By Bart Mongoven and Dan Kornfield
Harvard University professor John Ruggie, the U.N. special representative
to the secretary-general on business and human rights, is expected to issue his final report to the U.N. Human Rights Council in March. His report will mark the culmination of two years of exploring the controversial mandate of clarifying corporations' human rights responsibilities. Human rights groups, corporations and government representatives have been eagerly awaiting the report. Despite the buildup, the Ruggie report probably will seem anticlimactic initially. It probably will make it clear that a mandatory mechanism governing corporations' human rights responsibilities is untenable at present. In lieu of such a mechanism, activists and businesses probably will create two institutions, one setting standards for corporate behavior and another containing enforcement mechanisms. Each year, human rights groups, corporations and government representatives gather by the second week in February at the plenary of the Voluntary Principles on Security and Human Rights
(VPs), one of several initiatives
destined to shape the future of corporate behavior and financial projects around the world. But their 2007 meeting was postponed, without fanfare, until May. The delay will allow decision-makers at the plenary to take Ruggie's report into account. Another initiative aimed at shaping corporate behavior is the Business Leaders Initiative on Human Rights (BLIHR), comprising 13 multinational corporations — including Ericsson and General Electric, which joined in November 2006. The two companies were positioning themselves strategically to benefit from participation in the close relationship BLIHR has developed with Ruggie. Though the Ruggie report can be expected to address many important questions, it is unlikely to put to rest the questions activists actually want answered. It will not provide a neat bundle of human rights responsibilities applicable to business, along with ways to hold corporations accountable to these. Instead, Ruggie probably will say the answers businesses and activists seek must be developed through a longer process. BLIHR realizes this, and is positioning itself to be instrumental to that process. Meanwhile, the communities that are developing various codes of conduct have paused. This is partly because they do not want to duplicate Ruggie's work, partly because they do not want to embark on actions Ruggie will undo, and partly because codes of conduct collectively have reached a point at which the groups need more than just rules with limited to no enforcement capability. Though these groups have put much on hold waiting for Ruggie, they are not likely to get an enforcement mechanism out of him. Activists and businesses will face several choices at this point. They can:
- continue to fight over the content and enforcement mechanisms of each individual code of conduct.
- step up lobbying and counterlobbying efforts to enact or obstruct national legislation and international treaties.
- return to deadlock over the Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights (U.N. Norms), which Ruggie dismissed in his interim report.
- create institutions to continue to explore the standards and their implementation and enforcement mechanisms in a carefully organized, credible multi-stakeholder context. (The standard-setting and enforcement bodies would have to be separate.)
The first two options essentially would maintain the status quo. The third option would mark a step backward; it appears most actors have lost their appetite for that fight in any case. Over the course of the past five years, businesses have become adept at engaging cooperatively with activists at the tactical level, so both sides probably will push for similar engagement at the strategic level. The fourth outcome thus becomes the most likely. It probably will lead to a strong demand by both businesses and activists for the creation of two related multi-stakeholder institutions. Ruggie's final report probably will emphasize a vacuum that the development of two very important institutions will fill. One of these institutions would be an oversight body for codes of conduct. It would provide an authoritative, credible voice to adjudicate whether voluntary codes of conduct are soundly conceived and implemented, and possibly undertaking the investigation of specific claims of abuse. The other body would work to translate the human rights obligations currently applicable to nation-states into obligations applicable to businesses, drawing on the experience of companies as they craft and attempt to abide by the voluntary codes. BLIHR has set itself up as the seed of this second organization. Ultimately, it will have to grow into a consultative process that is large enough and open enough to establish the legitimacy of the conclusions reached in its reports. Meanwhile, the community likely to develop the codes of conduct oversight and auditing function will emerge out of the set of relationships BLIHR is crafting with activists and businesses. Teeth, Please
The VPs are among the most prominent business human rights codes of conduct thus far devised. Drafted in large part by the U.S. State Department, its participants include four countries (the Netherlands, Norway, United Kingdom, United States), several prominent nongovernmental organizations (NGOs), and 16 major oil, gas and mining companies. The VPs outline ways companies can avoid being complicit in human rights abuses committed by security forces working for or assigned to them — a serious problem, particularly for companies with operations in countries with repressive governments. The main reason the VPs 2007 plenary was postponed is tied obliquely to Ruggie's work. The VPs marked its five-year anniversary at the 2006 plenary session, but the mood there was hardly celebratory. A group of participating NGOs, led by Amnesty International and Human Rights Watch, demanded that annual reporting criteria be established for signatories to the VPs, including provisions for excluding companies and countries that were clearly failing to abide by the principles. No consensus on these points was reached, and the question was put off for the next plenary session, with NGOs issuing veiled threats to withdraw their support from the VPs if they did not enact an accountability mechanism by 2007. The parties to the VPs — governments, companies, NGOs — still have not reached a consensus on annual reporting standards, and they do not want to hold the plenary as long as they can expect a repeat, or worse, of the last meeting's failure. NGOs long have expressed concerns that voluntary codes of conduct sometimes provide cover for corporate misbehavior
while posing as a solution to a problem that binding legislative options and international treaties might otherwise address. The Final Report
Ruggie's report in March will follow an interim report he issued in February 2006, and will draw on numerous regional and topical consultations involving legal experts, NGOs, policymakers and business leaders. As demonstrated in his interim report and judging from the reactions to it, Ruggie has positioned himself as an authoritative mediator whose work and insights are respected by both businesses and NGOs. Ruggie's interim report changed the terms of the business human rights debate, removing the draft U.N. Norms as a focal point. His final report is likely to be just as consequential — and likely will carry implications for national legislation, international standard-setting and even the implementation of voluntary codes of conduct and other voluntary initiatives, including the VPs. The central issue Ruggie is likely to address in his final report is the tensions between two poles. At one pole are activist demands for a mandatory human rights regime that dictates detailed, enforceable standards regarding companies' obligations pertaining to political, civil, economic, social and cultural human rights. The other pole is rejection of such a regime by corporations, arguing that it would rest on faulty legal reasoning and create an impossibly heavy burden that, in any event, rightfully should fall to governments. Ruggie's solution is likely to distinguish between egregious violations of human rights and less egregious violations of human rights. Additionally, he probably will propose mechanisms to help voluntary initiatives become more robust, and eventually interact with and inform legal institutions. Activists are likely to concede the first point guardedly while watching the details of the second point very, very carefully. Credible Voluntary Codes
In examining the most egregious violations of humans rights — violations of the so-called jus cogens norms — Ruggie's final report likely will call for states to create national laws that hold transnational corporations accountable for acts abroad
. This would aim to improve upon the role the U.S. Alien Tort Claims Act — established in 1789 to combat piracy, not hold corporations to account — has been shoehorned into. Ruggie probably will be very clear that such legislation should deal only with violations of the top tier of the most universally recognized human rights. Otherwise, a great deal of confusion regarding multiple jurisdictional claims and standards of harm might result — one of the fundamental problems with the draft U.N. Norms. That will be the easy part. The tricky part for Ruggie will be weighing in on what to do with the whole array of potential human rights abuses that fall below the egregious standard. In this regard, two questions must be addressed:
- how to develop a consensus on what constitutes the human rights obligations of businesses?
- how to hold businesses accountable for those obligations?
Ambiguities surrounding the first question significantly complicate the second. The generally accepted human rights obligations are defined as state obligations, not obligations for private actors. For example, the International Covenant on Economic, Social and Cultural Rights, adopted by the U.N. General Assembly in 1966 and entering force a decade later, calls for states to recognize and take steps to ensure, among other things, peoples' right to an adequate standard of living, including adequate housing. It is tricky enough to know how to hold states to such a standard, but even more difficult to understand
what holding corporations to this standard would mean. Furthermore, there are good reasons why this might not be a proper responsibility to assign to corporations. As long as standards are not clear, mandatory enforcement cannot be taken very far. Ruggie said in his interim report that "standards in many instances do not simply 'exist' out there waiting to be recorded and implemented but are in the process of being socially constructed." This train of thought could indicate that the proper venue for the process of constructing standards is in multi-stakeholder initiatives that have led to the creation of voluntary codes of conduct. Although not technically a code of conduct, the extensive consultative process that resulted in the third version of the Global Reporting Initiative
is a case in point. Working groups with representatives from corporations of many industry sectors, together with policymakers and activists from around the world, developed consensus points through months of collaboration and open comment periods. It is not clear whether activists will follow through on threats to leave these processes, but a climate of frustration and distrust is an ongoing problem, which again raises the question of the continued viability of voluntary codes. In the case of the VPs, getting four countries, several prominent NGOs and 16 major oil, gas and mining companies all to sign onto a joint initiative was quite a feat. But now that initiative is in jeopardy, because there is not enough trust left in the process to develop a more stringent version of the VPs that would help to ensure their credibility and guarantee that members abide by their commitments. Activists want something that will enable them to trust that signatories to a code of conduct are genuinely implementing the code. Companies want a reasonable avenue of appeal so they do not get stuck with campaigns that accuse them of violations they did not commit or that do not necessarily portray the circumstances fairly. Based on these demands, the need for institutions that satisfy these concerns is inevitable. Setting Standards
BLIHR has positioned itself as the beginning of the standard-setting process by developing a three-tiered standard of human rights obligations for businesses — essential, expected and desired by stakeholders according to evolving international norms. BLIHR's small membership cannot claim to speak for the mainstream business community. BLIHR has laid the conceptual groundwork for what soon must be taken over by a larger group, however. In this sense it served as the necessary incubator — just as the corporate social responsibility group Ceres once incubated what became the Global Reporting Initiative. Its work probably will be expanded to a larger multi-stakeholder platform. Based on this new body's work, the essential, expected and desired standards will be negotiated through a dynamic process affording it increasing legitimacy in the public eye. Those elements found to fall in the essential category can then become de facto recommendations to legislative and international standard-setting bodies. An Enforcement Mechanism
Meanwhile, a sister organization would lay basic standards for the operation of credible codes of conduct, and provide an auditing function on the implementation of those codes. BLIHR does not set out to be such an organization. But it has already begun to build the necessary relational ties to other key actors — including the International Chamber of Commerce and the International Finance Corp.
— that form the community from which such an auditing function is likely to emerge. The work of the International Standards Organization (ISO) on ISO 26000
, an international standard that will provide guidelines for social responsibility, probably will be important to this sister organization's work as well. Models exist for such an auditing body, though it has been tried only with a narrower range of issues. One of the best known and most effective was established to enforce the first code of conduct to result from a modern activist campaign. The Nestle Model
Established in the early 1980s, this group was the Nestle Infant Formula Audit Commission (NIFAC). This body was established as part of the resolution of the global consumer boycott of Nestle over its marketing of infant formula in developing countries. Though the company funded the body, it was independent and headed by former U.S. Secretary of State Edmund Muskie. NIFAC's objectivity was unimpeachable. Nestle approved of the policing organization as part of the boycott resolution because it was concerned that many alleged violations were ideologically or opportunistically motivated, not based on fact. Nestle also recognized it could not police the activities of all of its marketing personnel globally, and that isolated violations likely would continue until activists, governments and the company together identified problem offices and people. For the boycott organizers, NIFAC provided a one-stop shop where allegations could be raised, investigated and a judgment made. NIFAC was a permanent body that ensured that the code of conduct Nestle agreed upon would not lie flat on the page; rather the momentum started by the boycott brought real change in corporate policy. Amplified across a wide spectrum of codes of conduct and industries, such a group would inaugurate the next wave in the debates over corporations, globalization and codes of conduct, a sort of Codes of Conduct 2.0. Ultimately, companies that consider opting out of participating in the formation of these two institutions will need to consider the following:
- The minimum standards advocated by the standard-setting group could start to become habitual — and eventually expected — elements of state-investor agreements. They could thus become contractually binding as part of the rules by which foreign companies and host governments agree to work together, which often supersede some elements of domestic law and process.
- The minimum standards advocated by the standard-setting group could be referenced by other tools such as the Equator Principles, which guide private banks' project investment selection and implementation through to-be-developed human rights impact assessments and management procedures.
- If companies do not endorse the minimum required standards or the implementation mechanisms advocated by these groups, they will be much more likely to face antagonistic activist campaigns.