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Last Updated: 21 February 2010
The United Nations’ Compact with Business: Hindering or Helping the Protection of Human Rights?
Justine Nolan[*]
Citation
This paper was published in the University of Queensland Law Journal (2005) Vol. 24, (2), pp. 445–466.
Abstract
A fundamental shift has occurred. The United Nations once dealt only with governments. By now we know that peace and prosperity cannot be achieved without active partnerships involving governments, international organisations, the business community and civil society. In today’s world we depend on each other. The business of the United Nations involves the businesses of the world.
Introduction
A fundamental shift has occurred. The United Nations once dealt only with governments. By now we know that peace and prosperity cannot be achieved without active partnerships involving governments, international organisations, the business community and civil society. In today’s world we depend on each other. The business of the United Nations involves the businesses of the world.[1]
In 2005, amidst an era of reform the United Nations (UN) moved into its 61st
year of existence. Constantly battling its critics, which
label it bureaucratic,
old-fashioned and ineffective; the UN is once again trying to reinvent itself.
As part of the process to streamline
and modernize the organisation,
Secretary-General Kofi Annan is reaching out, beyond its nation state members,
to non-state actors,
particularly corporations, to help address human rights
issues. Annan sees business as an essential partner in helping to curb human
rights violations.[2]
Engaging corporate actors is seen as part of the solution, not the problem in
fulfilling the UN’s mission to ‘reaffirm
faith in fundamental human
rights ... [and] to promote social progress and better standards of
life’.[3]
Annan’s
ongoing attempts to overhaul the UN are aimed in part at enabling it to face the
challenges of a new global era. The
seemingly increasing rate of globalisation
in the last three decades has placed the UN and governments generally in a
difficult position.[4]
On the one hand, policymakers want to encourage further economic integration to
achieve positive benefits such as investment, technology
and employment that
global firms can bring to national economic growth. But at the same time, many
policymakers want to ensure that
such corporations have safeguards in place so
as to avoid causing environmental harm or directly or indirectly being involved
in
human rights abuses. Yet too often many governments lack the capacity and the
will to regulate at the national level to ensure protection
from such abuses
because such regulation may make their nations less attractive to global
investors. Thus, a range of actors, including
civil society, governments, the
United Nations and corporations, who want to promote global business citizenship
must find a strategy
that holds corporations accountable without thwarting the
many benefits that such companies bring to their stakeholders.
As a result,
the United Nations under the leadership of Kofi Annan, is being encouraged to
forge partnerships and alliances with the
private sector to ensure that
globalisation is accompanied by the effective promotion and protection of human
rights and the environment.
The UN Secretary General is promoting the model that
engaging with the private sector is not an option for the organisation but an
imperative.[5] But such
an approach has its critics who do not believe that economic globalisation can
be made sustainable and equitable, even if
accompanied by the implementation of
standards for human rights. Such critics argue that corporations would like
nothing better than
to wrap themselves in the flag of the UN in order to
‘bluewash’ their public image, while at the same time avoiding
significant
changes to their
behaviour.[6] Agreeing
to disagree, Kofi Annan and the United Nations are forging ahead with their
latest high profile attempt—the Global
Compact—to enlist the help of
business to humanize the face of globalisation.
At the World Economic Forum
in Davos in January 1999, Annan proposed forming a compact between the United
Nations and business promoting
shared values and principles. The Global Compact,
officially launched the following year, is an ambitious initiative that attempts
to unite business and the UN on a mission to promote the positive role business
can play in protecting human rights and the environment.
The Global Compact asks
business leaders to “embrace, support and enact, within their sphere of
influence”,[7] a
set of ten principles in the areas of human rights, labour, the environment, and
anti-corruption. The development of the Compact
is part of the ongoing evolution
of ‘soft law’ standards seeking to clarify (and at times limit) the
human rights responsibilities
of
business.[8] It seeks to
bring together the standards which have been developing over the last thirty
five-years in the form of international
guidelines, declarations and codes of
conduct that are helping to define corporate responsibility for human rights.
However, the
Global Compact does not claim to be another code of conduct, rather
the UN views itself as providing a framework and forum for the
development of a
global learning network where businesses can come together with other
stakeholders to discuss how they can improve
corporate adherence to the human
rights, labour, environmental and anti corruption principles and then implement
them in their operations.
Business participation in the voluntary initiative is
triggered simply by a letter sent from a company to the UN Secretary General
advising support for the ten broadly framed principles and an ongoing commitment
to publicly provide a description of the ways in
which the company is supporting
the Global Compact and its ten principles. While the Compact carries a
significant degree of authority
and weight given the UN’s
‘international and intergovernmental
character’[9]
business adherence to the principles is completely voluntary and it does not
attempt to impose any legally binding commitments on
its participants. In fact,
the United Nations seems eager to ensure that the Compact is not interpreted as
anything more than a highly
public effort to support a form of global corporate
citizenship[10] and
relies on companies to implement its ten principles based on concepts of
enlightened self-interest, public accountability and
transparency.[11]
Five years since the launch of the Compact, questions are being asked as to
the value of this compact between the United Nations and
business.[12] This
paper considers whether the efforts of the Global Compact and its participants
to protect human rights are likely to make a
significant difference to corporate
behaviour. Part 1 examines the notion of corporate responsibility and the role
of the Compact
as a form of soft voluntarism in promoting such concepts amid
calls for developing stronger measures of corporate accountability.
Part II
addresses the mechanics and principles of the Global Compact itself and the
history from which it is derived. Finally, Part
III focuses on the flaws
inherent in the structure of the Compact and the challenges it must face in
order to have an impact in ensuring
greater corporate respect and protection for
human rights.
The Global Compact has been successful in attracting a large
number of participants, now estimated at more than
2,000,[13] but its
attempt to build such a broad and inclusive tent with a diverse range of
corporate participants has resulted in a diminution
of its overall effect. The
Compact is constantly
evolving,[14] however,
in its current form it is not a vehicle to push companies beyond their comfort
zone in confronting their human rights responsibilities.
Corporate Responsibility vs Corporate Accountability for Human Rights
It is indisputable that the idea of corporate
responsibility is becoming increasingly important to both domestic and
transnational
corporations as can be seen from the increasing number of
initiatives aimed at promoting the
concept.[15] Corporate
responsibility, corporate social responsibility, corporate accountability
or corporate citizenship, however termed, is a developing concept that lacks a
commonly agreed definition. Despite
the lack of consensus on a common definition
or terminology, a distinction can be drawn between the use of terms such as
corporate
responsibility, corporate social responsibility and corporate
citizenship versus corporate accountability. Corporate accountability
implies
commitment, legal responsibility and mechanisms that allow for enforcement of
human rights.[16] It
assumes reference to a process whereby a company considers, manages and can be
held accountable for the long-term human rights
impact of its decisions on its
stakeholders.[17]
Corporate accountability contrasts with the softer terms more commonly
associated with the corporate responsibility/citizenship
movement, the latter
signifying more a voluntary uptake of ethical conduct by corporations that is
not necessarily legally enforceable.
For example, the Global Compact aims,
through the power of collective action, “to promote responsible
corporate citizenship so that business can be part of the solution to the
challenges of
globalisation”.[18]
Likewise, continuing with the theme of corporate responsibility, the World
Business Council for Sustainable Development defines it
rather abstractly as
“the commitment of business to contribute to sustainable economic
development, working with their employees,
their families, the local community
and society at large to improve their quality of
life”.[19] It is
this more lenient type of terminology with which the Global Compact clearly
sides and why it can be characterised as a soft
form of
voluntarism.[20]
Generally, the acceptance (in some circles) of the broad concept of
corporate responsibility indicates acknowledgement of the influence
of
corporations on the economic and political life of most countries. Today, the
economic capacities of some corporations often goes
far beyond the economic
capacities of the countries in which they operate and their political muscle is
often far greater than the
ability of some States to regulate them
effectively.[21] The
notion that this power should be accompanied by some level of responsibility
lies at the heart of the corporate responsibility
movement. However, there is a
distinct lack of consensus about the nature and extent of such
responsibility.
Over the last 35 years attitudes towards issues of corporate
responsibility have come full circle, starting and ending with an emphasis
on
regulation and ‘corporate accountability’ rather than
‘corporate social responsibility’. As can be seen
from the
discussion in Part II below, early efforts to curb corporate power in the 1970s
were aimed at ‘regulating’ corporations
to take responsibility for
and be held accountable for human and environmental
rights.[22] The
discussions of the 1980s stand in contrast to this emphasizing deregulation and
corporate rights.[23]
The 1990s was a period when globalisation gathered force (including a growth in
the number and influence of civil society actors)
and media interest focused on
sensational issues such as the use of sweatshops by well known brands like Nike,
Disney and Levi
Strauss.[24] Corporate
self regulation was the key buzz word.
Recently, as the limits of self
regulation have started to become apparent, alternative approaches emphasizing
corporate accountability
(versus corporate social responsibility), and a renewed
interest in international regulation of business are
emerging.[25] The
interest of a large number of civil society groups, including some high profile
human rights groups, in promoting corporate accountability
over corporate
responsibility is evidenced by their unified stance toward the development of
the United Nations’ Norms on the
Responsibilities of Transnational
Corporations and Other Business Enterprises with Regard to Human Rights (the
Norms).[26] The
Norms constitute the most recent attempt to definitively outline the human
rights and environmental responsibilities attributable
to business. The Norms,
drafted by the United Nations Sub-Commission on the Promotion and Protection of
Human Rights and debated
for the first time by the United Nations Commission of
Human Rights at its annual meeting in March 2004 and again in April 2005,
have
provoked diverse reactions from business, governments, human rights
organizations and international and corporate
lawyers[27] but have
generally been embraced by civil society.
Support for stronger notions of
corporate accountability is also evidenced by a new wave of litigation against
companies alleged to
have violated human rights or environmental obligations.
Corporations are increasingly facing scrutiny for the effect of their operations
on the human rights and the environment, and the Alien Torts Claims Act (ATCA)
in the United States, (legislation not traditionally
applied to business
activities), is one tool that is being used to emphasize this link in the public
arena. The ATCA was passed by
the United States Congress in 1789 and provides
District Courts with jurisdiction over violations of the “law of
nations”.
In the modern era, courts have allowed foreign victims to use
ATCA to address egregious human rights violations. More recently, ATCA
has been
used against corporations that have allegedly been knowingly complicit in human
rights violations.[28]
Litigation is also being used to attempt to hold companies to their oral and
written commitments to uphold human rights. Recent efforts
focusing on
Nike[29] and
Walmart,[30]
demonstrate an innovative use of litigation to recognise the potential legal
character of codes of conduct and firm commitments to
human rights and
environmental standards. These cases and others (pursued, for example, under the
law of negligence in the United
Kingdom[31] and
Australia)[32] test
the boundaries of existing legal assumptions with respect to the accountability
of corporations for human rights and environmental
obligations.
The newly
established International Criminal Court (ICC) also offers another opportunity
for using the law to hold individuals within
companies accountable for egregious
human rights abuses. Building on the UN’s special tribunals set up in the
1990s, particularly
those in the former Yugoslavia and Rwanda and on new legal
precedents of universal jurisdiction, the ICC takes an important step
towards
global accountability for all, including potentially targeting individuals
operating within a company that is involved in
the commission of human rights
abuses. The ICC is a permanent tribunal that investigates and tries individuals
for the most serious
international crimes: genocide, crimes against humanity,
and war crimes.[33]
The current prosecutor of the ICC, Luis Moreno-Ocampo has indicated that
officials of corporations could be held accountable before
the ICC for directly
or indirectly facilitating conduct that leads to violations of international
law.[34] For example,
if a company engaged in trading natural resources pays money to a government
that uses it to fund soldiers who commit
war crimes, arguably such a company may
have facilitated a war crime and its relevant officers could be
prosecuted.[35]
Given the contemporary establishment of the ICC and its limited capacity for
investigations to date, much of this remains conjecture
but a recently initiated
Australian investigation shows the potential for using legislation in an
innovative way to hold individuals
within companies liable for egregious human
rights abuses and press for stronger measures of corporate accountability. In
October
2004, a small-scale rebellion occurred in the Democratic Republic of the
Congo which caused the interruption of operations at a mine
run by an Australian
company, Anvil Mining. The rebellion was ruthlessly suppressed by the Congolese
Armed Forces (FARDC). It is
alleged that Anvil Mining provided logistical
support to the soldiers by provision of company planes and vehicles used to gain
access
to the area. As a result of certain amendments to the Criminal Code in
Australia, which were introduced as a result of the Rome Statute
on the
International Criminal Court, it is now a criminal offence under Australian
national law for an Australian national to commit
war crimes or crimes against
humanity, even where those offences have occurred overseas, including aiding and
abetting a crime.[36]
Counsel in Australia has been instructed by several human rights organisations,
two in the Congo, one in the United Kingdom and one
in Australia, to file a
complaint with the Australian federal police requesting them to investigate
whether or not certain human
rights violations, crimes against humanity and war
crimes were committed by individuals of Anvil Mining. The ongoing investigation
will hinge on the manner in which the planes and vehicles were provided to the
military, that is, offered or commandeered. Because
of the geographical
isolation of the area it meant that it would have been very difficult without
the provision of transport facilities
for the Congolese military to have acted.
The increasing prevalence of such innovative uses of legislation to curb
corporate involvement
in human rights abuses, indicates a growing appetite in
some circles for the development of stronger measures of corporate
accountability.
Beyond litigious techniques, calls for greater transparency
and access to information on social and environmental aspects of company
performance represent the next frontier for improving corporate accountability
mechanisms. Mandatory legislation on various aspects
of business transparency is
emerging around the world. It can form part of company law, environmental
regulation, or tailored legislation
for institutional investors on social and
environmental
reporting.[37] A
number of jurisdictions have begun to make inroads into regulating reporting on
social and environmental issues including Australia,
the United Kingdom, France
and South Africa which, in various forms, have been regulating versions of
triple bottom line
reporting.[38] Such
legislation, which for the most part is still relatively open ended, may be used
to support claims that argue for the legitimacy
of incorporating social and
environmental considerations into corporate decision-making and highlights the
possibility of corporate
regulatory agencies devising mechanisms to make clearer
the connection between corporate action and the protection of human
rights.
At the very least, the ongoing development of these legal mechanisms
described above sounds a warning for business to consider more
seriously their
human rights obligations and the public commitments they make to them. The
limited ambition of the Global Compact
to guide rather than
enforce improvements in corporate behaviour stands in stark contrast to
some of these latest efforts to promote corporate accountability
over corporate
responsibility.
The Global Compact
A. What it is and what it is not
The Compact is a purely voluntary initiative that aims to use the “power of collective action... to promote responsible corporate citizenship.”[39] The Compact asks business leaders to “embrace and enact” a set of ten principles relating to human rights, labour rights, the protection of the environment and corruption, in their individual corporate practices.[40] The standards aim to reflect those norms as laid out in the Universal Declaration of Human Rights, the ILO’s Tripartite Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development and the United Nations Convention Against Corruption. The ten principles are:
The Global Compact seems clearer now on what it is and what it is
not than when it was first established five years ago. In its first
few years of
existence there was a flurry of letters back and forth between the Compact and
civil society emphasising concerns with
the Compact model and its limitations
for enforcing improvements in corporate
behaviour.[41]
Concerns generally focused on fears of companies using the United Nations as a
public relations cover while offering only token changes
toward improving actual
corporate responsibility
practises.[42] From
the beginning, the Global Compact had an open door policy where businesses only
had to submit a letter of intent to the Secretary
General expressing support for
the Compact and agreeing to advocate for its principles and submit once a year
examples of good practice
in relation to at least one of the principles. In
practice however, few companies complied with this minimal reporting
requirement.[43] The
easy access into the Compact continues to concern many NGOs and motivated the
Compact to undertake a strategic review of the
integrity of its processes over
the last year.[44]
However, although civil society concerns have not noticeably decreased over the
last five years, the Global Compact has taken the
time to become more assertive
about what it does stand for.
In a recent interview with the Executive Head
of the Global Compact, Georg Kell, he emphatically stated that the Global
Compact “is
not an enforcement mechanism...it’s a learning dialogue
and a platform for
action”.[45]
Kell is keen to characterise the Global Compact as a learning network and one
that is more closely associated with the concepts of
corporate responsibility
and thus distance it from stronger notions of enforcement that accompany an
understanding of corporate
accountability.[46] In
the words of the Compact itself:
[T]he Global Compact is not a regulatory instrument—it does not “police”, enforce or measure the behavior or actions of companies. Rather, the Global Compact relies on public accountability, transparency and the enlightened self-interest of companies, labour and civil society to initiate and share substantive action in pursuing the principles upon which the Global Compact is based.[47]
In principle, the idea of establishing a global learning network to improve corporate adherence to human rights, labour, environmental and anti corruption principles seems sound. However its reliance on public accountability, transparency and the enlightened self interest of companies to achieve this goal has been hindered from the outset by a lack of clarity around its principles, limited transparency requirements and an overemphasis on the voluntary nature of the initiative.[48] Network learning may act as an impetus for improving corporate behaviour but only if business takes the next step and incorporates it into its practices.[49] The 2004 study by McKinsey & Company, commissioned by the Global Compact to assess its impact does not provide solid reassurance that the network learning model is penetrating organisational behavioural changes focused on encouraging greater adherence to the protection of rights.[50] While arguing that the Compact had “noticeable incremental impact” on companies, the study also acknowledged that 40% of participants in the Global Compact felt that participation in the initiative had no significant impact on company policy reform.[51] Such a response indicates that it may be time to rethink the soft voluntary format of the learning network model of the Global Compact in favour of stronger notions of enforcing corporate accountability as set out in the UN Norms.[52]
B. The origins of the Global Compact
The interaction between business and human rights
concepts and the recognition of the necessary existence of such a relationship
is
not new. What is new is the ever increasing breadth and depth of the
business-human rights debate. The United Nations has a history
of interacting
with business but its attitudes and approaches to business have undergone a
profound change during the past three
and a half decades. For much of that
period business has viewed the United Nations with hostility. The launch of the
Global Compact
signalled a significant change in the relationship between
business and the UN.
In the 1970s, amidst calls for a New International
Economic Order, work began within the UN on drafting an international code of
conduct
to regulate the activities of transnational corporations
(TNCs).[53] In 1975,
the UN established a Centre on Transnational Corporations (UNCTC), which by 1977
was co-ordinating the negotiation of a
voluntary Draft Code of Conduct on
Transnational Corporations. Over subsequent years the negotiators managed to
agree that TNCs should
respect host countries developmental goals, observe their
domestic laws, respect fundamental human rights, adhere to sociocultural
objectives and values, abstain from corrupt practices, and observe consumer and
environmental protection objectives. Negotiations
lingered until the
1990’s but the now defunct United Nations Centre on Transnational
Corporations met serious political and
business opposition. It was viewed an
attempt by the United Nations to meddle in the affairs of business. The
involvement of the
United Nations in corporate affairs was viewed as an
unnecessary and unwanted effort (by companies and some governments) to regulate
business.
In the 1980s, the United Nations’ policy towards TNCs
changed course. Instead of trying to regulate foreign direct investment,
UN
agencies sought to facilitate the access of developing countries to
investment.[54]
Deregulation was encouraged.
The 1990s was a period when globalization
gathered force and corporate lobbying effectively undermined multilateral
attempts at addressing
their power. Corporate self regulation was the key buzz
word and the take up and development of codes of conduct in various forms
from
1991 (when Levi Strauss first introduced its code) to the end of the decade was
remarkable and was accompanied by an impressive
body of research literature
focused on exploring this new
phenomenon.[55] These
codes of conduct were an attempt by business to self regulate and make
transparent (at varying levels) their acknowledgement
of universal human rights
and/or environmental standards.
At the same time and continuing today,
UN-business relations entered a new era as the international body strives to
develop partnerships
with large corporations or establish long term projects
funded by corporate
philanthropists.[56]
The United Nations is clear in its belief of the positive role business can play
in ‘being part of the solution to the challenges
of
globalisation’.[57]
Throughout
this period when the United Nations started to change course and develop a more
user friendly relationship with business,
there were ongoing efforts to continue
to develop ‘soft law’ mechanisms to guide improvements in corporate
behaviour,
some in the ‘corporate responsibility’ mode and others,
more recently, that could be characterised as ‘corporate
accountability’ initiatives. Since the 1970’s a number of
inter-governmental organizations have formed voluntary guidelines,
declarations
and codes of conduct to guide the activities of corporations with the most
notable being the efforts of the Organization
for Economic Cooperation and
Development (OECD) and the International Labour Organisation (ILO).
The OECD
Guidelines for Multinational Enterprises (first established in 1976 and
revised in 2000) take the form of a recommendation from OECD Governments to
multinational enterprises
to abide by a set of voluntary guidelines that take
into account issues as diverse as employment and industrial relations, human
rights, environment, information disclosure, combating bribery, consumer
interests, science and technology, competition, and taxation.
The Guidelines
clearly state that "observance of the guidelines is voluntary and not legally
enforceable" and are intended as "good
practice for
all".[58]
In 1977,
the ILO established its Tripartite Declaration of Principles Concerning
Multinational Enterprises and Social Policy
(1977)[59] which
recognizes that business plays an important part in the economies of most
countries but acknowledges the complexity of their
role and the positive and
negative influences corporations can have on development. The Tripartite
Declaration aims to encourage
the positive contribution which multinational
enterprises can make to economic and social progress by devising a set of
principles
to improve conditions of work in multinational enterprises.
The
OECD Guidelines and the ILO Tripartite Declaration were revolutionary in the
sense that they explicitly honed in on delineating
the obligations of companies
with respect to protecting human rights and in some form paved the way for the
establishment of the
Global Compact’s ten principles. However, like the
Compact they continue to be subject to severe limitations. Apart from the
fact
that they are non-binding, their implementation mechanisms are extremely weak
and the duties outlined are broad, lack detail
and provide little practical
guidance for companies aiming to implement such
rights.[60] While the
OECD Guidelines and the ILO Declaration encourage companies to promote
and protect internationally recognized human rights, there are no effective,
independent enforcement mechanisms
to ensure they do so. Decisions cannot be
enforced directly against a company and their power to compel behavioural
changes remains
subject to the political will and ability of national
governments.[61]
Parallel to the development of these high-level broad inter-governmental
guidelines were efforts focusing more specifically on regional
issues or
particular industries. In 1977 the Sullivan
Principles,[62]
directed at the behaviour of American companies operating in South Africa, were
established, and in 1984 the MacBride
Principles[63] were
created with the aim of influencing the behaviour of US firms in Northern
Ireland. Both were voluntary guidelines established
to justify the continued
presence in South Africa and Ireland respectively, of American firms, and to
guide their behaviour within
a regime which mandated, and in some cases even
required, the exploitation of workers. The codes were voluntarily adopted by
some
businesses to avoid harsher external regulation (the threat of United
States legislation) which would require companies to disinvest
from South Africa
and Northern Ireland.
More recently, the 1990s has seen increased media
attention focused on ‘sweatshop’ conditions used by high profile
companies
such as Levi Strauss, Gap, Nike and others to produce consumer
goods.[64] In the rush
to find cheaper and quicker ways to produce shoes, apparel, and other
labour-intensive goods for the global marketplace,
transnational corporations
have moved much of their manufacturing offshore to countries where practical
legal protections for workers
are limited. Such media attention sparked a
growing public demand for corporations to take responsibility for a range of
human rights
and environmental problems in countries where they operate and
foreshadowed the ever increasing uptake of codes of conduct. Codes
of conduct
assume many forms and
roles.[65] One
function is in setting a standard to which companies publicly commit. Although
codes are not generally legally enforceable, they
are backed by the reputation
of the company that adopts them, supported by the ever-present threat of media
exposure. As such, codes
have tended to be adopted more quickly by those
companies that rely heavily on the value of their brand to sell their product
and
their content influenced by the issues most relevant to the company’s
operations.
In addition to company-specific codes, alliances between NGOs,
companies, industry groups and in some cases trade unions have led
to an
increase in multi-stakeholder approaches to developing consensus on code
standards, guidelines and monitoring mechanisms. Codes
such as the Fair Labor
Association’s Workplace Code of
Conduct,[66] Social
Accountability
8000,[67] the Ethical
Trading
Initiative,[68] the
Global Reporting
Initiative,[69]
AA1000,[70] Voluntary
Principles on Security and Human
Rights,[71] and the
Business Principles for Countering
Bribery[72] are just a
few of the plethora of codes and guiding principles that have been developed,
all largely focused on transnational corporations
who bear responsibilities,
either directly or via their supply chain for the protection and promotion of
human rights and environmental
norms.[73] The content
of these codes and guidelines have laid the foundation for the establishment of
the ten principles set out in the Global
Compact.
Despite this extensive
array of principles and guidelines that attempt to define the social
responsibilities of corporations, there
remains “a gap in understanding
what the international community expects of business when it comes to human
rights.”[74] It
is partly for this reason that subsequent to the establishment of the Global
Compact, the United Nations Norms on the Responsibilities
of Transnational
Corporations and Other Business Enterprises with regard to Human Rights were
formulated. The Norms were developed
at the instigation of the United Nations
Sub-Commission on the Promotion and Protection of Human Rights, a 26-member
group of experts,
which reports to the 53 government members on the Commission
on Human Rights.[75]
In 1998 the Sub-Commission established a working group on the activities of
transnational corporations which, in 2001, was asked
to “[c]ontribute to
the drafting of relevant norms concerning human rights and transnational
corporations and other economic
units whose activities have an impact on human
rights.”[76]
The Norms were adopted by the UN Sub-Commission on the Promotion and
Protection on Human Rights in August 2003. They were considered
by the
Sub-Commission’s parent body within the UN, the Commission on Human
Rights, in April 2004 and again in 2005. The Commission
did not adopt the
Norms, but did not reject them either, and the Norms remain in a holding
pattern. Despite their apparent legal
limbo, the Norms have taken on a life of
their own. A number of companies and NGOs are ‘road-testing’ the
Norms.[77] Indeed, it
is likely that in the short term, the Norms will become the international
standard for corporate human rights responsibilities,
and may over the longer
term constitute the blueprint for future international standards. This is not to
say that the Norms have
been universally welcomed, in fact they have survived
despite consistent efforts by some business organisations and governments to
defeat them.[78]
However, prompted by the widespread interest in the Norms (both positive and
negative), the Commission was motivated to take a number
of initiatives. Most
importantly, it resolved in April 2005 to appoint a Special Representative on
the issue of ‘business
and human
rights’.[79] The
appointment of the Special Representative reflects a growing consensus
internationally on the importance of companies to promote
and protect human
rights.[80]
The
rights encompassed by the Norms cover a wide spectrum of human rights including
the most fundamental and basic rights that have
been agreed as accepted
standards for nation states and individuals for decades and previously
enunciated in some of the codes mentioned
above. The issues encompassed within
the Norms focus on the right to equal opportunity and no-discriminatory
treatment; the right
to security of persons; the rights of workers; consumer
protection; environmental protection and economic, social and cultural
rights.[81] As such,
the Norms represent a growing refinement and acceptance of the core rights
applicable to business. In this sense, they are
crucial in offering much needed
clarification of the nature and extent of business human rights obligations and
stand in contrast
to the broad principles outlined in the Global Compact. The
Norms similarly attempt to incorporate a wide variety of implementation
techniques ranging from company self-reporting to external verification but the
proposals outlined in the Norms are more in the form
of road signs than well
developed theses on the most effective means of enforcing corporate
accountability for rights.
With the plethora of codes, declarations and
guidelines that have been developed in the last three decades, it begs the
question of
how the Global Compact stands apart from the others and what value
it brings to the business and human rights arena. The Compact
has much in common
and is derived from other multi-stakeholder initiatives but the UN factor sets
it apart. From the outset it was
clear that the credibility of the United
Nations brand name was, and continues to be important in attracting a large
number of business
participants to the initiative. The moral authority and
leadership of the Secretary-General in establishing the Global Compact validates
the business and human rights connection as an issue that warrants high level
attention and guarantees the Compact, via the UN, global
reach. An additional
attraction of using the United Nations to promote these issues is its undisputed
convening power and networking
capacity.[82] The
Compact enjoys inter-governmental backing along with support from governments,
business and segments of civil society. These
positive attributes of promoting
corporate responsibility through the United Nations can turn negative if it is
used more as a cover
for improving corporate practices rather than implementing
actual changes in the boardroom and on the ground. The lack of clarity
of the
Compact’s principles, its limited accountability and transparency and an
overemphasis on the value of the voluntary
approach to corporate responsibility
are all factors which damage the credibility of the Global Compact model.
Challenges facing the Global Compact
The launch of the Global Compact in 2000 offered the promise of strengthening corporate respect for human, labour and environmental rights and with over 2,000 companies involved in the Compact some might argue it has already done so. But the challenge currently facing the Compact is whether the practices of its participants live up to the rhetoric. In three crucial areas it appears that the Global Compact model suffers fundamental flaws which affect its ability to engender practical support for rights. These three issues: the lack of clarity in the content and scope of the Compact’s principles; its limited notions of accountability and transparency; and the overemphasis on the value of the voluntary approach to improving corporate behaviour result in a diminution of the overall promise offered by the Compact in bringing such a large number of companies together.
A. Lack of clarity in content and scope of the Compact’s principles
From the outset the Compact has framed its
principles in broad terms. It adopts a descriptive rather than prescriptive
approach, asking
companies to ‘embrace, support and enact, within their
sphere of influence’ a set of core values in the areas of human
rights,
labour standards, the environment, and anti-corruption. By defining the
requisite behaviour only in terms of actions that
embrace, support and enact
rights, the Compact immediately appears to be more promotional than
protectionist in
character.[83] Compare
the language used in the latterly drafted Norms which asks business, within
their spheres of activity and influence “to
promote, secure the fulfilment
of, respect, ensure respect of and protect human
rights”.[84]
Such distinctions in drafting continue in the detail of the principles
themselves.
A major problem with the Compact is the elusive nature of its
broadly framed principles. The human rights and labour standards aim
to reflect
those norms as laid out in the Universal Declaration of Human Rights and the
ILO’s Tripartite Declaration on Fundamental
Principles and Rights at Work.
With the exception of the labour rights principles which are narrowly focused,
the Compact does little
to advance the debate toward clarifying what the
key human rights issues are for business.
The human rights principles
ask business to “support and respect the protection of internationally
proclaimed human rights”
within their sphere of influence and that
business should “make sure that they are not complicit in human rights
abuses”
but do not specify the exact human rights which business should
support and
respect.[85] The
rights covered by the Universal Declaration of Human Rights are presumably not
all primarily relevant to business activities
but little guidance is provided as
to which, if any, rights should be prioritised. Likewise by way of comparison,
Principles 7, 8
and 9 of the United Nations Global Compact are also broadly
framed and encourage businesses to support a precautionary approach to
environmental challenges, undertake initiatives to promote greater environmental
responsibility, and encourage the development and
diffusion of environmentally
friendly technologies. The principles cited in the Global Compact do not
constitute a sufficient basis
for designing enforceable standards and are
beneficial more from the point of view of acting as yet another indicator in the
global
arena of the general relevance of international human rights norms to
business. The lack of conceptual clarity leaves a wide margin
of appreciation to
business regarding the interpretation of these principles and offers little
practical guidance in interpreting
and limiting the responsibility of business
for human rights. The broadly framed principles of the Global Compact stand in
contrast
to the rights more specifically enumerated in the Norms.
Along with
the lack of specificity in defining the relevant rights, is a vagueness
concerning the scope of the initiative, in particular
the degree of
responsibility a company assumes in embracing, supporting and enacting these
rights. The Compact uses the phrase ‘sphere
of influence’ to limit
business responsibility for rights but does not define this crucial
term.[86] The exact
nature of company responsibility for rights is subject to the practical
interpretation of its participants and the marketplace,
with the two sides
likely to offer deeply contrasting views.
Precisely what falls within the
sphere of influence of a corporation is debatable and may be influenced by both
moral and legal responsibilities
which will help determine if a company is
complicit in human rights
violations.[87] In
attempting to more firmly confine the sphere of influence concept, the nature of
the obligation should be considered, as should
to whom that obligation is owed.
The appeal to business in the Compact is to embrace, support and enact a set of
broadly referenced
rights. The terminology used suggests that this is not so
much as an obligation placed on business but rather a polite request to
respect
rights. While it may be interpreted as incorporating an obligation to refrain
from acting in a way that constitutes a violation
of rights, it does not
necessary flow from the language employed that a company then accepts a positive
duty to prevent violations
of rights and to play a proactive role in promoting
the specified rights. Such consequences are more likely to stem from
principle 2 of the Compact which asks businesses to make sure they are not
complicit
in human rights abuses.
Understanding complicity represents an
important challenge for business and it is a term the Global Compact should seek
to provide
clarity on. The Office of the United Nations High Commissioner for
Human Rights argues that broadly speaking, “corporate complicity
in human
rights means that a company is participating in or facilitating human rights
abuses committed by
others.”[88] In
examining the notion of corporate complicity it is possible to distinguish
between direct complicity (positively assisting),
beneficial complicity
(benefiting indirectly from human rights violations committed by someone else,
for example, government) and
silent complicity (silence or inaction in the face
of human rights violations: to do nothing is not an
option).[89] Whether
a company could be held legally responsible for all such forms of corporate
complicity is a different question from whether
they will be judged morally
responsible by the public at
large.[90]
The
question of who falls within the sphere of influence of a corporation will
likely not turn on legal principles alone but the lack
of guidance provided by
the Compact suggests it is possible for companies to view it in a restrictive
manner. A restricted legalistic
interpretation could limit a company’s
sphere of activity and influence to those with whom it has a direct
relationship, such
as employees and shareholders. However a more contemporary
view may be to look beyond a company’s contractual relationships
in
defining its stakeholders and consider those with whom it has a particular
political, economic, geographical or contractual
relationship.[91]
However limits should be placed on the assumed extent of a company’s
influence. It is not the role of a company to act as a
substitute for government
and much depends on the closeness of the connection between a company and its
stakeholders. Clearly there
is a sliding, and at this point in time still
largely undefined, scale of responsibility between a company and the victim or
violator
of the human rights abuses. The more direct the connection, the greater
the responsibility placed on the company to prevent or protect
potential victims
from such abuse.[92]
The lack of clarity provided in the Compact in terms of both the content of the
principles and their scope leaves a far too enticing
opportunity for some
corporations to abuse the polite generosity of the Compact in picking and
choosing their ‘obligations’
to at least support human rights.
B. Limited accountability and transparency
Accountability, or rather the lack of it, is the
crucial issue that faces the Global Compact. There are now more than 2,000
companies
participating in the Compact. There can be no doubt that the
participation of such a group (bearing in mind that there are estimated
to be
about 65,000 transnational corporations in the
world)[93] has helped
broaden corporate focus on human rights issues but at the same time it has
consistently been alleged that a number of
companies are simply using their
participation in the Global Compact as a marketing tool. Growing disenchantment
with the current
model has seen the Compact labelled by one critic as merely
providing a ‘venue for opportunistic companies to make grandiose
statements of corporate citizenship without worrying about being called to
account for their
actions.’[94]
Very
little is asked of participating companies to prove their commitment to the ten
principles. The participating company is required
to do three things:
These current requirements for a company to report on its progress
in its annual report and publicly advocate the Global Compact are
not exactly
rigorous and have weakened since its inception. The Compact’s original aim
was to have companies communicate their
progress on the Global Compact website
but because so few companies took up this offer, rather than mandating
compliance with this
requirement, the Global Compact adapted its policies to
conform to market
practices.[96]
Establishing the external ‘verification’ process via corporate
publications as opposed to a centralised UN website arguably
results in a lower
level of scrutiny of corporate performance.
In response to criticisms about
the minimal reporting requirements imposed on corporate participants in the
Compact, an annual ‘Communication
on Progress’ was introduced in
2003. These communications describe actions taken by each participant in support
of the ten
principles and are made available publicly, including via the
Compact’s website. In 2005, in an attempt to further defend the
Global
Compact’s integrity, a new requirement was introduced that allows for
companies to be designated as ‘inactive’
if they do not submit a
Communication on Progress for two years in a row, a move, albeit limited, at
least in the right direction
for increasing the transparency of corporate
performance.[97] In
communicating aspects of their compliance with the Compact, companies are
expected to use indicators that accurately convey their
achievements and
difficulties in applying the principles to their business operations. Tracking a
company on certain issues from
year to year requires some performance metrics
that all can understand. While the indicators in the environmental assessment
area
have a longer history of development, social reporting indicators
(accounting for human rights and labour standards performance)
are only in their
infant stages and much more consensus building is required. The Global Compact
has no requirements stipulating
standard reporting provisions but encourages
companies to use the Global Reporting
Initiative[98] (a
reporting system that is more about process than assessing performance). If the
Global Compact was willing to strengthen accountability
from its participants
and face up to the issue of standardizing reporting on human rights compliance
it could have a valuable role
to play in gathering consensus on such indicators.
Such action however seems unlikely.
The Global Compact has stated that it
will not be involved in monitoring or verification of compliance with the
principles. And that
the Compact is not a code but should be seen as a frame of
reference to stimulate best practices and to bring about convergence around
universally shared
values.[99] But it
is questionable if the limitations of the current model even allow for this. The
results of the 2004 McKinsey study suggest
not.[100] In many
ways with its limited notions of transparency, the Compact does seem to be yet
another variation of a code but one without
accountability.[101]
The limitations of the Global Compact model highlight the narrow ambition, and
therefore, impact of this initiative in providing
protection against corporate
abuse of human
rights.[102]
C. Limitations of the voluntary approach
The Global Compact is designed to complement and not
substitute regulatory frameworks by encouraging voluntary, innovative corporate
practices to support greater respect for human, environmental, labour and
anti-corruption
standards.[103] The
voluntary nature of the Compact and its emphasis on dialogue and learning makes
it primarily an educational tool—rather
than a viable means of enforcing
corporate accountability commitments. However, at the same time, given the
Compact's significant
public profile, it is in a prime position to support other
UN initiatives that seek to press companies to confront their human rights
responsibilities. Until the recent development of the Norms, the Compact has
been (and for many, remains) the principal UN vehicle
for dealing with issues of
corporate responsibility. The recent decision by the Commission on Human Rights
at its 2005 meeting to
recommend the appointment of a Special Representative on
business and human rights suggests urgency for collaboration and reconciliation
between the Global Compact and the stronger proposals contained in the Norms.
When alternatives, such as the Norms, are proposed the Global Compact has
been held up by some as a reason for nipping such initiatives
in the bud.
Several influential business organisations, (notably the International Chamber
of Commerce and the United States Council
for International Business),
vigorously opposed the Norms and the 2005 recommendation of the Commission to
appoint a special representative
on business and human
rights.[104] One of
the arguments put forward is that such initiatives are not needed because
business is already engaged with the Global Compact
and that regulatory
initiatives would undermine the spirit of the United Nation’s new level of
engagement with big business.
The Compact is being used by some as an avoidance
technique to avoid the introduction of stronger corporate accountability
measures
at either national or international levels.
The use of such tactics
to promote the soft voluntarism of the Global Compact over the potentially
stronger mechanisms contained in
the Norms invites general speculation about the
role of self regulation in promoting greater respect for rights. The Compact,
with
its limited transparency and lack of clarity around the content of its
principles, essentially asks companies to self regulate the
nature and extent of
the support they offer for the protection of rights. The rapid uptake of the
various codes of conduct and guidelines
developed over the last three decades
and the large number of companies participating in the Global Compact indicates
an obvious
propensity of companies to endorse a self regulatory approach to
rights protection. It is clear that self regulation can, and does,
have a role
to play in promoting corporate respect for human, labour and environmental
rights but to be effective the self regulatory
model must meet some minimum
requirements - all of which the Compact model is currently lacking.
First, the principles which a company must adhere to should be clearly
specified. Without this, it will not be possible for external
stakeholders to
evaluate and verify the outcomes. The lack of clarity in the nature and scope of
the Compact’s ten principles
leaves far too much room for speculation as
to whether or not a participant is adhering to its standards in company
practices. Second,
there should be credible and reliable monitoring. The better
self-regulatory regimes include independent performance auditing, auditor
certification and formal verification processes. This does not exist in the
Compact model of corporate responsibility. Third, effective
enforcement is
essential. Most self-regulatory regimes rely on peer pressure and/or some sort
of certification as the primary incentives
for participation and compliance. The
limited transparency of the Global Compact makes it difficult for either
corporate peers or
NGOs to ‘police’ the compliance of participants
within the Compact.
Finally, the most effective self regulatory models of
corporate responsibility are likely to be mulitstakeholder based and this is
what the Global Compact sets out to achieve. The Global Compact endorses
the approach that improvements will only occur when all stakeholders are fully
engaged in the effort
to develop corporate practices that do more to respect and
promote human rights and in this sense the Compact formally includes not
only
business but also labour unions, NGOs and representatives of UN agencies in its
participatory model. However from the outset
the influence of business has far
outweighed the contributions of the NGO and labour participants. The most recent
example comes
from the Compact’s 2005 proposal to establish an advisory
board. Of the proposed twenty members; 11 seats are reserved for
companies
compared with just 4 for civil society and 2 for labour representatives. This
imbalance is likely to exacerbate existing
concerns that the Compact is heavily
tilted in favour of corporate interests and approaches. If the Compact is
serious about being
a genuine "multi-stakeholder" initiative, a more equitable
allocation of board seats should be found and implemented.
The softly, softly
approach of the United Nations to engendering greater respect for rights by
business carries the risk of subverting
the public purpose of the organization.
Close relations between the UN and big business provides “ample scope for
‘capture’
such that the United Nations—the supposed rule
setter—wittingly or otherwise begins to adopt the agenda of business
partners
without debate and due democratic
procedure”.[105]
This appears to be the case with the ongoing development of the Global
Compact’s corporate responsibility model.
Conclusion
The United Nations clearly finds itself in a difficult position. On the one hand it is aware of the limitations it faces in trying to deal exclusively with the impact of business on human and environmental rights and so it is right in assuming that in this era of globalisation, the state is not necessarily the most capable or indeed only agent for addressing such issues. Non state actors—such as corporations—have distinct responsibilities and competencies to deal with particular issues. However the United Nations Global Compact must do more to clearly define the obligations and expectations of its participants and to narrow its focus on what it should be trying to achieve. The Global Compact should not be just another United Nations forum for allowing for broad-based corporate participation but aim to provide specific guidance on the pragmatic issues companies face in complying with human rights in the business world. In order to do this the Compact must urgently address issues around the lucidity of its principles and encourage the introduction of mechanisms that allow for greater transparency and accountability measures to ‘enforce’ corporate protection for rights. The emphasis on its voluntary approach toward corporate responsibility should not be used to inhibit the ongoing development and exploration of stronger corporate accountability mechanisms at both the international and national levels. The Global Compact is focused on inspiring practical action to support rights but it is doubtful whether it is achieving this. If the Compact continues on its path of self destruction to build a broad and inclusive tent for all corporate participants, the result will only continue to be a diminution of its overall message that does little for the protection of human rights. The United Nations Global Compact does have a role to play in promoting a greater understanding of the links between business and human rights but the shortcomings of the current model need to be urgently addressed before it can be viewed as a valuable contributor to this field.
[*]
Justine Nolan is a lecturer in international human rights law at the University
of NSW and an Associate of the Australian Human Rights
Centre,
UNSW.
[1] A Zammit,
Development at Risk: Rethinking UN-Business Partnerships (2003) A Joint
Publication by the South Centre and UNRISD, 30 quoting United Nations
Secretary-General Kofi Annan in a 1998 speech
to the World Economic
Forum.
[2] The term
‘business’ is used throughout this article to incorporate references
to transnational corporations and business
more generally as defined in the
United Nations’ Norms on the Responsibilities of Transnational
Corporations and Other Business Enterprises with Regard to Human Rights, UN
ESCOR, 55th sess, Agenda item 4, U.N. Doc
E/CN.4/Sub.2/2003/12/Rev.2 (2003) ( ‘the Norms’), paragraph I. The
Norms defines ‘transnational
corporation’ as an economic entity
operating in more than one country or a cluster of economic entities operating
in two or
more countries—whatever their legal form, whether in their home
country or country of activity, and whether taken individually
or collectively
[20]. Paragraph 21 defines ‘other business enterprise’ to include
any business entity, regardless of
the international or domestic nature of its
activities, including a transnational corporation, contractor, subcontractor,
supplier,
licensee or distributor; the corporate, partnership, or other legal
form used to establish the business entity; and the nature of
the ownership of
the entity.
[3]
Charter of the United Nations,
Preamble.
[4] See
generally R McCorquodale and R Fairbrother, ‘Globalization and Human
Rights’ (1999) 21 Human Rights Quarterly 735 who refer to
globalisation as an ‘economic, political, social and ideological
phenomenon which carries with it unanticipated,
often contradictory, and
polarising consequences.’ Also see the varied collection of definitions of
globalisation in First
Report of the House of Lords Select Committee on Economic
Affairs, The United Kingdom Parliament, Globalisation (2002) [21-56]
at
<http://www.publications.parliament.uk/pa/ld200203/ldselect/ldeconaf/5/504.htm>
[5]
Zammit, above n 1,
31.
[6] O F Williams,
‘The UN Global Compact: the challenge and the promise’ (2004) 14
Business Ethics Quarterly 755, 759. Also, K Bruno and J Karliner,
‘The UN’s Global Compact: Corporate Accountability and the
Johannesburg Earth
Summit’ (2002) 45(3) Development 33, 34.
[7] The UN Global
Compact, available at<www.unglobalcompact.org> The ten
principles are set out below in Part
II.
[8] The Global
Compact specifically deals with four broad areas of concern: human rights,
labour rights, the environment and anti-corruption.
This article focuses on
efficacy of the human rights principles (which in essence, incorporates labour
rights) and refers to environmental
and anti-corruption principles only as
illustrative of other issues
raised.
[9] United
Nations Office of the High Commission on Human Rights, Report of the United
Nations High Commissioner on Human Rights on the responsibilities of
transnational corporations and related business
enterprises with regard to human
rights, 61st sess, Agenda item 16, 5, UN Doc.
E/CN.4/2005/91 (2005) (‘OHCHR’).
[10] See
discussion below at Part I which reviews the term ‘corporate
citizenship’.
[11]
OHCHR, above n 9,
8.
[12] See
discussion, below n
50.
[13]United
Nations Global Compact states there are now nearly 2,200 participants in the
Global Compact. See, United Nations Global Compact,
‘UN Global Compact
Participants Disclose Actions In Support Of Universal Principles’ (Press
Release 15 July
2005).
[14] An
example is the attempt in 2004-05 by the Global Compact to develop more credible
and transparent mechanisms to handle complaints
of systematic and egregious
abuse of the Compact’s principles. See, UN Global Compact, ‘The
Global Compact’s Next
Phase’, 6 September 2005, Attachment 1, Note
on Integrity Measures at para. 4.
[15] See
discussion below at Part II
(b).
[16] The
Norms, above n 2, is the latest attempt to more clearly define standards using
the language of corporate accountability rather
than corporate responsibility
and which includes proposed mechanisms for enforcing corporate adherence to
human rights
principles.
[17]
The term stakeholder is also open to a multitude of definitions but the most
comprehensive is that used in the recently formulated
UN Norms, above n 2. The
Norms define “stakeholder” to include stockholders, other owners,
workers and their representatives,
as well as any other individual or group that
is affected by the activities of transnational corporations or other business
enterprises.
In addition to parties directly affected by the activities of
business enterprises, stakeholders can include parties which are indirectly
affected by the activities of transnational corporations and other business
enterprises such as consumer groups, customers, governments,
neighbouring
communities, indigenous peoples and communities, non-governmental organizations,
public and private lending institutions,
suppliers, trade associations and
others.
[18]
‘What is the Global Compact?’ (2005) The Global Compact
<http://www.unglobalcompact.org>
[19]
World Business Council for Sustainable Development, as stated in the KPMG
International Survey of Corporate Responsibility,
2005.
[20] P
Utting, Rethinking Business Regulation: From Self Regulation to Social
Control, United Nations Research Institute for Social Development (UNRISD),
programme paper 15, 16,
(2005).
[21] United
Nations Research Institute for Social Development (UNRISD), Corporate Social
Responsibility and Business Regulation: Research And Policy Brief 1,
UNRISD/PB/04/1, 1 (2004). See also S Joseph, Corporations and
Transnational Human Rights Litigation (2004)
1.
[22] J Bendell,
(United Nations Research Institute For Social Development), ‘Barricades
And Boardrooms: A Contemporary History of
the Corporate Accountability
Movement’, Programme paper 13, 12 (2004) referring to R Jenkins,
‘Corporate Codes Of Conduct: Self Regulation in A Global Economy’,
(Paper presented at the UNRISD Workshop
on Promoting Corporate Responsibility in
Developing Countries, Geneva, Switzerland, 23-24 October 2000) and see
generally, J Nolan,
‘With Power Comes Responsibility: Human Rights and
Corporate Accountability’, 28(2) University of New South Wales Law
Journal.
[23]
Bendell above n 22 at
1.
[24] B Herbert,
‘Children of the Dark Ages’, New York Times (New York), 21
July 1995, A25, A Bernstein, ‘A floor under foreign factories?’,
Business Week (New York), 2 November 1998, 126; T Egan, ‘The Swoon
of the Swoosh’, New York Times (New York), 13 September, 1998, 66
(column 1); A Bernstein, ‘A potent weapon in the war against
sweatshops’, Business Week (New York), 1 December, 1997,
40.
[25] Bendell
above note 22 at 1. Also Utting, above n 20 16-18 for a varied list of
examples of how civil society and some governments are pushing stronger
notions
of corporate accountability.
[26] Amnesty
International, ‘The U.N. Human Rights Norms For Business: Towards
LegalAccountability’(2004)
<http://web.amnesty.org/aidoc/aidoc_pdf.nsf/Index/IOR420022004ENGLISH/$File/IOR4200204.pdf>
Also
see a joint statement from human rights organizations welcoming the
Norms, ‘Nongovernmental Organizations Welcome the New U.N. Norms
on
Transnational Business’ (Press release, 13 August 2003)
<http://www.hrw.org/press/2003/08/un-jointstatement.htm#ngos>
.
[27]
For a negative reaction, see Joint Views of the IOE and ICC on the draft
“Norms on the responsibilities of transnational corporations and other
business
enterprises with regard to human rights, UN ESCOR,
55th sess, Agenda item 4, UN Doc
E/CN.4/Sub.2/2003/NGO/44 (2003). (‘IOE and ICC Joint Views’) In
contrast, The Business Leaders
Initiative on Human Rights (BLIHR) chaired by
Mary Robinson, the former United Nations High Commissioner of Human Rights, is
‘road-testing’
the Norms. It is expected that the various company
projects under the initiative will add learning and experience on whether the
Norms add value to the existing work on corporate social responsibility in the
companies. Participating companies are Novartis, Transco
Grid, Body Shop,
Barclay’s Bank, MTV Europe, Novo Nordisk, ABB, Hewlett Packard and Gap
Inc. The project is expected to conclude
in 2006. See S Skadegaard Thorsen and A
Meisling, ‘Perspectives on the UN Draft Norms’ (Submitted for the
IBA/AIJA conference
on Corporate Social Responsibility, Amsterdam, 25-26 June
2004)
<http://www.lawhouse.dk/?ID=259>
at
22 November 2005. The response of both the United States and Australian
governments to the Norms is indicative of the wary
negative approach adopted by
several States with regard to the possibility of developing binding corporate
accountability measures.
See, for example the stakeholder submissions of the
United States and Australia to the Office of the High Commissioner for Human
Rights:
<http://www.ohchr.org/english/issues/globalization/business/contributions.htm#states>
.
The United States and Australia were 2 of only 3 countries that voted against
the 2005 resolution of the Commission on Human
Rights calling for an appointment
of a Special Representative on business and human rights
issues.
[28] The
Alien Tort Claims Act 28 USC §1350 (1789) was passed as part of s 9
of Judiciary Act (1789). The Act in its entirety reads: ‘The
district courts shall have original jurisdiction of any civil action by an alien
for a tort only, committed in violation of the law of nations or a treaty of the
United States.’ For an overview of cases brought
under ATCA with respect
to corporate liability, see generally Joseph, above
n21.
[29]Nike v
Kasky, [2003] USSC 4777; 539 US 654 (2003). This case (settled September 12, 2003) alleged
that Nike’s reports on its labour practices in its supplier factories
constituted a misrepresentation, an unfair business practice and false
advertising under Californian law. See L Girion, ‘Nike Settles
Lawsuit over Labor Claims’, L.A. Times (Los Angeles), 13 September
2003, C1.
[30] A
class action complaint filed against US retailing giant Walmart (13 September
2005) alleges Walmart failed to meet its contractual
duty to ensure that its
suppliers pay basic wages due; forced workers to work excessive hours seven days
a week with no time off
for holidays; obstructed their attempts to form a union;
and, made false and misleading statements to the American public about the
company’s labour and human rights practices. The claim alleges Walmart
made false representations regarding compliance with
its code of conduct.
Walmart maintains a Supplier Standards Agreement with its foreign suppliers that
incorporates adherence to its
corporate code of conduct as a direct condition of
supplying products to Walmart. The claim argues that by incorporating the code
of conduct into the supply agreement, it creates a contractual obligation
enforceable by the workers supplying to Walmart, who are
the intended
beneficiaries of the code’s worker rights provisions. The claim is being
pursued under California’s Unfair Business Practices Act §
1720;
<http://www.laborrights.org/projects/corporate/walmart/WalMartComplaint091305.pdf>
at 22 November 2005.
[31] Lubbe v
Cape plc [2000] UKHL 41; [2000] 4 All ER 268; Connelly v RTZ [1997] UKHL 30; [1998] AC
854.
[32] Dagi
and Ors v BHP and OkTedi Mining Limited (No. 2) [1997] 1 VR
428.
[33]Rome
Statute of the International Criminal Court, opened for signature 17 July
1998, 2187 UNTS 90, art 1 (entered into force 1 July 2002) The ICC can only
investigate events that occurred after the treaty was entered into
force.
[34] M
Chertoff, ‘Justice Denied’, The Weekly Standard (Washington),
12 April 2004, 28.
[35] See
discussion, below n 87 regarding corporate complicity in human rights abuses.
[36] Criminal
Code 1995 (Cth) s 268 proscribes genocide, crimes against humanity and other
serious war crimes.
[37] See
generally, H Ward, ‘Legal Issues In Corporate Citizenship’ (Report
prepared for the Swedish Partnership for Global
Responsibility, February 2003)
<http://www.iied.org/pubs/pdf/full/16000IIED.pdf.>
at 22 November
2005.
[38] Recent
legislative initiatives in select jurisdictions indicate a willingness of
corporate regulatory agencies within these jurisdictions
to adopt a more
expansive view of what issues are considered material to a corporation’s
short- and long-term performance,
thus requiring disclosure and increasing
corporate transparency in a company’s public reports. Superannuation
legislation
in the United Kingdom, Australia, Belgium and Germany has
incorporated reporting requirements with respect to certain human rights.
Also
France has introduced mandatory annual disclosure and reporting requirements for
the largest corporations under French law (the
New Economics Regulations (NRE)
were adopted in May 2001 by the Parliament and came into force on January 2002.
Law N° 2001-420).
And in South Africa, the Johannesburg Securities Exchange
adopted a “Code of Corporate Practices and Conduct” that requests
all publicly listed corporations to disclose non-financial information in
accordance with the Global Reporting Initiative Sustainability
Reporting
Guidelines.
[39]
See ‘About the GC’ at
<www.unglobalcompact.org>.
[40]
Originally launched in 2000 with nine principles, the tenth relating to
corruption was added in June 2004 at the Global Compact Leaders
Summit; see
<www.unglobalcompact.org>.
[41]
See, for example, the letters from Human Rights First (then Lawyers Committee
for Human Rights) stating its concerns with the Global
Compact, available at
<http://www.humanrightsfirst.org/workers_rights/issues/gc/index.htm>
.
[42]
For example, concerns over the inclusion of Nestle as a Global Compact
participant in view of its alleged violations of the International
Code on the
Marketing of Breast-milk Substitutes were raised consistently by an NGO group
CorpWatch to the United Nations; see
<www.corpwatch.org>.
[43]
See discussion, below n
94.
[44] The Global
Compact has come around to recognising that there does need to be some threshold
for non-compliance at which business
participation should be excluded from the
Compact. Its 2005 Integrity Measures, allows the Compact to list participants
as non-active
or be removed from its website but it still does not contain a
regular monitoring or verification feature.
[45]
PriceWaterhouseCoopers, ‘The UN Global Compact: Moving to the Business
Mainstream, An Interview with Georg Kell, Executive
Head’, (2005) 2 The
Corporate Responsibility
Report,13.
[46]
See generally, G Kell and D Levin, ‘The Global Compact Network: An
Historic Experiment in Learning and Action’, (2003)
108(2) Business and
Society Review,
151.
[47] See
‘About The GC’ at
<http://www.unglobalcompact.org>
.
[48]
See discussion in Part III
below.
[49]
Zammitt, above n 1, 95 for further discussion on organisational learning. Also
see generally, Kell and Levin, above n
46.
[50] McKinsey
& Company, Assessing the Global Compact’s Impact, (Report
prepared for the Global Compact Office, 11 May
2004).
[51] Ibid
2-4.
[52] The
Norms, above n 2, [15-18] provide for general provisions for implementation
including options of monitoring and reporting at
both international and national
levels.
[53] P
Utting, ‘UN-Business Partnerships: Whose Agenda Counts?’ (Paper
presented at a seminar on Partnerships for Development
or Privatization of the
Multilateral System?, Oslo, 8 December 2000)
2.
[54] Ibid
2-3.
[55] World
Bank Group Corporate Social Responsibility Practice, ‘Strengthening
Implementation Of Corporate Social Responsibility In Global Supply
Chains’ (2003); K Gordon And M Miyake, (Organization For
Economic Co-Operation And Development), ‘Deciphering Codes Of Corporate
Conduct: A
Review Of Their Contents’, Working Papers On International
Investment, Number 1999/2, (1999); C Sabel, D O’Rourke and
A Fung,
‘Ratcheting Labor Standards: Regulation For Continuous Improvement In The
Global Workplace’, The World Bank,
Social Protection Discussion Paper No.
11 (2000); J Diller, ‘A social conscience in the global marketplace?
Labour dimensions
of codes of conduct, social labelling and investor
initiatives’, (1999) 138 International Labour Review
99.
[56] Zammit,
above n 1, Chapter III. Also Utting, above n 53, 3. Recent examples include the
establishment of the UN Foundation with a
one billion dollar grant from CNN
founder Ted Turner and the establishment of the Global Alliance for Vaccines and
Immunizations
whose contributors include the Bill and Melinda Gates
Foundation.
[57]
See
<http://www.unglobalcompact.org>
.
[58]
Organization for Economic Co-Operation And Development (OECD), OECD
Guidelines For Multinational Enterprises, (2000) I(1), I(4) ‘Concepts
and
Principles’.
[59]
The Declaration can be seen as providing guidance for how corporations should
implement the fundamental ILO conventions. The overarching
obligations with
respect to labour rights are set out in the eight fundamental conventions of the
International Labour Organization:
Forced Labor Convention (C29); Freedom of
Association and Protection of the Right to Organize Convention (C87); Right to
Organize
and Collective Bargaining Convention (C98); Equal Remuneration
Convention (C100); Abolition of Forced Labor Convention (C105); Discrimination
(Employment and Occupation) Convention (C111); Minimum Age Convention (C138) and
Worst Forms of Child Labour Convention,(C182). These
conventions are legally binding on those states that have ratified them.
Obligations then exist at a national level to ensure
enforcement of these rights
by corporations; they do not directly bind companies.
[60] The results
of OECD Watch’s study of forty-five complaints filed over the last five
years suggests “that the Guidelines
have [not] helped to reduce the number
of conflicts between local communities, civil society groups and multinational
companies.”
The report also criticised the lack of transparency of the
OECD in dealing with complaints. See, OECD Watch, ‘Global NGO Coalition
Calls for Tighter Regulation of Multinational Corporations’ (Press
release, 22 September
2005).
[61]
International Council on Human Rights Policy (ICHRP), Beyond Voluntarism:
Human Rights And The Developing International Legal Obligations Of Companies
(2002) 99-102,
(‘ICHRP’).
[62]
Leon Sullivan, The Sullivan Principles
(1977).
[63] Sean
McManus for the Irish National Caucus, The McBride Principles
(1984).
[64] See
above, n 24.
[65]
Gordon and Miyake above n 55. This OECD study was the result of an investigation
of 246 voluntary codes collected "from business
and non-business contacts which
OECD Member governments helped identify" (at 8). Out of this set of codes, they
found that 118 or
49% of them were issued by individual companies (mostly
multinationals), while 34% were industry and trade association codes, 2%
issued
by an international organization, and 15 % by partnership of stakeholders
(mainly NGOs and unions) (at 9).
[66]
www.fairlabor.org.
[67]
www.sa-intl.org.
[68]
www.ethicaltrade.org.
[69]
www.globalreporting.org.
[70]
www.accountability.org.uk/aa1000.
[71]
http://www.state.gov/g/drl/rls/2931.htm.
[72]http://www.transparency.org/building_coalitions/private_sector/business_principles/dnld/business_principles2.pdf.
[73]
Several of these codes and guidelines can be distinguished by their focus on
performance or reporting standards (for example SA8000
vs GRI). AA1000 is more
of a ‘process’ standard advising companies on how to approach these
issues from a systems management
point of view.
[74] OHCHR, above
n 9, 8.
[75] The
Human Rights Commission is the main body within the UN dealing with human rights
issues and is comprised of (rotating) representatives
of 53 member governments.
The Commission sits in Geneva each year for approximately 6 weeks during March
and April. At the time of
writing, reform proposals are being discussed in the
United Nations to replace the Commission with a smaller standing Human Rights
Council, see; Report of the Secretary-General, In larger freedom:towards
development, security and human rights for all
(2005).
[76]
UN Sub-Commission on the Promotion and Protection of Human Rights, The
effects of the working methods and activities of transnational corporations on
the enjoyment of human rights, Sub-commission on human rights resolution
2001/3, 25th meeting, UN Doc
E/CN.4/Sub.2/RES/2001/3 (2001).
[77] See
above n 27.
[78]
See above n
27.
[79]
Promotion and Protection of Human Rights, UN ESCOR, Commission on Human
Rights, 61st sess, Agenda Item 17, UN doc
E/CN.4/2005/L.87
(2005).
[80] On 28
July 2005, the UN Secretary General appointed Professor John Ruggie as the UN
Special Representative. Professor Ruggie previously
served as UN Assistant
Secretary-General and senior adviser for strategic planning from 1997 to
2001. He was one of the main architects
of the United Nations Global
Compact, and he led the Secretary-General’s effort at the Millennium
Summit in 2000 to propose
and secure the adoption of the Millennium Development
Goals. The Special Representative is due to hold broad-based consultations
and
issue two reports, an interim one in 2006 and a final one in 2007.
[81] See
discussion below in Part III (a) and the Norms, above n 2
[1-14].
[82] Kell
and Levin, above n 46, 160.
[83] OHCHR, above
n 9, 5.
[84] The
Norms, above n 2,
[A.1].
[85] United
Nations Global Compact, Principles 1, 2, above n
7.
[86] The Norms
refer to a company’s ‘sphere of activity and influence’ to
apportion corporate responsibility for rights
but it is similarly undefined. The
Norms, above n 2,
[A1].
[87] ICHRP,
above n 61, 136.
[88] OHCHR
Briefing Paper, ‘The Global Compact and Human Rights: Understanding Sphere
of Influence and Complicity’ in A joint
publication of the United Nations
Global Compact Office and the Office of the United Nations High Commissioner for
Human Rights,
Embedding Human Rights in Business Practice (2004) 14,
19.
[89] A Clapham
and S Jerbi, ‘Categories Of Corporate Complicity In Human Rights
Abuses’ (2001) < http://209.238.219.111/Clapham-Jerbi-paper.htm>.
[90] For example,
public pressure led in part to a claim being filed against Royal Dutch Petroleum
Co under the Alien Torts Claims Act alleging complicity in gross human
rights abuses, Wiwa V Royal Dutch Petroleum Co No 96 Civ 8386, 1998 US
Dist LEXIS 23064 (SDNY 25 Sept. 1998). Also see Charles Woofson and
Matthais Beck, ‘Corporate Social Responsibility failures in the oil
industry’ in Rory Sullivan (ed),
Business and Human Rights: dilemmas
and solutions
(2003).
[91] ICHRP,
above n 61, 136. Also an expanding definition of stakeholder is also being
discussed in company law reforms. See for example
The United Kingdom’s
Department of Trade and Industry Guidance on the OFR and changes to the
directors’ report (April 2005) which notes that directors of a company
subject to Operating and Financial Review disclosure requirements should
consider
the impact of the business’s operation on a variety of
stakeholders including employees, customers, suppliers and society more
widely
‘to the extent necessary’ to comply with the relevant regulations.
In July 2003, the U.K. government announced
its intention of requiring certain
business to produce operating and financial reviews (OFRs). This followed the
work of the Company
Law Review and the 2002 White Paper ‘Modernising
Company Law’. The OFR is designed to improve the disclosure of information
by companies. The UK Companies Act 1985 (Operating and Financial Review and
Directors Report etc) Regulations 2005 [S.1. 2005/1011] came into force on
March 22, 2005. Also relevant is the Department of Trade and Industry most
recent White
Paper on company law reform, Company Law Reform March 2005;
<www.dti.gov.uk/cld/review.htm>
[92]
See generally S R Ratner, ‘Corporations and Human Rights: A Theory
of Legal Responsibility?’ [2001] YaleLawJl 32; (2001) 111 Yale Law
Journal
443.
[93]
This is a general estimate commonly quoted, for example see Nuchhi R Currier,
‘World Investment Report 2002 Transnational Corporations
and Export
Competitiveness’, United Nations Chronicle Online Edition, 17 March
2003
<http://www.un.org/Pubs/chronicle/2003/webArticles/031803_wir.html>
.
[94]
Williams, above n 6, 762 quoting S P
Sethi.
[95] See
‘How Can We Participate’ at
www.unglobalcompact.org.
[96]
Zammit, above n1,
83.
[97] Global
Compact ‘Note on Integrity Measures’ above note 14, [3]. The
provision became effective as of July
2005.
[98] GRI,
above n 69.
[99]
Williams, above n 6,
762.
[100]
McKinsey, above n 50. But the Global Compact has come round to recognizing that
there does need to be some threshold for non compliance
at which business
participation should be excluded from the Compact—the 2005 Integrity
Measures—allows the Compact to
expel members for egregious violations but
it does not have a regular monitoring or verification
feature.
[101]
Zammitt, above n 1,
265.
[102] D
Kinley and J Tadaki, ‘From Talk to Walk: The Emergence of Human Rights
Responsibilities for Corporations at International
Law’ (2004) 44
Virginia Journal of International Law, 931,
951.
[103] Kell
and Levin, above n 46,
159.
[104] See
above n 27.
[105]
Zammit, above n 1, 8.
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