Any of our business? Human Rights and the UK private sector

Any of our business? Human Rights and the UK private sector - Human Rights Joint Committee Contents

7 A UK STRATEGY ON BUSINESS AND HUMAN RIGHTS?

164. One of the governance gaps identified by Professor Ruggie was a lack of coherence within national Governments on the relationship between their work with businesses and their human rights obligations and related policies. He told us:

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The UK Government approach

165. Responsibility for Government policy on business and human rights straddles at least four major departments:

The Ministry of Justice, the Foreign and Commonwealth Office (FCO) and the Department for International Development (DFID) share responsibility for Government policy on human rights. Their responsibilities vary according to domestic or international boundaries, and whether the policy involved relates to human rights issues in developing countries;
BIS has responsibility for business policy in the broader sense. It has lead responsibility for corporate responsibility, the operation of the OECD Guidelines and anti-corruption issues. BIS is "fully engaged" in any human rights initiatives which are taken forward by other departments which have an impact on UK businesses, consumers and employees;[231]
A number of departments play additional roles:
- DFID leads on a number of voluntary multi-stakeholder initiatives which the Government supports, including the Ethical Trading Initiative (ETI), the extractives industry mechanisms and other natural resource and conflict issues. DFID also provided funding for the establishment of the International Institute of Business and Human Rights, a body led by former UN Commissioner for Human Rights Mary Robinson, which is designed to build on the work of the Business Leaders Initiative on Human Rights;
- The FCO provides the UK lead on the work of the UN Special Representative. It runs the Government Diamond Office which works on the Kimberley Process. Working with the US, the FCO was responsible for establishing the Voluntary Principles on Security and Human Rights in the extractive industry. It also led on the creation of the Extractives Industry Transparency Initiative;
- The Export Credit Guarantees Department, together with BIS, DFID and the FCO sits on the Steering Board of the UK NCP for the OECD Guidelines;
- The Department for Environment, Food and Rural Affairs (DEFRA) has responsibility for environmental reporting by businesses and "skills for corporate responsibility";
- The Department for Work and Pensions has responsibility for Government policy on ethical pension fund management and socially responsible investment, UK relations with the International Labour Organisation (ILO) and liaison with trade unions in the workplace; and
- Other Departments may work on individual projects, for example, the Department of Health is currently working with the Ministry of Justice on its Private Sector and Human Rights project, which we consider, below.[232]

166. Witnesses had three criticisms of Government policy in this area:

Undue priority was given to voluntary initiatives in the Government's approach;[233]
Government policy lacked coherence;[234]
The Government had failed to provide a clear lead.[235]

167. We consider each of these criticisms in relation to the following recent Government initiatives:

The Corporate Responsibility Report, published by the then Department for Business, Enterprise and Regulatory Reform, in February 2009.
The Ministry of Justice's new private sector project, designed to inform Government work on the relevance of human rights for the domestic UK private sector ("the Private Sector and Human Rights Project");
The FCO Toolkit for its overseas posts, focusing on the issue of business and human rights. The final version of this Toolkit was published in October 2009. ("the FCO Toolkit").
The draft Bribery Bill, published for pre-legislative scrutiny in March 2009.

Government Corporate Responsibility Report 2009

168. The Corporate Responsibility Report sets out the Government's vision for corporate responsibility. It states:

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169. The Report sets out the business case for corporate social responsibility and explains that the Government intends to create a policy framework which sets minimum levels of performance in health and safety and environmental and employment practices and helps businesses to take voluntary measures aimed at encouraging responsible behaviour. The Report recognises that while much of the impetus behind the Corporate Responsibility agenda has come from environmental issues, customers, employees and other stakeholders are increasingly "demanding ethical trading policies, fair employment practices and the safeguarding of human rights". It outlines a number of Government initiatives both at home and abroad to foster corporate responsibility.

170. The work of the UN Special Representative is highlighted as one of a number of initiatives supported by Government. The Report outlines the 'protect, respect, remedy' framework in brief but provides no explanation of what the business responsibility to respect means or of the due diligence measures recommended by the UN Special Representative to meet that responsibility.

171. Although the document sets out a range of measures which support corporate responsibility - and positive steps being taken by the Government to that end - there is no clear statement on which measures the Government consider to be effective or what steps the Government recommends or expects businesses to take next. The Government's latest Corporate Responsibility Report presents a positive overview of the steps which the Government is taking to implement its existing policy. While we commend the steps taken by the Government to promote the business case for corporate responsibility, we regret that the Report does not clearly connect this business case to the responsibility to respect human rights recognised by the UN Special Representative in his work. The language of 'encouragement' found in the Corporate Responsibility Report, while positive, seems out of kilter with the conclusion of Professor Ruggie that many of the steps taken by business to address their human rights impacts are incorrectly viewed as purely voluntary measures. Equally, the Report does not clearly identify that existing compliance and regulatory steps required of business - for example in respect of health and safety, the environment and equality - are designed to meet the human rights obligations of the UK. This suggests that the Government's corporate responsibility strategy is unduly focused on voluntary measures and underestimates the extent to which businesses have human rights responsibilities.

The Private Sector and Human Rights Project

172. The Ministry of Justice is currently working with the Department of Health on a Private Sector and Human Rights Project. This has involved establishing a private sector working group, running an online survey and conducting a series of interviews with businesses from a variety of sectors. The project: "aims to establish an understanding of the engagement of UK businesses with human rights within their domestic operations and will consider whether a need for further guidance for businesses with human rights within their domestic operations and … whether a need for further guidance for businesses exists on how to embed human rights within their UK practices".[237]

173. The project seems to us to demonstrate a number of limitations and shortcomings. First, it focuses solely on the domestic activities of UK businesses. Secondly, is principally concerned with the view of UK businesses on whether they need guidance, not on wider issues surrounding the impacts of UK business on human rights. The consultation appears to have focused principally on private sector and business bodies and organisations. It does not appear to have canvassed the wider views of consumers, NGOs or other stakeholders.[238]

174. The Ministry of Justice submitted a supplementary memorandum dealing principally with the preliminary findings of the project. These included that the majority of business respondents "clearly understood" human rights applying to all individuals. The majority of companies understood the concept of human rights, but these companies perceived that human rights issues were largely confined to employment matters. UK businesses surveyed had a "significant desire" for practical guidance on "how to integrate human rights within their policies". Importantly, companies surveyed did not often use the term 'human rights' beyond the enclave of corporate social responsibility. Businesses surveyed typically saw 'human rights' as "mainly applicable to their wider operations only when they operate overseas, particularly in the least developed countries".[239]

175. The Government launched the report of its scoping study after the conclusion of this inquiry, on 12 November 2009. The findings of the report broadly reflect the initial findings set out above. In addition, the study recognises that its sample is likely to be dominated by companies who were inclined to express a positive interest in human rights issues. It acknowledges that a "vociferous yet small number of negative responses" were likely to be significantly underrepresented. This group is characterised as the "Human rights are not for us" or "Get out of my hair" cohort in the study.[240]

176. The study raises a number of key questions for the Government to consider and encourages the Government to engage with business leaders in taking this discussion forward:

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177. The Government told us that the findings of the study would inform the next steps of the project and its overall scope.[242] In his foreword to the report of the study, the Minister for Human Rights, Michael Wills MP called it an initial "outreach" to guide "further engagement with the UK private sector". However, he also made clear that the project has provided "initial momentum" which the Government hopes will be taken forward by the EHRC.[243]

178. It was initially unclear why the scope of this project had not been widened to include the overseas activities of UK businesses. In oral evidence, Michael Wills MP, the Minister for Human Rights, told us that the FCO was not part of the steering group for the project, although it had been "copied in". The Government has since said that the FCO has begun to attend project steering group meetings.[244]

179. We commend the decision of the Government to initiate its Private Sector and Human Rights Project. It seeks informed answers to many of the questions posed by this inquiry, including whether there are gaps in existing guidance and legal and regulatory frameworks relating to businesses in the UK which need to be addressed. However, we are concerned that the project appears to have been limited to gathering the views of UK businesses about their domestic activities. It is unfortunate that other Government departments, including BIS, DFID and the FCO, which are more familiar with the Government's corporate responsibility agenda, have not been more heavily involved. Their experience of the international debate on the cross border impacts of companies could have usefully informed the scoping study. We recommend that any policy options pursued as a result of the Private Sector and Human Rights Project are subject to wider consultation with consumers, employees, NGOs and other stakeholders.

180. At present, there are no planned next steps for the Government Private Sector and Human Rights Project, other than to recommend action by the Equality and Human Rights Commission. We are concerned that this approach appears to indicate a lack of leadership and commitment to taking this debate forward. We make some positive recommendations for further action, below.

The FCO Toolkit on Business and Human Rights

181. The FCO Toolkit has been distributed to all overseas FCO and UK Trade and Industry posts. The 20 page Toolkit explains that its purpose is to give guidance to political, economic, commercial and development officers in overseas missions on how to "promote good conduct for UK companies overseas". It focuses principally on the implementation of the OECD Guidelines, but gives guidance to staff on how to promote human rights. It provides basic further information on other mechanisms for the protection of human rights, including the Voluntary Principles on Security and Human Rights, the Extractives Industries Transparency Initiative and the work of the Special Representative. The Toolkit sets out the Government's support of the work of the Special Representative and the OECD Guidelines and stresses that the UK is "committed to promoting responsible corporate behaviour amongst UK companies operating (or considering potential opportunities for operating) overseas". It expressly states that:

An important part of overseas missions' work is to promote human rights…with host government representatives. Missions should therefore be aware of allegations of concern arising from the operations of UK companies or their subsidiaries overseas. Where possible, facilitate and lobby for discussion and resolution of these issues.

182. In addition to this lobbying and promotional work, the Toolkit identified a number of possible actions for FCO posts. For example, staff who become aware of acts of bribery committed by UK nationals or companies, should report immediately to the Serious Fraud Office. Staff must inform companies about human rights risks, particularly in conflict zones. If a complaint arises against a UK company, staff should inform relevant bodies including the EU, the UN, and the International Monetary Fund. Any information relevant to a complaint - irrespective of whether it supports or undermines the allegations against the UK company - should be communicated to the UK NCP.

183. Some witnesses argued that promotion of UK businesses overseas should be linked to their human rights performance.[245] Others argued that the UK Government had taken steps to promote UK businesses in ways which would be inconsistent with local law and the international human rights commitments of the host state. Gavin Hayman, for Global Witness said:

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184. We asked the Minister for further information on the guidance and support provided by UK posts overseas to business and others on human rights issues. The Minister for Regulation, Ian Lucas MP, told us that Government wanted human rights to be at the "front of the minds" of UK businesses working overseas and that this was "very high" on the list of priorities for UK missions.[247] We also asked whether the FCO and UK Trade and Investment (UKTI) took a consistent approach. The Minister explained:

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185. The Government subsequently provided us with further information on the role of UKTI. This information makes clear that the objectives of the UKTI - to promote UK enterprise overseas[249] - are paramount:

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186. We discussed the promotion of human rights with a number of FCO personnel overseas. We recognise from our discussions that a more proactive role for UK posts could require significant additional resources and the need for more training in human rights particularly in relation to the private sector.

187. Lord Malloch-Brown, then Minister for UN and Africa, explained that all posts currently receive generic human rights training. It is unclear what further training staff will receive on the issues in the Toolkit. In June 2009, the Government explained that it intended after publication of the Business and Human Rights Toolkit to disseminate it to posts and make it available on the FCO website.[251]

188. We welcome the Government's Toolkit on Business and Human Rights and commend the aim of providing accessible information and recommendations to overseas posts on issues which might arise about business and human rights. We particularly welcome the specific directions given to posts about how they might promote human rights and respond to allegations against UK companies. There are, however, limits to what this short document can achieve. Without promotion and adequate training for relevant staff in what human rights mean for business, there is a risk that the Toolkit will gather dust in embassy in-trays.

189. We recommend that the FCO monitors the use of the Toolkit in practice to assess its value. At present, the Toolkit does not provide a UK contact for posts to consult for further guidance. We recommend that the Government considers how knowledge and expertise on business and human rights issues can be developed centrally, with a view to ensuring best practice is shared within the FCO and across Whitehall.

The draft Bribery Bill

190. The draft Bribery Bill was introduced by the Government in March 2009 for pre-legislative scrutiny. The Joint Committee on the draft Bribery Bill reported in July 2009. It welcomed the draft Bill and made a number of detailed recommendations.[252] At the request of the Chairman of the Joint Committee, we wrote to indicate our view that in so far as the Bill was designed to meet both domestic and cross border corruption, in our view it was a human rights enhancing measure.[253] Anti-corruption measures address human rights issues. In the 2004 foreword to the UN Convention, the then UN Secretary General, Kofi Annan explained:

Corruption is an insidious plague that has a wide range of corrosive effects on societies. It undermines democracy and the rule of law, leads to violations of human rights, distorts markets, erodes the quality of life and allows organised crime, terrorism and other threats to human security to flourish.

191. In the past, the Government has been criticised for a lack of leadership on bribery and corruption issues, facing accusations that the international obligations of the UK suffer at the expense of short term economic interests.[254] We hope that the publication and enactment of the Bribery Bill during this Parliamentary session will mean that such concerns are a thing of the past. We look forward to scrutinising this measure. In so far as it is designed to reduce bribery and corruption in the UK and abroad, we consider that it is a human rights enhancing measure. We recommend that Parliamentary time be made available to allow this Bill to gain Royal Assent before the end of this Parliament.

The need for a UK strategy on business and human rights

192. We are concerned that a number of the weaknesses highlighted by Professor Ruggie in his reports are apparent in the Government's current strategy for business and human rights. No clear message appears from the Government's evidence on these issues, other than encouragement to businesses to take a responsible approach to their human rights impacts. Peter Frankental, of Amnesty International told us that:

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193. The Institute for Business and Human Rights said that greater coordination on this issue was needed nationally and could be provided by either the Government or the national human rights institutions in the UK:

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194. We asked Ministers how the Government achieved consistency and coherence in its approach when its policy straddled the responsibilities of so many Departments and agencies. The Minister for Human Rights, Michael Wills MP, explained that the Government hoped to learn from its Private Sector and Human Rights Project. He accepted that there may "need to be changes to the machinery of Government to ensure better coordination and better certainty for business" and that the project was highlighting the need to "join the dots".[257] Government policy on business and human rights lacks the coherence called for by the UN Special Representative. We recommend that the Government reviews its approach to business and human rights to develop a more consistent strategy with a clearer message. The forthcoming review of the OECD Guidelines provides a good opportunity for the Government to step back and look not just at the Government position on the Guidelines but at its broader approach to the human rights impacts of business both in the UK and overseas.

195. One approach would be to broaden the cross-Government steering group on the UK NCP so that it could inform and coordinate Government strategy on business and human rights issues. While this steering group includes external members, it also provides an example of a coalition of relevant Government departments not currently duplicated on other issues. We recommend that the Government consider this option.

What would a UK strategy look like?

196. There are many facets of the Government's existing policy which are to be commended, not least its financial support for multi-stakeholder initiatives and capacity building in nations where governance is weak.[258] However, there are limits to the Government's current approach.

197. On voluntary mechanisms, Professor Ruggie told us that policies limited to advocating voluntary approaches to corporate responsibility for business "often differ very little from laissez faire":[259]

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198. The limits of capacity building are illustrated in the recent work of the House of Commons International Development Committee on Nigeria. The Committee counselled against increased aid until corruption in Nigeria had been reduced and its governance mechanisms improved. It considered the impact of the operations of Royal Dutch Shell in Nigeria and concluded that legislation might be necessary in addition to capacity building measures:

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199. Witnesses identified a number of themes which could be addressed in a new UK strategy on business and human rights, including:

A consistent approach across their domestic and international policies.[263]
Capacity building and enhancing human rights protection in host states[264]
Proactive engagement with business and human rights issues by the UK at an international or intergovernmental level.[265]

200. Professor Ruggie has been clear that the most effective approach is a proactive one, where Governments integrate a human rights based approach into all aspects of their activities relating to business:

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201. There are a number of proactive steps which Professor Ruggie and others told us the UK could consider taking to support and reinforce the 'protect, respect, remedy' framework. These include:

Clearer guidance and support for business on human rights issues;
A strategy on human rights in public procurement and public investment;
Reforms to the Government's approach to Export Credit Guarantees;
Revisiting the Companies Act 2006; and
A change in approach to investment.

202. The Government and business witnesses tended to argue against such measures and we assess their arguments, below.

EXTRATERRITORIALITY

203. Some witnesses suggested that the UK could use domestic law to make parent companies directly responsible for their actions overseas, the actions of their subsidiaries, or actions in their supply chain, where human rights abuses cannot be remedied in the countries where they happen.[267] However, the IoD argued that the adoption of this approach "serves to weaken the sovereignty of other national governments", lacks legitimacy and can be criticised as an exercise in "cultural hegemony".[268] The CBI was cautious about the involvement of the home state in any extraterritorial activities of business:

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204. The Government opposes such extraterritorial action. Lord Malloch-Brown said he had concerns about how firms' behaviour overseas could be monitored from the UK and about determining the relevant standard that should be applied to UK businesses. Professor Ruggie told us that home-state regulation applied to the activities of the parent company was not unreasonable and should be explored, despite its potential extraterritorial effects:

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205. We accept that there are legitimate concerns to be addressed in respect of direct application of extraterritorial standards overseas. We are not persuaded that the same degree of concern applies to all forms of regulation which may have some extraterritorial effects. We consider that the application of conditions to a parent company based in the UK, for the purposes of regulating their relationship with the UK Government or its shareholders in the UK, has a very different degree of extraterritorial effect to the direct application of the jurisdiction of the UK courts to breaches of the human rights obligations of the UK overseas. We recommend that the Government considers which standards it expects UK companies to meet in respect of its own contacts with and support for those businesses.

INTERNATIONAL STANDARDS AND LEGAL CERTAINTY

206. Standards can be defined and applied in a number of ways to affect how businesses respect human rights. In the Netherlands, certain forms of support will not be provided to companies who cannot prove that they comply with the OECD Guidelines.[271] In Norway, statutory ethical standards are applied to certain actions of public bodies, for example in relation to pubic investment. A third possibility is to introduce a clear reporting mechanism which allows the Government, consumers and other stakeholders to test business performance against voluntarily accepted business standards.[272] The Government should not rule out setting clear standards for business to meet where it considers these standards are necessary to meet its human rights obligations. There is merit in considering whether existing standards supported by both businesses and the UK Government could be used to reinforce the responsibility of business to respect human rights in practice.

COMPETITIVENESS AND THE PLAYING FIELD ARGUMENT

207. The last of the key arguments against further action by the UK Government is that by taking action unilaterally, the UK will undermine the competitiveness of its companies and harm the economy. Gary Campkin, for the CBI, told us that caution must be exercised when looking at the competitiveness of UK businesses:

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208. We asked Professor Ruggie about this argument and he told us:

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209. Arguments based on anti-competitiveness are difficult to square with the understanding that all responsible companies should already be performing due diligence in respect of their human rights impacts. For the home state to take action to incentivise or reward behaviour which is accepted good practice would seem logically to have little impact upon the competitiveness of UK companies. We are not persuaded that unilateral steps by the UK would undermine the competitiveness of UK businesses.

210. We recommend that any new Government strategy should build on the work of the Special Representative and the 'protect, respect, remedy' framework. It should also seek to address the criticisms raised by witnesses to this inquiry. In particular, Government policy must be clearer and more coherent. The principal purposes of the strategy should be to meet the Government's duty to protect human rights and to support UK businesses in meeting their responsibility to respect the human rights of others, both within the UK and abroad. Its key aim should be to set out clearly for businesses, consumers and the wider community what the UK expects of UK business. The international human rights obligations of the UK and UK Government policy on human rights should inform its policies for the private sector both within the UK and overseas. The strategy should present a clear and coherent connecting thread between domestic policy, foreign policy and the UK's international diplomacy, including at the EU, the OECD and the UN.

230 Q1 Back

231 Ev 96 Back

232 Ev 85 Back

233 See for example, Ev 138, Ev 209 Back

234 See for example, Ev 139, Ev 172, Ev 207, Ev 218, Ev 271 Back

235 See for example, Ev 279, Q 63 - 64, Q113 - 114 Back

236 Corporate Responsibility Report 2009, page 5. Back

237 Ev 85 Back

238 Ev 85 and Ev 89.Compare Ev 99 - 100 Back

239 Ev 89 Back

240 Twenty-Fifty Ltd, The Private Sector and Human Rights in the UK, October 2009, pages 23 - 24. Back

241 Ibid, page 8 Back