Corporate Lawyers and the Guiding Principles

On October 10, Shift and Microsoft jointly organized a dinner of in-house counsel and other lawyers to discuss the implications of the UN Guiding Principles on Business and Human Rights for their work. Shift’s Chair, John Ruggie, spoke at the dinner and wrote the following blog about the event, which was also published by Microsoft here.

Several thousand lawyers, in formal business attire and carrying briefcases, descended upon Boston’s Copley Square for the annual conference of the International Bar Association last week. In the air was talk about how the UN Guiding Principles on Business and Human Rights, which I authored—unanimously endorsed by the UN Human Rights Council in 2011—apply to law firms as business enterprises, with their own responsibility to respect human rights.

This was the subject of my presentation at a dinner on Thursday evening across the river in Cambridge, jointly organized by Dan Bross of Microsoft and John Sherman of Shift – the non-profit, independent center of expertise on business and human rights started by former members of my team, whose board I chair. The dinner, hosted by Microsoft, was attended by a mix of in-house corporate legal officers, representatives of several national bar associations, outside legal counsel and other legal organizations.

In my remarks, I noted that I had invited corporate lawyers into the business and human rights debate after reading a 2009 client memo from Marty Lipton at Wachtel Lipton, one of the world’s preeminent corporate lawyers. The memo expressed deep concern that the UN “Protect, Respect, and Remedy” Framework, which I had developed as the Special Representative of the UN Secretary-General for Business and Human Rights, would impose inappropriate duties on directors of corporate boards.

I realized then that corporate lawyers had large influence on their business clients, and that they would be essential in spreading wider understanding about the work I was doing. So I began a process of engagement with the corporate legal community, who became among the most consequential of the new actors that I engaged with. The International Bar Association (IBA) marshaled its global network of international lawyers to help create BASESwiki, a website of user-generated information about non-judicial grievance mechanisms (now hosted by Twenty leading corporate law firms contributed their time on a pro bono basis to the mandate’s Corporate Law Tools Project, which examined the corporate and securities laws of nearly forty jurisdictions to determine the extent to which those laws facilitated or obstructed corporate respect for human rights—the second pillar of the UN Framework.

The engagement paid off. Marty Lipton subsequently issued another client letter encouraging businesses to follow the UN Guiding Principles (which implement the “Protect, Respect, and Remedy” Framework). He characterized the Guiding Principles as outlining a balanced and prudent process for corporations to manage their human rights risks. And in 2011, the American Bar Association formally endorsed the UN Guiding Principles.

Subsequently, I addressed, in an addendum to the Guiding Principles, the role of lawyers who negotiate long-term investment agreements with the governments of very poor but resource rich countries. I pointed out that if the company’s negotiators use their leverage to extract the most advantageous terms possible, regardless of the human rights impacts—such as freezing the state’s ability to regulate changing human rights impacts—this can have serious adverse consequences on affected individuals and communities in those countries. This may increase the likelihood of community conflict—expressed in strikes, blockades and violence—which can also threaten the investment’s profitability and long-term viability.

This generated a rich discussion at the dinner regarding the responsibility of law firms under the UN Guiding Principles to go beyond advising businesses on what is strictly legal, to what is acceptable – and now expected – from a human rights perspective. Senior in-house counsel from several companies that are serious about implementing the Guiding Principles unanimously expressed the strong expectation that their preferred outside counsel should become partners in helping them achieve the company’s strategic goals—including the management of human rights risks—by identifying human rights risks that relate to the company’s legal transactions.

So we’ve come a long way in just a few years. Where previously corporate counsel expressed deep skepticism about the implications of the UN Guiding Principles, corporate in-house legal leaders are now challenging their outside counsel to proactively advise them on human rights risks.

So the times change, and in this case, it’s for the better.

John G. Ruggie is the Chair of Shift and the author of the Guiding Principles. He is the Berthold Beitz Professor in Human Rights and International Affairs at the Harvard Kennedy School.

Shift Comments on UK Financial Reporting Council’s 2013 Exposure Draft Guidance

The UK Financial Reporting Council issued its guidance in June 2014.


The UN Human Rights Council unanimously endorsed the UN Guiding Principles on Business and Human Rights in June 2011. In September 2013, the UK Government was the first EU Government to issue a national action plan entitled Good Business – Implementing the UN Guiding Principles on Business and Human Rights (the “Implementation Plan”). This Implementation Plan states that, “from 1 October a clarification of the Companies Act 2006, means that company directors will include human rights issues, in their annual reports.” This also builds on the Government’s intention, set out in 2010, to, “ensure that directors’ social and environmental duties have to be covered in company reporting.” [Document no longer available online.]

The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 (the “Regulations”) amend existing company law requirements and became effective on 1 October 2013. The main change introduced by the Regulations is a requirement for certain companies to prepare a strategic report as part of their annual report. The new requirements apply for periods ending on or after 30 September 2013.

Section 414C(7)(b) of the Regulations provides that:

In the case of a quoted company the strategic report must, to the extent necessary for an understanding of the development, performance or position of the company’s business, include—

  1. the main trends and factors likely to affect the future development, performance and position of the company’s business, and
  2. information about—
    1. environmental matters (including the impact of the company’s business on the environment),
    2. the company’s employees, and
    3. social, community and human rights issues, including information about any policies of the company in relation to those matters and the effectiveness of those policies.

In August 2013, the Financial Reporting Council (“FRC”), upon request by the Department for Business, Innovation and Skills (“BIS”), issued non-mandatory guidance supporting the strategic report requirements in the new Regulations (“Guidance”). The FRC invites comments on all aspects of the draft by 15 November 2013. See final guidance here.

The Guiding Principles establish the authoritative global standard on the respective roles of business and governments in seeking to ensure business respect for human rights. They have been incorporated or reflected in other global standards, such as the OECD Guidelines for Multinational Enterprises, the ISO 26000 Guidance Standard on Social Responsibility, the revised Sustainability Framework and Performance Standards of the International Finance Corporation, and the European Commission’s 2011 Communication on Corporate Social Responsibility. Increasingly, companies are applying the Guiding Principles in their operations, governments are reflecting them in policies and regulations, investors are referencing them in their engagements with companies, and civil society organisations are highlighting them in their activities.

The Guiding Principles make clear that companies are expected to respect human rights throughout their operations. This means that they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved, whether through their own activities or their business relationships.

In order to meet their responsibility to respect human rights, companies should have in place effective policies and processes, as further described in the Guiding Principles. While the Guiding Principles state that all companies should be prepared to communicate externally how they address their human rights impacts, they do not require that all companies necessarily report on this formally. However, they make clear that at least those companies whose operations or operating contexts pose risks of severe human rights impacts should do so.

Furthermore, a range of other companies – notably large, state-owned or listed companies – are increasingly being required or encouraged to report on human rights by government regulators and stock exchanges. It can reasonably be expected that this trend will continue. For all these companies, the Guiding Principles provide a much needed reference point when considering what makes for meaningful human rights reporting. | Also see our 2013 report on regulatory and stock exchange requirements of corporate reporting on human rights-related issues

See our complete submission | See Chair John Ruggie’s letter to UK Secretary of State for Foreign Affairs and UK Secretary of State for Business, Innovation and Skills on the guidance | All our resources on corporate disclosure on human rights