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


Examination of Witnesses (Questions 1 - 19)

WEDNESDAY 3 JUNE 2009

PROFESSOR JOHN RUGGIE

  Q1  Chairman: Good afternoon, everybody. This is the first of our formal witness sessions in our new inquiry on business and human rights and we are joined by Professor John Ruggie, who is the UN Special Representative on business and human rights. I believe, Professor Ruggie, you want to make some opening remarks.

  Professor Ruggie: Thank you very much. It is a great pleasure to be here. Thank you for inviting me. I understand that I have about five minutes so let me just focus on one point that has come up on a number of occasions in the submissions to your Committee, and that is the whole issue of the debate around voluntary versus mandatory measures. I feel that the debate unduly bifurcates two categories and has become quite stale and an impediment to creative thinking and therefore I would encourage the Committee not to get trapped in that bifurcation. My responsibilities are essentially at the global level, as you know. I do not have a mandate that is specific to any country or to any particular company or industry. It addresses what ought to be the emerging global rules governing corporate behaviour in relation to human rights. From that perspective globally we have serious business and human rights challenges because fundamentally we suffer from a series of what I call governance gaps, and there are essentially four kinds of governance gaps as I see it. One is simply, if you will, the misalignment between globally integrated economies and globally integrated companies and a very fragmented system of public governance. Corporate strategy has one driver globally; the international community has 192 drivers, and therefore by definition there is a misalignment between those two that is just part of the nature of things which we have to try to overcome. Secondly, there is considerable lack of coherence or policy incoherence, if you will, within governments themselves. Government departments, agencies that directly shape business practices, whether it is securities regulations or whether it is trade, commerce or investment, are off doing their thing, the human rights people are off somewhere else and the twain rarely meet, so governments take on human rights obligations but you would not know it when you look throughout the rest of the government. The human rights obligations tend to be compartmentalised within a human rights body; they never filter into other areas of the government. I am over-simplifying because we have very little time but that is essentially what I would describe as the second governance gap, the lack of a policy of coherence. Thirdly, governments take on human rights obligations without ever intending to fulfil them or making any effort to fulfil them. That, of course, creates yet a different gap, so there are laws on the books in many countries which the government either lacks the capacity to enforce, is afraid to enforce because it fears the competitive consequence, "We need this investment, therefore let us lower our standards or let us ignore our obligations", or because of corruption, or whatever the case may be. Finally, what we are finding is that corporate governance rules themselves rarely, if ever, address human rights related issues, the human rights impacts of companies, and that is a problem because it does not send the appropriate signals to companies. So you find the situation today. This week in the US a trial opens against Shell. Corporate regulations in the home countries of Shell, and there were two, made no signal to Shell that it had certain responsibilities with regard to human rights whether or not the Nigerian government chose to implement those. Result: it is in the courts. Chevron faces a potential $27 billion award as a result of things that went on in Ecuador. These are very serious problems which corporate law in few, if any, corporate regulations, in few, if any, jurisdictions, signals to companies that they need worry about, and I think that is another serious element of what I call global governance gaps.

  Let me turn to the mandatory versus voluntary. Overcoming these governance gaps requires creative thinking and innovative policies. As I have indicated, in my judgment the reification of the mandatory versus voluntary distinction is an impediment to creative thinking and innovative policies. For example, those advocating international mandatory measures, a treaty instrument, let us say, ignore the fact that treaties are inherently voluntary in character. You cannot force a government to adopt a treaty. It is a choice that governments make, and even if we were able to lock in an effective set of standards in an international treaty instrument the implementation of that de facto would be voluntary because there is no international enforcement mechanism in place in the area of human rights and there is not likely to be one any time soon, and so this most mandatory of measures in fact relies on voluntarism on the part of states and on the part of companies. On the other side companies that argue pure voluntarism have not explained how one ever reaches sufficient scale to make a difference, turn markets around or how to pull laggards along. Governments add to the problem when they advocate voluntarism and fail to provide even non-legal guidance to what is expected, so governments will say, "We favour voluntary approaches to this, that and the other thing", but then do not give business a clue as to what that means. There is never any consequence and therefore it signals to business that these voluntary standards really do not have very much practical consequence. They are there, they are nice, some people adhere to them and others do not. On top of that governments provide relatively little assistance to their companies operating overseas, even when they operate in very difficult environments, so you have an export credit agency, for example, and I do not want to pick on any in particular, actually supporting an investment abroad in a country where a civil war is taking place and requiring very little, if any, due diligence on the part of a company about what kind of problems they are likely to run into, are they prepared to deal with those problems, et cetera. At the end of the day, therefore, the promotion of voluntary approaches by governments often differs very little from laissez-faire. They are not really policies at all; they are just words on paper, and so I think this again adds to the problem that we face. Finally, quite apart from whatever the legal requirements are, what we have argued, with the support of business, is that companies ought to do an appropriate human rights due diligence process, especially big footprint companies, the extractive industries, for example, especially when they go into difficult environments, doing an appropriate process of due diligence, having a human rights policy, doing an impact assessment, looking at who are your business partners going to be, are they going to get you into trouble. What about the government forces that you are relying on to protect your assets, are they going to get you into trouble, are they going to shoot demonstrators, what is their record, do they have adequate human rights training, et cetera. These are all questions that need to be asked. A number of people have said, "Ah, but this is simply voluntarism again", but what we have argued is that there is nothing voluntary about doing due diligence if a company is committed to respecting human rights because there is no other way to demonstrate respect for human rights except to look at whether or not you adversely impact human rights and then take that into account and develop remedial measures to deal with the potential adverse effects. My bottom line, and I will stop here, is that we clearly need a smart mix of national and international measures and voluntary and mandatory measures and we need to get on with the job of practical problem solving and end the doctrinal debates that have impeded progress and creative thinking in this area. Let me stop there and I will be happy to respond to whatever questions or comments or queries or concerns you may have. Thank you.

  Q2  Chairman: Thank you for a tour de force there, I think. Perhaps I could start with some of the devil's advocate type questions. What do you say to the sceptics who argue that human rights laws and international obligations have nothing whatsoever to do with business and all you should do is make suggestions to corporations about being socially responsible?

  Professor Ruggie: $27 billion in Ecuador; a court case in New York. Both of those companies have highly developed CSR programmes and yet there they are. There has to be guidance, as I suggested, even if the measures are "voluntary". What does it mean? What do you need to do in order to adhere to what you have committed yourself to? What is the process? Companies universally will say that they respect human rights. I have never come across a company website that said, "We do not respect human rights". The question that we ask them is, "Okay, that is great. We are delighted that you respect human rights, but how do you know that you do? What steps do you go through to demonstrate to yourself that you do, and are those steps adequate?", and most of the time there are no systems in place. What is the issue here? The issue here as far as the companies are concerned is having adequate risk management systems in place. That is really what the due diligence process, for example, is all about.

  Q3  Chairman: We will come back to that later on. You also mentioned that the prospects of international agreement are probably somewhat remote in the immediate future. One of the arguments that has been put forward by witnesses to us is that regulation of companies in the human rights context, the human rights impact of businesses, has to be agreed internationally to be effective. Do you agree with that or not? I presume you do not from what you are saying. Basically, should the UK Government and UK business wait until you have finished your work in trying to produce an international regime? You mentioned earlier on the fact that Shell has not been hauled before the courts either here or in the Netherlands but in the US.

  Professor Ruggie: Part of our work thus far has been to point out to governments in particular what they are already obligated to do and are not doing. The human rights regime fundamentally rests on obligations that governments undertake. Governments sign on to human rights instruments; companies do not. Governments, under the existing human rights treaties which they have ratified, are obliged to protect against human rights abuses by parties other than themselves, in addition to themselves, and third parties include businesses. We have tried to point out to governments, "Look: you have signed up to these things. Here is what they mean and here is what you ought to be doing given present obligations, let alone future ones".

  Q4  Chairman: Has the economic downturn, the recession, affected the way that businesses and states relate to your work, and, if so, in what way?

  Professor Ruggie: We get all sorts of stories of factories in China and elsewhere evaporating overnight and people who have not been paid for three months being left holding the bag, as it were. Also, at a more general level, I think to some extent the crisis has separated the wheat from the chaff a bit. Companies for whom CSR, corporate social responsibility, was largely rhetoric are pulling back but not companies that have made a serious commitment. Travel budgets are being cut down, people are not going to as many CSR meetings, but the risk management dimension of it is as important as ever, if not more so, because in times of crisis people do things that they otherwise would not do and it is even more important to manage your risks.

  Q5  Chairman: Are states are affected the same way as they were before?

  Professor Ruggie: I came in this morning from Geneva. I spent yesterday presenting my latest report to the Human Rights Council. The level and diversity of support from different countries is quite encouraging. Yesterday the parade included not only the EU and those sorts of countries but also China, India, Brazil, the African Group, a number of countries that see quite positive advantages to making sensible progress in this area.

  Q6  Lord Dubs: I was very interested in some of the things that you have written, and indeed what you said about legal obligations on the private sector when they undertake public functions or responsibilities, because there is a crossover from the public sector to the private sector and so on, and I wonder whether your framework has any lessons for situations when public services are privatised and what happens to the human rights obligations. In other words, can the state effectively contract out its responsibility to protect human rights?

  Professor Ruggie: It is a very technical issue, Lord Dubs, but my non-technical answer—

  Q7  Lord Dubs: Please!

  Professor Ruggie:— would be that you cannot contract out of obligations; you can contract out of service delivery, so that if there were certain obligations when a prison was run by public authorities those state obligations do not go away when the service itself is privatised. It is the responsibility of the government to make sure that whatever contract it signs with the private service provider it continues to reflect the standards that prevailed previously. That would be my non-technical answer.

  Q8  Lord Dubs: And your view is that that should be pretty well automatic, that when services are privatised the state ensures the obligations are not lost in the process?

  Professor Ruggie: The state cannot contract out of standards that it is obligated to fulfil. It can contract out of service delivery.

  Q9  Lord Dubs: May I move on to another issue. You talk about voluntary standards and you said that voluntary standards work up to a point. Is there room for what I would call a less legalistic approach to private sector involvement in human rights in an individual state? For example, would guidance be sufficient or is that rather weak, and do you have any examples of good practice that would cover this point?

  Professor Ruggie: One example is that Denmark recently adopted a regulation requiring companies to report their CSR policy, and if they do not have one they are required to say that they do not have one. That is an interesting measure. It was not very draconian, it does not cost anybody very much but it does send signals to the market place that this particular country at least has bothered to adopt a CSR policy, but again it demonstrates why the voluntary/mandatory distinction does not work very well because it is mandatory for the company to say something but it is not mandatory to have a policy. It is simply mandatory to say whether or not it does.

  Q10  Lord Dubs: We had a case in this country, and I know you are not necessarily talking about national obligations, where an individual was given by a local authority into private care for elderly people and at that point it was held by our courts that there were no human rights obligations on that because the local authority had transferred the person into the private sector. That is the subject of changes in government policy, but it does not happen automatically. It requires further action by the government.

  Professor Ruggie: Yes, it does, and it is through the contracting provisions that it would have to happen.

  Q11  Lord Morris of Handsworth: Professor Ruggie, in your opening statement you spoke quite forcefully about what you described as the governance gap and you went on to make the arguments about necessary measures, voluntary or mandatory. If there is no international legal obligation in the UK to deal with the human rights impacts of UK companies and their activities outside the UK, what incentive is there for the Government to act?

  Professor Ruggie: Let me go back to the basic point that the government has already accepted obligations which in many cases, and I am not talking about the UK, it either does not fully understand or has not fully acted upon. On top of that, when governments themselves are involved in the promotion of business enterprises abroad you would think, not necessarily on legal grounds but just on policy grounds, that the government, using taxpayer money, would have a heightened sensitivity to the potential impact of that business activity and to the possibility that it itself may be indirectly involved in human rights abuses through those activities. There are already existing obligations and there are good policy grounds for arguing that governments ought to do in many cases more than they are currently doing.

  Q12  Lord Morris of Handsworth: Is there any case here for international treaties to, if you like, regulate and influence behaviours of the international companies?

  Professor Ruggie: The only elements of international law currently in my judgment that are directly applicable to companies have to do with the most egregious violations—the crimes against humanity sort of thing. That can certainly get companies into court in many jurisdictions.

  Q13  Lord Morris of Handsworth: Are there any steps which the UK could take unilaterally which would not inhibit UK businesses or stand on the toes of other governments?

  Professor Ruggie: If I may I would reframe the question. If what we are talking about is helping companies to manage risks then you are doing business a favour by providing assistance; you are not doing a favour to business by not providing guidance and assistance, so I do not see where the competitive disadvantage is by sensitising a company or requiring a company to have greater sensitivity when it goes into a difficult environment, for example, particularly if government funds are involved as export promotion or investment insurance.

  Q14  Mr Sharma: In your experience does our Government speak with one coherent voice? Who do you deal with in the UK?

  Professor Ruggie: I have many friends in the UK Government, so I deal with them.

  Q15  Mr Sharma: Anyone important?

  Professor Ruggie: They like to think so.

  Lord Dubs: I am sure they do.

  Q16  Lord Morris of Handsworth: What about the future?

  Professor Ruggie: The Foreign Office, BERR, the Export Credit Agency; we deal with a variety of players. The UK Government is always fun to deal with because there are lots of smart people in the UK Government.

  Q17  Mr Sharma: Who should lead—the human rights experts or the "business" experts? Do you have any experience of best practice that you could share with us?

  Professor Ruggie: At the end of the day I do not think it matters who leads. The problem is one of linking things up, of getting the pipes connected. Who leads then becomes an administrative choice, it seems to me, as long as the basic principles on the basis of which coherence needs to be established are clear and clearly transmitted to the various arms of an administration.

  Q18  Mr Sharma: You have expressed concern about a lack of international coherence, with states failing to learn and support each other to address concerns about business impacts on human rights. Is this a problem that can only be addressed on an international level or can individual states do anything on their own?

  Professor Ruggie: Individual states can do many things, sure. I do not want to make it sound as though there should not be any kind of international legal instruments; I just do not think an overarching business and human rights treaty is around the corner, and therefore we have to look to other measures if nothing else as an intermediate step to reduce the harm that companies can cause and to reduce the risks that they face. As I say, if a government provides assistance to help companies reduce human rights harms and the risks that they themselves face it is not a competitive disadvantage and therefore the debate should not be framed in that way. I am sure Chevron would rather not have to pay $27 billion if that is how the Ecuador case comes out. Something like that can drive a company into bankruptcy. Those sorts of things can be avoided.

  Q19  Lord Dubs: May I follow up on that? If you have companies operating in a third country and the companies themselves come from different governments, as it were, operating under different systems, is there not a lack of a level playing field then? Company A says, "We are subject to very tight laws", and Company B says, "In our country it does not matter".

  Professor Ruggie: Your companies will be at an advantage because they are going to stay out of trouble, and the Chinese companies, or whatever they may be, who do not have the backing of a government to provide them with effective assistance and enhanced risk management concerns, will be in deeper trouble. We need to reframe this debate. It is not an imposition, it is not a competitive disadvantage. It helps companies stay out of trouble because in the current environment, as we saw with the financial sector meltdown, when incentives are fundamentally misaligned the market does not automatically produce optimal outcomes. There has to be some signalling device, there has to be assistance provided.


 
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