How should corporates respond to the significant increase in human rights legislation?
Bennett Freeman Associate Fellow of Chatham House shares his opening remarks at GoodCorporation’s Business Ethics Debate on ‘The changing pace of human rights legislation and what this means for business‘.
It is an honor to be with Baroness Young of Hornsey, one of the great champions of social and racial justice in modern Britain as well as an inspirational voice and force in the cultural and educational life of this country. I also salute her longstanding leadership on behalf of the Modern Slavery Act—and her current emphasis on moving from “talk to action” by mobilizing full legal enforcement and implementation by government and business alike.
It is also an honor, as a student of British history and politics, to be with you in the Attlee Room. Despite a certain contemporary observation to the contrary (by one Winston Churchill), history now sees “Citizen Clem” as a modest man without much to be modest about: as no less than the instrumental architect of British social democracy three quarters of a century ago.
Let me thank Leo Martin and GoodCorporation for inviting and introducing me to kick off this timely debate. Leo and I first meet 22 years ago—in early 2001—a few weeks after I left the US State Department and as he and others were designing and launching this initiative of such continuing relevance and resilience. That is because its fundamental insight then and now is that a good corporation—whether a large multinational or a small or medium-sized enterprise— must not only be focused on legal compliance but also be imbued with ethical commitment.
This imperative is even more important and urgent now in a vastly more complex and challenging arena for responsible business than the one we faced two decades ago. Then we were making the transition from corporate responsibility as philanthropy to corporate responsibility as accountability and sustainability. While philanthropy remains invaluable, this transition remains a work in progress with still too few pillars of accountability and signposts of sustainability in full and firm place.
Yet we have built the foundations of a normative architecture of international standards and domestic laws: from the UN Global Compact and the Sustainable Development Goals to the ILO core labor standards and the UN Guiding Principles on Business and Human Rights; from sector and issue-specific multi-stakeholder initiatives to due diligence disclosure requirements. Significant resources have been expended by individual companies on compliance and implementation through their operations and across their supply chains. But the application of those standards and laws remains inconsistent and incomplete in every sector of the global economy around the world—and positive impact lags far behind the severity and urgency of the problems and challenges we must address.
As Baroness Young would probably say, there may be talk but there is not enough action—and I would add that there is not even enough talk on the part of some companies. The Corporate Human Rights Benchmark initiative, now with five iterations of assessments of companies in the most sensitive sectors for human rights, observed last November that “corporate respect for human rights has gained momentum… but the pace of this improvement is very slow.”
This slow pace of improvement is frustrating—indeed alarming—now that we are a quarter century past the inception of the contemporary business and human rights agenda (predating by a decade the creation in 2005 of the late John Ruggie’s UN Special Representative mandate).
This slow pace of improvement is frustrating and alarming as human rights, labor rights, women’s rights, LGBQT rights and Indigenous peoples’ rights continue to be degraded—all too often by the actions and inaction of business.
It is frustrating and alarming as the “shared space” of the rule of law, accountable governance and civic freedoms upon which both business and civil society depend remains under pressure—in both democracies and autocracies— and as human rights defenders remain under attack.
It is frustrating and alarming as the pernicious social and economic inequality exposed and exacerbated by the pandemic persists in poor and rich countries alike, Global South and Global North.
It is frustrating and alarming as racial injustice remains a stubborn scourge around the world, including in the UK and the US.
It is frustrating and alarming that in the US, not just ESG investing but the entire responsible business agenda has been branded as “woke capitalism” and become a lightning rod in the intensifying culture wars and the emerging 2024 presidential campaign.
It is frustrating and alarming that amidst geopolitical conflict and confrontation—and with Russia’s invasion of Ukraine an attack on both a sovereign democracy and the international rules-based order—that many multinationals still fail to link political risk analysis with human rights due diligence.
But enough frustration and alarm. There are signs that the pace of improvement is picking up, but not enough for this winter for human rights to turn to spring (even today on the vernal equinox).
We have seen an historic exit of foreign companies from Russia over the last year, although even more (including many American and British companies) have remained.
Some companies and entire industries are standing up for the rule of law, most dramatically now the tech sector in Israel, and others will be convening next week in Washington at the Summit of Democracy to hear a call to action for business support.
Human rights due diligence in high-risk and conflict-sensitive regions has finally come into focus, even if largely due to the brutality of Vladimir Putin and the Myanmar junta. The reliance of the just transition on “red cobalt” and other critical minerals in conflict zones such as the Democratic Republic of Congo (DRC) should sharpen that focus to avoid harm to human rights as we try to rescue the planet at the same time.
Geopolitical, conflict and human rights issues—together with ethical and material risk—will become even more intertwined and inescapable. I would say to corporate executives and directors (and to their investors and advisors): worry but don’t lose sleep; get a grip before you get hit.
At least it is encouraging—indeed inspiring—as we look back on an era of corporate responsibility largely guided by voluntary standards to see the momentum growing for corporate accountability grounded in mandatory human rights due diligence.
The US and the UK get credit for pioneering both voluntary and mandatory approaches: voluntary through the (originally the US/UK) Voluntary Principles on Security and Human Rights; mandatory through the California Supply Chain Transparency Act and the UK Modern Slavery Act plus Dodd-Frank Section 1502 in the US requiring disclosure of due diligence related to conflict minerals in the DRC.
But now the initiative is with the EU through Corporate Sustainability Due Diligence Directive and the Corporate Responsibility Sustainability Reporting Directive. Other governments have already acted, mostly notably France with the Duty of Vigilance law and Germany, Switzerland and Norway are among those also moving forward. Perhaps most significantly, the Japanese government has recently committed to develop human rights due diligence for its corporations.
At the risk of touching a nerve with my American accent, the US and the UK can once again become rule-makers not takers, leaders not laggards.
It will be harder to act quickly in the US than in the UK, with divided government and legislative gridlock amidst partisan warfare.
The outlook is less bleak here in Blighty. Of course, there are political considerations. But this government can act. If not, the next one could and should.
The case is now being made for human rights due diligence laws in the UK. A “Business, Human Rights and Environment Act” would have two main benefits: fewer abuses by British companies at home and abroad; a level playing field with other countries and companies. Support is growing on the part of companies, investors and civil society.
British business should support mandatory human rights due diligence, as companies have done to varying degrees in Europe. Values and interests can and must converge. It is time for UK companies and investors to embrace ethical clarity and regulatory consistency for the Global Britain that the world needs and wants.
Thank you for allowing me to make the case. Let the debate begin and I hope, Baroness Young, that talk will become action.
Bennett Freeman is an Associate Fellow of Chatham House and Principal of Bennett Freeman Associates LLC. He served as Senior Vice President for Sustainability Research and Policy at Calvert Investments and as U.S. Deputy Assistant Secretary of State for Democracy, Human Rights and Labor.