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In Every Nation for Itself: Winners and Losers in a G-Zero World, World Policy Institute Senior Fellow Ian Bremmer illustrates a historic shift in the international system and the world economy—and an unprecedented moment of global uncertainty.
By Chris Albin-Lackey
Some of the most powerful and sophisticated actors on the world stage today aren’t governments, they’re companies. While some global businesses show consideration for the people whose lives they touch, many don’t. Whether through incompetence or design, some companies seriously harm the communities around them, their own workers, and even the governments of the countries where they operate.
Much of the problem lies with companies themselves—even those that consider themselves ethical. Too often, many deal with human rights problems on the fly, without forethought and in a de facto regulatory vacuum that they lobby vigorously to maintain. History’s long and growing catalogue of corporate human rights disasters shows how badly companies can go astray without proper regulation. Yet many companies fight to keep themselves free of oversight, as though it were an existential threat.
But the lion’s share of the responsibility to prevent and address company-driven human rights abuse lies with governments. As companies continue to extend their global reach, their actions affect the human rights of increasingly more people in profound ways. Governments have failed to keep pace. Most countries have laws on the books requiring companies to adhere to basic human rights standards on their own soil. But multinational companies operate around the world in countries that can’t or don’t provide enough oversight or regulation of their human rights practices.
The governments of countries that are home to the world’s biggest and most powerful corporations—including the United States, European nations, and emerging powers like Brazil and China—have consistently and inexcusably failed to scrutinize the actions of their companies when they go abroad. Instead, governments have focused on developing voluntary initiatives and standards, like the Guiding Principles on Business and Human Rights, which only improve the behavior of companies that are interested in taking them up. Other firms are free to pay disingenuous lip service to these standards or simply ignore them—and many do exactly that.
Lasting Harm to Vulnerable People
The collective failure of governments to do more causes real and lasting harm to vulnerable people all over the world. History right up through the present day shows that poorly regulated industries can devastate the lives of the people and communities they impact. Human Rights Watch research—in places as diverse as India, Papua New Guinea, Nigeria, Bangladesh and Eritrea— has shown this all-too-clearly. Governments should pull their heads out of the sand and accept their responsibility to oversee and regulate company human rights practices.
At a minimum, governments should take it upon themselves to proactively monitor the conduct of their companies when they work in other countries and to investigate credible allegations of human rights abuse linked to those operations. That would still leave hard questions on the table—like how governments should articulate and enforce extraterritorial human rights obligations for companies. But it would at least end an indefensible status quo, with governments refusing to find out whether their corporate citizens are credibly implicated in serious human rights abuses abroad. In Canada, for instance, the government has eschewed calls to establish an ombudsman with robust investigatory powers in favor of a toothless “Corporate Social Responsibility Counsellor.” That office has no mandate to investigate company abuses and in fact can’t do anything at all without being invited to do so by a company.
Human Rights Watch and other organizations have argued that governments should regulate the human rights practices of their businesses, including requiring them to carry out human rights due diligence activity and to fulfill their human rights responsibilities under international law. Not only is this responsible policy, but emerging norms of international law are in support of it. The real question now is whether governments will find the courage to take steps in the right direction, and whether businesses will stand in their way or act as partners. So far, both have disappointed, leaving countless vulnerable people to suffer.
Companies’ Exaggerated Concerns
The reasons companies give for opposing extraterritorial human rights oversight or regulation by their home governments don’t stand up well to scrutiny. One of the most common is the notion that such oversight would put them at a competitive disadvantage against unscrupulous firms from countries with less progressive governments. But frankly, companies should not invest in markets where they cannot effectively compete without being complicit in serious human rights abuses that they need to hide from their own governments and shareholders.
There is also ample reason to think these concerns are overblown. In recent years, governments around the world have passed increasingly tough laws that criminalize overseas corruption by their citizens and companies. In many countries it’s far trickier for businesses to stay clear of corruption than it is to avoid complicity in serious human rights abuses. Yet there is no evidence that tough anti-corruption laws with extraterritorial reach have made companies less competitive.
The only legitimate fear companies have about responsible, measured steps in the direction of extraterritorial oversight and regulation is that “responsible” and “measured” might in some cases be code for “extreme” and “anti-business.” Some worry that opening the door even a crack would lead to stifling overregulation and the criminalization of honest, understandable mistakes.
Some business leaders suspect that nongovernmental advocates of oversight and regulation are inherently hostile toward their industries. Those fears are somewhat understandable—while many nongovernmental organizations are pushing for reasonable rules, some activists probably would like nothing better than to see the mining industry, for instance, crushed by excessive regulation. But those voices shouldn’t dictate the terms of this discussion or be used as an excuse to avoid having it.
Companies may never end up liking the government oversight they need, and they may be correct in calculating that it is not in their narrow self-interest to have it constantly looking over their shoulder. But extraterritorial oversight and regulation of company human rights practices can be done in a way that businesses can live with and profit under. Government action need not be unduly burdensome to be effective, and there is far too much avoidable human suffering on the other side of the scale to justify inaction.
First Steps and Positive Examples
We already have at least some useful models that show us what responsible, measured government action on these issues ought to look like. Under section 1504 of the Dodd-Frank financial overhaul bill, all U.S.-listed oil, mining, and gas companies will be required to publish the payments they make to foreign governments. This essentially makes mandatory the core requirement of a voluntary initiative called the Extractive Industry Transparency Initiative (EITI).
EITI was born through an understanding that the vast revenues extractive industries produce have often fueled corruption and abuse rather than development and progress. EITI tries to combat this by promoting greater transparency. Section 1504 is a modest but potentially transformative step in the right direction.
Incredibly, a powerful coalition of industry groups led by the American Petroleum Institute has sued to gut the rules that would put the law into force. They are effectively demanding the right to keep the public and even their own shareholders in the dark about their payments to foreign governments. Industry groups have also sued to obstruct another key component of Dodd-Frank—a provision to require companies to ensure that their mineral supply chains do not fuel conflict and abuse in the Democratic Republic of Congo.
In spite of all the acrimony (or perhaps underlying it), Dodd-Frank’s transparency requirement speaks to a controversial but important truth: most of what has been achieved through the hodgepodge of voluntary initiatives that dominate the global business and human rights landscape could be accomplished more effectively and even-handedly via binding laws and regulations. The core requirements of many voluntary initiatives that various businesses have agreed to help improve their human rights performance, could be translated into relatively straightforward regulatory mandates. As models for regulation, those standards have the advantage of having already been accepted as legitimate benchmarks for corporate behavior by leading global companies. Their implementation has also been proved feasible and useful for the many companies who have taken them up voluntarily.
Similarly, the idea of human rights due diligence—which holds that businesses should take effective and proactive steps to identify, mitigate, and address human rights risks linked to their operations— would be a stronger tool if governments make it mandatory. The U.S. government recently took a narrow but positive step in this direction, requiring companies that invest in Burma to publicly report any due diligence activities they undertake on a variety of issues, including human rights, and to report any human rights risks, impacts, and mitigation efforts the company identifies.
International efforts to combat corruption provide another useful model. A steadily growing number of governments have moved to criminalize bribery of foreign public officials, no matter where in the world it occurs. In fact, the UN Convention against Corruption and the Organisation for Economic Co-operation and Development’s (OECD) Anti-Bribery Convention both require this. Companies have responded to tough anti-bribery laws with rigorous due diligence programs that are not altogether different from the human rights due diligence activities the Guiding Principles promote.
Governments should also look at how they can push companies toward better human rights practices through existing multilateral institutions, which should in turn examine how they can better help the governments that seek loans to address these issues. For instance, governments could work through the World Bank’s International Finance Corporation (IFC) to better tie the international financing that private companies receive to robust human rights safeguards and require independent monitoring of company compliance.
This would not only help push IFC-funded projects toward better human rights performance, it would probably influence other lenders too. In 2012, the IFC began implementing new performance standards that go some way toward considering human rights in international financing—a small but important step.
Other existing institutions could also be made stronger and more useful. The OECD Guidelines for Multinational Enterprises set out baseline standards for corporate performance in human rights, environmental protection, and a range of other issues. They also call on member countries to establish “contact points”—forums that are able to hear complaints regarding the overseas activities of companies. However, these contact points are generally quite weak and strictly non-adjudicatory. In 2012, Denmark revamped its contact point to allow it to undertake proactive, independent investigations of companies—a real step forward.
Ultimately what’s needed is a workable balance that reduces serious human rights abuses while acknowledging the reality of a complex world where companies do not always have full control over the local environments in which they operate. Getting there will require something from all sides.
Governments need to find the courage to make respect for human rights by powerful corporations mandatory wherever they operate, rather than treating it as just a nice idea. Human rights activists should help design workable regulatory frameworks that are fair to companies. And businesses should welcome, rather than reject, efforts to provide them with the kind of rules and oversight they need to be responsible actors who respect the fundamental human rights of the people they impact.
Chris Albin-Lackey is a senior researcher in the business and human rights division of Human Rights Watch.
[Photo courtesy of Hoyasmeg]