as George Floyd, a black man, died in the custody of the Minneapolis police department on May 25, 2020, an event that set off days of large public demonstrations against racial injustice all around the world, often accompanied by vandalism and looting as well as disproportionate police responses that escalated the tensions.  As has often happened in the past when such incidents have occurred, businesses large and small were quick to issue statements through social media expressing their concerns about social justice and supporting the Black Lives Matter movement.  Many large and well-known brands made commitments to contribute substantial sums to social justice initiatives and supporting minority businesses.  However, Darren Walker, the president of the Ford Foundation, criticized the traditional and predictable response of companies in the face of racism in a quote published in an article in The New York Times:  The playbook is: Issue a statement, get a group of African-American leaders on a conference call, apologize and have your corporate foundation make a contribution to the N.A.A.C.P. and the Urban League ... That’s not going to work in this crisis.[17]  The same article led with the headline Corporate America Has Failed Black America and went to say: ... many of the same companies expressing solidarity have contributed to systemic inequality, targeted the black community with unhealthy products and services, and failed to hire, promote and fairly compensate black men and women.[18]

      Surveys showed that a majority of Americans wanted business leaders to seize the challenges and opportunities that gripped society’s attention in the wake of the events of the first half of 2020 by taking a stand and making and fulfilling commitments to action across a broad spectrum of issues and contexts that includes embedding equality, diversity and inclusion in the boardroom, the workforce and all aspects of organizational culture; financial equity and security; community engagement; involvement in the public square through advocacy for racial justice and re-imaging products and services.  Discrimination on the basis of race is a fundamental human rights issue and while States have the primarily responsibility under international human rights laws to protect the freedom of everyone and guarantee their dignity and ability to enjoy all of the universally recognized human rights, businesses have a duty to respect those rights and take the necessary steps to promote racial non-discrimination and equality wherever they operate.  Businesses have also been called upon to contribute to the Sustainable Development Goals established by UN such as access to basic services, participation in decision making, full and productive employment and decent work, reducing income inequality, ensuring equal opportunity, promoting peaceful and inclusive societies, providing justice for all and building effective, accountable and inclusive institutions at all levels.

      While the years leading up to the publication of this book have been difficult for many businesses, there are also heartening examples of companies providing relief to their communities and support to essential workers, taking extraordinary steps to protect the safety and economic wellbeing of their employees and repurposing aspects of their business in order to provide new products and services required by consumers to get through the pandemic.[19]  We can hope and expect that the lessons learned will change the landscape for business and human rights in the years to come.

      1

      Evolving Relationship of Business and Human Rights

      _______________

      Recognized international human rights have traditionally been framed as creating duties and obligations for states under treaties and other instruments and elements of international human rights law and, until recently, relatively little attention, if any, was paid to businesses’ responsibility for human rights.  This situation has changed amid growing criticism of how businesses have implemented the strategies associated with globalization, and it is now apparent that the day-to-day operational activities and strategic decisions of businesses inevitably have an impact, both positive and negative, on one or more universally recognized human rights.  The first chapter of my new book on Business and Human Rights focuses on framing and address key fundamental questions relating to the evolving relationship of business and human rights such as what are human rights; who should be responsible for human rights; which human rights, if any, should businesses be responsible for and what should be the scope of that responsibility; what is the relationship between business and human rights and corporate social responsibility; and what governmental actions are needed to drive corporate human rights due diligence?

      _______________

      Recognized international human rights have traditionally been framed as creating duties and obligations for states under treaties and other instruments and elements of international human rights law.  The main concern of human rights activists has generally been vertical protection, which refers to ensuring that individuals and groups are protected from, or receive required services and resources from, the state.  Relatively little attention, if any, was paid to businesses’ responsibility for human rights.  Many business ethicists were skeptical about whether businesses had any ethical responsibilities and noted that it was difficult and unfair to identify responsibilities in this area when the concept of human rights was so difficult to describe.  Others clung to the traditional argument that states had the exclusive responsibility when it came to human rights and that the role of businesses should be confined to complying with the laws and regulations promulgated by states with respect to workplace conduct, use of natural resources and the like, even if those laws failed to meet international standards.[20]

      In recent years, however, the criticism of businesses that accompanied the globalization that dominated the last decades of the twentieth century has shifted more and more attention toward horizontal protection, which includes situations where individuals seek protection or services from non-state actors such as businesses, non-state armed groups, the media and other people, groups or institutions.  For example, protecting women and children from violence in their homes, improving conditions for workers in factories, offices and other workplaces and reducing pollution from operations that is damaging the health of people living in surrounding communities must be addressed by strengthening horizontal protections and imposing higher human rights duties and responsibilities on businesses beyond simply complying with the domestic laws and regulations of the countries in which they had made an affirmative choice to operate. 

      The pressure for holding businesses, as well as states, accountable for human rights duties and obligations was also exacerbated by highly publicized events such as the chemical gas leak at Union Carbide’s Bhopal pesticide plant in 1984 that killed thousands in India, the Exxon Valdez oil spill in 1989, and disclosures of child labor abuses among the supply chains of well-known global apparel and footwear companies, and the complicity of Western mining, oil and gas companies in the violence by governmental security forces in developing countries.[21]

      In addition, as governmental and intergovernmental bodies have begun to act, several other factors have been driving companies to undertake human rights due diligence:[22]

      A human rights crisis or scandal, often amplified by reports from non-governmental organizations (NGOs) and social media, that leads companies to realize they need to do better and put better human rights risk management and mitigation systems in place and that failure to do so is not only morally wrong but will expose them to reputational and operational risks.

      Increasing legal and regulatory standards driven by a convergence of legal and human rights risks.

      External pressure by financial institutions and the investment community including increasing investors’ expectations regarding ESG (environmental, social, and governance), questions from investors about human rights policy and processes for managing risks, the emergence of rating agencies and benchmarks assessing companies’ human rights policies and risk management procedures, shareholder activism and engagement, and conditions set by export credit agencies and development finance institutions.

      Business-to-business pressures including increased usage of supplier codes of conduct and contract clauses driven by a desire to achieve more sustainable supply chains in operational and commercial terms.

      Pressure from employees and trade unions calling on companies to adopt human rights policies and explain their approach to managing human rights issues in high-risk operations.

      Realization that adopting a human rights due diligence approach is simply the right thing to do, as the enterprise does not want to become involved in negative impacts on human rights.

      Many of the world’s best-known and otherwise respected brands have found themselves caught up in debates regarding their own human rights practices and/or those of their business partners, for example, Nike’s reliance on the sweatshop practices of its vendors that were prevalent throughout the global garment industry; Apple’s use of Chinese sub-contractors who repeatedly failed to adhere to even minimal fair labor standards; and questions regarding Internet companies’ policies relating to the protection, use, and sharing of the personal information of their users.  While the fallout from disclosures of actual or potential human rights issues has sometimes been devastating for specific businesses, others have been able to recover and use the crisis as a catalyst for establishing more reliable and productive processes in their supply chains that have become sources of competitive advantage and enhanced reputational value.[23]

      The day-to-day operational activities and strategic decisions of businesses inevitably have an impact, both positive and negative, on one or more universally recognized human rights.  On the positive side, businesses create jobs that provide workers and their families with a higher standard of living and the financial resources to pursue education and leisure and can take steps within their own direct control over their operations to make progress on fundamental human rights topics such as discrimination, sexual harassment, health and safety and privacy.  Philanthropic activities of businesses can also support the efforts of states and other non-state actors such as non-governmental organizations (NGOs) to alleviate poverty and improving education and housing conditions.  Businesses have been acknowledged and praised for the unique role that they play in society as the creators of wealth, sources of employment, deliverers of new technologies, and providers of basic needs.[24]

      At the same time, however, businesses, fixated on profits as the main and often seemingly exclusive goal and purpose of the enterprise, have repeatedly treated their workers poorly, engaged in dangerous or corrupt business activities, polluted the environment, developed and marketed products and services that cause harm to consumers, and become involved in development projects that have displaced or marginalized communities.[25]  The concern about these negative impacts of business activities has increased as corporations themselves have grown in size to the point where many of them are larger than some nation states.  Moreover, as states struggle to balance their own budgets and provide their citizens with services that are fundamental to many of the basic human rights, they are turning to business for assistance, a trend that raises further concerns about whether companies can assume and carry out these responsibilities in an ethical fashion with due respect for human rights. 

      Out of all this, three key questions have emerged and are being hotly debated by a wide range of stakeholders around the world in a variety of forums: what should be the appropriate scope of human rights duties and obligations for businesses and other non-state actors, how should those duties and obligations be formalized and what should be role of the state in enforcing the human rights duties and obligations imposed on businesses and non-state actors, and how should that role be integrated into the existing international human rights framework (e.g., a treaty)?[26]  While it is certainly true that some businesses have no interest in being held accountable for the human rights impacts of their activities and will never voluntarily participate in the formulation of laws, regulations, and standards that could be used to hold them responsible for their violations of human rights, it is also likely that progress toward viable formulations of the duties and responsibilities of businesses with respect to human rights is hampered by a lack of consensus among states, businesses, multi-governmental organizations, NGOs, community groups, human rights activists, and other interested parties on how to frame and address key fundamental questions such as what are human rights; who should be responsible for human rights; and which human rights, if any, should businesses be responsible for and what should be the scope of that responsibility?[27]

      What are Human Rights?

      Human rights have been described as those activities, conditions, and freedoms that all human beings are entitled to enjoy, by virtue of their humanity and regardless of their status.  Human rights are ideally thought of as being inherent, inalienable (i.e., they cannot simply be waived when they are violated by another agent, such as a state or a business), interdependent (i.e., realization of one right contributes to the realization of others), and indivisible, which means that they cannot be granted or taken away or selectively ignored.[28]  One person’s enjoyment of human rights depends on universal respect for such rights and the actions of other members of society to the extent that such actions have an impact on that person’s enjoyment of his or her rights.[29]  A variety of sources have been referred to in identifying and describing human rights, including the teachings of all of the world’s major religions, moral philosophy, natural law, and legal positivism. However, human rights transcend laws or cultural traditions.[30]  Human rights are formed at the intersection of legal, moral, and social rights. Human rights should be protected under the law, and states and other parties should be legally obligated to respect human rights; human rights exist because they are moral and proper; and human rights ensure that people can live happily and safely together as members of society.[31]

      While the basic principles of human rights described above are fairly well settled, they obviously fall short of providing specific guidance regarding the scope of human rights.  Three different stances on this important question have been identified.[32]  The first one, referred to as the relativist view, argues that human rights are culturally based, but has been widely criticized by business ethicists who believe that human rights are universal moral concepts that transcend religious, societal, and cultural norms and remain fixed across historical periods.  The second one, the restrictive view, limits human rights to basic moral rights (e.g., natural rights such as life, liberty, and property) and objects to lengthy lists of economic and social human rights on the grounds that recognizing such rights makes it impossible to set fixed limits and garner universal support among states for enforcement.[33]  The third stance, the expansive view, is based on the belief that the basis for human rights is human dignity and includes desirable ends or ideals (e.g., a healthy life) that society might strive to achieve but for which it will not be condemned or punished if efforts fall short.  The expansive view can be seen in the broad principles of the United Nations Universal Declaration of Human Rights described in Chapter 2 of this publication and the human rights treaties that have been forged based on those principles since the UN was formed.

      A variety of approaches have been used to describe human rights.  One way is to focus on some of the ways in which human rights impact the ability of people to participate fully in society: human rights include freedom to engage in certain activities such as being able to travel, engage in free expression, and practice a religion; human rights include freedom from certain conditions such as torture and slavery; human rights include access to services such as education, healthcare, a fair legal system, and the ability to work; and human rights include protections for vulnerable and disadvantaged groups such as the disabled, children, women, and refugees.  Another way to view the landscape is through the various categories of human rights that appear from an examination of treaties and other intergovernmental instruments:[34]

      Fundamental rights: These are rights that no state, regardless of the situation, can ignore or violate and include freedom from slavery and torture, the right to life, non-discrimination, and the idea that everyone is born equal.

      Rights in the legal system: Individuals must enjoy an equal legal identity and have access to courts that practice justice fairly (with a presumption of innocence), competently and impartially and treat individuals well and equally and must be free from arbitrary arrest and detention. 

      Rights in society: These include civil rights that allow individuals to participate in society and live with dignity on a daily basis free from interference by the state and include freedoms that ensure privacy, freedom of movement within a country, the right to marry and have children, to practice religion, freedom of expression, the right to a nationality, the right to seek asylum, and the right to property.

      Political rights: These include rights to allow people to participate in politics and in a fair political system (e.g., the rights to vote, to be a politician or government official, to form or associate with a political group, and to assemble publicly or privately to protest governmental actions or to raise awareness of an issue).

      Economic rights: These rights are intended to ensure that individuals have enough money and other economic resources to live with dignity in their community and include the right to work for fair wages and in a safe and healthy work environment and the right to rest and leisure (i.e., maximum work hours and required days off).

      Social rights:  These are rights that persons should expect from living in a society, including the rights to healthcare, education, food, water, and housing, some of which are fulfilled directly by the state and others of which are provided by people themselves with the assistance and protection of the state.

      Cultural rights: These rights allow people to freely participate in their culture without interference from the state and include rights to language, religion, and cultural activities.

      Who is Responsible for Human Rights?

      As discussed above, the standard view has always been that states are legally responsible for addressing the human rights of individuals within their boundaries for at least two reasons: it is the states who ratify the UN documents that articulate human rights, and states have the sole legitimate force over certain sovereign areas within which they claim authority over the individuals living and working there.[35]  As part of their role as the primary responsible party for human rights, states are expected to set and enforce the rules on how non-state actors, such as businesses, operating within their borders impact the human rights of the state’s citizens, thus implying that the responsibilities of businesses with respect to human rights are those determined by the states.  A competing view is that businesses have responsibilities for human rights that are independent of the state, based on social expectations (i.e., a company’s social license to operate) or moral grounds.[36]  This view is important in its own right, but has become particularly relevant given the growth in size and influence of transnational corporations (TNCs) and the difficulties that states have had in controlling TNCs and the impact of their activities on the environment and local communities and holding them legally accountable for violations of their human rights duties. 

      A number of challenging impediments to enforcement have been identified and critiqued by human rights activists, academics, and policymakers, including the limited liability status for corporations and their agents that makes it difficult to hold persons, such as directors and officers, responsible for their human rights violations and those of their subsidiaries; the ability and willingness of wealthy corporations to bribe states’ officials to avoid enforcement of local human rights laws; the difficulties in obtaining jurisdiction over corporations that do business in a particular country yet maintain their headquarters and assets outside of the country; and delegating responsibility for activities often associated with human rights issues by outsourcing those activities to unrelated foreign entities.  Wealthy multinational corporations can also exert outsize leverage in foreign countries by conditioning new projects, and the financial investments and local jobs that go with them, on local politicians supporting laws and regulations that are relatively weak and that keep the costs of doing business in those countries (e.g., requirements regarding minimum wages, workers’ rights and benefits and environmental standards relating to the extraction of raw materials or manufacturing activities) down for the corporation.

      In those situations, such as in many developing countries, where it is clear that states are unable or unwilling to enforce the human rights treaty obligations that they have ratified, including regulating activities of businesses, the only real hope is that businesses will assume human rights duties and responsibilities, either voluntarily or pursuant to some form of mandatory framework that creates business human rights obligations directly rather than through a state.[37]  Arguably, the stakes are high for businesses, including the possibility of reputational damage and/or disruptions to supply chains caused by human rights crises in foreign countries, and there are real incentives for them to step in and take up the slack caused by a growing sense that environmental and social challenges are overwhelming the resources and regulatory tools of the public sector.  One commentator pointed out that businesses can no longer leave it to markets, governments or a relatively weak civil society to respond ... [and] ... [i]t’s in businesses’ interests to take an urgent and proactive role in delivering the transformational change required.[38]

      While it is easy to say that businesses should know better and that shifts in public opinion should serve as a catalyst for companies to voluntarily acknowledge certain responsibilities with respect to human rights, one researcher found that as of December 2011, less than 1% of the world’s some 80,000 multinationals [had] actually adopted human rights policies, performed impact assessments or tracked performance, devised means to ensure that they [did] not undermine human rights, or developed means to remedy human rights problems.[39]  The situation had not improved significantly by 2017, at least in the eyes of human rights activists skeptical about the implementation and effectiveness of voluntary standards such as the UN Guiding Principles on Business and Human Rights, when the Corporate Human Rights Benchmark Ltd. reported that only three firms in a cluster of companies operating in the apparel, agriculture and extractive industries scored more than 60% when benchmarked against metrics tied to the Guiding Principles and the average score across all companies was under 30%.[40]  Performance data such as this has led to a growing belief that progress will only be made when a formal legal framework for business and human rights, rather than voluntary standards, has been created through a deliberative and consultative process.

      What is the Scope of a Businesses’ Human Rights Duties and Obligations?

      In order to begin understanding what society can and should expect from businesses with respect to human rights, a consensus must be reached on what duties and obligations should be placed on businesses.  While international human rights treaties have touched on topics that are relevant to the everyday operations of businesses around the world, as described elsewhere in this publication, those treaties have been primarily concerned with defining the duties and obligations of states rather than businesses.  One of those duties and obligations is to promulgate and enforce laws and regulations that provide guidance and standards for actions by businesses and other members of society.  For businesses, their initial steps in respect to international human rights should be complying with these domestic laws and regulations.  For example, the international human right of freedom from discrimination in the workplace is realized by businesses complying with laws that prevent them from making employment decisions based on factors such as gender, race, religion or age.

      Articles 29 and 30 of the UN Declaration of Human Rights specify that no state, group, or person (presumably including business enterprises such as corporations) can infringe upon human rights.  Building on that basic concept, it seems easy to arrive at the position that businesses should not knowingly expose their workers to dangerous working conditions or rely on forced labor, but progress in even these areas has been slow.  However, looking at business activities through a human rights lens has raised novel and challenging questions when those activities bring into play rights that have traditionally been assigned to and carried out by the state:[41]

      Social media businesses have been allowed to make their own decisions regarding the communications activities of visitors to their sites and can remove those communications if it is decided that they violate policies created and enforced solely by the business.  When a social media business removes a communication, does it violate the user’s freedom of expression and should the business have a legal duty not to infringe on users’ freedom of expression?

      Does a restaurant that fails to provide food to a homeless person who comes into the restaurant and asks for food infringe on the homeless person’s human right to be free from hunger and should restaurants have an affirmative legal duty to provide food in such situations?

      Does a utility company that provides electricity or water to households have a duty and obligation, based on human rights principles, to continue providing services to households that are unable or unwilling to pay?  Similarly, do hospitals have a duty to provide emergency medical services to patients without insurance or other means to pay for such services?

      In each of the situations described above, the question is whether human rights duties imposed on states should also be applied to non-state actors such as businesses.  In some cases, the first steps have been left to the businesses themselves, as has been the case with social media businesses making their own decisions regarding political advertising on their sites and how data collected from visitors to the site is used within the business and shared with outside parties.  However, some states, pushed by a range of stakeholders including consumers and human rights activists, are now coming to realize that leaving these issues to businesses is untenable, although it may be too early to reliably predict the ultimate resolution.  An obvious problem in several of the cases is whether and how imposing human rights obligations on businesses will impact their ability to remain in business and create positive human rights impacts for their stakeholders (e.g., a restaurant required to fulfill the unmet needs of homeless people in its community for food may eventually not be able to achieve the minimum level of profitably necessary to remain in business, thus causing workers to lose their jobs, reducing the revenues of their suppliers and depriving governments of tax revenues that could be used to provide other support and assistance to the homeless community).

      According to Brenkert, some have argued that businesses should be held responsible only for a limited list of human rights since they cannot perform acts and provide services that are within the exclusive realm of states such as offering or denying citizenship or conducting judicial proceedings.  At the other extreme are those who promote the idea that businesses are potentially responsible for all human rights depending on their relationship to the persons involved and/or how human rights may be infringed by the actions taken by the business.[42]  One proposed solution to this debate has been the widely discussed framework of three different kinds of human rights responsibilities: respect, protect and remedy.  In general, it is agreed that businesses, as well as states, have duties to respect human rights (i.e., not infringe of the rights of others) and duties of mitigation and remedy when they violate the human rights of others.  As for protection, Ruggie has argued that this is the role of the state, not businesses. However, Donaldson believed that businesses had duties to help protect from deprivation for a few fundamental rights such as nondiscriminatory treatment, physical security, freedom of speech and association, minimal education, political participation and subsistence.[43]

      The International Organization for Standardization (ISO), a worldwide federation of national standards bodies, developed ISO 26000 Guidance on Social Responsibility to serve as a guide for organizations on the underlying principles of social responsibility, recognizing social responsibility and engaging stakeholders, the seven core subjects and issues pertaining to social responsibility and on ways to integrate socially responsible behavior into the organization.[44]  The second core subject of ISO 26000 is human rights, and ISO 26000 takes the position that states have a duty and responsibility to respect, protect and fulfil human rights and organizations have the responsibility to respect human rights by identifying and responding to members of vulnerable groups within their sphere of influence.  ISO 26000 points out that the responsibilities of organizations with respect to human rights are independent of the duties and obligations of the state, which means that organizations must act regardless of whether the state is unable or unwilling to fulfil its duty to protect.  At a minimum, organizations should avoid passively accepting or actively participating in the infringement of the rights of others, a duty that can only be discharged by undertaking due diligence.  Moreover, while the baseline responsibility for businesses and other non-state organizations is to respect human rights, they need to take into account stakeholder expectations that go beyond respect and may also want to make affirmative contributions to the fulfilment of human rights for their own sake. 

      Corporate Social Responsibility

      Complying with the laws and regulations established by states in order to fulfill their duties and obligations with respect to human rights is just one way that businesses can contribute to respect and protection of those rights.  Since the 1970s, there has been a growing movement for businesses to take matters in their own hands and voluntarily assume accountability and responsibility for the environmental and social impacts of their operational activities.  The concept is popularly referred to as corporate social responsibility (CSR), or corporate citizenship, and was first defined in as the firm’s considerations of, and response to, issues beyond the . . . economic, technical, and legal requirements of the firm to accomplish social benefits along with the traditional economic gains which the firm seeks.[45]  One of the most cited definitions and models of CSR from the early years of scholarly work suggested that there were four primary criteria that should be used in evaluating organizational commitment and performance with regard to CSR: economic (jobs, wages, services), legal (legal compliance and playing by the rules of the game), ethical (being moral and doing what is just, right, and fair), and discretionary (optional philanthropic contributions) responsibilities.[46]

      Most of the definitions of CSR incorporate the notion that it means going beyond the law, something that should be taken on voluntarily rather than because such actions are required by law or in order to relieve external pressures that arose before actions were taken and which the firm could not easily resist.[47]  As time has gone by, businesses have implemented CSR principles in a wide range of relevant organizational processes including stakeholder engagement, community investment and involvement (e.g., philanthropic activities, sponsorships and volunteer programs), employee health and safety programs, product safety and quality initiatives, management of environmental impacts, supply chain management programs, investor relations programs, and reporting and communications. 

      The growth of CSR has also been accompanied by a wide array of standards-setting initiatives relating to supply chains and other topics that are intended to set out the basic principles that businesses should refer to when practicing CSR and establish metrics that could be referred to in assessing corporate performance.  It is true that deliberations regarding many of these standards, which serve a role similar to treaty obligations, have been carried out with the participation and support of states, either on their own or as part of multilateral institutions such as the UN (e.g., the UN Global Compact) and the International Labour Organization (ILO). However, in large part these efforts have been driven by non-state actors, such as NGOs, that grew frustrated with what they perceived as states’ unwillingness or inability to regulate businesses and elected instead to try and make progress by partnering with the enemy and relying on consumers, rather than politicians, to push businesses to be more environmentally and socially responsible.  Standards setting initiatives have often been organized at the sectoral level, as described elsewhere in this publication, with well-known examples including the Electronics Industry Citizenship Coalition, Equator Principles, Extractive Industries Transparency Initiative and Fair Labor Association.  As standards have emerged, so have ideas about how to make businesses accountable for complying with those standards, with approaches ranging from sustainability reporting based on one of several reporting standards developed through multi-stakeholder processes (e.g., Global Reporting Initiative) to benchmarking using various types of scorecards to rank companies on their human rights performance.

      CSR has been widely criticized by human rights activists, many of whom dismiss CSR as being nothing other than a marketing stunt by corporations that remain primarily focused on profitability and have little real interest in changing their business models to become more environmentally and socially responsible.[48]  Organizations specifically focused on business and human rights tend to draw a distinction between what they refer to as the business and human rights approach and CSR, which they describe as being more concerned with enhancing brand value through a series of diverse initiatives including community development, environmental protection and corporate philanthropy.  These critics point to companies that widely tout the

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