No. 100 - April 2008
The 2008 ruggie report: A framework for business and human rights
For Profit and People

By Roxanne V. Lu , Senior Research Associate

The world is feeling and living the impacts of globalization, a process that “integrates national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology.” 1This process affects individuals, communities and societies not only at the economic and financial level but also at the social level, particularly on issues concerning human rights.

Recognizing the need to integrate the human rights aspects in global business, the United Nations (UN), in June 2005, appointed Professor John Ruggie to be the first-ever special representative on the issue of human rights and transnational corporations and other business enterprises. The UN mandated Prof. Ruggie’s team to develop a conceptual and policy framework to anchor the growing debate of business versus human rights, as well as to elaborate on the responsibility of States to effectively regulate and adjudicate the role of corporations and business enterprises with regard to human rights.

In 7 April 2008, Prof. Ruggie presented to the Human Rights Council his report entitled “Promotion and Protection of All Human Rights, Civil, Political, Economic, Social and Cultural Rights, including the Right to Development.”2 It concludes that the root cause of the business and human rights quandary today lies in the “governance gaps”3 created by globalization. It explains that while nation economies their markets to globalization, societies are struggling to adjust with this change particularly on its system and culture to protect and promote the core values of social community. It also states that there is disjuncture between business-related activities and the development of capabilities to govern those activities.

These gaps, according to the Report, result in an environment where wrongful acts committed by companies go unsanctioned and unpunished.

Developing a Structure

The Report suggests that in order to bridge the identified governance gaps, global markets must share the same values and institutional practices. It proposed a guiding framework for business and human rights to at least narrow the said gaps. The Framework establishes the following core principles:

1. Protect – the State duty to protect against human rights abuses by third       parties, including business;
2. Respect – the corporate responsibility to respect human rights; and
3. Remedy – the need for more effective access to remedies.

I. To Protect

It is a universal view that governments and States are the appropriate entities to reconcile different societal needs and to protect the general well being of its people. Likewise, it is the State’s unique role to foster corporate cultures that bind businesses to respect people’s rights.

Prof. Ruggie‘s report illustrates two approaches on how governments can foster positive corporate cultures. First, governments can support and strengthen market pressures on companies to respect rights. One example of putting “pressure” is to require companies to submit sustainability reports, such as in the case of Sweden which requires its state-owned enterprises to submit a sustainability report using the Global Reporting Initiative format. The Organization for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises is another soft law instrument related to corporate responsibility and human rights, although, the Report says this guideline requires revision.

The other approach is to use “corporate culture” in deciding corporate criminal liability. This means looking beyond individual acts of employees or officers, and into the company’s policies, rules and practices to determine criminal liability and identify necessary sanctions.

On a broader spectrum, the Report pointed out the need for States to address domestic policy incoherence, which takes two forms: the “vertical incoherence” and the “horizontal incoherence.” The former occurs when governments make human rights commitments without regard to implementation, while the latter occurs when state departments and agencies work at the State’s human rights obligations.

The Report cited cases of incoherence occurring under bilateral investment treaties and agreements where States offer protection to big companies in order to attract foreign capital. When investors come and operate and show little regards to States’ duties to protect, and States, find it difficult to challenge foreign investors, then there is a case of imbalance.

Imbalances like these is said to often occur in developing countries, and it is ideal for States, companies, and the institutions supporting investments, to “work towards developing better means to balance investor interests and the needs of host States to discharge their human rights obligations.”4

But not all governments have the technical or financial resources to effectively regulate companies, monitor compliance as well as achieve greater policy coherence. As such, the Report encourages peer learning where States with relevant knowledge and experience in dealing with transnational companies share information about challenges and best practices to partner States.

Finally, part of States’ duty to protect is its responsibility to inform and advice the business sector and embassies on matters regarding conflict zones. These areas experience the most human rights violence cases due to their unique situation of sporadic or sustained violence, governance breakdown and absence of the rule of law. Home States should issue alerts with respect to companies operating in conflict areas to help businesses address the heightened human rights risks.

II. To Respect

In the business and human rights debate, the main focus is the business enterprises’ roles and responsibilities to uphold internationally recognized human rights, and the limitations to which these roles and responsibilities legally apply. Several attempts have been made to identify which of the many human rights business impacts, but Prof. Ruggie concluded that limiting these in a list would be problematic. For one, a study conducted by the Business and Human Rights Resource Centre5, covering 320 cases of alleged corporate-related human rights abuses, found that business impacts almost all internationally recognized human rights, both labor and non-labor rights. (see Table 1) As such, companies should consider all human rights and comply with all national laws.

In addition, the Special Representative identifies a number of distinct responsibilities of companies in relation to human rights, namely respecting human rights, carrying out due diligence, being aware of its activities and relationships, and avoiding complicity.

Respecting Human Rights

Respecting human rights is the baseline responsibility of all companies, large, medium or small. Governments define the scope of legal compliance, but corporate responsibility in relation to human rights has a much broader scope in the social realm, guided by social expectations. Furthermore, companies cannot compensate for human rights harm incurred by performing good deeds elsewhere. Similarly, the concept of “doing no harm” does not necessarily mean not doing anything damaging but part of it means that firms must adopt proactive measures to prevent harm from occurring or for good developments to take place.

Due Diligence

“To discharge the responsibility to respect requires due diligence – companies should become aware of, prevent and address adverse human rights impact.”6

Companies, in carrying out due diligence, must consider three sets of factors. First, it must consider the country contexts in which their business operates particularly noting the specific human rights challenge they may face in that country. Second, companies must be aware of the human rights impacts of their own existing and proposed activities in the context of the country they are operate in. And lastly, companies must be aware if their business circle, such as relations with suppliers, partners, State agencies, contribute to human rights abuse. These sets of factors, constitute the scope of due diligence as part of respecting human right.

Having identified the scope of due diligence, Prof. Ruggie proceeded to establish the process in carrying out due diligence. He stated that companies must first adopt a human rights policy, which must be integrated throughout the entire company. His research and consultations, reveal that integrating human rights policies throughout the different divisions and relations of the company is the biggest challenge in fulfilling the business responsibility to respect. As such, leadership from the top is the essential key to embed respect for human rights throughout the company.

Part of the process is for companies to assess their existing and proposed activities and consider the potential implications of these on human rights. Such impact assessments can be based on the UN Global Compact, the previously mentioned OECD Guidelines and the Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy, among others.

Sphere of Influence

The UN Global Compact is “a framework for businesses that are committed to aligning their operations and strategies with ten universally accepted principles (see Table 2) in the areas of human rights, labor, the environment and anti-corruption.” The Global Compact first introduced the concept of “sphere of influence” to the corporate responsibility discourse, which shows the extent of influence that a business has in its internal and external operations.7 (see Figure A)

Avoid Complicity

The final responsibility of a company in respecting human rights is to avoid direct and indirect involvement in human rights abuses caused by another party, such as governments and non-State actors. In essence, this means that the company did not actually carry out the abuse but knowingly contributed to another’s abuse on human rights.

The second principle in the Global Compact indicates that corporate complicity in human rights abuse could occur in three main forms: direct, beneficial and silent. Direct complicity is when a company knowingly assists in violating human rights. Beneficial complicity takes place when a company directly benefits from the abuse committed by someone else, while silent complicity occurs when a company fails to raise the question of systematic or continuous human rights violations in its interactions with appropriate authorities.

In international criminal law, complicity does not require knowledge of the occurrence of abuse, nor the desire for it to have occurred, as long as there was knowledge of the contribution. Meaning, no legal protection can be guaranteed even if the company is simply carrying out its normal business activities and those activities contributes to the abuse, of which the company is aware or should have been aware of.

There have been a growing number of domestic jurisdictions where charges of corporate complicity can be filed. However, the non-legal effects of claims of complicity, such as reputational costs, are already damaging to the company. In some cases it could lead to divestment8 or loss of consumer support.

III. To Remedy

Providing effective grievance mechanisms is an important component under States’ duty to protect. These are tasked to prescribe certain corporate conduct with an accompanying mechanism to investigate, punish and redress abuses. As stated earlier, States are also encouraged to focus on failures in “corporate culture” as basis to hold companies accountable under both civil and criminal laws.

Equally, corporations, under their responsibility to respect, should provide means for those who wish to air their grievances to the company and seek remediation. These resources include providing hotlines to accept complaints, advisory services for complainants, or expert mediators. Redress by companies, takes the forms of compensation, restitution, guarantees of non-repetition, changes in relevant law and public apologies.

The Report found that judicial mechanisms are under-equipped to provide effective remedies for victims of corporate abuse due to lack of basis in domestic law And even if they can bring a case, “political, economic or legal considerations may hamper enforcement.”9 As such, it suggests for States to strengthen their judicial capacity to hear complaints and enforce remedies against all corporations operating or based in their territory. Meanwhile, the Special Representative suggests that non-judicial grievance mechanisms should be legitimate, accessible, predictable, equitable, rights-compatible and transparent.

State-based, non-judicial mechanisms include agencies with oversight over particular standards like healthy and safety. The Report highlights the importance of recognized national human rights institutions in addressing grievances involving companies as these provide the means to hold business accountable. In cases where they cannot handle grievances, they play an important role in providing information and advice to those seeking remedy.

Gaps

Despite the number of existing mechanisms, Prof. Ruggie’s studies find that many still lacks access to any functioning mechanism that could provide remedy. To address the lack of public awareness about existing mechanisms, non-government organizations, academic institutions, governments and other actors should address this gap by improving information flows. In addition to lack of information, the gaps in access also include intended and unintended limitations in the competence and coverage of existing mechanisms. Some actors propose the creation of a global ombudsman but Prof. Ruggie counsels careful consideration and planning if this idea is to be developed.

Summing Up

The Report concludes that the complex and dynamic nature of business and human rights issue, in this globalized world, require an effective framework to serve as a guide to governments, corporations and other actors. The framework proposed by Prof. Ruggie establishes States’ responsibility to protect people against human rights abuses in corporations, and to protect corporations against frivolous and false claims.

Corporations, large and small, have the responsibility to respect all internationally recognized human rights. But given that it is impossible to limit the list of human rights which business impacts, business should build a corporate culture where they adopt a certain human right policy integrated in all divisions of the corporation, supported by an effective impact assessment and tracking system. Generally, what is simply required from corporations is to exercise due diligence by being aware of all its business activities and relationships in order to prevent and address human rights abuses within their sphere of influence.

A shared responsibility by both governments and corporations is to provide access to remedies in both legal and policy dimensions. Existing grievance mechanisms were found to be incomplete and flawed, especially in developing countries. Finding ways to address these is part of the new mandate10 of the Special Representative. Under the new mandate, the office of the Special Representative will continue to explore issues relative to both private investment agreements and bilateral and regional investment treaties, including issues surrounding dispute resolution.