This document contains reflections offered by Shift to the World Economic Forum on its white paper ’Towards Common Metrics and Consistent Reporting on Sustainable Value Creation’. The document is based on Shift’s expertise and experience working directly with companies, standard setters and financial institutions. It focuses on indicators and metrics most relevant to the assessment of impacts on people, and draws on Shift’s work leading the improvement of human rights reporting by companies and Valuing Respect, our current initiative to advance better ways to evaluate business respect for human rights.
Shift, IHRB, The Business & Human Rights Resource Centre and the European Coalition for Corporate Justice have written to Sergio Mujica, Secretary General of the International Organization for Standardization (ISO). In the letter, we make the case for why ISO should not proceed with proposals to revise the ISO 26000 social responsibility standard, nor to establish a technical committee charged with introducing further private standards on responsible business conduct.
The ISO 26000 standard was adopted in 2010 in careful alignment with key international standards on business and human rights, and we are concerned that its reopening will become a major distraction from the development of international and national laws in relation to environmental and human rights due diligence.
Please read the full letter below and share it with your networks.
In February, the European Commission began seeking stakeholder feedback to inform the revision of the EU Non-financial reporting directive (NFRD) as part of its strategy to strengthen the foundations for sustainable investment.
Shift made this submission as part of the consultation, drawing on our work over several years to strengthen human rights reporting standards in line with the UN Guiding Principles on Business and Human Rights.
In December 2019, Shift and the Finnish Presidency to the EU Council co-organized the conference ‘Business & Human Rights: Towards a Common Agenda for Action’, a space where businesses, government representatives and civil society organizations engaged in a multi-stakeholder dialogue to discuss business and human rights and, in particular, a collaborative and constructive way forward on this critical agenda.
In his initial remarks, Professor John Ruggie emphasized that while we often hear the term ‘smart mix’ being employed to mean voluntary measures, the concept is broader and should be understood to include mandatory measures. (Watch the full video)
During the conference, participants discussed the role of state financing in promoting human rights due diligence; the role of regulation in a smart mix to foster business respect for human rights; and the use of collective leverage and cooperation to improve human rights outcomes.The conference concluded with the launch of Agenda for Action -the outcome paper of the conference.
These remarks were originally delivered by Professor John Ruggie at the Conference ‘Business & Human Rights: Towards a Common Agenda for Action’, on December 2, 2019. The Conference was co-organized by Shift and the Finnish Presidency of the Council of the EU.
Many thanks to the government of Finland for convening this timely and important conference.
It is timely because a new European Parliament has been elected and a new Commission selected. It is important because we live in a turbulent world that challenges foundational premises we had been able to take for granted. The European Union is one of the most significant governance innovations in modern times. It all began modestly, with six countries coordinating their coal and steel sectors in the wake of World War II. Today, the EU – whether it is 27 or 28 – constitutes an economic and social superpower. Now more than ever, the EU needs to think of itself in those terms.
I am pleased that Finland chose business
and human rights as the focus of its EU Presidency and of this
conference. It leads us to address the people part of the people and
planet challenges faced by all humanity. The conference agenda asks the
question: How do we most effectively advance action on the EU level? My
job this morning is to sketch out the backstory to our discussions and
suggest some strategic directions.
Let me begin with the most basic question:
What is business and human rights all about? The answer varies depending on the vantage point. In big-picture terms, it is about the social sustainability of globalization. Some years ago, my favorite boss, Kofi Annan, said: “if we cannot make globalization work for all, in the end it will work for none.” Today, people around the world are telling us that we have fallen short, that the benefits and burdens of globalization have been unequally distributed within and among nations. The result is public resentment and loss of trust in institutions of all kinds.
When seen from the perspective of enterprises, business and human rights is about ways they can recover trust and manage the risk of harmful impacts. Undeniable progress has been achieved by individual firms, business associations, and even sports organizations. But not enough, and not by enough of them.
For governments, business and human rights is at the core of new social contracts they need to construct for and with their populations. This includes decent work and living wages, equal pay for work of equal value, social and economic inclusion, education suitable to the needs and opportunities of the 21st century, and effective social safety nets to buffer unexpected shocks to the economy or the person.
For the individual person whose rights are impacted by enterprises, business and human rights is about nothing more – but also nothing less – than being treated with respect, no matter who they are and whatever their station in life may be, and to obtain remedy where harm is done.
My second point is to remind us that
formal international recognition of business and human rights as a
distinct policy domain is relatively recent. At the UN level, the first
and thus far only formal recognition dates to 2011, when the Human
Rights Council unanimously endorsed the Guiding Principles on Business
and Human Rights.
The UN Guiding Principles rest on three pillars:
The state duty to protect against human rights harm by third parties, including business; the responsibility of enterprises to respect human rights, regardless of whether states meet their own obligations; and the need for greater access to remedy
by people whose human rights have been abused by business conduct. The
OECD Guidelines on Multinational Enterprises quickly incorporated Pillar
II virtually verbatim.
The UNGPs comprise 31 Principles and Commentary on what each means and implies for all actors: states, enterprises, as well as affected individuals and communities. They are not merely a text. They were intended to help generate a new regulatory dynamic, one in which public and private governance systems, corporate as well as civil, each come to add distinct value, compensate for one another’s weaknesses, and play mutually reinforcing roles—out of which a more comprehensive and effective global regime might evolve.
That brings me to the key issue of strategy – how to reinforce and add to this transformative dynamic. The Guiding Principles embody two core strategic concepts: advocating a “smart mix of measures,” and using “leverage.” I’ll take them up in turn.
We often hear the term “smart mix of measures” being employed to mean voluntary measures alone. But that gets it wrong. Guiding Principle 1 says that states must have effective legislation and regulation in place to protect against human rights harm by businesses. Guiding Principle 3 adds that states should periodically review the adequacy of such measures and update them if necessary. They should also ensure that related areas of law, for example corporate law and securities regulation, do not constrain but enable business respect for human rights. So, a smart mix means exactly what it says: a combination of voluntary and mandatory, as well as national and international measures.
A number of EU member states and the EU as a whole have begun to put in place mandatory measures that reinforce what previously was voluntary guidance to firms on corporate responsibility. These include reporting requirements regarding modern slavery, conflict minerals, and non-financial performance more broadly, as well as human rights and environmental due diligence. Such initiatives are aligned with the spirit of the UNGPs, and they are important steps in adding “mandatory measures” into the mix. Still, many leave a lot to the imagination – of company staff, consulting firms, and civil society actors among others. More should be done to specify what meaningful implementation looks like, in order to avoid contributing to the proliferation of self-defined standards and storytelling by firms. Also, with limited exceptions currently no direct consequences follow from non-compliance. Nevertheless, the ascent of Pillar I is underway.
A second key strategic concept embedded in the UNGPs is “leverage.” Here are three examples of how leverage can play into the core question of how most effectively to advance implementation at the EU level.
- First, individual member states and the EU as a whole are economic actors: they procure goods and services, provide export credit and investment insurance, issue official loans and grants, and so on. Each agency involved has particular objectives of its own, to be sure. But in all cases, they should consider the actual and potential human rights impacts of beneficiary enterprises with which they engage.
- Second, the UNGPs state that the responsibility of enterprises to respect human rights requires that they avoid causing, contributing to, or otherwise being linked to adverse impacts, and to address them when they occur. This extends throughout their value chains. Of course, all firms, including the suppliers of goods and services within global value chains, have the same responsibility to respect. But parent companies and companies at the apex of producer- or buyer-led value chains should also use whatever leverage they have in relation to their subsidiaries, contractors, and other actors in their network of business relationships. They should establish clear policies and operational procedures that embed respecting rights throughout their entire value chain system. Where leverage is limited it may be possible to increase it, for example by providing incentives or collaborating with other actors.
In turn, home, as well as host states of multinational enterprises, have significant roles to play through laws and regulations that enable and support private international ordering of this sort. Global value chains are exceedingly complex. If parent or lead companies fear that they may be held legally liable for any human rights harm anywhere within their value chains, irrespective of the circumstances of their involvement, it would create the perverse incentive to distance themselves from such entities. It is important that regulation gets the balance right.
- A third way in which leverage can play into effective implementation at the EU level is by reinforcing positive trends already underway in the business community, but which need strengthening. Perhaps the most important instance today is ESG investing – investment decisions that combine environmental, social, and governance criteria with financial analytics. ESG investing now accounts for $31 trillion of all assets under management worldwide, or one-quarter of the global total. And while it may not be known to many investors themselves, the S in ESG is all about human rights. It seeks to assess how firms conduct themselves in relation to the broad spectrum of internal and external stakeholders – workers, end-users, and communities. It typically includes such categories as health and safety, workplace relations, diversity and social inclusion, human capital development, responsible marketing and R&D, community relations, and company involvement in projects that may affect vulnerable populations in particular.
But here is the problem: it is now generally agreed that a major impediment to the further rapid growth in ESG investing is the poor quality of ESG data provided by raters. Common taxonomies and templates are still in their infancy and evolving haphazardly even as demand for ESG products is increasing. This poses problems for investors who seek ESG opportunities and may be paying a high price for flawed data, as well as for companies striving to improve their practices that go unrecognized. The problem is especially severe in the S category – addressing human rights-related issues.
The EU has developed a comprehensive taxonomy for investment on climate-related standards, indices, and disclosure. That should have a significant impact for strengthening the E in ESG. Also issuing official guidance to the S in ESG investing, making clear its human rights bases, could have a transformative effect on global capital markets.
In short, a great variety of opportunities exists for exercising leverage in order to generate further positive developments in business and human rights.
Allow me briefly to add two thoughts in closing.
The first is that business and human rights, by definition, is a domain that requires horizontal vision and cross-functional collaboration – whether within companies, governments, or the EU. Within the European Commission the task has been largely left to the External Action Service, with the support of other directorates-general. That is too narrow a lens to do justice to the broad array of challenges, and to have the impact that could be achieved. One of the singular contributions of National Action Plans for implementing the Guiding Principles is that they have required the whole of governments, for the first time ever, to consider business and human rights as a single policy space. The same holds true at the EU level.
My other concluding thought concerns the ongoing negotiations on a binding business and human rights treaty in Geneva. International legalization is both inevitable and desirable to help level the playing field in a world of global business. In fact, at the conclusion of my mandate in 2011, I proposed that governments negotiate a targeted legal instrument addressing business involvement in gross human rights violations, coupled with the need for greater cooperation between states to provide remedy. Some parties objected on the grounds that this did not go far enough, others that it went too far. It became the only one of my recommendations that did not get adopted.
The current treaty process began in 2014. From the outset, I expressed my doubts about attempting to shoehorn the entire business and human rights domain into a single, overarching treaty. In my judgment, this is far too complex and too contested a domain for such an endeavor to produce meaningful results. Indeed, the risk is that if it were to “succeed” in the sense of being adopted by some minimum required number of states, it would be by locking in lower expectations and fewer incentives for innovative practical approaches than exist today. Nothing I have seen in the five years of negotiations suggest otherwise.
Having said all that, I do find it puzzling that the EU has taken no substantive position in these treaty negotiations. It is puzzling because the EU was an early supporter of the “smart mix of measures” idea. This leads me once again to thank the government of Finland for bringing business and human rights to the forefront of its EU Presidency, with the aim of contributing to a common agenda for action. I very much hope that Finland’s successors – as well as the Commission and Parliament – will continue on this path.
Thank you for your attention, and I look forward to our discussions.
This panel was moderated by our Vice President, Rachel Davis. The panelists were:
- Nina Norjama, Director of Social Responsibility at UPM
- Salla Saastamoinen, Director for Civil and Commercial Justice at DG Just
- Filip Gregor, Head of Responsible Companies Section at Frank Bold
- Virginie Mahin, Global Social Sustainability and Human Rights Lead at Mondelez
Under Pillar 1 of the UN Guiding Principles, all states “must protect against human rights abuse within their territory and/or jurisdiction by third parties, including business enterprises”. To do so, states “should consider a smart mix of measures – national and international, mandatory and voluntary – to foster business respect for human rights.”
Yet despite this encouragement to consider them, mandatory measures have not been a central part of the mix considered by states in the initial years of UNGPs implementation, outside of certain reporting requirements. That is now changing, particularly in Europe. A growing number of states are actively considering the use of mandatory due diligence measures to advance business respect for human rights.
In France, the Netherlands, Germany, Finland, the UK, Norway and Switzerland, we see governments and legislatures adopting or exploring mandatory measures as part of a mix of policy tools to incentivize business respect for human rights. In a growing number of cases, these measures go beyond reporting obligations to encompass comprehensive human rights due diligence. Continue reading…
New York, NY. – Shift is proud to be supporting the Finnish Presidency of the Council of the European Union in convening its flagship conference ‘Business and Human Rights: Towards a Common Agenda for Action’, to take place in Brussels on December 2, 2019. This is part of Shift’s broader support to the Ministry for Foreign Affairs on advancing business and human rights as part of the Finnish Presidency.
The Conference will bring together high-level EU Member State representatives, members of key EU institutions, senior representatives from business and civil society to discuss the present and future roles of different stakeholders in accelerating the implementation of the UN Guiding Principles at Member State and EU level.
Key topics will include state financing for doing business abroad, the role of regulatory measures as part of a mix of state measures, and the use of collective leverage and cooperation to enhance human rights outcomes for those most vulnerable to harm, especially human rights defenders.
The keynote speaker will be Professor John Ruggie, Chair of Shift and author of the UN Guiding Principles on Business and Human Rights. The event will culminate in the release of a conference outcome document, an Agenda for Action, with the objective to strengthen the EU’s actions on business and human rights.
The full draft program may be found here and will be updated as speakers are confirmed.
Shift looks forward to working with all the key stakeholders involved, in line with our commitment to advocate for the meaningful implementation of the UN Guiding Principles, in order to build a world where business gets done with respect for people’s dignity.
Shift is the leading center of expertise on the UN Guiding Principles on Business and Human Rights. Shift’s global team of experts works 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 a non-profit, mission-driven organization, headquartered in New York City. Visit shiftproject.org and follow us at @shiftproject.
About the Finnish Presidency of the Council of the European Union
Together with the European Parliament, the Council is the main decision-making body of the EU. Its presidency rotates among the EU member states every 6 months. Finland holds the Presidency of the Council from July 1 to December 31, 2019, with the motto ‘Sustainable Europe – Sustainable Future’. The Finnish Presidency will be the first to integrate the new priorities of the Strategic Agenda 2019 – 2024 into the Council’s work. Learn more at eu2019.fi
Shift is pleased to be providing expert support to the SER, and the Dutch Ministry of Foreign Affairs, as part of a pioneering process that has brought together companies, governments, unions and civil society, across key business sectors, to try to prevent human rights risks and ensure responsible business conduct in critical global value chains.
The process also seeks to address environmental impacts, corruption and taxation practices and other negative impacts covered by the OECD Guidelines for Multinational Enterprises.
“In our work on fostering sustainable supply chain management among Dutch industry, Shift has been extremely helpful in elevating the policy discussion and business practice in the area of business and human rights. The Shift team’s unique combination of strategic policy advice and practical experience with companies and other stakeholders has been invaluable to our work.”Mariëtte Hamer, President, Social and Economic Council of the Netherlands
This work is being undertaken in close collaboration with the SER – the advisory and consultative body of employers’ representatives, union representatives and independent experts that has been fostering sustainable supply chain management among Dutch industry since 2008. | See our explanatory note on prioritization of human rights risks prepared for the SER
In each sector, parties have identified severe risks that they are facing and developed individual commitments and collaborative approaches to address them. With the support of Shift, the SER has developed guidance -contained in its Advisory Report– to help parties ensure that the measures developed are credible, and aligned with international standards.
The expectation is that parties:
- Use credible methodologies, aligned with leading international frameworks, to identify sector-wide human rights, environmental, corruption and related risks;
- Identify collaborative approaches to building and exercising the leverage of sectors and their stakeholders to address such risks;
- Involve relevant stakeholders in credible, dialogue-based multistakeholder processes.
Shift has played a key role in building the capacity of all parties to play their envisioned roles as leaders, participants and conveners of a credible process aiming to assess and address sector-wide risks. This support has included workshops for a number of sector associations, together with expert stakeholders, held in The Hague and hosted by the SER. | Learn more about how Shift facilitates multistakeholder dialogue on business and human rights
Over the past years, Shift has also supported implementation of a number of specific agreements, most notably the Dutch Banking Sector Agreement. Our support to the parties involved in that agreement has included:
- Facilitating a workshop on human rights reporting, which led to the issuance of the first human rights reports by ING and Volksbank (Dutch) and of a second report by ABN AMRO.
- Providing expert input and leading the drafting of paper capturing learning from the “enabling remedy” working group, which among other themes, included exploring the concept of a “remedy ecosystem.”
- Supporting the “value chain mapping” working group by helping to shape its methodology and facilitating the process for the cocoa value chain mapping and part of the process for the palm oil value chain mapping.
In 2017, the Dutch Government recommitted itself to the process and is scheduled to undertake an evaluation in late 2019. The coalition agreement includes a provision to consider binding measures in case insufficient progress is deemed to be made. Shift looks forward to being a part of the evaluation process and discussions about what more is needed.
To learn more about the Sector Agreements, click here.
There is a growing number of national and international debates around mandatory measures to ensure business respect for human rights, and specifically a) a binding international instrument on business and human rights and b) national legislation on mandatory human rights due diligence. In these debates, the UN Guiding Principles’ expectation of a “smart mix” of implementation measures is often cited. As a contribution to these discussions, Shift has developed the following statement on the role of mandatory measures in a “smart mix”.
The State Duty to Protect is not a passive duty, but a proactive one.
Under UN Guiding Principle 1, all states “must protect against human rights abuse within their territory and/or jurisdiction by third parties, including business enterprises”.
This “requires taking appropriate steps to prevent, investigate, punish and redress human rights abuse through effective policies, legislation, regulations and adjudication”.
This should be understood as a proactive duty. States should actively assess the effectiveness of what is currently in place, understand what gaps there are, and identify ways to address them. Yet most “National Action Plans” on the UNGPs to date reflect a more passive approach; they are a catalogue of existing measures rather than robust assessments of what more is needed.
The State Duty to Protect is fulfilled through a smart mix of measures.
To fulfill their duty to protect, states will need to use a range of approaches. The commentary to UN Guiding Principle 3 elaborates on this when it says that states “should consider a smart mix of measures – national and international, mandatory and voluntary – to foster business respect for human rights.”
States should go beyond enforcing existing laws to “periodically assess the adequacy of such laws and address any gaps” in light of evolving circumstances.
A smart mix of measures necessarily involves legislative and regulatory measures.
A truly “smart mix” means looking at all four aspects (national, international, mandatory and voluntary), not just the one or two that are most convenient or already in place. It follows, therefore, that the state duty to protect necessarily involves legislative and regulatory measures at the national level, and the supportive infrastructure (such as enforcement, incentives and guidance) needed to make them meaningful in practice. Without these, the UNGPs will never fulfill their true potential.
The UNGPs also clearly contemplate mandatory international measures as a natural part of this “smart mix”. Shift follows with interest the current discussion of a new treaty in this area.
Measures that involve Mandatory Human Rights Due Diligence are in line with the UNGPs, and there are strong reasons for states to consider them.
While the UNGPs do not demand that states adopt legislation requiring companies to carry out mandatory human rights due diligence (HRDD), clearly such legislation is entirely in line with the UNGPs.
Some elements of HRDD are already embedded in national laws, such as in health and safety regulations, environmental legislation, privacy laws or in some corporate reporting regimes. However, there are often strong reasons for states to also consider more comprehensive mandatory HRDD legislation.
Practical reasons to consider mandatory human rights due diligence can include:
• The powerful effect it can have in driving top-level attention to human rights in companies, as well as engaging functions across the business;
• Leveling the playing field across companies and sectors, including through engagement with business partners in a company’s value chain;
• Obliging companies to consider the interests of stakeholders other than shareholders;
• Incentivizing collaborative approaches to address systemic human rights risks; and
• Enabling (where civil liability is included) a clear cause of action for individuals who are harmed to pursue remedy.
To be effective, such legislation should take account of critical aspects of the responsibility to respect. These include that: • It should not undermine the scope of the responsibility to respect, which extends throughout the value chain, even if liability is attached to a narrower set of relationships;
• HRDD is a standard of conduct not result, meaning that mandatory measures should allow consideration of the quality of a company’s efforts to respect human rights; and
• Meeting the responsibility to respect in practice will always involve going beyond compliance alone as good practice continues to evolve.