The explosion at the Union Carbide pesticide plant in 1984 in Bhopal, India, was responsible for over 20,000 deaths. When the Probo Koala dumped 581 tons of waste off Côte d’Ivoire in 2006, 17 people lost their lives and nearly 70,000 were poisoned. The collapse of the Rana Plaza building in Bangladesh in 2013 killed 1,000 textile workers. How can we avoid disasters such as these? From workplace accidents to pollution, the business activities of multinationals, their sub-contractors and commercial partners can have tragic human and environmental consequences. In recent years, new regulatory frameworks have been designed to push companies to take better account of the risks they pose to all their stakeholders.
Slow progress on CSR legislation
A binding international treaty on the legal liability of multinationals failed to win a favorable vote at the UN Commission on Human Rights in 2004. It was replaced by a reference framework proposing a number of global standards (see box). In France, a law on the due diligence requirements – or vigilance – of parent companies and contractors was adopted by the National Assembly on 21 February 2017. The legislation, which was the end result of 4 years of campaigning by civil society actors, compels firms to draw up a due diligence plan (covering subsidiaries and regular sub-contractors) to avert human rights violations and environmental damage in France and abroad. A company failing to implement the corporate plan may be held liable if any victims are able to prove that the plan could have prevented subsequent damage or harm. While this new law is clearly a “good thing”, its scope was subsequently undermined by France’s Constitutional Council, who rendered it much less binding than the NGOs initially hoped. At the same time, debate about the legislation promoted media coverage of human rights violations and challenged the reputation of many companies, spurring them at the very least to show concern for the fate of the people in their value chain.
The UN’s guiding principles for inciting corporate diligence
John Ruggie, special representative of the UN Secretary General, worked on the guiding principles for a global standard for human rights. The principles were based on six years of research, including wide-ranging consultations with businesses, governments, members of civil society, local communities, lawyers, and investors, and testing proposals. Aiming to "safeguard, respect and repair", the reference framework has three central pillars:
- A state's obligation to safeguard human rights
- The responsibility of companies to respect human rights
- The need to facilitate reparations for victims of corporate violationsThe UN suggests assessing the impact of economic activities from the point of view of the victims by measuring the severity, extent and irreparable nature of the damage or harm caused.
Many questions remain unanswered
In spite of this progress, the French legislation leaves a number of issues unresolved:
1. "Under French law today," Aucouturier explains, "companies can limit themselves to a single-issue 'human rights' program that is restricted to a handful of initiatives." How can businesses be incentivized to address human rights without reducing the issue to a single cause, such as hunger or child labor?
How can businesses be incentivized to address human rights without reducing the issue to a single cause, such as hunger or child labor?
2. Incorporating human rights into a risk management approach raises a fundamental problem: risk can be optimized but not eliminated. For instance, companies may choose to take the risk of letting people die to reduce production costs or consider human costs simply in terms of the risk of a lawsuit or damage to their image.
3. Risk is managed on the basis of priority. Is the aim to show that human rights abuses have been eradicated in areas where a company has already taken action — in other words, to publicize good practice? Or is the aim to identify where issues that have not yet been detected and tackled to prevent more serious violations from being committed?
4. "Lastly", says Aucouturier, "if we are going to be able to regulate the practices of sub-contractors, we need to cultivate long-term relationships with them. But this runs counter to the founding principles of globalization, which is precisely about increasing flexibility and introducing competition on the largest scale possible." It is a contradiction that calls into question corporate strategy.
How is due diligence to be implemented in a company?
There is another outstanding question: who in a company is responsible for due diligence? Will purchasing managers be content to add a "sustainable development" module to their business impact KPIs? Will lawyers carry on conducting risk analyses exclusively from the perspective of the threat of litigation? "Different perspectives coexist in a number of companies," points out Aucouturier. "For example, one program applies the methodology of the UN Guiding Principles in conjunction with a second program that includes human rights in materiality analyzes. Another approach brings it all together under the umbrella of a company's risk management".
There is no doubt, however, that the UN’s approach is the most effective: analyzing all the risks and acting where they are the most acute, rather than based on where a company has the greatest leverage. At the UN, a new binding treaty is currently being studied, led by the global south, to ensure that the issue is not buried under global risk perspective. “The story,” concludes Aucouturier, “is far from over.”