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ABSTRACT
The UN Guiding Principles did not dictate the appropriate scale and scope of human rights due diligence for multinational enterprises, partly in recognising the diverse forms of transnational business. In the absence of clear definitions, however, companies have, in some cases, been less than duly diligent about the impacts of their operations and business relationships on human rights. This paper presents a methodology and case studies for a proposed due diligence approach for enterprises evaluating the human rights risks of their indirect operations, either the product of their loans or the producers of their raw supplies. It offers a more limited depth of investigation than fully-fledged human rights impact assessment, while driving attention to the most severe threats to human rights. Case studies cover loan recipients and an agricultural supplier in Myanmar, Liberia and Jordan.
Notes
1 UNEP and Foley Hoag, Banks and Human Rights: A Legal Analysis. December 2015 <www.unepfi.org/fileadmin/documents/BanksandHumanRights.pdf> accessed 25 November 2018.
2 James Harrison, ‘Establishing a Meaningful Human Rights Due Diligence Process for Corporations: Learning From Experience of Human Rights Impact Assessment’ (2013) 31 Impact Assessment and Project Appraisal 107.
3 Vigeo-Eiris, ‘The Human Rights Responsibilities of Business In A Changing World: How Companies Across the Globe are Addressing Key Areas of Human Rights’ (2017). http://www.vigeo-eiris.com/the-human-rights-responsibilities-of-business-in-a-changing-world/ Accessed 30 November 2018.
4 OECD, ‘Responsible Business Conduct for Institutional Investors: Key Considerations for Due Diligence under the OECD Guidelines for Multinational Enterprises’ (OECD 2017). An additional guidance, applicable across all industries and sectors, was released in June 2018.
5 The OECD system works through a number of state-level ‘National Contact Points’, or NCPs, who field complaints (or ‘Specific Instances’) from advocates for affected individuals. Until 2012 it was primarily a labour-oriented process, but updates to the OECD Guidelines for Multinational Corporations broadened NCPs’ purview to include human rights violations. Several financial institutions have already been brought to NCPs for ‘specific instances’ involving their linkages to human rights impacts. For example, the Dutch NCP found in favour of a complaint against the Dutch pension fund (APG) for funding an iron and steel operation in India that violated human rights <https://mneguidelines.oecd.org/database/instances/nl0023.htm>. The Norwegian NCP took (and found in favour of) complaints against both the Norwegian pension fund and the sovereign wealth fund, both for failing to have mechanisms in place for identifying and managing human rights risks in their investment portfolios <https://www.oecdwatch.org/news-en/norwegian-ncp-publishes-final-statement-in-posco-nbim-case>. The Australian NCP accepted a complaint against ANZ Bank for funding a sugar operation in Cambodia that resulted in the forced eviction of hundreds of families (four years on, the Specific Instance has not yet been closed) <https://www.oecdwatch.org/cases/Case_343>. The Swiss NCP is currently facilitating mediation between Credit Suisse and complainants over the bank’s financial contributions to the Dakota Access Pipeline in Native American Lands of the US <https://www.oecdwatch.org/cases/Case_475?searchterm=credit+suisse> Accessed 25 November 2018.
6 C Jochnick, ‘Challenging Corporate Power Through Human Rights’ in C Rodriguez-Garavito (ed), Business and Human Rights: Beyond the End of the Beginning (Globalization and Human Rights) (Business and Human Rights: Beyond the End of the Beginning (Globalization and Human Rights), (2015) SSRN https://ssrn.com/abstract=2501084 last accessed 30 November 2018.
7 J Taylor, ‘Strengthening the Link between Performance Measurement and Decision Making’ (2009) 87 Public Administration 853.
8 S Aaronson and I Higham, ‘Putting the Blame on Governments: Why Firms and Governments have Failed to Advance the Guiding Principles on Human Rights’ in K Mills and DJ Karp (eds), Human Rights Protection in Global Politics: Responsibilities of States and Non-State Actors (Palgrave Macmillan 2014).
9 M Likosky, ‘Mitigating Human Rights Risks Under State-Financed and Privatized Infrastructure Projects’ (2003) 10 Indiana Journal of Global Legal Studies 65.
10 J Harrison and S Sekalala, ‘Addressing the Compliance Gap? UN Initiatives to Benchmark the Human Rights Performance of States and Corporations’ (2015) 41 Review of International Studies 20.
11 While the authors can see opportunities for expanding and tailoring this methodological approach to general loans and equity investments, scoping human rights risks would become more challenging, and the pilot case studies did not investigate these challenges. Likewise, the case studies considered situations where the financial institution would have a sufficiently large stake in the investment to carry leverage in decision-making. In situations where a financial institution is part of a large consortium supporting project finance, not all banks would have the same role in conducting due diligence. DFIs in Europe often address this by ceding due diligence responsibilities to the institution with the strongest institutional capacity, though that bank may have limited say over the final loan decision if its holding is too small. The HRRA presented here may not be ‘fit for purpose’ for passive index investments, though it could be used to spot-check investments, particularly in actively managed indices.
12 Harrison (n 2).
13 N Götzmann, F Vanclay and F Seier, ‘Social and Human Rights Impact Assessments: What Can They Learn From Each Other?’ (2016) 34 Imp Ass Proj App 14.
14 T Bansal and Y Wyss, ‘Nestlé's Experience Assessing Human Rights Impacts in its Business Activities’ (2013) The Danish Institute for Human Rights and Nestlé <http://www.nestle.com/asset-library/documents/library/documents/corporate_social_responsibility/nestle-hria-white-paper.pdf> Accessed 30 November 2018; M Koalick, D Utlu and P Bleckmann, Assessing Human Rights Risks and Impacts: Perspectives from Corporate Practice (2016) Global Compact Network Germany <https://www.globalcompact.de/wAssets/docs/Menschenrechte/Publikationen/Assessing-Human-Rights-Risks-and-Impacts.pdf> accessed 30 November 2018.
15 D Baumann-Pauly and J Nolan, Business and Human Rights: From Principles to Practice (Routledge 2016).
16 G Graetz and DM Franks, ‘Incorporating Human Rights Into the Corporate Domain: Due Diligence, Impact Assessment and Integrated Risk Management’ (2013) 31 Imp Ass Proj App 97. Reprisk, Maplecroft, Vigeo Eiris and GES provide human rights risk information as a corporate service. This is based on publicly available data and does not consider the interaction between the proposed investment and the baseline conditions, although it is good practice.
17 R Nieuwenkamp, T van Hoolwerff, C Bohjanen, C Barot ‘Environmental and Social Risk Due Diligence in the Financial Sector: Current Approaches and Practices’ (2013) OECD Working Party on Responsible Business Conduct Sustainable Finance Advisory <http://mneguidelines.oecd.org/global-forum/2013_ws1_1.pdf> Accessed on 30 November 2018.
18 FSR Arduini, , ‘Financial Institutions and the International Frameworks on Business and Human Rights: Challenges in Implementation Procedures’ (2016) 8(2) Amsterdam Law Forum <amsterdamlawforum.org/article/download/370/524>; J Ruggie and R Nieuwenkamp ‘Expert Letters and Statements on the Application of the OECD Guidelines for Multinational Enterprises an UN Guiding Principles on Business and Human Rights in the Context of the Financial Sector’ OECD <https://mneguidelines.oecd.org/global-forum/GFRBC-2014-financial-sector-document-3.pdf> Accessed 30 November 2018.
19 JG Ruggie, ‘Comments on the Thun Group of Banks Discussion Paper on the Implications of UN Guiding Principles 13 and 17 In a Corporate and Investment Banking Context’ Harvard Kennedy School of Government (21 February 2017) <https://www.ihrb.org/uploads/submissions/John_Ruggie_Comments_Thun_Banks_Feb_2017.pdf> accessed 30 November 2018.
20 Thun Group of Banks, Paper on the implications of the UN Guiding Principles 13B and 17 in a corporate and investment banking context (January 2017) <https://business-humanrights.org/sites/default/files/documents/2017_01_Thun%20Group%20discussion%20paper.pdf Thun Group rewrite of the paper available here: https://business-humanrights.org/sites/default/files/documents/2017_12_Thun%20Group%20of%20Banks_Paper_UNGPs%2013b%20and%2017.pdf> accessed 30 November 2018.
21 UNEP and Foley Hoag, ‘Banks and Human Rights: A Legal Analysis’ (2014) <www.unepfi.org/fileadmin/documents/BanksandHumanRights.pdf> accessed 30 November 2018.
22 LC Backer, ‘The Corporate Social Responsibilities of Financial Institutions for the Conduct of their Borrowers: The View from International Law and Standards’ Lewis and Clark Law Review (2017).
23 D Baumann-Pauly and J Nolan, Business and Human Rights: From Principles to Practice (Routledge 2016). Further to this point, Fasterling has noted that the framing of existing risk mechanisms, towards companies, does not provide any insight at all on the risks experienced by rightsholders: B Fasterling, ‘Human Rights Due Diligence as Risk Management: Social Risk Versus Human Rights Risk’ (2016) 2 Business and Human Rights Journal 225.
24 T Bekefi, B Jenkins and B Kytle, Social Risk As Strategic Risk (2006) Corporate Social Responsibility Initiative Working Papers, Working Paper No. 30 (Cambridge, MA: John F. Kennedy School of Government, Harvard University, December 2006).
25 J Browne and R Nuttall, Beyond Corporate Social Responsibility: Integrated External Management (2013) <https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/beyond-corporate-social-responsibility-integrated-external-engagement> Accessed 30 November 2018.
26 Felner (n 12).
27 Vigeo-Eiris (n 3).
28 C Rees and R Davis, ‘Salient Human Rights Issues: When Severe Risks to People Intersect with Risks to Business’ in D Baumann-Pauly and J Nolan (eds), Business and Human Rights: From Principles to Practice, (Routledge 2016).
29 R Horton, ‘Offline: Who Cares About Human Rights Anyway?’ (2013) 382 Lancet; K Salcito and others, ‘Assessing Corporate Project Impacts in Changeable Contexts: A Human Rights Perspective’ (2014) 47 Environ Impact Assess Rev 36; M Langlois, ‘Are Companies Taking a Principled Approach or Are They Cherry Picking?’ SHIFT and Mazars Reporting Trends and Insights Series (New York, 1 April 2017) <https://www.ungpreporting.org/reporting-trends-and-insights-are-companies-taking-a-principled-approach-or-are-they-cherry-picking/> accessed 30 November 2018.
30 MSDM Winkler, GR Krieger, MZ Balge, BH Singer and J Utzinger, ‘Assessing Health Impacts in Complex Eco-Epidemiological Settings in the Humid Tropics: The Centrality of Scoping’ (2011) 31 Environ Impact Assess Rev 310.
31 Assessors should be cautious not to be reliant on company restrictions on scope. In one example, a company requested that human rights evaluation consider the transportation corridor and local population, but did not include time or access to contractor camps on site. These camps turned out to have poor sanitation and sub-standard housing conditions which were the source of major tension within the operation and potential human rights violations.
32 K Bush, ‘A Measure of Peace: Peace and Conflict Impact Assessment (PCIA) of Development Projects in Conflict Zones’ (1998) Working paper No. 1 of the Peacebuilding and Reconstruction Program Initiative. Ottawa: International Development Research Centre.
33 EL Bennett, ‘Legal Ivory Trade in a Corrupt World and its Impact on African Elephant Populations’ (2015) 29 Conserv Biol 54.
34 JB Rule, Theories of Civil Violence (University of California Press 1988); Salcito and others, ‘Assessing Corporate Project Impacts’ (n 29).
35 A Ewing, ‘A Review of Responsibility for Human Rights: Transnational Corporations in Imperfect Statesby David Karp’ (2015) 14 Journal of Human Rights 286; A Kourula and J Mäkinen, ‘Bringing Political Context Back into International Business Studies of Human Rights’ (2017) 13 Management and Organization Review 193.
36 Letter from Michael Posner and Sarah Labowitz to the United States Department of State, Bureau of Democracy, Human Rights and Labor Attn: Jennifer Stein (25 January 2016)
37 JR Owen and D Kemp, ‘Social Licence and Mining: A Critical Perspective’ (2013) 38 Resources Policy 29.
38 D Larcker and B Tayan, Corporate Governance Matters: A Closer Look at Organizational Choices and their Consequences (2nd edn, Pearson 2015).
39 DL Spar and LT La Mure, ‘The Power of Activism: Assessing the Impact of NGOs on Global Business’ (2003) 45 California Management Review 78.
40 WE Thomson and others, ‘Gibson Dunn Offers 2016 Mid-Year Transnational Litigation Update’ The Columbia Law School Blue Sky Blog (New York, 4 October 2016) <http://clsbluesky.law.columbia.edu/2016/10/04/gibson-dunn-offers-2016-mid-year-transnational-litigation-update/> accessed 30 November 2018.
41 SA Soule, Contention and Corporate Social Responsibility (Cambridge Studies in Contentious Politics, Cambridge University Pess 2009).
42 JH Jones and M Salathe, ‘Early Assessment of Anxiety and Behavioral Response to Novel Swine-Origin Influenza A(H1N1)’ (2009) 4 PLoS ONE e8032; D Kahneman, Thinking Fast and Slow (Farrar, Straus & Giroux 2011).
43 K Salcito and others, ‘Assessing Human Rights Impacts in Corporate Development Projects’ (2013) 42 Environ Impact Assess Rev 39.
44 Ibid.
45 P Biernacki and D Waldorf, ‘Snowball Sampling: Problems and Techniques of Chain Referral Sampling’ (1981) 10 Sociological Methods Researsh 141.
46 MG Weiss and others, ‘The Explanatory Model Interview Catalogue (EMIC). Contribution to Cross-Cultural Research Methods From a Study of Leprosy and Mental Health’ (1992) 160 BJP 819.
47 UNICEF, Child Rights and Mining Toolkit: Best Practices for Addressing Children’s Issues in Large-Scale Mining (UNICEF 2017).
48 C Beyrer and others, ‘Neglected Diseases, Civil Conflicts, and the Right to Health’ (2007) 370 Lancet 619; LC Mullany and others, ‘Population-based Survey Methods to Quantify Associations between Human Rights Violations and Health Outcomes Among Internally Displaced Persons in Eastern Burma’ (2007) 61 J Epidemiol Community Health 908.
49 Salcito and others, ‘Assessing Human Rights Impacts’ (n 44).
50 RM Lee and CM Renzetti, ‘The Problems of Researching Sensitive Topics: An Overview and Introduction’ (1990) 33 The American Behavioral Scientist 510.
51 Beyrer and others, ‘Neglected Diseases’ (n 49).
52 Ibid; Salcito and others, ‘Assessing Human Rights Impacts’ (n 44).
53 L Rychetnik and others, ‘Criteria for Evaluating Evidence On Public Health Interventions’ (2002) 56 J Epidemiol Community Health 119.
54 Jones and Salathe (n 43).
55 N Taleb, The Black Swan: The Impact of the Highly Improbable (Random House 2007).
56 Kahneman (n 43).
57 JH Jones ‘Thoughts on Black Swans and AntiFragility’ (Stanford Blogs, Monkey's Uncle, 26 December 2012) <monkeysuncle.stanford.edu/?p=1153> accessed 30 November 2018.
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66 JG Ruggie, Report on the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises: human rights impact assessments – resolving key methodological questions (Implementation of General Assembly Resolution 60/251 of 15 March 2006 Entitled ‘Human Rights Council’, 2007).
67 Salcito and others, ‘Assessing Human Rights Impacts’ (n 44).
68 Kasperson and others (n 60).
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