- “It’s important to keep in mind that the principles are principles. They’re not a toolkit. You don’t take it off the shelf and plug it in and get an answer.”
- “In just three years, the concept ‘human rights due diligence’ – which didn’t exist before—has entered into a variety of international and domestic policy arenas.”
- “We now have a foundation on which we can build going forward. It doesn’t solve all the problems. But at least we now know what the foundations are and how to frame future debate.”
In July 2011, the United Nations Human Rights Council endorsed a set of principles designed “to ensure that companies do not violate human rights in the course of their transactions and that they provide redress when infringements occur.” The ground-breaking Guiding Principles on Business and Human Rights outline how nation states and businesses should implement the UN’s “Protect, Respect and Remedy” Framework in order to better manage business and human rights challenges.
The principles grew out of a six-year consultative process which began in 2005, when UN Secretary General Kofi Annan appointed Harvard University Professor John Ruggie as his Special Representative for Business and Human Rights. While implementation is still in its earliest stages, the Principles have been lauded by non-governmental organizations and endorsed by major corporations. The Coca-Cola Company has praised the “flexible framework” of the Principles; GE has said they will “no doubt serve as a lasting beacon for business entities seeking (to) grow their service and product offerings while respecting human rights.”
John Ruggie recently joined the Corporate Social Responsibility practice of the law firm Foley Hoag as a senior adviser, working with the firm and its clients on issues related to implementation of the Guiding Principles; he continues his association with the Harvard Kennedy School, where he holds a chair in human rights and international affairs, and Harvard Law. In the following interview with Business Ethics Magazine Editor & Publisher Michael Connor, Ruggie discusses implications of the Principles and why he thinks a newly-coined term – “human rights due diligence”- has already become a permanent entry in the lexicon of international business.
MICHAEL CONNOR: The new Guiding Principles rest on a framework that has what you call three pillars – “protect, respect and remedy.” Can you explain those?
JOHN RUGGIE: Yes. The first pillar is simply that under the existing international human rights regime, states are required to protect against human rights abuses – not only those committed by state agents, but also by third parties. So when a country adopts a human rights treaty or convention, there is the requirement that those whose rights are enumerated in those instruments are protected against abuse. By definition, third parties include business. States also have certain legal obligations under customary international law. The bedrock of the Guiding Principles is that they do not attempt to privatize human rights protection: it’s a fundamental duty of states.
The second pillar is what I call the corporate responsibility to respect rights. I chose the word responsibility, rather than duty, because for the most part international law doesn’t apply directly to companies. It applies to states, and through what states do domestically, it applies to companies. The exception to the rule is corporate involvement in the most egregious human rights violations, including crimes against humanity, where domestic courts may apply international standards—as under the U.S. Alien Tort Statute. The corporate responsibility to respect human rights is a social responsibility over and above compliance with applicable laws. It is the minimum expectation society has of business conduct in relation to human rights. It means that as business goes about its business, it should not infringe on the rights of others. So manufacture your mouse traps, deliver whatever services you provide, but don’t infringe on others’ human rights in the process.
The third pillar – access to remedy – includes both judicial remedy, which again is a duty of the state to provide, and non-judicial grievance mechanisms which companies themselves may create to deal with issues before they escalate and turn into major campaigns or lawsuits. The idea in the latter case is for companies to deal with grievances in an early stage.
MICHAEL CONNOR: What’s the business case for concern about human rights? Why should companies care?
JOHN RUGGIE: If you go to company websites, you won’t find one that says “we don’t respect human rights.” They will invariably say – if they say anything on the subject, and more and more companies do – that they respect human rights. I assume they do it in part because it’s the right thing to do, and because expectations by external stakeholders have raised the issue on company agendas. There are also very material reasons. You’ll recall that way back in the 1990s Nike first got interested because there was a worldwide campaign against the company. The extractive industry has been hit by lawsuits in courts in Europe and the United States probably more than any other sector. Internet and mobile telephone service providers are under growing legislative and social pressure for revealing user information to authorities and providing them with other tools to track down dissidents. And so on.
“It’s important to keep in mind that the principles are principles. They’re not a toolkit. You don’t take it off the shelf and plug it in and get an answer.”
MICHAEL CONNOR: So there’s financial risk?
JOHN RUGGIE: There can be huge financial risks. We’re still finishing a research project called the Cost of Conflict with Communities, which was triggered by a Goldman Sachs study about the international oil majors. Goldman looked at 190 projects and found that the time from first approval to the time the first drop of oil was pumped out of the ground had doubled over the course of the previous decade, creating substantial cost inflation. They looked into what the factors were and they discovered that it had a lot to do with various permitting issues, with resistance from communities, with demonstrations against projects, with lawsuits.
So we looked into this. One company went back over its own figures. It discovered that in a two-year period it had left $6.5 billion on the table. Now that attracted attention. We also did some work in the mining industry. For a world-class mining operation, which requires about $3-5 billion capital cost to get started, there’s a cost somewhere between $20 million and $30 million a week for operational disruptions by communities. Another estimate used by the mining industry is that an asset manager is supposed to spend between 5% and 10% of his or her time on community engagement issues. We found that it can be anywhere from a one-third to 50%, and in some cases 80% of their time. So there are opportunity costs, financial costs, legal costs and reputational costs. All this has escalated tremendously, which is why companies themselves have been so interested in the UN mandate I’ve led.
MICHAEL CONNOR: Your report notes that we live in a world of “192 United Nations member states, 80,000 transnational enterprises, 10 times as many subsidiaries and countless millions of national firms, most of which are small and medium sized enterprises. When it comes to means to implementation therefore, one size does not fit all.” In that context, how do you go about getting these principles implemented?
JOHN RUGGIE: It’s important to keep in mind that the principles are principles. They’re not a toolkit. You don’t take it off the shelf and plug it in and get an answer. Issues of context, issues of industry sector, matter. The size of a company may matter. For example, you don’t want to impose the same sets of rules on a small or medium-sized enterprise that has maybe 100-150 employees and occasionally sources something from overseas that you would apply to a company that has 300,000 employees in all the countries of the world. So it’s a principles-based framework, not a rules-based system, and it certainly isn’t a toolkit. But whatever the granular operationalization that companies develop, it has to meet certain criteria, and that’s what the principles really are intended for. They’re benchmarks against which specific tools that are adopted by companies as a way they implement things can be measured by themselves and other stakeholders.
MICHAEL CONNOR: Are there specific countries or parts of the world that might be more affected by implementation of the principles?
JOHN RUGGIE: One of the things we found is that there’s a negative symbiotic relationship between company involvement in human rights abuses and conflict zones -for example, the eastern parts of the Democratic Republic of Congo. That’s one of the types of situation that requires enhanced due diligence. You’re not operating in Denmark; you’re operating in a conflict-affected area where the writ of the government is weak to non-existent. There are also sectoral differences: the mining industry and the oil industry, because of their huge physical footprint, have tended to generate community-related issues. Footwear and apparel and the electronics industry have labor issues. The IT sector has end-user issues. Pharma has access to essential drug issues. That’s why you can’t write a detailed check-the-box toolkit for the globe. But you can, as I say, provide benchmarks against which such things can be assessed.
“In just three years, the concept ‘human rights due diligence’ – which didn’t exist before—has entered into a variety of international and domestic policy arenas.”
MICHAEL CONNOR: What’s been the reaction from business so far?
JOHN RUGGIE: Business has been supportive. I made it a point to reach out to business literally from the beginning, first through the international business associations – the International Chamber of Commerce, International Organization of Employers, the U.S. Council for International Business and the like – and worked closely with them from the start. And then individual companies started getting involved. Over the course of the six years, we held 47 international consultations; business was invited to participate, as were other stakeholders.
A number of companies worked with us to pilot various projects. A group of Dutch companies, including Unilever and Shell, piloted the idea of “human rights due diligence” processes, which is one of the key elements in the Guiding Principles. They spent a year examining whether they could make sense of this concept, and what it would take to make it work. And then they issued a public report saying “Yes, this actually is a good idea, we can make it work.”
We also got five companies in different countries to pilot site-level grievance mechanisms to see how you make them work. For example, Tesco set up a pilot in the Western Cape of South Africa for a network of fruit supplier farms. Sakhalin Energy participated in a pilot in Russia of their natural gas operation on Sakhalin. We had a Hong Kong-based company collaborating with us in its operations in Vietnam. Cerrejon Coal in Colombia participated. Hewlett-Packard collaborated in China. So we tried to work with business to make sure that what we were going to propose would have legs by road testing ideas on the ground.
MICHAEL CONNOR: When you talk about human rights, what are the key conflict points? What violations of human rights most often show up?
JOHN RUGGIE: Again, it varies by industry. If you look at the extractive and infrastructure sectors, one of the main issues initially has to do with taking over land and resettling the population. This has to involve adequate consultation and compensation. Particular issues relate to indigenous communities, which have special protections under many national laws and also under international law. Then there’s issue of the physical security of the person: conflicts between companies and communities; security forces that shoot demonstrators; or, as has been often alleged and sometimes proven, security forces protecting company facilities that trade access for sex, or that rape and sometimes kill people.
In manufacturing, the issue invariably has to do with labor rights. Do you remember the Foxconn story of last year, when there was a rash of suicides by workers? Foxconn is a major Chinese supplier of electronic equipment, mobile, telephones, computers and the like, to western brands; those were workplace related grievances. In the information technology and telecommunications area, a major problem in recent years has been privacy rights. The latter are not always easy cases; they pose dilemmas. When Google faced the issue in China, they tried to figure it out: “What do we do? Can we move our servers? We don’t want to be complicit in putting dissidents in jail. At the same time, we’re in China and we can’t outright violate Chinese law, otherwise we’re not going to be here very long.” One of the things we tried to do in the Guiding Principles is to better inform decision-making in dilemma situations, not to pretend that there are always easy solutions to be had.
MICHAEL CONNOR: The guidelines specifically state that businesses may be involved in adverse human rights activity either through their own activities or as a result of their business relationships with third parties. Does that put a greater obligation on companies to closely monitor their supply chain relationships?
JOHN RUGGIE: Yes. That’s how this all started in the first place. To go back to Nike in the 1990s, they didn’t own any factories; they were buying from independent contractors. Nike’s first reaction back then was, “This is not our problem, we’re just buying stuff.” But that argument didn’t hold for very long. So yes, it does put a greater obligation on companies to do adequate due diligence. Now if you have 100,000 suppliers, as Wal-Mart I think does by now, you obviously can’t monitor the day-to-day activities of each and every one of your suppliers. So it becomes a risk-based approach. Where are the areas of highest risk? Companies have enough intelligence sources to know that. They can ask the question: “What are the sectors, what are the geographical areas, where we need to pay most attention?” That’s part of the due diligence process.
“We now have a foundation on which we can build going forward. It doesn’t solve all the problems. But at least we now know what the foundations are and how to frame future debate.”
MICHAEL CONNOR: Take out your crystal ball for me if you can and look forward 10 years. How broadly will these principles be embraced by countries and business?
JOHN RUGGIE: Yogi Berra said it was hard to make predictions, especially about the future (laughing). But judging from the reception and uptake so far, I think it’s clear that some things are going to move fairly rapidly. Before 2008, no one had ever used the term “human rights due diligence.” It was introduced in my 2008 report. It is now everywhere.
By everywhere, for example, I mean big companies – like GE and the Coca-Cola Company, which have endorsed the Guiding Principles, as have big law firms, like Clifford Chance. Human rights due diligence is now also in the requirements of the OECD (Organisation for Economic Development and Cooperation) guidelines on multinational enterprises. What’s unique about the OECD guidelines is that they come with a complaints mechanism, so that people who feel that their human rights have been harmed can actually bring a complaint against a company to an office in any the 42 countries that adhere to the OECD guidelines.
The principle has been incorporated into a new ISO (International Standards Organisation) standard, ISO 26000. The International Finance Corporation has updated the performance standards it requires of clients, which now reference the business responsibility to respect human rights. The European Commission has incorporated the same principles, including human due diligence, into a new EU strategy on corporate social responsibility. In the U.S., the Dodd-Frank Act includes a due diligence element for companies sourcing certain minerals closely tied to conflict in the Democratic Republic of Congo.
So in just three years, the concept “human rights due diligence” – which didn’t exist before—has entered into a variety of international and domestic policy arenas. It is going to become standard operating procedure going forward. Companies themselves have welcomed the principle and many are already applying it in practice because adequate due diligence can only be their friend: it provides protection in law suits and other liability issues. It doesn’t absolve companies when they commit wrongs, but if they can demonstrate that they’ve done everything possible to get things right, that can only be helpful.
Another element of the Guiding Principles that has had really good resonance inside the corporate community itself, particularly in the extractive industry, is the idea of site-level grievance mechanisms. Again, that wasn’t anything that people generally did or talked about three years ago. I remember being in Peru talking to a community leader; he had just led a community in a demonstration, a long shut-down of a mining operation run by an American mining company. It turned ugly, as these things often do, and people got hurt. I met with him afterward and asked: “So what brought you to this point? Why did you close down the mine?” He said something I’ll never forget: “They wouldn’t listen to us when we came to them with small problems, so we had to create a big one.”
Companies understand that it’s better to deal with small problems before they escalate, particularly when they are embedded in a local community, as the extractives are. I know of a number of companies – I don’t think they’ve announced it publicly, because they don’t want to get too far ahead of the game – that are rolling out site-level grievance mechanisms throughout their operations.
Thirdly, I think the national regulatory regimes in different countries have been as perplexed in the past by business and human rights challenges as business itself was. But they too are beginning to realize that there are certain preventative measures – like human rights due diligence – which if you write them into policy requirements have tremendous potential positive consequences. It’s always harder to deal with issues after bad things have happened: you end up in the courts, with problems that might have taken place on the other side of the earth, and are costly to resolve. In the past, we tended to think about effective remedy largely in terms of after the fact judicial remedy. Now the regulatory authorities in various countries are beginning to realize that there are a lot of preventative measures that can and should be used, which lower the incidence of corporate involvement in human rights abuse in the first place, and thereby also lower the burden on the rest of the remedy system.
Finally, judicial remedy will continue to evolve. Judicial reform in countries where the rule of law is weak and governments are corrupt is a slow process, but it is happening. And the web of legal liability for corporate involvement in egregious violations is expanding in the home countries of multinational corporations—a trajectory that will continue no matter how the U.S. Supreme Court rules on the applicability of the Alien Tort Statute to legal persons, such as corporations.
MICHAEL CONNOR: How does it feel, having spent six years on this project, now that it’s done?
JOHN RUGGIE: It’s not done. It goes on. When I wrapped up my mandate in June, I said to the Human Rights Council that this is not the end, but I believe it is the end of the beginning. What I meant was that we now have a foundation on which we can build going forward. It doesn’t solve all the problems. But at least we now know what the foundations are and how to frame future debate, which was all over the place in the past.
MICHAEL CONNOR: So is there a feeling of accomplishment about that?
JOHN RUGGIE: Yes. I mean it hadn’t been done before. And I don’t have to travel as much (laughing). I get to see my wife and talk to my son more often.
MICHAEL CONNOR: It seems a well-deserved change of pace. Thanks, John, for speaking with us.
This interview transcript has been edited for length and clarity.