Prince Zeid has a longstanding and globally renowned trajectory of leadership and commitment to advancing respect for human rights. He served as the United Nations High Commissioner for Human Rights from 2014-2018, as well as Jordan’s Permanent Representative to the UN, Ambassador to the US, and as the first president of the governing body of the International Criminal Court (ICC), among other leadership roles.
He is currently the CEO and President of the International Peace Institute and the Perry World House Professor of Practice of Law and Human Rights at the University of Pennsylvania Carey Law School. He is also a member of The Elders, an independent group of global leaders working together for peace, justice and human rights, first established by Nelson Mandela in 2007. He has been recognized globally as a leading defender of universal human rights, receiving the Stockholm Human Rights Award, the Netherlands’ Human Rights Tulip prize, and Foreign Policy magazine named him 2018 Diplomat of the Year.
Prince Zeid succeeds Shift’s late founding Chair, Professor John Ruggie, author of the UN Guiding Principles on Business and Human Rights. Prince Zeid was High Commissioner for Human Rights at the time the Guiding Principles were endorsed by the UN in 2011. On taking up the role of Shift’s Chair, Prince Zeid said:
“The unanimous endorsement of the Guiding Principles in 2011 represented a watershed moment in changing the understanding of companies’ responsibility for the negative impacts that business activities can have on people. For a decade now, Shift has worked relentlessly to embed the ethos of the UNGPs in the way business gets done, with the focus where it must always be – on delivering better outcomes for the most vulnerable workers and communities. I am delighted to take up the role of Chair of Shift’s Trustees at a time when we see so much growth in the appetite and need for the organization’s work and leadership, not least as regulators, legislators, investors and financiers become more attuned to their own roles in incentivizing rights-respecting business practices, including as an essential component of a Just Transition to carbon neutral economies. I look forward to working with the Board and the management team to seize these growing opportunities to deliver on the promise of the UN Guiding Principles.”
Prince Zeid Ra’ad Al Hussein Chair of Shift
For the past three years, Shift has worked closely with Prince Zeid in strategic partnerships to advise global sports bodies––including the International Olympic Committee and the Féderation Internationale de l’Automobile ––on their responsibility to respect human rights under the UN Guiding Principles.
Shift’s President and Co-Founder, Caroline Rees, said:
“We could not be more thrilled to welcome Prince Zeid to the Shift Board. This is an exciting time for Shift as we start upon our second decade of work, taking forward the tremendous legacy of our founding Chair, John Ruggie. It is a time of burgeoning developments in the field of social sustainability, with growing legislation, reporting standards, investor engagement and business leadership now rightly focused on companies’ responsibility to respect human rights. It is therefore a particular privilege and delight for all of us in the Shift team that we get to embark on this new era with Zeid’s wise stewardship at the helm of our Board. His extraordinary international experience, professional achievements and personal authority and commitment in advancing human rights will bring fresh insights, ideas, opportunities and energy to our mission.”
Caroline Rees President and Co-Founder of Shift
Shift is a non-profit, mission-driven organization, working across all continents and sectors to challenge assumptions, push boundaries and redefine corporate practice in order to build a world where business gets done with respect for people’s dignity. Shift is headquartered in New York City. To learn more, visit shiftproject.org
Thank you very much to MEPs Heidi Hautala and Lara Wolters for the invitation to be with you all today, and congratulations to the Commission for taking on this challenge and to Commissioner Reynders in particular for his leadership.
March 2022 |
Shift’s Analysis of the EU Commission’s Proposal for a Corporate Sustainability Due Diligence Directive
The launch of the Commission’s Proposal for a Corporate Sustainability Due Diligence Directive is a truly pivotal moment in our progress towards markets that require and reward sustainable business practices. It builds on the efforts of many stakeholders to advance greater respect by business for people and planet since the adoption of the UN Guiding Principles and the OECD Guidelines over a decade ago.
As the architect of the UNGPs and our founding chair, John Ruggie always said, “the GPs are not merely a text; they were intended to help generate a new regulatory dynamic in which private and public governance systems play mutually reinforcing roles and move us towards a more effective global regime.” In the last few years, we have seen the public regulation side of this dynamic start to advance at the national level – particularly but not only in Europe, creating the need for the EU to help level the playing field on due diligence. The Commission has championed this initiative, as have leaders in the European Parliament, in individual member states, in civil society and in the business and investor community.
As the last week has demonstrated, the EU is a powerful force when it stands up for its values – including respect for the fundamental dignity of those who are vulnerable or whose rights are threatened. At its core, the EU is a market-oriented project; so it is vital that the rules of that market fully reflect and reinforce EU values, including on human rights. Given the scale of the challenges facing us in relation to climate change and global inequality, we need this market alignment more urgently than ever. That is why it is so important not just to get this Directive through (though we certainly need to do that), but to get it right.
The Directive’s stated ambition is to ensure that companies in the single market contribute to sustainable development by preventing and addressing adverse impacts in their operations and value chains. Done right, the Directive is an opportunity to scale quality due diligence processes focused on the most severe human rights and environmental risks; to encourage the creative use of leverage by companies to tackle these risks; to enhance internal governance on sustainability; and to expand pathways to remedy for those harmed. But to seize these opportunities, the Directive must be more firmly grounded in the international standards on sustainability due diligence, the GPs and OECD Guidelines, which EU member states have endorsed and which are informing global developments.
Today, I want to highlight 3 key concepts from the international standards that Shift believes need to be better embedded in the Directive if it is going to meet its own objectives and more clearly align with those standards. The 3 concepts are: Severity, Leverage, and People. I’ll take each in turn.
The Directive needs to use severity of risk to people as the organizing logic for due diligence, not what is closest or easiest for business to address.
Limiting the scope of due diligence on business relationships to a set of narrowly defined relationships – whether that is by tiers in the supply chain or by characterizing them as ‘established business relationships’ – risks creating perverse incentives. It encourages companies to focus on relationships that are important to the business or where the business has existing leverage, but which are not necessarily the source of greatest sustainability risks. And it can even encourage companies to game these definitions to avoid business relationships coming into scope. That’s why states did not adopt that logic in the UN Guiding Principles.
The Commission is rightly concerned about making due diligence manageable for business. The good news is that the international standards already do that, and the past decade of practice shows us how: by prioritizing attention to the most severe risks regardless of where in the value chain they occur and expecting companies to take reasonable steps to use and build leverage to address them.
To make this work, the Directive needs to separate the scope of the duty to do due diligence from the scope of civil liability. Administrative supervision and civil liability are both essential forms of enforcement and we welcome the inclusion of both in the draft. But they are most effective when used in a complementary way. So, through administrative oversight, the Directive can encourage due diligence to the full scope of the value chain, with prioritization based on severity. Then through civil liability, it can provide for remedy for harms in a narrower set of prescribed business relationships, for example established business relationships. Indeed, this complementary approach is what the Parliament itself has proposed. For as long as we continue to tie the scope of due diligence to the scope of liability, we will continue to debate where to draw arbitrary lines in the value chain that limit due diligence, rather than debating how best to incentivize the allocation of corporate resources towards the most severe risks.
The Directive needs to rely less on what is easiest to measure and more on what is meaningful in demonstrating and assessing corporate compliance. In other words, it needs to focus less on contracts and audits, and more on leverage.
There can be no doubt that after the last thirty years, the weight of evidence shows that ‘command and control’ approaches to managing human rights, including labor rights, risks in global value chains have limited impact. At the same time, they generate significant costs both for companies relying on these policing-style approaches but also for business partners that are subject to them. A clause in a contract can be an essential foundation for leverage – but it is only a foundation.
Instead, the Directive should require companies to look at their own potential contributions to generating risks to people – particularly purchasing practices. And it should expect companies to use the full range of approaches to leverage to address the most severe risks, from commercial to capacity-building to collaboration with peers, NGOs and wider multistakeholder initiatives. Companies should target their efforts where they matter most rather than taking a uniform approach to all business relationships regardless of their risk profile.
Importantly the Directive does stress the role of the Board in overseeing due diligence and ensuring that its results inform corporate strategy. This is very positive; we believe it can go further in specifying additional aspects of the governance of sustainability risks that are both measurable and meaningful in assessing a company’s seriousness in this area, such as whether the Board approves high-level targets for human rights and environmental risks, beyond climate targets alone.
The Directive needs to put people, and specifically affected people, more clearly at the heart of sustainability due diligence.
Meaningful engagement with affected stakeholders or their legitimate representatives, including unions, is essential to what makes due diligence under the international standards effective in practice. And it is what differentiates it from transactional due diligence. As John Ruggie said, “you are not looking to buy a piece of property and wanting to make sure there is title to it; you are undertaking a long-term relationship with people whose lives, opportunities and activities you can affect”.
While it may seem challenging to translate this into a legally binding duty, there are several clear opportunities to do so in the draft. The first way is by integrating a requirement forproactive engagement with affected stakeholders into key moments in the due diligence process, particularly during identification and prioritization of impacts and in tracking effectiveness. This would complement the engagement that occurs through complaints procedures, which Commissioner Reynders highlighted, but which is purely reactive in nature. A second way is by going beyond the narrow example of financial compensation to adopt a human rights understanding of remedy, the many forms it can take and the many ways in which companies can play a role in enabling it, starting by asking those affected what would put things right.
So, at Shift, we want to see even more focus on severity, leverage and people. We’ve produced a fuller analysis of the proposal which explains these points in detail and also highlights concerns about the scope of companies covered and about special carve-outs for the financial sector, which you can find here.
In conclusion, we believe this is an opportunity with few parallels. We greatly welcome the Commission’s initiative, and we look forward to working with all stakeholders as the debate moves forward to strengthen the Directive in line with its own ambitious aims and with international standards.
The Framework provides guidance to sports bodies within the Olympic Movement on how to draft and implement eligibility criteria for men’s and women’s categories in competitive sport. Historically, the creation of gender categories has played an essential role in helping to break down the structural barriers that excluded and unfairly discriminated against women and prevented their equal participation in sport. At the same time, the design and implementation of eligibility criteria for these categories has led in some instances to significant human rights harms to individual women, in particular transgender women and women with sex variations.
The Framework seeks to safeguard the rights of all athletes, in particular, the rights of transgender athletes and women athletes with sex variations who have historically faced hostile sporting environments, including discrimination and abuse, and in some cases have experienced irreversible impacts on their health, privacy, safety and livelihoods.
Shift welcomes the progress made by the IOC through this Framework in:
Recognizing that eligibility criteria for sex-segregated sports may lead to harm to some athletes and calling on sports bodies to conduct due diligence to identify and prevent negative impacts on all athletes’ health and well-being.
Acknowledging and respecting the concept of gender autonomy in line with evolving international human rights standards, which recognizes that individuals should be able to define their own gender identity.
Seeking to prevent discriminatory assumptions (for example, based on an individual’s physical appearance) in the development and implementation of eligibility criteria, which have disproportionately affected transgender women and women of color from the Global South.
Confirming the rejection of invasive physical examinations and other scientifically unfounded “sex-testing” methods as ways to determine eligibility, which have in the past led to grave forms of abuse.
Aiming to prevent eligibility criteria from infringing on the right to bodily autonomy, including ensuring that such criteria do not directly or indirectly pressure athletes to undergo medically unnecessary treatment or procedures of any kind.
Strengthening the role of informed consent as a prerequisite for the collection and use of personally identifiable information, in order to protect the privacy and safety of all athletes.
Ensuring that eligibility criteria set by sports governing bodies are informed by the perspectives and lived experiences of affected stakeholders, as the development of the Framework was.
The success of this new Framework in ensuring respect for the rights of transgender and intersex athletes will depend heavily on how it is implemented by sports governing bodies. The IOC will need to play an active and ongoing role in this regard. Moreover, adoption of a forward-looking Framework does not, on its own, address harms that have occurred in the past, which sports bodies will also need to consider.
While this Framework marks an important change in the Olympic Movement’s approach to the issue of eligibility, it continues to be founded on a binary notion of gender; further work will be needed on the inclusion of athletes who are non-binary or have gender non-conforming identities.
Finally, the adoption of eligibility criteria that take greater account of human rights standards is only one element in meeting the broader responsibility of sports bodies to prevent and address all forms of abuse and harassment towards athletes and others participating in sport, particularly towards those who may be most vulnerable or marginalized.
“The rules set by sports bodies, and particularly by the IOC as the global steward of the Olympic Movement, can have an immense impact on the lives of athletes and also on the perceptions of everyone who follows competitive sport. When a sports body adopts rules that are grounded in inclusion and the prevention of harm, it is not only recognizing its human rights responsibilities; it is also sending a powerful social message about respecting the dignity of all athletes.”
Rachel Davis Shift Vice President and Co-Founder
“This is an unprecedented step in the world of sports. The IOC’s new Framework helps break the myth that fairness and inclusion are mutually exclusive; that eligibility has to be a zero-sum game between including trans athletes and protecting the female category. Rather, it is sending a strong message to the world of sports that eligibility rules cannot rely on placing unfair burdens on transgender and intersex athletes, which often lead to grave impacts on their health, careers and livelihoods.”
Daniel Berezowsky Shift Advisor who led Shift’s support to the IOC’s consultation and design process
For media inquiries regarding this statement, please contact communications [at] shiftproject [dot] org.
John Ruggie passed away on 16 September with his beloved wife and son at his side. A light has gone out in the world. More than a light. John was a beaming beacon for so many of us who had the privilege to know him, to work with him, to learn from him, to laugh with him, to love him. He achieved academic heights that his colleagues at Harvard and around the world will attest to in the days and weeks to come. Yet his ideas and insights never rested on paper, for his gift was to turn them into the tools of tangible change and his passion was to make the world a more equal and just place. He did both.
Nowhere is John’s gift for crafting words that create change more evident than in the UN Guiding Principles on Business and Human Rights, which he authored in his six years as the UN Secretary-General’s Special Representative. We had the good luck and constant delight of working with John through that time as part of a wider team which he fondly dubbed ‘Team Ruggie’ and which became an enduring extended family. As we then set up Shift to be part of the movement needed to translate the Guiding Principles into practice, John was at our side – not just formally as our Chair, but as our champion, support and guide, and above all as our friend.
John’s legacy cannot be captured in a few words. He leaves behind not just the seeds of the change he wanted to see in the business world, but the blossoming on all continents of new policies and practices, laws and regulations, fans and followers. John’s spirit will live on in all we do at Shift, alongside so many others in the business and human rights movement, to further nurture and fuel the change he set in train. Indeed, our name comes from a phrase John would gleefully pronounce, a sparkle in his eye, whenever he saw a new sign of the impact of the Guiding Principles – ’Shift happens!’ So it does – when grounded not just in the intellectual depth and drive but in the humanity, humility, integrity and compassion that were so central to how John moved through the world. We miss him deeply.
Our thoughts are with Mary and Andreas Ruggie and their wider family at this time. A memorial service will be held in Cambridge, Massachusetts with details to be announced in the coming days.
Today in 2021, there should be little need for a discussion on whether human rights and the environment are intrinsically connected. The question is rather, how can businesses best address risks to people and planet in a holistic way and how can the policy environment enable this transition?
Companies operating today can no longer treat their climate, other environmental and human rights risks in silos: there are too many interconnections between these areas for this approach to work. Rather, what we need is for companies to be empowered, equipped and incentivized to adopt a comprehensive sustainability approach to risks to people and to the planet. The upcoming EU legislation under the Sustainable Corporate Governance Initiative offers a golden opportunity to design a due diligence structure to do just that. And importantly, there are already examples of harmonized due diligence that can serve as a foundation on which new legislation can build.
Here we offer some key reflections that we believe can help inform a harmonized due diligence obligation.
We have applicable international frameworks already
The UN Guiding Principles on Business and Human Rights (‘UNGPs’) provide a clear and authoritative reference point for what is expected of companies when it comes to human rights due diligence. The OECD Guidelines for Multinational Enterprises (‘OECD Guidelines’) echo the UNGPs’ expectations on human rights and extend the due diligence framework set out in the UNGPs to environmental impacts and risks (as well as other relevant risks). An overarching 'sustainability due diligence'
(This term draws on a research-based concept of sustainable value creation within planetary boundaries, as described further in the SMART project’s reform proposals for EU company law and corporate governance.)
framework should clearly build on these soft law due diligence standards and methodologies, and create further connections and synergies between them.
Companies navigate the relationship between international expectations and national requirements in both areas
In the area of human rights, companies are expected (under the UNGPs and OECD Guidelines) to look at internationally recognized human rights standards set out in core UN and ILO instruments which inform their due diligence approach and define the baseline against which they assess their impacts on people.
National laws also regulate human rights: they may compel company actions in a range of areas, such as discrimination, labor arrangements and health and safety. However, if these standards fall below, or conflict, with international standards, companies are still expected to meet, or seek to meet, international standards. Notably, the UNGPs expand these expectations to the company’s business relationships, whereas applicable law typically focuses on the company’s own operations.
We find a similar picture when looking at the environmental side. Companies are expected under the OECD Guidelines to take due account of the need to protect the environment – referencing in turn principles and objectives contained in international agreements. Similarly, companies can rely on national environmental laws, but this is often insufficient on its own to meet international environmental expectations of business – and, again, may not extend beyond the company’s operations.
Of particular note, a recent court case in the Netherlands held an energy company (Royal Dutch Shell) to international climate standards (the 2015 Paris Agreement) rather than to national standards. The court also relied on international expectations contained in the UNGPs, rather than applicable national law, to conclude that the company had a responsibility for scope 3 emissions, beyond its own operations.
In both areas then, companies are increasingly accustomed to navigating international and national standards. On the environmental side however, and in contrast to the human rights side, there is no comprehensive body of international standards on the protection of the environment. This can be addressed by EU regulators defining the adverse environmental impacts that companies should be assessing as part of their due diligence and specifying the key principles of environmental law that companies should have regard to in carrying out their due diligence (such as the precautionary principle).
Growing convergence around the scope of responsibility
Companies are expected to take a full value chain approach to human rights due diligence under the UNGPs and the OECD Guidelines. (This full value chain approach is coupled with a specified method for prioritising impacts within the value chain, as further described below). The scope of due diligence extends to impacts that may be directly linked to their operations, products or services through their business relationships. For environmental due diligence, a similar full value chain approach is expected under the OECD Guidelines. Companies should incorporate both direct and indirect environmental impacts connected to their operations into their due diligence. There is also a growing consensus that individual methodologies used for specific environmental areas (such as water, greenhouse gas emissions and biodiversity) should cover impacts beyond a company’s direct operations and tier one suppliers. Taking a full value chain approach to sustainability due diligence is becoming the expectation.
Not only looking at risks to business – but also risks to people and planet
The risks companies will identify through their due diligence will look different – depending on whether they are viewed from the perspective of people, the planet, or the business.
In the human rights space, companies are expected to look at risks to people from the perspective of those who are or may be affected, using international human rights standards. Similarly, in the environmental space, companies are expected to look at risks to the environment from the planet’s perspective – meaning that they need to consider environmental impacts whether or not they also pose risks to the business. This is where new legislation can provide greater clarity for companies, in defining what would constitute an adverse environmental impact.
Beyond this, by bringing these areas together under one ‘sustainability due diligence’ umbrella, we have the opportunity of more clearly understanding the inter-connections between these impacts. For example: impacts on the environment and the climate that, over a longer timeframe, will manifest as impacts on human rights; or impacts on human rights that can be mitigated but in a way that harms the environment in the immediate term. This being said, we also need to ensure that bringing these areas together under one umbrella does not result in the dilution of environmental risks which do not have immediate human rights impacts.
Potential to take a longer term view of risk
One point to consider when looking at environmental and human rights risks together is that companies commonly use different timeframes and geographic locations for assessing them.
Looking at risks to people and planet today will yield a different result than looking at impacts that could occur in a year, in ten years or in a generation’s time. The timeframe for assessment of human rights impacts tends to be more immediate, with a focus on human rights impacts that could occur in the short- or medium-term. Due diligence can also include longer-term impacts (e.g. from the future decommissioning of a project or transitions to automation), however, capturing long-term human rights impacts can be a challenge because of limitations in predicting future activities and behaviours. When it comes to environmental impacts, the time horizon for assessing impacts tends to be longer and commonly relies on scientific projection data.
Furthermore, human rights due diligence will typically capture impacts on people close to the company’s site, or those impacted by its suppliers’ operations. Some environmental impacts also have localized impacts on a specific habitat or water source, while others have both cumulative impacts and ripple effects on the environment elsewhere, and/or are global in nature. Where environmental impacts are local, this could more visibly result in local human rights impacts (e.g. impacts on a community’s access to water or sanitation). In contrast, where the environmental impacts manifest elsewhere or are global, this could connect to human rights impacts elsewhere (e.g. communities’ livelihoods impacted by greenhouse gas emissions) – but it is more challenging to identify the specific groups of people affected.
In practice, we are seeing that companies are finding it easier to bring environmental and human rights considerations together under one broader umbrella when both sets of impacts are more localized in nature. New legislation can reflect the differing timelines and locations of where risks may manifest, and help ensure that due diligence enables capturing change over time, both to the risk and to the expected mitigation/action.
Whose views determine which risks to prioritize?
The human rights risks that companies are expected to prioritize for attention are those that pose the greatest potential harm to people. Since human rights risks should be understood from the perspective of those who are or may be affected, the most effective way to conduct due diligence is to conduct stakeholder engagement – with those who could be impacted or their legitimate representatives, or with credible proxies where direct engagement is not possible, as well as with human rights experts. In the environmental space, we are seeing a growing number of companies including elements of human rights-based stakeholder engagement as part of their environmental work – and this is also expected for environmental impacts that result in impacts on people (as evidenced for instance by the European Parliament’s 2020 proposal for an EU legal framework to halt and reverse deforestation).
The opportunity here is to support companies in conducting stakeholder engagement that can inform both their environmental and human rights due diligence, while recognizing where the objectives of, and audiences for, engagement may differ. Further, engaging on both human rights and environmental risks together can help companies see the interlinkages, develop more nuanced prioritization criteria and methodologies, and inform and explain their prioritization decisions.
What actions is a company expected to take?
The actions that a company is expected to take in response to a human rights impact differs depending on how the company is, or could be, involved with an impact. There are different expectations for action depending on whether a company has caused the impact, contributed to the impact, or whether the impact is directly linked to the company’s operations, products or services by a business relationship. Actions range from ceasing the impact, preventing the impact, building and using leverage (alone or with others) to prevent and/or mitigate the impact (or seeking to do so), and remedying the impact.
Cause and contribution as modes of involvement are also well-known in environmental due diligence. In particular, we often see companies talk about cumulative environmental impacts: how their actions alongside those of other parties can combine to create environmental impacts. This is akin to contribution in parallel, an accepted mode of involvement in the human rights space. The actions expected for instances of cause or contribution are similar to the human rights space: cease, prevent, and/or mitigate the impacts and remedy the contribution.
Although not necessarily framed as such, a number of environmental methodologies expect companies to build and exercise leverage. But there may be some areas of distinction to consider when it comes to remedy. A company’s responsibility to remedy a human rights impact seeks to restore the person to the situation they would have been in, had that impact not occurred, or as close to it as possible. Companies may also be expected to remediate their environmental impacts – with the appropriate remedy being defined by regulation or the applicable international framework. At the same time, when it comes to environmental harm, there may be broader repercussions where environmental degradation has had ripple effects and led to other forms of environmental harm. Where environmental harm results in impacts on people, the remedy expectations of companies are clear. When they have not (or have not yet), the remedy expectations are less clear.
A new corporate duty could reinforce the importance of companies using leverage to tackle risks, and articulate what can be reasonably expected of companies in terms of action depending on their mode of involvement with an impact, including what remedy can look like (and to whom it can be delivered) in the environmental space.
Conclusion: Embedding due diligence in governance
As the connections between the ‘E’ and the ‘HR’ of ‘HREDD’ grow, so too will the need for cross-functional structures and discussions that enable companies to take a holistic approach to due diligence. This extends to when companies are setting overarching targets, as well as how they set up their internal accountability and responsibility structures. Synergies should start to happen between functions, budget lines, programming and expertise on these areas within companies. And this in turn will start to inform business models that are viewed as sustainable for the long term – as well as those that are not. New EU regulation can play a pivotal role here in supporting companies to take a holistic approach to sustainability risks, which builds on and amplifies existing methodologies and standards, in a way that is embedded in appropriate governance structures.
Shift, the leading center of expertise on the UN Guiding Principles on Business and Human Rights, is delighted to announce the launch of our Financial Institutions Practitioners Circle, a space carefully designed for a small number of leading practitioners from banks and export credit agencies (ECAs) to discuss common human rights challenges and co-create cutting-edge solutions that put people first.
The first generation of the FIs Circle will gather virtually for the first time in early March and will include a limited number of practitioners from institutions in the financial sector who have demonstrated a serious commitment to advancing their understanding and implementation of the UN Guiding Principles.
Discussion and learning in the FIs circle will be facilitated by experts from Shift, who will also contribute creative solutions that we have been fine-tuning in our one-on-one engagements with financial institutions. Together, through group workshops and discussions, practitioners will foster leading practice by sharing and co-creating approaches to putting the responsibility to respect human rights into practice in the FIs context.
Shift is committed to disseminating the learnings from this group for the benefit of a wider audience of FIs practitioners and other stakeholders.
Shift is currently evaluating candidates for the first generation of the FIs Circle. Admissibility is determined through an in-depth discussion, based on where the organization is on their human rights journey and, regardless of its level of maturity, its commitment to sharing its experiences and improving performance.
To learn more about the FIs Circle, or to inquire about joining, please email communications [at] shiftproject [dot] org.
The UN Guiding Principles on Business & Human Rights are approaching the tenth year since their unanimous endorsement by the Human Rights Council. It is encouraging that their uptake continues apace, not only by businesses but beyond. For example, human rights factors make up the bulk of the S elements in ESG investing, with investors clamoring for more robust metrics. Also, global sports bodies, including the International Olympic Committee and FIFA, have made human rights a mandatory part of their host city agreements.
The UNGPs were conceived to generate an ongoing interactive dynamic of a smart mix of measures – voluntary and mandatory, national and international – that would strengthen the business and human rights regime over time.
But I confess that governments, with exceptions, have been a weak link in this dynamic. So, I am pleased to see action picking up on two significant fronts in the EU context.
The first is human rights due diligence. This is the foundational construct for businesses to identify, prevent, mitigate and account for their adverse human rights impacts – throughout their operations and business relationships.
The experience of the past decade has demonstrated that many multinationals understand the importance and utility of human rights due diligence. But the record also shows shortcomings and weaknesses in implementation.
In response, Germany, like several other governments, is giving serious consideration to making human rights due diligence mandatory, as foreshadowed in its 2016 National Action Plan. Similarly, mandatory human rights and environmental due diligence is on the legislative agenda of the European Commission.
I appreciate that many details still need to be worked out. Perhaps none is more important than the question of liability. It may be helpful for me to recall that the UNGPs foresaw the possibility of liability, and how it might play out in practice. The Commentary to UNGP 17 state that:
Conducting appropriate human rights due diligence should help business enterprises address the risk of legal claims against them by showing that they took every reasonable step to avoid involvement with an alleged human rights abuse.
Of course, case-specific facts would also be considered in any such assessment.
A second area that shows progress is the strengthening of non-financial disclosure requirements, including on human rights. Indeed, there is a rush into this space by private international standard setting bodies, large asset managers, alliances of consulting firms and the like, all wanting a piece of the ESG standards market.
Here the EU, as the world’s largest trading bloc, has a golden opportunity to provide authoritative standards, which inevitably would have international spillover effects.
Perhaps there is still time for the Germany Presidency in collaboration with the Commission to establish a measure of policy coherence across the related EU initiatives, so as not to contribute to overwhelming businesses with potentially overlapping or, worse, inconsistent requirements.
Progress on these two fronts would contribute significantly to the overarching concern of this conference with promoting decent work in supply chains.
Indeed, I believe it would go even further and help inform the grand debate taking place on both sides of the Atlantic on the social purpose of the corporation, on the need for it to better serve a broad array of stakeholders in addition to shareholders.
So in conclusion, thanks again, and I wish you every success on the journey ahead.
John G. Ruggie, the Berthold Beitz Research Professor in Human Rights and International Affairs at Harvard’s Kennedy School of Government, has served as UN Assistant Secretary-General for Strategic Planning, and as the Secretary-General’s Special Representative for Business & Human Rights. He chairs the Board of Shift.
As the accounting continues, one clear rule of thumb is emerging as to who is getting their response to the crisis (at least mostly) right: those companies that focus first on the most vulnerable. The language of ‘vulnerability’ peppers the news and commentary as never before. Yet it is far more than just a label for the people who stand to lose the most as this crisis unfolds. It is the essential lens we must apply if a new stakeholder capitalism is to succeed: the difference between how our economies have worked in the past and how we need them to work going forward.
Before the pandemic hit, there was already a growing movement away from Milton Friedman’s idea that business should focus on maximizing shareholder returns. The gross and growing inequalities in our societies are the now inescapable result of externalizing risks and costs of business onto vulnerable ecosystems, workers and communities.
Yet this new narrative of ‘stakeholder capitalism’ always risked being far less radical than it appeared – potentially even the ‘virtuous side hustle’ some have feared from the get-go. Why? At least in part because the categories of stakeholder beneficiaries – employees, suppliers, customers and communities – were defined so generically that they necessitated little real change from the status quo.
Take ‘employees.’ The term includes those generously compensated in safe jobs as well as those whose pay, security and benefits are vulnerable to cost-cutting initiatives. It also excludes altogether people whose roles are externalized by evolving business models and strategies into categories of ‘contractor’ or the nominally ‘self-employed.’ The category of ‘suppliers’ blurs the line between large, strategic partners and small or more remote businesses whose cash flow is fragile and whose workers’ wages are the first to give under pressure.
May 2020 | Publications
Making Rights-Respecting Business Decisions in a COVID-19 World
Similarly, ‘customers’ are by definition those who can afford to access a company’s products or services; yet the term does not call out those who are stretched to do so, and excludes, of course, those who simply can’t. Meanwhile, ‘communities’ can continue to be viewed as the beneficiaries of corporate philanthropy rather than groups whose health, livelihoods and opportunities may be directly affected by company actions and decisions.
With all this flexibility in interpretation, the new ‘stakeholder capitalism’ built a broad church. It certainly embraces companies committed to understanding how business practices may harm people across their value chain, and to reducing those impacts. However, it also readily accommodates companies hoping for little more than marginal adjustments to usual practice, or continuing to bank on business models that embed risks to people at their core. Little surprise, then, that some CEOs seemed taken aback to find that their new commitments raised expectations of real and substantive changes to address the inequalities of today.
Yet this pandemic, with all its awful consequences, is fast removing the ambiguity about what matters. At least in the Global North, it is showing the lens of vulnerability to be essential for businesses to determine how they should act, and a guide for how popular opinion will react. This focus on vulnerable people, once seen by many as idealistic, is becoming a primary expectation from investors, public figures, civil society and business commentators alike.
The same Milton Friedman who spawned the ‘shareholder primacy’ theory that stakeholder capitalism now proposes to replace, ironically also wrote, “Only a crisis, actual or perceived, produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe is our basic function: to develop alternatives to existing policies, to keep them alive and politically available until the politically impossible becomes politically inevitable.”
The idea that businesses must look beyond generic categories of ‘stakeholder’ to hone in on those individuals in workplaces, supply chains, transportation networks and communities who are most vulnerable is alive and available. It is embodied in the UN Guiding Principles on Business and Human Rights: a ready blueprint for governments and businesses to reorient capitalism to protect and respect those most at risk: a true ‘stakeholder capitalism.’
Companies that have led the way in putting the UN Guiding Principles into practice have shown a more natural reflex to focus on the most vulnerable in their response to the crisis, getting it right while others have fumbled. Yet it is the crisis itself that is now taking the lens of vulnerability to scale. It can no longer be viewed as impossible to make it the ‘new normal’ once we emerge from the pandemic. We just need to make it inevitable.
Between 2010-2014, the Peruvian fruit growing company Composol was in ceaseless conflict with its workers and their union representatives. It had strong turnover of staff, low motivation among those remaining, and, according to its own accounts, very high litigation cost due to constant cases before the labor courts. The company’s labor troubles were even featured as a prominent case example in complaints filed by Peruvian and international unions with the US Department of Labor and the European Commission related to beneficial trade agreements.
It was not until 2014 that the company started to realize how much of an impact this was having on its business, and decided more meaningful action was necessary. Together with local and internationally focused unions and business associations, the company embarked on a path towards fully embracing social dialogue and trade union rights. Through a process of trust-building, negation training and capacity building on labor rights -among others- the company and unions were able to fundamentally transform their relationship. In addition to more satisfied workers and meeting company commitments, results also included lowered costs in recruitment, transportation and legal fees, among many others.In the words of Javier Morales, Camposol’s Managing Director of the Fruit and Vegetable Division: “We have been able to be profitable while focusing on people. (…) Now workers come to Camposol because they choose to, not because they have to as in the past. Competitors are raising the salaries to attract workers more but it is not the only thing that workers seek. What they seek is also a healthy emotional relationship with their employer. We demonstrate that we can align the interests of workers and shareholders.” Perhaps most central to turning things around was the realization that in order to ensure respect for trade union rights companies need to take proactive steps to realize them in practice. This, in a nutshell, is the key message of our newest publication ‘Respecting Trade Union Rights in Global Value Chains’, developed with Mondiaal FNV, to help companies approach trade union rights proactively.
What are trade union rights?
What are trade union rights?
Freedom of association and the rights to collective bargaining (collectively referred to in the publication as “trade union rights”) are recognized by the International Labour Organisation (ILO) as one of a set of four core labor standards that all governments and companies should adhere to. While they are fundamental rights in and of themselves, trade union rights are also recognized as “enabling rights,” meaning that respecting these rights can often lead to the fulfillment of a number of other labor rights, including adequate wages, reasonable working hours, workplace safety, and a work environment free from discrimination and harassment.
Action on trade union rights is hard…
Those who have worked on trade union rights know that this is all easier said than done.
While many companies list respect for trade union rights in their policy commitments, pledge to adhere to industry standards, and participate in multi-stakeholder initiatives, many still struggle to identify and implement meaningful action to address the risks to trade union rights in their global value chains.
In our work with Mondiaal FNV we recognized three categories of barriers that often create challenges for global companies to ensure respect for trade union rights in their global operations and value chains:
External factors: Respecting trade union rights in many contexts can be extremely challenging: local laws may prohibit them, union-relations may be seen to be political, and local business partners may not see the value in changing what already works.
Business models and practices: some companies have risks embedded in how they are structured or in how they operate. For instance, extensive reliance on contract labor, or sourcing strategies that rely upon production in markets with lower labor costs and often weaker labor protections.
Internal company governance and due diligence pitfalls: a number of challenges arise from weaknesses in corporate governance and due diligence. For example, a lack of understanding of trade union rights, limited visibility into conditions in the supply chain, or strong commitments on paper not being translated into action on the ground.
Our publication provides a detailed diagnostic tool with simple questions to help companies identify the specific barriers they might face in a particular context or relationship.
… but there are ideas and experiences to inspire action
We have seen that those companies who identify their salient human rights issues (one of the practical steps the publication suggests) now often include freedom of association and right to collective bargaining among them. I believe it reflects a broader understanding of how interconnected human rights impacts are and that one of the most sustainable ways to improve human rights for workers—in a way that also brings benefits to business—is to give workers a voice and take proactive steps to reduce barriers and reinforce constructive relationships that enable them to organize, make their voice heard and take a stake in the long-term interest of the company.
October 2019 |
Respecting Trade Union Rights in Global Value Chains: Practical Approaches for Business
But identifying trade union rights as important is only the first step. We need to move to action. Our work with companies on these issues has surfaced a range of practical approaches companies are taking to address these barriers in new and meaningful ways. Whether it is the Freedom of Association protocol that was developed by apparel and footwear companies with local suppliers and stakeholders in Indonesia to address the locally challenging context for trade union rights or the way that companies have collaborated in Mexico to jointly apply leverage to improve union relations.
Different types of approaches are almost certainly going to be necessary to address the range of situations a company might face and the different types of barriers that may be present. The resource offers a continuum of different types of leverage that can be applied internally and externally, with practical case examples to illustrate these approaches in practice: for example, working jointly with peer companies and international and local trade unions to advance collective bargaining to improve living wages in the garment sector, or exerting collective leverage with peers vis-à-vis a government to improve laws and regulations that protect trade union rights (both of which have concrete case examples in the publication).
Our aim is to inspire companies with ideas for concrete action, to move from recognizing risks to trade union rights to taking meaningful action to address those risks, by drawing from a menu of potential options for action. We hope it can provide companies with a roadmap for developing thoughtful, meaningful and targeted actions necessary to tackle these issues more effectively in practice.
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