Memorandum submitted by the Corporate
Responsibility Coalition (CORE)
The Corporate Responsibility (CORE) Coalition
seeks to help achieve our members' goals by improving the environmental
and social performance of UK companies abroad.
CORE is a coalition of 130 NGOs, trade
unions, academics, responsible businesses and individuals who
work on environment, development and human rights issues including
groups as diverse as Action Aid, Amnesty International (UK), Christian
Aid, Friends of the Earth, Global Witness, The Schumacher College,
Traidcraft, War on Want, The Women's Institute, WWF-UK, UNISON
and Unity Trust Bank. CORE was founded in 2001 to provide
policy leadership and coordinate campaign efforts to improve the
environmental and human rights impacts of UK companies.
CORE's members have extensive and diverse experience
in identifying and finding solutions to environmental, human rights
and poverty related issues. The broad experience of the membership
has led them to conclude that all too often UK companies' impacts
abroad are detrimental to people and the environment. CORE's work
is guided by these experiences and aims to establish an appropriate
framework for the corporate sector, specifically to:
1. Improve companies' transparency regarding
social and environmental impacts;
2. Increase accountability of companies
for their impacts on stakeholders; and
3. Ensure adequate access to justice mechanisms
are in place for victims of corporate abuses.
From 2001 to 2006 CORE's campaign
focused on securing legislative amendments in relation to directors'
duties and company reporting in The Companies Act 2006. The
campaign resulted in new legal obligations on company directors
to have regard to environmental and social impacts in company
decision-making and a new obligation on the largest public companies
to report annually on their environmental and social impacts.
Since enactment of the Companies Act 2006, CORE
has followed the implementation of this new legislation
and undertaken a range of research to update our analysis in this
area (producing research on corporate abuse in 2007,
exploring options for reforming tort law,
and carrying out consultations with MPs, government departments
and civil society groups). CORE is now campaigning for the UK
Government to improve access to justice for victims of UK companies,
through the creation of a new UK Commission for Business, Human
Rights & The Environment.
There are many obstacles to effective corporate
governance of international companies. The reluctance of some
states to effectively regulate companies' negative impacts, liability
limitations, concern about the exercise of extraterritorial jurisdiction
and the sheer range and complexity of international business arrangements
all combine to make it difficult to bring companies to account,
particularly where the abuse has taken place in a country with
a developing or emerging economy.
"The root cause of the business and human
rights predicament today lies in the governance gaps created by
globalizationbetween the scope and impact of economic forces
and actors, and the capacity of societies to manage their adverse
consequences. These governance gaps provide the permissive environment
for wrongful acts by companies of all kinds without adequate sanctioning
or reparation. How to narrow and ultimately bridge the gaps in
relations to human rights is our fundamental challenge."
UN Special Representative on Human Rights and Transnational
There is a likelihood that trends in business-related
international human rights and environmental violations are worsening
as the global reach of companies and their supply chains extends
and as poor practices go unchecked. This is compounded by the
lack of effective penalties and other forms of deterrence that
would have the effect of preventing poor practices. Those in business
who would like their companies to have a better social and environmental
footprint will only be able to justify this if they know they
will not be undercut in the market. Currently there is no business
case which exists for all companies to be more ethical, only a
business case for strong consumer brands selling to socially conscious
Ideally, unacceptable corporate practices should
be dealt with in the country where they occur, the reality is
there are often many barriers to redress in developing countries.
Although laws may exist on paper, regulatory oversight can be
weak, under-resourced and, in some cases, corrupt. CORE and The
London School of Economics (LSE) published a report 'The Reality
of Rights: Barriers to accessing remedies when business operates
beyond borders', provided as an appendix to this submission,
illustrating how victims of human rights violations are far too
often unable to obtain adequate remedy. Case studies were drawn
from a broad spectrum of commercial sectors and activities and
although each case study raised its own set of problems a number
of common themes emerged:
1. Governments having to decide between the competing
priorities of effective redress for victims and attracting international
investment for job creation;
2. Victims lacking information about the processes
for seeking redress;
3. Victims being politically marginalised based
on issues such as race, class and gender;
4. Victims being unable to afford legal advice
as well as there being a lack of legal expertise to call on;
5. Victims not trusting the delays, uncertainty,
weak remedies, and independence of the legal and self-regulatory
6. Governments lacking the capacity to enforce
the laws they do have, and
7. Large multinational companies having the money
and expertise to exploit and reinforce the barriers.
Some victims' groups have bypassed their local
legal systems altogether and have brought claims directly against
parent companies of corporate groups in the "home states"
of those companies (eg in the UK and the US). These claims are
based upon the idea that parent companies ought to bear some responsibility
for the failings of their subsidiaries and suppliers, since it
is usually the parent which influences the subsidiary's decisions
and profits. But the logistical, financial, legal and psychological
obstacles to pursuing a lawsuit against the parent company in
another jurisdiction are huge, meaning that many abuses go un-remediated.
Alternatively, it might be possible to bring
a complaint under the Organisation for Economic Cooperation and
Development's (OECD) Guidelines for Multinational Enterprises
before the appropriate National Contact Point (NCP). Recent reforms
of the UK NCP have resulted in some significant improvements to
this process (eg. a steering board with external representation,
increased capacity, judgements) though inherent limitations remain.
The most significant of limitations are the lack of transparency,
inconsistency of application, lack of legal force, and the absence
of an enforcement mechanism to compensate those affected or to
penalise companies that clearly breach these standards.
In the UK, environmental, health and safety,
and labour legislation has been vitally important in setting out
what is and is not acceptable corporate practice in this country.
Crucially, this legislation does not address the impacts of UK
companies operating in other countries. Although ILO Conventions
have been successful in securing advancement of workers rights
internationally, many other international agreements and standards
such as the OECD Guidelines for Multinational Enterprises have
proven ineffective in ensuring responsible behaviour of corporations
in relation to their international activities.
There are, however, several other initiatives
relating to business and human rights that the Government is currently
involved in. The Foreign and Commonwealth Office (FCO) lead on
the United Nations Human Rights Council, the Voluntary Principles
on Security and Human Rights for the Extractive Sector, as well
as liaising with the United Nation's Special Representative for
Business and Human Rights. The Department of Works and Pensions
lead on ILO conventions, the Department for International Development
(DFID) lead on the Ethical Trading Initiative, Extractive Industries
Transparency Initiative, The Kimberly Process and The Global Compact.
CORE's members follow all of these initiatives
to a varying extent. Although there is significant encouragement
by the actors involved in these initiatives for greater civil
society involvement, CORE's members do not have the capacity to
take part in all of these initiatives in a meaningful way. This
makes it difficult for other concerned stakeholders be they business,
investors and consumers to ascertain the effectiveness of these
initiatives. Furthermore, CORE's members do not feel it is their
role, and do not have the mandate, to monitor the compliance of
all the companies involved in these initiatives, as is sometimes
expected of them.
Additionally, very little coordination exists
between government departments involved in these initiatives and
no cross-initiative learning or analysis of if, and how, these
initiatives may have contributed to preventing human rights abuses
or the attainment of the Millennium Development Goals, has been
produced. The Department of Business, Enterprise and Regulatory
Reform (BERR), FCO and
DFID all have produced their own corporate social responsibility
(CSR) strategies and it is of concern to CORE that it is unclear
as to the progress achieved in relation to these strategies to
date. It is also of deep regret to CORE that the FCO strategy
has not been implemented due to the closure of the Sustainable
Development and Business Group within FCO and CORE are concerned
that this has led to further polarisation between departments
working on these issues.
In summary, the problems with the operations
of UK companies in developing and emerging economies are threefold:
1. There is a lack of effective enforcement of
human rights by many host countries.
2. There is a lack of effective remedy available
to foreign victims of UK companies; and
3. A lack of clarity in the outcomes, benefits
and coherence of the various CSR initiatives which the Government
is involved in.
The Government must address the lack of accountability
of UK companies responsible for human rights abuses abroad. Although
many companies do act responsibly, relying on voluntary CSR initiatives
to drive companies to act responsibly is insufficient. Such initiatives
are far too often undermined in the market place by irresponsible
competitors. Since poor practice is not checked, the trend of
worsening practices appears to be increasing, particularly for
unbranded and low quality goods where there is no driver for change.
The lack of drivers to improve the social and environmental performance
of the bottom of the market, effectively acts as a brake on all
parts of the market to improve.
In many areas of UK law, alternatives to expensive
and uncertain court action have already been found. The last few
years have seen a proliferation of "quasi-judicial"
bodies and public complaints mechanisms whereby people can enforce
their rights and resolve disputes informally without having to
resort to court action. The UK legislature has introduced numerous
such procedures, ranging from court-like institutions (eg employment
tribunals) to less formal methods of investigating and settling
complaints by members of the public (eg various "ombudsmen"
services). A new dispute resolution body with a mandate to receive,
investigate and settle complaints against UK parent companies
relating to subsidiary or supplier abuse in other countries is
a realistic legal possibility provided it:
1. Respects international law restrictions on
2. Complements existing civil liability processes,
rather than seeking to replicate or replace them; and
3. Is underpinned by a clear set of standards
which focus, not on the day-to-day operations of subsidiaries
and suppliers, but on the role of the parent company as the "primary
influencer", "overseer" or "coordinator"
of the corporate group.
PROPOSAL: A UK COMMISSION
|Mandate:||To oversee compliance with codes of best practice relating to the management by UK companies of their global labour, environmental and human rights impacts, and to monitor the impacts of UK companies abroad (either directly or through subsidiaries and suppliers).
|Functions:||To provide an information and advisory service for companies and complainants; to oversee and enforce standards of best management practice; and to investigate complaints and resolve disputes regarding alleged breaches of core labour rights or adverse environmental and human rights impacts outside the UK.
|Powers:||To investigate and report on allegations of breaches of standards; to compel production of documents and witnesses; to enter into "cooperation" agreements with foreign regulatory authorities; to undertake research; to commission expert reports; to hear and resolve disputes involving UK companies in accordance with its dispute resolution procedure, to make hearings and decisions publically available.
|Possible Outcomes: ||Financial award (up to a specified limit). Publication of apology and/or explanation. Recommendations. Undertakings (an order to a company in relation to a specific breach, eg. clean up a contaminated area).
CORE's Directors Duties Guidance, by David Chivers QC was sent
to the FTSE 100. Available here: http://www.corporate-responsibility.org/module_images/directors_guidance_final.pdf Back
Zerk, Jennifer, (2007), Corporate Abuse 2007: A discussion
paper on what changes in the law need to happen, CORE, London
available at http://www.corporate-responsibility.org/module_images/corporateabuse_discussionpaper.pdf Back
Watson, Niall "Challenging the Future of Corporate Responsibility",
CORE, London available at http://www.corporate-responsibility.org/C2B/document_tree/ViewADocument.asp?ID=146&CatID=9 Back
RAID in Association with CORE and The TUC, 'Fit for Purpose? A
Review of the UK National Contact Point (NCP) for the Organisation
for Economic Co-operation and Development (OECD) Guidelines for
Multinational Enterprises 2008" available http://www.corporate-responsibility.org/module_images/NCP_report_2008.pdf Back
See the Foreign and Commonwealth Office Departmental Strategic
Objectives for 2008/09 - 2010/11 at http://www.fco.gov.uk/resources/en/pdf/pdf1/CSR-07. Back