Big Business and the U.N.: Toward a new framework for corporate responsibility

Should the United Nations become much more active in trying to embed human rights in the policies and practices of multinational corporations? That question has long vexed the U.N. Human Rights Council. A decade ago, when he was secretary general, Kofi Annan answered it. At the January 1999 World Economic Forum, held in Davos, Switzerland, he proposed that “you the business leaders gathered in Davos, and we, the United Nations, initiate a global compact of shared values and principles, which will give a human face to the global market.” Eighteen months later at U.N. headquarters in New York, top executives of Unilever, Nike, DaimlerChrysler and 50 other multinationals signed the U.N. Global Compact, with its set of nine general principles on labor standards, the environment and human rights.

Meanwhile, however, a Geneva-based subcommission of the Human Rights Council was working on a different project linking business and human rights. Its human rights specialists spent nearly five years developing their own set of standards for corporations, culled from 36 United Nations treaties and conventions, titled Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights. Once the subcommission formally adopted their document in August 2003, a “battle of the norms” broke out.


“Doomed from the outset,” said a note from the U.S. Embassy in Geneva, siding with the U.S. Council for International Business, which branded the norms “unfeasible, unnecessary, and counter-productive.” Amnesty USA took the opposite view and publicly called on Secretary of State Condoleeza Rice to stop “undermining the U.N. Norms for Business.” With human rights groups hailing the norms on one side and organized business denouncing them on the other, the Human Rights Council turned to Annan for help. In mid-2005 he appointed John Ruggie, professor of international affairs at the John F. Kennedy School of Government at Harvard University, as special representative of the general secretary on human rights and business.

When Ruggie arrived in Geneva, he received this welcoming message from a developing country diplomat: “We’ve had a train wreck. Please get the train back on track.” Now, three years later, the train is not only back on track but moving forward. In June, the Human Rights Council settled any lingering question about U.N. involvement. It unanimously approved his strategic policy plan and issued a new three-year mandate for him to develop it further. Ruggie described the plan in detail in his 2008 report, titled Protect, Respect, and Remedy: A Framework for Business and Human Rights. Its framework, hammered out with various business groups, amounts to a human rights paradigm for corporations in the globalized 21st century. As such it adds another dimension to the celebration of the 60th anniversary of the Universal Declaration of Human Rights.

A New Framework

Ruggie’s four years (1997-2001) as U.N. assistant secretary general under Annan helped prepare him for the current task. As one of the top architects of the Global Compact, Ruggie honed his skills at navigating the international ideological and political terrain. When he took office in Geneva, it seemed clear that he was not there to save the treaty-based norms. A self-described “principled pragmatist,” he took a different approach. Ruggie built a conceptual framework that, unlike the norms, distinguishes the role of the state in human rights from the role of business. It is based on three core principles: (1) the government duty to protect against human rights abuses by third parties, including corporations; (2) the corporate responsibility to respect human rights; and (3) the obligation of both (and others) to develop better access to remedies for human rights abuses. Ideally, as Ruggie put it “the three principles form a complementary whole in which each supports the others in achieving sustainable progress.”

Although the norms as such have been sidelined, the debate about what to do and what not to do, and about the dividing line between roles continues, though not in the highly charged environment that helped doom the norms. The current mood, quieter and more positive, stems from what Ruggie thinks is a widespread realization among people on all sides that it is urgent to leaven globalization with human rights.

Ruggie and his team advanced that understanding through diligence and transparency. They held 14 multi-stakeholder consultations on three continents, conducted a survey of Fortune Global 500 corporations and more than two dozen other research projects, and generated more than 1,000 pages of documentation as the factual and conceptual foundation for their three reports to the council. Ruggie also delivered dozens of speeches and distributed the texts widely. Further, he arranged to have these activities documented and open to the public, in the U.N.’s archives and on the user-friendly Web site of the London-based Business and Human Rights Resource Centre, whose staff covers human rights developments daily.

Ruggie also engaged in extensive exchanges of opinion with leaders of the top international business organizations that deal with the United Nations and the International Labor Organization on matters affecting multinational corporations, which now number 78,000 with 780,000 subsidiaries. At the Paris headquarters of the International Chamber of Commerce in April 2007, he explained in detail the contents and purpose of his second report, Mapping International Standards and Responsibility for Corporate Acts. His proposed framework eventually won the approval of the I.C.C., the International Organization of Employers and the Business and Industry Advisory Committee to the Organization for Economic Cooperation and Development.

Does the top-level endorsement mean that corporations will get behind the U.N.-led initiative? Obviously, they will not all do so immediately. Perhaps a better question is whether Ruggie’s continuing efforts will have a cumulative impact on corporate culture over time. That remains uncertain. But he has salted his reports, speeches and interviews with many reasons why corporations should strengthen their commitment to human rights.

Ruggie has gone to great lengths to analyze the environment in which multinational corporations operate today, particularly what he calls “governance gaps” or “weak governance zones”—areas where few of the underpinnings of law and order exist. “This authority vacuum, or governance gap, often leads responsible companies to stumble when faced with some of the most difficult choices imaginable, or to try and perform de facto governmental roles in local communities for which they are ill equipped. Less responsible firms take advantage of the asymmetry of power they enjoy to do as they will,” Ruggie told the 2006 World Mines Ministries Forum in Toronto. There he emphasized that “our fundamental challenge” is to narrow and ultimately to bridge this governance gap “by efforts from all sides if companies are to sustain their social license to operate, and if the people of the countries involved are to benefit from the enormous potential contributions that [global industry] can make to economic and social development.” He encouraged efforts from all sides so that “thinking and action can build in a cumulative way.”

In spelling out the separate roles of government and business, Ruggie was mindful of business’s loud complaint that the norms would saddle it with obligations properly belonging to government. So he has been unambiguous about the state’s duty to protect human rights. “The human rights regime rests upon the bedrock role of states,” he asserted in explaining how his first core principle is enshrined in domestic and international law. That may not turn out to be quite the concession to business that it might seem, however.

By listing specifics on how governments fall short in fulfilling their basic duty, Ruggie has in effect written a set of action programs waiting to be incorporated into campaigns. Here is an example: “They [governments] need to consider human rights impacts when they sign trade agreements and investment treaties, and when they provide export credit and investment guarantees for overseas projects, especially in contexts where the risk of human rights challenges is known to be high.”

The second principle—the corporate responsibility to respect human rights—is founded on “the basic expectation society has of business,” which he restates as “do no harm,” but with a positive accent. For example, to do no harm, a workplace anti-discrimination policy “may require the company to adopt specific recruitment and training programs.” In a special study of more than 300 reports of alleged corporate-related abuses, Ruggie found that the “do no harm” principle applies to a surprising range of corporate behavior. The empirical study identified violations of 12 labor rights and 17 non-labor rights. He concluded, “there are few if any internationally recognized rights [that] business cannot impact—or be perceived to impact—in some manner.” Ruggie found that there are no limits to the rights that companies “should take into account,” whereas the norms contain only “a limited set of rights for which [a corporation] may bear responsibility.”

Consequently, Ruggie lays a potentially heavy human rights burden on corporations. It can be met, he says, by exercising the moral and legal requirement of “due diligence.” He lists the elements of due diligence: written policies, integration of those policies throughout a company, impact assessments (before new activities are launched) and tracking performance. Due diligence can help a company rebut a charge of “complicity”—meaning a company’s indirect involvement in human rights abuses, where the actual harm is done by another party, including governments and non-state actors. He warns that a truthful defense “that a company was following orders, fulfilling contractual obligations, or even complying with national law will not, alone, guarantee it legal protection.” He also found that “relatively few companies have systems in place to support claims that they respect human rights.”

Building Consensus

The international law firm Wachtell, Lipton, Rosen & Katz objected to the Ruggie plan because it would “impose on corporations the obligation to compensate for the political, civil, economic, social, or other deficiencies of the countries in which they conduct business.” But in rebuttal another international law firm, Weil, Gotshal & Manges argued that the best U.S. companies already monitor human rights as part of their fiduciary duties and that for all companies Ruggie’s rules simply restate existing legal requirements. Which legal opinion is right? Both, in a sense.

The Ruggie plan does not introduce new legal requirements, but carefully spells out existing ones, thereby adding pressure on corporate boards and their lawyers to strengthen their human rights policies. For that reason, a coalition of socially responsible investors announced last June that they support the Ruggie plan. Still, some influential human rights organizations insist Ruggie should do more. Last May they went public with their view that a follow-up mandate for Ruggie should “include an explicit capacity to examine [specific] situations of abuse…to give greater visibility and voice to those whose rights are negatively affected by business activity.” But the business representatives argued it would distract Ruggie from his mandate to “operationalize” the framework.

Professor Ruggie will not likely assume the role of prosecuting attorney against a Nike or Walmart, but it will be hard for him to avoid studying how specific companies fail to address human rights abuses for which they are directly or indirectly responsible.

Under his new mandate, Ruggie must be careful not to neglect the third principle of his framework, the obligation to improve access to remedies for human rights violations. He has reported the mechanisms for redress already available in treaties, domestic law, industry agreements and various other arrangements, not so much to record progress but to inventory the opportunities waiting to be seized.

Overall, Ruggie’s most difficult challenge centers on those “weak governance zones,” where government is unable or unwilling to exercise its authority and where multinationals have expanded and prospered. Recognizing the urgency of filling this vacuum, he has put all options on the table, including home-state regulation of the multinational corporation’s foreign operations. Traditionally, that option is seldom advanced. But after conducting extensive research of current legal opinion, Ruggie found an evolving consensus on this point. International law does not require home states to regulate the conduct of their multinationals abroad, but does not flatly prohibit it either. Some United Nations entities that interpret U.N. treaties are leaning toward requiring such regulation.

So where does the struggle for human rights stand? There is good reason for cautious optimism, thanks to the Human Rights Council’s adoption of the Ruggie paradigm. As he has emphasized, “The international community is still in the early stages of adapting the international human rights regime to the challenges posed by globalization.” The challenge for governments, corporations, human rights organizations, unions, investment firms and other “stakeholders” is to work together to exploit the vast potential that the new paradigm offers.

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