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At its June 2011 session, the UN Human Rights Council will consider formal endorsement of a global standard for preventing and addressing the risk of adverse human rights impacts linked to business activity. John Ruggie, Berthold Beitz Professor in Human Rights and International Affairs, has developed these standards in his role as the UN Secretary-General’s Special Representative for Business and Human Rights.
Q. Please tell us about these new proposed standards.
Ruggie: This is the first time that the UN will formally endorse a set of standards to govern the adverse impacts of business activities on the rights of individuals and communities. It has been six years in the making; we’ve convened 47 international consultations; I had a team of ten professionals; more than 20 law firms did pro-bono work for us; and I’ve held repeated meetings with governments in capitals, New York, and Geneva. There is now a general consensus as to these guiding principles and what they should do, so we’re very hopeful that the Human Rights Council in June will adopt them.
Q. How would the formal endorsement of such guidelines impact conceptions of corporate social responsibility and its practice in the global business community, especially as such responsibility relates to human rights?
Ruggie: The intent is that this provides an authoritative focal point for both states and businesses. Ever since the 1990s, the activist community has been pushing for an international treaty that would impose binding legal standards on companies in the area of business and human rights. We all remember the challenges of Nike in Indonesia, Shell in Nigeria, and Yahoo in China. For their part, companies insisted on figuring out for themselves voluntary means for avoiding those kinds of risks. But all came around to the view that a common policy framework was necessary: an authoritative focal point and level playing field, defining the same set of rules for all players. And that’s what I’ve provided.
The standards combine legal obligations with “social license to operate” requirements. They have been discussed at great length with various stakeholder groups, including businesses, NGOs, and states. We’ve held town hall meetings literally around the world on every continent to get the input of local communities, and we have road-tested many of the recommendations that we ended up putting forward.
So, for example, one of the ideas that we’ve promoted is that companies in certain sectors, like mining and oil – because they have a huge physical footprint on the communities in which they operate – should establish legitimate community-based grievance mechanisms. If something goes wrong people in the community would know where to go, and the company would know how to manage the grievance. We road-tested such mechanisms in five different countries over the course of 18 months, so we know that the final recommendations we’ve made actually have traction among would-be users.
We’ve done this repeatedly in the different areas covered by the standards. We can say to the Human Rights Council, “This is not simply an academic exercise, nor is it simply an exercise in drafting a document. What we’re proposing here has been road-tested in very different industry sectors, in very different geographical locations, and what we’re putting before you actually works on the ground."
Q. How does you work at Harvard Kennedy School in general and the Mossavar-Rahmani Center for Business & Government (MRCBG) in specific inform your role as the UN Secretary-General’s Special Representative for Business and Human Rights?
Ruggie: The Kennedy School is a wonderful incubator for innovative ideas concerning the relationship between business and government. At HKS we focus on governance as a process, and governance increasingly includes not only governmental entities, but also non-governmental entities including the private sector and civil society.
My work is on the global level. There I see that boundaries are blurring, not only geographic boundaries, but core distinctions: the distinction between the public and the private; the distinction between the national and the international. We increasingly work at the intersection of all of those because that’s where the leverage is for identifying and implementing innovative solutions.
Here at the Kennedy School the issues that we focus on in our research, discussions, and teaching address those kinds of developments. So I draw heavily on the experience of being a faculty member at the Kennedy School in generating ideas for my UN work – and I bring that UN work into the classroom. This is all about bridging the practical policy world with the academic world, which is one of the main objectives of Kennedy School training for students.
Q. There are critics who say that social responsibility and human rights are not concerns of the private sector. How do you answer those critics?
Ruggie: Well that’s a question that’s answered surprisingly easily. One of the projects that we have run over the last several years is something that we call “The Cost of Conflict with Communities.” We’ve worked closely with companies particularly in the extractive sector and in the infrastructure sector – again, the big physical footprint kind of companies. We have been asking them to look into their own books to find out what it’s costing them to get things wrong.
The results of that have been absolutely staggering, not only for us but also for the companies themselves. We find in the oil industry, for example, the amount of time that it takes from the initial stage of getting a permit to drill to the time the first drop of oil comes out of the ground has doubled over the last ten years. That pushes up costs. The single most important factor driving it is community push-back – what is now called “stakeholder-related risk.” We asked companies to look further into this – “What does it cost you because pipelines are being blown up? What does it cost you because the only access road to a mine is being blocked by a community one week, two weeks, or three weeks at a time?” The irony is that companies didn’t know the answers to those questions because the costs are borne by individual business units and absorbed as operating costs. They’re never aggregated, and so senior management never sees them as a single total. We had one company report to us that over the course of a two year period they lost $6.5 billion to stakeholder-related risk. This was at a time when their annual profit was $20 billion.
Management hit the roof when they saw that and said, “There has to be a better way, can you help us identify viable means to avoid these kinds of risks?” And so, the answer to the question that you posed, “Why should this be of concern to companies?” is because it makes sense for companies to be concerned, and because at the end of the day it’s also the right thing to do.
Business is in business to do business; business is not in business to harm human rights. When you put it to most businesses in that way, they actually want to know, “How can we limit the adverse impacts our business has on human rights, and how can we increase the positive effects that we have on human rights?” And so I’ve provided the tools for managing those challenges by developing what I call a human rights due diligence process by which companies can anticipate what the adverse impacts of a project are likely to be, help them develop mitigation strategies, and at the other end of the process establish grievance mechanisms so that if something does go wrong there is a response mechanism in place, before grievances escalate into major campaigns or major law suits.
Q. Is there anything else we haven’t covered that you would like to add?
Ruggie: There’s one thing that is important to note: this process of developing these global standards has come in two phases. First, I was asked simply to identify a broad policy framework, and I presented that in 2008. The framework rests on three pillars: the state duty to protect against human rights abuses by third parties, which includes business; the corporate responsibility to respect human rights, which means to act with due diligence to avoid harmful effects; and the need for victims to have greater access to greater remedies.
This framework was already endorsed by the Human Rights Council in 2008, and I was then asked to go out and come back with specific concrete recommendations for the implementation of that framework. That’s what I’ve been doing the last three years. But I was also asked to promote the framework in the world at large.
So one of the things that I’ve done is to go to other international institutions, like the Organization for Economic Co-operation and Development (OECD) in Paris, which has an instrument called “Guidelines for Multinational Enterprises,” and I’ve worked closely with them to get them to incorporate our Guiding Principles into their instrument. That process is now complete.
We’ve done the same thing with the International Organization of Standards. They’ve developed a new social responsibility standard (ISO26000), which includes a human rights chapter that is drawn directly from our work. I’ve also been working with the International Finance Corporation, which is revising its Performance Standards, and so on and so forth.
I’ve worked with the socially responsible investment community to get them to adopt these standards as part of their social screening devices. And I’ve promoted the Framework and the Guiding Principles with individual companies. I’ve just returned from a large conference in Atlanta that was hosted by Coca-Cola and co-sponsored by the U.S. Chamber of Commerce and the U.S. Council for International Business on how to implement this in the company context. The phrase they use – honestly, I didn’t invent it – is that they want to make their companies “Ruggie-proof.”
So what we’ve done, even before the process in the Human Rights Council deliberations are completed, is to make sure that other entities that have leverage and are engaged in this space adopt the same set of standards. Therefore, for the first time ever, you have a convergence of standards and a common, level playing field in the business and human rights sphere, which will send stronger market signals to companies that these are the standards around which expectations and activities should converge because it has the strong backing of the international community, including by business itself.