A seismic shift in improving the behaviour of large companies? Guest post from Phil Bloomer

July 17, 2014

     By Duncan Green     

My former boss, Phil Bloomer is now running the Business and Human Rights Resource Centre (check out its smart new multilingual website). Here he sees some signs of hope that the debate on corporate responsibility is PhilBloomermoving beyond trench warfare over voluntary v regulatory approaches. Fingers crossed.

‘Mind the gap’ is a refrain that any visitor to London’s Underground trains will have had drilled into their brains. In development and human rights, one of the most controversial issues is how to deal with the dangerous governance gap that has opened up between the powerful globalising forces in our economies, often led by large companies, and the often weak capacity of societies to cope with the problems and damage these forces can create.

A fortnight ago came a seismic shift in this debate. The UN Human Rights Council adopted a resolution to create an international binding treaty for transnational corporations. This comes three years after the adoption, by consensus, of the more voluntary, UN Guiding Principles on Business and Human Rights. Most observers put this major tremor down to rising frustration at the apparent glacial pace of implementation of the Guiding Principles by governments (only the UK, Netherlands and Denmark have so far agreed National Action Plans), and few companies are stepping up. The age-old, and sometimes theological, divisions between opposing panaceas of state-regulation v voluntary codes, may be returning.

But there is also a positive difference in the debate at this juncture: there are many voices that believe that a smart mix of regulatory and voluntary approaches are essential to the progress we need in business’ contribution to human rights, development, and sustainability. Perhaps the Guiding Principles and the binding treaty approaches might be complementary?

mind_the_gap-logoJohn Ruggie, author of the UN Guiding Principles, in a response this week, is deeply concerned that a blanket international treaty is impractical and a distraction. But he views “international law as a tool for collective problem solving” and calls for “precision tools” in international law focused on specific governance gaps. He also highlights the inconsistency of opponents of advances in international law:  “if national law and domestic courts suffice, then why do TNCs not rely on them to resolve investment disputes with states? Why is binding international arbitration necessary, enabled by 3,000 bilateral investment treaties?”

Equally, one European government official admitted recently, under Chatham House rules, that it is using the threat of a binding treaty to demand more decisive action on the Guiding Principles by fellow governments.

Peter Frankental of Amnesty International has said ‘we should not be afraid to frighten the horses” regarding a treaty, and that we need a “far-reaching debate on the kind of binding mechanisms that are necessary to ensure companies operate to acceptable standards and the different pathways towards achieving this”.

But there are also voices of polarisation: one of them, described in a recent report by Misereor and Brot fur die Welt, is the business associations that lobby the United Nations intensely. The report highlights the “influence that corporate actors exert and their ability – in cooperation with some powerful UN member states – to prevent international binding rules for TNCs at the UN and, instead, promote legally non-binding, ‘voluntary’ approaches such as CSR and multi-stakeholder initiatives.” Equally Richard Howitt MEP, the CSR rapporteur for the European Parliament, recently expressed his frustration at business associations’ lobby power in Europe to delay and, at times, derail even innocuous regulation for ‘non-financial reporting’ by companies regarding their environmental and social impact. Though, happily, this advance in basic transparency, was finally passed in April this year, after 15 years of debate.

It is perhaps this blanket opposition to a blend of regulatory and voluntary approaches to human rights in business that is most damaging to advances in business goodinc-badinccontributing to human rights and development. A number of business leaders, led by the likes of Paul Polman of Unilever, accept that there is a dangerous governance gap. In contradiction to some business associations, they are beginning to speak out in favour of appropriate regulation, as they want a more level playing field in social and environmental standards which will cut out the cowboys, and provide a benefit to responsible companies, and to the societies they operate in.

It is this governance gap that the proponents of both the UN Guiding Principles, and the binding treaty seek to address. While a robust debate is necessary, cooperation and complementarity between them is likely to do far more for the victims of abuse in supply chains than sterile dispute and competition.

Phil Bloomer, Executive Director, Business and Human Rights Resource Centre. Twitter: @pbloomer