Business interest in human rights regulation: shaping actors’ duties and rights

ABSTRACT

Business actors create and operate in global production networks that bring them in contact with regulatory frameworks across multiple levels and domains. Importantly, they also participate in shaping those regulatory frameworks. But what are the specific interests they pursue in their involvement in regulation? Traditionally, scholars tended to assume that the focus of business actors is primarily on avoiding (stringent) public regulation. Recent developments have highlighted a broader range of business interests, however. Accordingly, this paper investigates business positions on the ascription of duties and rights in regulation, specifically in the fields of due diligence, supply chain liability, and extraterritorial jurisdiction. The paper explores these issues in the context of business regulation in the field of Human Rights, looking at the United Nations Guiding Principles on human rights, their German implementation in the ‘Nationaler Aktionsplan Wirtschaft und Menschenrechte’ and the associated processes, in particular.

KEYWORDS:

• Human rights governance
• right and duties
• business
• due diligence
• supply chain liability
• extraterritorial jurisdiction

Introduction

Business actors, especially transnational corporations (TNCs), operate in global production networks that bring them in contact with multiple regulatory frameworks ranging from the local to the international level and from public to private regulation. These regulations ascribe particular duties and rights to business actors. Importantly, however, they are not just objects of such regulatory frameworks but also shape them via various forms of influence exerted in the political process including sometimes even co-regulatory roles.

But what are the specific duties and rights ascribed to business actors and what interests do they pursue with what arguments in their attempts to influence regulation? Critical observers tend to assume that business generally advocates for a hands-off approach to regulation. But are there differences in terms of ascriptions of specific duties or rights that are more acceptable or more important to business? And can we notice a difference between business actors in that respect? After all, companies differ in their vulnerability to shaming and scandal as well as competitive (dis)advantage in adhering to specific regulatory demands (Fuchs, 2006). While some businesses may prefer little regulation, others may look to regulation in the hope to establish a level playing field and receive protection from ‘unfair’ competition. Thus, it is interesting to explore both the role and interests of business actors in regulatory contexts, especially to inquire into the duties and rights assigned to them and their positions on such ascriptions.

A particularly pertinent regulatory context for such an inquiry is provided by human rights governance. After all, human rights governance aims to protect the most fundamental rights and conditions of human wellbeing, and cases of human rights violations have drawn particular attention and controversy in the past. Moreover, the UNHRC’s ‘Open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights’ is currently developing new human rights regulations for business actors, with business representatives taking an active role. Understanding their interests and arguments, then, will provide a basis to anticipate developments and outcomes of this process.

Choosing human rights governance as empirical context may be counterintuitive, though. As part of international law, the protection of human rights relies on national executive and judicial systems of enforcement. Therefore, one would expect that relevant international standards, such as the United Nations Guiding Principles on Business and Human Rights (UNGP), treat business actors solely as regulatory objects (United Nations, 2011). Indeed, while the UNGP discuss responsibilities of businesses, the objective of harmonizing relevant national policies and laws around the world would appear to make states the primary target.

As in other policy fields, however, business actors play an important role not just as regulatory objects but also exert influence on human rights governance today. In Germany, for example, the largest economy in Europe, the implementation of the Guiding Principles was facilitated by the ‘Nationaler Aktionsplan Wirtschaft und Menschenrechte’ [National Action Plan Business and Human Rights] (NAP; AA, 2017). Next to federal ministries, this process involved representatives of business (and civil society) as members of the core steering group. Moreover, the UNGPs already explicitly emphasize an active role and responsibility of business. In fact, critical scholars have argued that business is awarded agency to an extent that makes it a quasi-regulator (Deva & Bilchitz, 2013; Scheper, 2015). Against this background, exploring the interests of business actors in the development of human rights regulation in terms of duties and rights ascribed and arguments made for or against them promises interesting insights.

The present paper, therefore, pursues such an inquiry. Specifically, it explores both the duties and rights ascribed to business actors in relevant regulations as well as their interest in such ascriptions. To that end, the paper first embeds the analysis in the broader context of business’ role in (human rights) governance and identifies specific foci for the ascription of duties and rights. The paper then illustrates the application of the framework in the context of the UNGP and the NAP with the help of an empirical analysis of the codices themselves as well as protocols of the associated processes, using qualitative content analysis. This analysis is based on the documents shown in Table 1. The concluding section summarizes the results and ponders their implications for the broader debate on business power. The results of this analysis show that in the processes leading to the United Nations (2011) and the Mieth and Neuhäuser (2016) businesses primarily voiced interests in line with the idea that states bear the responsibilities of protecting human rights, while business actors have no such obligations and may focus on their economic interests. It also reveals that amongst the discussed regulatory approaches, due diligence was the only approach businesses seemed to accept to a certain degree. Overall, then, the results stand in contrast to claims of an increasing diversity in business interests in the context of human rights regulation made in recent publications and suggest a continued emphasis on (some) duties of care rather than responsibility for outcomes on the part of business.

Table 1. The following table provides an overview of the text corpus.

Data Sources for Coding	Guiding Principles	Nationaler Aktionsplan [National Action Plan]
Results	Guiding Principles on Business and Human Rights	Nationaler Aktionsplan Wirtschaft und Menschenrechte [National Action Plan Business and Human Rights]
Process	Comments by the International Chamber of Commerce (ICC; 2009) and the International Organisation of Employers (IOE), International Chamber of Commerce (ICC) & Business and Industry Advisory Committee to the OECD (BIAC; 2008) and the Business Leaders Initiative on Human Rights (BLIHR; 2008) Bair (2008)	Protocol of the opening conference Protocol of the second plenum conference Protocol of the third plenum conference Protocols of expert consultations

Business interests in human rights governance

There is an extensive literature on business’ involvement in the regulatory process. Scholars have pointed out that business influence policy output today via lobbying and sponsorship, agenda- and rule-setting, as well as the shaping of public discourse (Arts, 2003; Fuchs, 2007, 2013). They have shown that this active political role of business actors has increased over time and interacted with a rise in their acquisition of legitimacy as political actors.¹ Not surprisingly, the increasing influence of business on the drafting of legislation has drawn considerable attention and controversy among scholars and practitioners, with critical observers highlighting the risks of turning the ‘poacher’ into the ‘gamekeeper’ (Gibson, 1999). The literature on ‘regulatory capture’ also adds to the resulting picture, exploring both the dynamics leading to and implications of business influence on regulation (Croley, 2011).

At the same time, research has also inquired into more specific questions of business’ preferences with respect to regulation. Traditionally, an assumption that business wants as little regulation as possible prevailed. In the 1980s and 90s, discourses about corporate social responsibility/corporate citizenship and private governance arose, however. These promoted an idea of business self-interest in ‘good behavior’ and the avoidance of risks, especially consumer boycott, against the background of scandals such as Shell and Esso’s ‘Brent Spar’ public relations disaster or ExxonMobil’s ‘Exxon Valdez’. They also argued that private governance in the form of standards and certification-based self-regulation arose mainly from the failure of public actors to provide necessary regulation, forcing business actors themselves to ensure a level playing field and reducing business risks. Thus, these discourses transported arguments questioning ideas of business’ general opposition to regulation and often promoted claims about the benefits of ‘soft law’ over ‘hard law’.

Critical scholars and practitioners have demanded a more differentiated view on these claims and arguments from the beginning. They highlighted, for instance, that the public regulation presumably missed by business actors had been prevented by themselves to begin with (Smythe, 2009). More fundamentally, they showed that business exposure to consumer pressure and boycott and thus one potential source of interest in regulation differs greatly by sector, home base, and other determinants of visibility (Fuchs, 2006; Mikler, 2018). Many of the sentiments on both sides are also echoed by the literature on global value chains and production networks (e.g. Bair, 2008; Gereffi et al., 2005). The core implication of these research strands, however, is that we cannot assume homogeneity of business actors’ regulatory preferences both in terms of the general avoidance of public regulation or the contents of regulation. Accordingly, more differentiated inquiries into these aspects of business’ regulatory role are urgently needed, and such inquiries should look at the concrete duties and rights assigned to and desired by business actors, in particular. Differentiating between what business ‘must’, ‘should’, or ‘can’ do allows a more systematic understanding of business actors concrete preferences in the context of a given regulatory process.

In international law, in general, there is a distinct imbalance between the duties and rights ascribed to business actors. Traditionally, states are the ones able to implement and enforce international law and therefore ascribed distinct duties. However, increasingly debates around business’ duties in the context of human rights have arisen. Such debates focus on three particular areas of regulation in particular: due diligence, supply chain liability, and extraterritorial jurisdiction.

Due diligence refers to what is required of businesses to prove responsibility in their operation. Thus, it specifies what business actors need to do to prove that they have fulfilled a given responsibility ascribed to them by regulation. Supply chain liability focuses on the question to what extent business actors are responsible for what environmental or social damages are created along their supply chains. Questions here focus on to what extent a given business actor can, should, or must ascertain that they are informed about the conduct of their immediate or even indirect suppliers and structure business relationships accordingly. Extraterritorial jurisdiction, finally, targets the question of the influence of governments outside their territories, implemented via the ability of courts of a company’s home country to judge cases related to events in another country. It affects business in so far as the question is whether business actors can be tried for violations of laws in other countries than the ones in which the violations occurred.

These debates on business’ regulatory role are present in the literature on human rights governance as well. Scholars have inquired into reasons for business’ preference for, public or private human rights governance, for instance, (Scheper, 2015). López (2013) has argued that the shift towards CSR and non-legal frameworks represented in the UNGP was a compromise allowing the garnering of wide-spread support to begin with. The question of why which form of regulation is chosen thus relates to issues of political feasibility but also expected impacts, of course. In this context, Nolan (2013) argues that soft law may make a contribution to the protection of human rights, but that it must be accompanied by harder forms of regulation if it is to have lasting effects (see also, LeBaron et al., 2017). Supporting such views, LeBaron et al. (2017) find that ethically focused audit regimes – despite their apparently growing legitimacy – are primarily used to protect industry commercial interests. Deva and Bilchitz (2013) take an even more critical position on soft law in human rights governance, highlighting that it may not only not contribute to the protection of human rights but also hinder the development of hard law solutions. Finally, Anner et al.’s (2013) analysis of the causes of labor violations in international subcontracting networks also supports a critical view of the potential impact of soft law, as the authors find that the buying practices of global brands and retailers are actually an important driver of human rights violations.

In human rights governance, policy output can be assessed in terms of the duties and rights ascribed to relevant actors. Who has the duty to protect the rights of people, and of whom can those harmed demand justice? The traditional imbalance in the ascription of duties and rights to business actors in international law pointed out above is even more pronounced here. In the relevant international agreements, there are mentions of responsibility that address ‘all of humanity’ in an abstract way and which could be interpreted to include business actors. However, these are only found within the preamble of official documents. Concrete obligations have tended to remain within the traditional approach to international law, under which private persons have no direct responsibility for human rights violations (Baughen, 2015, p. 13). Still, the ascription of duties and rights in the context of due diligence, supply chain liability, and extraterritorial jurisdiction has become an increasing focus of debate both in research and practice.

With respect to due diligence, the ‘responsibility to respect’ plays a core role in the human rights context. Due diligence prescriptions here include the steps required to identify, prevent and address adverse human rights impacts (Human Rights Council, 2008a). Scholars often discuss the potential problems arising from the dual role of due diligence as a managerial tool to reduce risk and as a human rights protection method required to discharge an obligation (Bonnitcha & McCorquodale, 2017; Ruggie & Sherman, 2017). Along this vein, Gregg (2021) argues that while human rights due diligence may work at what it is intended to do – protecting corporations from committing human rights abuses – it does not address the underlying problems and structures which enable the abuse of human rights in the first place. Similarly, Landau (2019) outlines the danger of ‘cosmetic’ human rights due diligence and calls for international regulation that enables respect for human rights in a way that is meaningful and makes sure corporations are accountable for their self-regulatory systems. Also, Michalowski (2013) points out that due diligence in the context of soft law only becomes enforceable if corporations are legally liable for complicity.

Importantly, what is considered due diligence and what relevant prescription find their way into law is influenced by business actors, as well (Smit et al., 2020a, 2020b). Indeed, the concept of due diligence itself could be considered a result of business’ successful pursuit of its interests. After all, it emphasizes the duty of care of business actors rather than outcomes and thus a more circumscribed responsibility. Business demand for due diligence regulation in human rights governance and a reduction in legal uncertainty, which Smit et al. (2020b) identify, may be as much the result of an interest in reducing legal exposure as in leveling the playing field with competitors.

Supply chain liability, in turn, touches on a core issue in the field of business and human rights. Because of the often complex and shifting supply chains in a globalized economy, human rights abuses by business actors can be difficult to tie to specific corporations while nonetheless benefitting them financially. The question, if and how business actors are or can be responsible for their supply chains, therefore, has been the focus of many inquiries (e.g. Terwindt et al., 2018). Scholars discuss these questions for (potential) UN regulation and/or national legislation (Nolan, 2017) or corporate governance (Sherman, 2018), for example. Thus, Bright et al. (2020) argue that the UNGP have encouraged business actors to voluntarily report on their efforts to improve human rights compliance along their supply chains, even though they do not require them to account for violations there. LeBaron and Lister (2015), however, come to the conclusion that business ‘ethical’ audits often focus on rather limited parts of supply chains and may help conceal rather than reveal relevant problems.

In terms of political practice, initiatives concerning supply chain liability are on the rise, as documented by recent changes in national legislation, for example, in France (Assemblée Nationale, 2017) and Germany (Bundesgesetzblatt, 2021). Such legislative initiatives aim to establish some level of obligation for relevant companies to take responsibility for specific conditions along their supply chains and contribute to the closing of regulatory gaps. The concrete ascriptions of duties and rights in these laws and regulations, however, have been quite controversial, with civil society complaining about the weakening of the initial proposals by the German Ministry of Economics, for instance. Thus, the impact of this legislation will have to be seen. At the same time, such an impact could perhaps be a demand for European supply chain regulation to protect companies against a plethora of different regulations in different countries and the resulting regulatory overload.

Extraterritorial jurisdiction, finally, is especially relevant because many cases of human rights abuse along business supply chains occur in countries that are either unable or unwilling to enforce human rights themselves. Analyses of this topic often focus on the legal situation (Chambers, 2018) and the potential impact of extraterritorial jurisdiction as opposed to other solutions (Nissen, 2018). Schrempf-Stirling and Wettstein (2017) argue that human rights litigation presents a promising way for governments to influence business’ human rights policies and conduct. Similarly, Skogly (2017) argues that extraterritorial state obligations (ETO) are fundamental to successfully enforcing human rights across the world. At the same time, implementing such extraterritorial jurisdiction has its own stumbling stones, as reality shows.²

In sum, the ascription of specific duties and rights in human rights governance and of business preferences in this regard deserve attention in research and practice. This is particularly the case with respect to the issues of due diligence, supply chain liability, and extraterritorial jurisdiction. In the following, we pursue such an inquiry for the case of the UNGP and the German NAP, to illustrate relevant questions and dynamics.

Methodological approach

To explore business role and interest in human rights governance, we inquire into the duties and rights assigned to business actors in the UNGP and the NAP and into opinions voiced about these duties and rights in the processes leading up to the regulations. Business actors, specifically business associations, were involved in both processes. In the UNGP process, the International Chamber of Commerce, the International Organization of Employers, and the Business and Industry Advisory Committee to the OECD took part in the hearings and submitted written statements. This consulting role and direct access presented a fundamental change from the previous process, the result of which had not been adopted by the UN-Human Rights council due to business’ protests that it had not been consulted. In the UNGP process, in contrast, business actors were pleased with their role in the consultations (IOE, ICC & BIAC 2008, p. 1; AA, 2015c, p. 6).

In the NAP process, business actors had a close to co-regulatory role as members of the committee on business and human rights that developed the plan for implementing the UNGP in Germany. Here, business interests were represented by the German Chambers of Commerce and Industry, the Confederation of German Employers’ Associations, and the Federation of German Industries.

Our analysis is not supposed to provide a comparison of the two cases. Their nature, both in terms of level but especially in terms of intended output, is too different for that. Rather we see the two processes as interlinked and providing a view on multi-level governance with respect to business and human rights. The NAP is the implementation of the UNGP and, thus, regarding process, topics, and regulatory options influenced by the international process and outcome.

In terms of specific methods, we carry out qualitative content analyses of a) the relevant codices themselves and b) protocols and stakeholder position papers from the relevant negotiations.

Qualitative content analysis facilitates the systematic analysis and interpretation of textual data. Following Mayring (2010), we rely on a rule-bound method defining our starting categories according to our research interests, while retaining the possibility to inductively define further subcodes according to the data. Our core codes include ‘rights’ and ‘duties’, codes for the different actors to whom these duties and rights are attributed, the source of the attribution (speaker), as well as different topics the duties and rights address, specifically due diligence, supply chain liability, and extraterritorial jurisdiction. Given Mieth and Neuhäuser’s (2016) discussion on the need to differentiate between negative and positive duties, the former describing the duty to abstain from harmful action and the latter denoting a duty to help in the fulfillment of rights, we also coded for this difference. Finally, we also paid attention to the question of the distribution and sharing of duties and rights between actors, as assigning certain duties to the state, for instance, tends to imply that one is not assigning these duties to business actors. Unfortunately, the protocols did not always provide information on the exact speaker, at times only referencing ‘a panelist’. This highlights that future research needs to include participating observation in the methodological tool-set.

Business interests in the context of the UNGP and the NAP

Background

Attempts to regulate business activity at the international level have a long tradition. They resulted especially from perceptions of misbehavior by multinational enterprises concerning political, social, and environmental criteria. In the field of business and human rights, international efforts to regulate business’ role in human rights governance initially concentrated on developing binding ‘Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with regard to Human Rights.’ Following the non-adoption of these Norms by the UN, the Human Rights Council appointed a ‘Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises’ (Gereffi et al. 2005). He was tasked with developing the United Nations Guiding Principles on Business and Human Rights (UNGP). In other words, the process moved away from the original target of defining binding rules for business to one in which improvements in the human rights situation were hoped to result from voluntary commitments by states and business actors. During the process of UNGP development, five stakeholder consultations were held in 2007, addressing the role of states, corporate responsibility, accountability, and multi-stakeholder initiatives. Additional consultations with member states and civil society were held in 2010. The Special Representative presented the Guiding Principles to the UN General Assembly in March of 2011, and in June of the same year, they were adopted unanimously by the UN Human Rights Council. It is important to emphasize that the process and the special representative did not set out to create new law. The UNGP are a summation and restatement of existing law regarding business and human rights, rather than a new piece of legislation.

As an international policy instrument, the UNGP rely on adaption into national contexts to become effective. In Germany, this process began in 2014 with work on the ‘Nationaler Aktionsplan Wirtschaft und Menschenrechte’ (NAP). Under the leadership of the German Federal Foreign Office, the committee for business and human rights was formed, consisting of six federal ministries (Labour and Social Affairs, Economic Cooperation and Development, Justice and Consumer Protection, Environment, Nature and Nuclear Safety, Economic Affairs and Energy), three representatives of the economic sector (Confederation of German Employers’ Associations, The Federation of German Industries and Association of German Chambers of Commerce and Industry), two representatives of human rights and development NGOs (Forum Menschenrechte and VENRO), the German Trade Union Confederation, and two consulting members (the German Institute for Human Rights and ecosense; AA, 2017, p. 6). Consultations and hearings were held in 2014 and 2015. The NAP was eventually adopted in December 2016.

Interestingly, the two processes differed in the role held by business actors. While they were consulted in the process of developing the UNGP, they were members of the steering group for the German NAP. Human rights governance, as captured in these documents and their associated processes, thus reveals a procession of the role of TNCs from consulted actor to co-regulator that we witness in many policy fields.

Duties and rights in the UNGP and the NAP

Let us now turn to the duties and rights assigned to business in the UNGP and the NAP and the positions voiced on this by business actors in the relevant processes. We start with a short general discussion on the ascription of duties and rights in the UNGP and the NAP. Then, we focus on the three specific aspects that shape corporate activity in the field: due diligence, supply chain liability, and extraterritorial jurisdiction. In each subsection, we first discuss the information from the two codices and then turn to statements made by business actors in the processes.

Duties and rights (in general)

In terms of the general ascription of duties and rights in human rights protection, the UNGP differentiate between the ‘duty to protect’ for states and the ‘responsibility to respect’ for business enterprises. This differentiation between ‘duty’ and ‘responsibility’ is mirrored further in the use of ‘must’ and ‘should’ in the guidelines. The guidelines clearly formulate that states ‘must’ protect human rights, and only use ‘should’ in suggestions for how to achieve this.

“States must protect against human rights abuse within their territory and/or jurisdiction by third parties, including business enterprises. This requires taking appropriate steps to prevent, investigate, punish and redress such abuse through effective policies, legislation, regulations and adjudication.” (United Nations, 2011, p. 3),

In contrast, references to business are generally framed as ‘should’, thus indicating a form of moral obligation or practical responsibility, but not identifying duties:

“Business enterprises should respect human rights. This means that they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved.” (op.cit., p. 13)

On the one side, this differentiation between the role of states and business actors fits with the nature of international law, in which states traditionally play the central role. One the other side, it is notable, of course, that a regulation on business and human rights does not assign specific duties to business. Given the state centric nature of international law, the task of assigning such duties may have been given to the implementation process at the national level, of course.

However, the NAP follows the tone of the UNGP in highlighting the state’s duty to protect and business’ responsibility to respect:

“With the concept of three pillars, the UN Guiding Principles create guidance for stocktaking on the part of states and at the same time describe obligations or responsibilities of states and business enterprises. They do not create any new human rights standards and do not contain any additional legal obligations, but refer to existing binding and non-binding human rights instruments.” (AA, 2017, p. 5, translated).

Moreover, the NAP explicitly assigns responsibility for working towards avoiding human rights infringements by German companies to the state (op.cit., pp. 21). Thus, we cannot find general duties assigned to business actors in the context of human rights protection in either the UNGP or the NAP.

Turning to the attribution of rights³ in the policy documents and processes, it is interesting to note that we also find no explicit reference to ‘rights’ of business actors. However, one may argue that states’ duties imply other actors’ rights. Of course, not every state duty translates into business rights, as the state may also have duties towards others. However, a business actor may well defend itself for not ‘respecting’ human rights in court proceedings, for instance, arguing that the relevant state did not fulfill the necessary duties to provide business actors with the necessary resources. Naturally, this situation is less clear or the right less strong compared to one explicitly specified in the regulation. Still, the potential rights implied for business need to be kept in mind when considering duties assigned to states below.

Turning to the analysis of the processes, we also notice that discussions focused far more on duties than on rights. Ascriptions that contained expected duties outnumbered such containing rights by almost seven to one. Thus, it appears that the assignment of duties to different actors was a topic of particular concern.

In the UNGP process, business actors emphasized duties for states and the difference in nature between these duties and business’ responsibility. Such arguments can be found, for instance, in statements by the International Chamber of Commerce and the International Organization of Employers, issued as the inputs for the UNGP process:

“[…] Thirdly, governments and business have distinct and very different responsibilities in relation to human rights, and confusing these responsibilities would not serve to protect human rights.” (International Organisation of Employers (IOE), International Chamber of Commerce (ICC) & Business and Industry Advisory Committee to the OECD (BIAC), 2008, p. 2)

At the same time, business voice their interest in being involved in the process and state their commitment to participating in the development of the guidelines (International Chamber of Commerce (ICC), 2009, p. 2). Similar arguments can be found in the NAP process.

Due diligence

The UNGP layout different steps and requirements for due diligence, yet these are, much like the rest of the document, not stated as duties, but as possibilities. As a consequence, Bueno and Bright (2020) see these provisions as a source of legal uncertainty. The NAP goes further than the UNGP and defines five ‘core elements’ of human rights due diligence: a declaration of principles on respect for human rights, procedures for identifying actual and potential adverse human rights impacts, measures to avert potential negative impacts, and review of effectiveness, reporting, and a complaints mechanism. It also specifies that the government will consider additional steps, which may amount to legal requirements, if business actors fail to adhere to these core elements sufficiently by 2020 (AA, 2017, p. 8). Thus, while not being explicitly identified as business’ ‘duties’, the core elements are a step in that direction. In the NAP, we can also recognize implicit rights attributed to business actors which concern government support in the performance of due diligence:

“Small and medium-sized enterprises in particular should take advantage of the advisory and support services offered by the federal government and the associations that are planned in the course of this NAP.” (AA, 2017, p. 7)

Thus, we see a larger degree of divergence between the guidelines and the NAP with respect to due diligence than was noticeable with respect to general duties and rights. The greater extent of specificity on the part of the NAP reflects its nature as implementation of the UNGP. In addition, we see the process moving close to specifying elements of due diligence that business has to carry out, without using the term duty, however.

In the processes, we see a somewhat ambivalent positioning of business actors on due diligence. In the UNGP process, they acknowledged the idea of due diligence as ‘a useful and practical part of the framework’ (International Organisation of Employers (IOE), International Chamber of Commerce (ICC) & Business and Industry Advisory Committee to the OECD (BIAC), 2008, p. 2), however noting also that it would potentially add substantial additional demands on companies (International Chamber of Commerce (ICC), 2009, p. 2). Moreover, they highlight the role of the state in enabling due diligence on the part of business. Thus, business actors stressed the responsibility for states to provide clear guidelines in human rights due diligence, in the NAP process (AA, 2015a, p. 5). The representative of the Union of German Employers also formulated the expectation that the state would be required to provide support to small and medium enterprises to define due diligence and meet their due diligence goals (AA, 2015a, p. 4), and a representative of a fashion industry business association argued that governments need to make due diligence financially attractive by giving them tax incentives (AA, 2015c, p. 11). At the same time, business representatives stated that due diligence reporting should be a possibility to improve their image (or at least manage cases of reputation loss). In addition, they emphasized that they welcome the active role involved in business activities in support of due diligence:

“In particular, we welcome the recognition of the corporate responsibility to respect human rights. It requires the performance of due diligence, which is not just a passive or reactive process. The responsibility to respect and its due diligence component form a very useful baseline for any business wishing to engage on human rights” (Business Leaders Initiative on Human Rights (BLIHR), 2008).

Indeed, due diligence is also one of the few times in which business representatives assign duties to business in the UNGP process:

“Companies cannot ex ante exclude any human rights from consideration; they must develop a human rights policy; have systems in place to ensure that human rights are not adversely impacted; track their performance, and develop systems to mitigate any adverse impacts they may have.” (International Chamber of Commerce (ICC), 2009, p. 6).

Amongst the topics analyzed here, due diligence clearly is the topic with which business actors are most comfortable with. Their positioning is as would be expected. There is some acknowledgment of their responsibility alongside arguments in support of it. Especially, the NAP comes close to defining due diligence as a duty. At the same time, business representatives highlight what states need to do in support of business due diligence, which relates both to clarity in the provisions as well as supportive frameworks in the form of economic incentives and resources.

Supply chain liability

The UNGP discuss possible factors determining the responsibility or need to act for business actors regarding third parties in Principle 19.⁴ Specifically, they outline that business actors should use their leverage to influence third parties to ensure no human rights are violated (United Nations, 2011, p. 21 f). In this context, the guidelines state that business actors are to consider how ‘crucial’ the business relationship is to their activities. While the possibility of ending the business relationship is generally discussed, businesses should, at least, be able to demonstrate their efforts to improve the situation (ibid.). The NAP discusses withdrawal from a business sector or a business relationship explicitly as a measure of last resort (AA, 2017, pp. 8 f.). Additionally, it specifies steps to increase the transparency in supply chains, establish grievance mechanisms, and communicate best practices (ibid.). As discussed in the section on due diligence, the state is expected to help small and medium enterprises in the development of a common understanding of due diligence and supply chain management (op.cit., pp. 19).

Thus, neither the guidelines nor the NAP delineate explicit duties for business actors in terms of supply chain liability. All formulations stay in the realm of responsibilities. Moreover, references to the possibility to consider the importance of a business relationship leave business actors substantial room for maneuver. Indeed, there is little even in the NAP that would appear to impose serious constraints on business activities in the context of human rights violations along the supply chain.⁵ For corporate actors, especially those in the consumers’ eyes, the biggest motivator is probably still the likelihood of scandal, at that point.

Turning to the processes, the idea that leverage or influence would constitute grounds for a duty to act was outright negated by business actors in the UNGP process: ‘The simple fact of having influence is not sufficient to expect from companies a duty to act’ (International Chamber of Commerce (ICC), 2009, p. 4). The majority of business actors’ inputs are critical of strong notions of supply chain liability. Business actors argued for the supplier’s home-state’s duty to ensure human rights protection to be the focus of regulation instead of attributing it to the buyer’s realm:

“If the goal is to reach down into the global supply chain, a large part of the focus should be on the suppliers and domestic companies themselves and the framework conditions in which they operate” (International Organisation of Employers (IOE), International Chamber of Commerce (ICC) & Business and Industry Advisory Committee to the OECD (BIAC), 2008, p. 2).

Thus, relevant duties would lie with the local governments rather than business partners. Shifting regulatory pressure to local governments and thereby implicitly to supplying companies, may also be motivated by the assumption that such regulation might not come to pass in the end. However, the present analysis cannot answer whether this is the case.

Similarly, business representatives in the NAP process attributed responsibility to the state rather than business actors in this context, arguing that states should help businesses generate transparency within their supply chains (AA, 2015a, p. 2). At the same time, business representatives lauded voluntary initiatives by business actors for their flexibility and demanded that the state would not infringe on these (AA, 2015b, p. 2). But the core arguments here were about business’ limited influence on their supply chain and the duties of states. Thus, a representative of the German fashion industry argued that German businesses are ‘guests’ in third countries and thus have limited chances to accomplish change (op.cit., p. 10). The representative added that civil society is often weak in third countries, the state is unable to enforce laws, and, at times, business owners are also parts of national parliaments, which would make passing legislation on the subject difficult. As a solution, the representative suggested that the German government should tie foreign aid to human rights goals to achieve change (op.cit.), thus pushing obligations from business actors to public ones.

The only indication of a potentially less defensive position of business actors on supply chain liability in the UNGP and NAP processes may be provided by business representative’s argument that ‘Above all, stable (legal) framework conditions for entrepreneurial activity would be desirable.’ (AA, 2015c, p. 4, translated). This call could possibly be interpreted as a wish for more provisions, in this respect. However, it may also just be a wish for less legal uncertainty and minimization of related risks.

The analysis of the processes shows that business actors were very critical of supply chain liability as duties for corporate actors, ascribing duties to governments instead. At the same time, they emphasized the importance of flexibility for individual business actors as well as relevant voluntary initiatives. There is a certain mismatch between the ascription of duties to states and the acknowledgment of problems in regulation and enforcement in supplying countries. However, business representatives navigate this paradox by asking the German state to intervene via foreign aid requirements, for instance. Moreover, even for the limited responsibility for supplier conduct with respect to human rights that they are willing to acknowledge, business actors ascribe duties of support to their governments. Except possibly for the call for a stable legal framework then, there is little divergence from the hands-off approach traditionally expected from business actors to be noted by critical observers here.

Extraterritorial jurisdiction

Extraterritorial jurisdiction is a field in which the question of business duties or rights comes down to their protection against the potential rights of others. Can business actors be tried for human rights violations associated with their business in other countries than those in which the violations occurred? The UNGP make four mentions of extraterritoriality. Initially stating that states are not obligated by international law to regulate the business activity outside of their territorium, they then mention extraterritoriality as a possibility which some states have used. However, they remain ambiguous about whether states should adopt policies regulating the extraterritorial activities of business actors based on their territory (United Nations, 2011, p. 3). Augenstein and Kinley (2013) argue that the stance on extraterritorial jurisdiction chosen by the Guiding Principles stops short of what would have been possible to safeguard human rights. They postulate that the state’s duty to protect should be applied to all actors under its jurisdiction, regardless of whether problems arise within its borders or outside of it.

The NAP addresses the topic by negating the applicability of jurisdiction outside of home countries as a principle (AA, 2017, p. 27). It reaffirms that the protection of human rights is a state duty, and every state is responsible for safeguarding its protection in its territory. At the same time, the NAP does mention the possibility of bringing grievances before German courts in specific cases (op.cit., p. 24). Again, we notice a certain level of ambivalence, then. This ambivalence exists in all contexts in international governance, where states may fear that their sovereignty could be challenged. Thus, it cannot be attributed to business interests here, or certainly not to business interests alone. Still, given that business actors exert influence in the relevant regulatory processes, understanding their specific positioning is important.

In the UNGP process documents, we find arguments by business actors that extraterritorial jurisdiction should be limited to cases in which a strong, predictable link between the matter in question and their national territory can be observed (International Chamber of Commerce (ICC), 2009, p. 5). Given that it is not easy to define what such a ‘strong’ and ‘predictable’ link looks like, considerable room for maneuver and interpretation would remain, even if extraterritorial jurisdiction became the norm in this form. In general, however, business representatives assign both duty and impact to the local state:

“A key issue remains the need for adequate implementation and effective enforcement of existing laws – addressing this issue alone would improve human rights in innumerable ways. These elements should be given the highest priority under the State duty to protect” (International Organisation of Employers (IOE), International Chamber of Commerce (ICC) & Business and Industry Advisory Committee to the OECD (BIAC), 2008, p. 2)

Similarly, a representative of the IOE stated in the NAP process that ‘to improve the situation in Cambodia, you would need a Cambodian NAP’ (AA, 2015b, p. 3).

In support of arguments against extraterritorial jurisdiction, business actors also referred to risks of ‘forum shopping’ by potential victims of human rights abuse (International Chamber of Commerce (ICC), 2009, p. 5). They also highlighted the danger of legal uncertainty. Against this background, they highlighted the importance of clear provisions on what would be acceptable and unacceptable behavior abroad by home governments (HRC, 2008b, p. 3; AA, 2015c, p. 20)

Overall then, we see little arguments on the side of business that would go beyond attempts to protect themselves against court suits based on extraterritorial jurisdiction and the associated need for legal clarity. At this point, neither a divergence in business perspectives nor more surprising positions or arguments can be detected. Business actors assign relevant duties to public actors – home countries in providing guidance on how to avoid cases of extraterritorial jurisdiction, and host countries in the passing and enforcing of national laws to protect human rights – while overall rejecting the idea of extraterritorial jurisdiction.

Conclusion

In this article, we have suggested that inquiries into business’ role in global governance should focus on the attribution of specific duties and rights to business actors and business actors’ positions and arguments on these duties and rights. Debates in the literature have suggested a greater variance in business’ regulatory preference than the hands-off approach traditionally expected by critical observers and thereby highlighted the need for more nuanced analyses. In consequence, we explored business’ positions and arguments in the context of human right governance, focusing especially on the areas of due diligence, supply chain liability and extraterritorial jurisdiction. We conducted our inquiry on the basis of a qualitative content analysis of the UNGP and the German NAP as well as documents related to the processes in which they were developed. Given ongoing developments in business’ role in human rights governance, specifically the process of the UNHRC’s ‘Open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights’, it is important to both understand business’ discursive strategies as well as the usefulness of using the ascription of duties and rights as an analytical perspective.

Our analysis of the duties and rights ascribed in human rights governance regulation and associated processes shows much more focus on duties than on rights. Indeed, an actor’s rights may be implicitly associated with other actors’ duties towards that actor, and repeated statements by business actors allude to such an interpretation of state duties. However, corresponding rights for business are not explicitly defined. In terms of duties, we find little that diverges from the hands-off approach critical observers would expect from business, overall. Rather, arguments suggest limits to business’ potential impact on the human rights conduct of their business relations as well as political contexts. Moreover, they emphasize state duties, even when simultaneously acknowledging problems with legislation and enforcement in other countries. Simultaneously, business actors voice the need for legal clarity and their interest in participating in the shaping of relevant regulation, while also highlighting the benefits of voluntary approaches.

However, some differences in business preferences across the fields of due diligence, supply chain liability and extraterritorial jurisdiction can be noted. Of these fields, business appears most comfortable with the field of due diligence. This is probably the case, because due diligence with its emphasis on business’ duty of care rather than outcomes has the potential to offer a ‘safe harbor’ for business actors. The opposition to supply chain liability as well as extraterritorial jurisdiction tends to be stricter, which is particularly interesting given recent legislative developments in some countries in the very field of supply chain liability.

Unfortunately, our data did not allow for a differentiation between the positions of individual business actors or sectors. Business interests were mostly represented by associations and in some cases the protocol only identified that a business representative spoke. That is particularly unfortunate, because individual firms sometimes have more progressive positions than business associations who have to represent the interest of a broad spectrum of companies. It would be interesting to see whether differences in the vulnerability of individual companies or sectors and competitive (dis)advantages) will lead to differences in regulatory positionings and arguments. To get more leverage from an analysis of business positions and arguments on business’ duties and rights in (human rights) governance, therefore, future research should combine an evaluation of protocols with participating observation if not interviews.

Our analysis does not just speak to the question of the regulatory interests of business actors, but also to the debate on business power (e.g. Fuchs, 2013; Levy & Newell, 2005; Mikler, 2018). Scholars of structural power, for instance, will interpret our findings regarding business actors’ preferences on supply chain liability and extraterritorial jurisdiction, in particular, to fit with their interests in maintaining their ability to flexibly move between production locations according to differences in the costs of production, which are at least partially determined by regulatory requirements, of course. Insights into the arguments used by business representatives provide information on what they deem to grant them the most leverage in terms of discursive power, in turn. The concept of due diligence, finally, may provide some leverage to business actors even if specified as a duty, in that its focus on processes rather than outcomes can serve as a firewall against potential litigation.

More fundamentally, scholars of business power would link the access to regulatory co-design awarded to business in the NAP process to business’ acquisition of political authority. In this vein, Mondré et al. (2017) have explored the impact that the attribution of responsibility has on private authority.⁶ They conclude that business actors gain authority from this attribution of responsibility, especially through the performant acts they execute in doing so.

However, the relation between regulation and corporate power is not straight forward and the implications of changes on either side not easily foreseeable. Baars (2017, 2019), for example, argues that business could even gain power in some way from more stringent regulation, specifically legislation subjecting corporate actors to international criminal law, for instance, if corporate actors are able to stabilize or improve their perceived legitimacy through judicative processes. Yet such dynamics would depend on the specifics of the regulation in terms of supply chain liability and extraterritorial jurisdiction, for example. Importantly, our results do not provide any indication that business actors themselves favor such an arrangement. Still, inquiries into the interaction between forms and content of regulation on the one side and business power definitely deserve further attention in research and practice.

The business and human rights field remains in flux, as many ongoing legislative processes show. The Open-ended intergovernmental working group (OEIWG) on transnational corporations and other business enterprises with respect to human rights is working on the development of new international law. The German government has passed a law on due diligence, and the European Union is in the process of doing the same. Again, business actors are involved in the negotiations both directly and indirectly, i.e. via national delegations in the international sphere. Scholarly and societal attention to these processes, thus, is urgently needed, specifically inquiries into the nuances in business’ positioning, potential differences between different types of business actors in this regard, and the various ways in which business actors shape the implementation as well as the further development of relevant regulation. As argued above, human rights governance pertains to the most fundamental contexts of human existence. If actors with a global reach, i.e. affecting the lives of billions of individuals around the globe, are both objects and subjects of human rights governance, we need to know what the consequences of this dual role are.

Acknowledgments

The authors would like to thank the organizers and participants of the Workshop “Political Power and Legitimacy of Corporations” that took place at the TU Dortmund in July 2019 as well as the reviewers of this manuscript for their constructive and valuable feedback. They are also grateful for research assistance provided by Franziska Griebel and Nils Blossey.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Doris Fuchs

Doris Fuchs is Chair of International Relations and Sustainable Development and Speaker of the Center for Interdisciplinary Sustainability Research at the University of Münster, Germany. Her research focuses on power, justice and responsibility in the political system with a particular focus on economic actors, and on global sustainability governance, especially sustainable consumption governance. In previous publications on the role on business actors in global governance she has developed and applied concepts of instrumental, material and discursive power, in particular.

Benedikt Lennartz

Benedikt Lennartz is a research associate at the Chair of International Relations and Sustainable Development at the University of Münster, Germany. His research is focused on business influence in human rights regulation and global governance. He is currently working on his dissertation on the interests of business actors in human rights regulation.

Notes

1. Most fundamentally, this attribution of legitimacy results from perceptions regarding the ability of business actors (relative to governments) to contribute to global governance in terms of problem solving (see, Cashore (2002) on ‘pragmatic’ versus ‘moral’ legitimacy, or Buchanan and Keohane (2006) on ‘empirical’ versus ‘normative’ legitimacy).

2. The collapse of a garment factors in Dhaka, Bangladesh in 2013, was brought before German courts, for instance, given that the factory produced for German textile discounters. However, the case ended up being dismissed by the court in 2019 on the basis that the time gone by since the accident meant that the case had passed the statutes of limitations (Tagesspiegel, 2019).

3. The term rights has different meanings and reference points in the context of the topic at hand. First, the term refers, of course, to the human rights, the protection of which is the explicit aim of the UNGP and NAP. Rights can also be discussed as opposed to duties, in terms of claims that a given actor can make (also against other actors) when it comes to roles in the protection of human rights, however. In our discussion, we have tried to be as explicit as possible with respect to these different uses of the term.

4. The UNGP also link the question of supply chain liability to due diligence, stating that business’ relationships with third parties directly linked to their activities are to be considered an element of due diligence (op.cit., p. 15).

5. Of course, this situation is currently in move, as several governments have or are in the process of introducing separate legislation in this regard. For example, the German ‘Sorgfaltspflichtengesetz’ attributes due diligence duties to companies for the first level of their supply chains, on additional levels duties only apply if the company gains knowledge of transgressions (Bundesgesetzblatt, 2021, p. 6).

6. Following Hannah Arendt, authority can be seen as legitimate power, i.e. power that doesn’t need to be enforced because those affected by it see it as justified. Changes in authority are therefore closely linked to changes in legitimacy.