Financial Times

Moving beyond the voluntary code. Self-regulation for international business is the norm when it comes to rights. But a new study says this is slowly giving way to legal obligations, writes Alison Maitland. Feb 18, 2002

Should companies have a direct duty under international law to respect human rights? Some would strongly reject the idea, arguing that voluntary standards and self-regulation are a better way to ensure good corporate behaviour.
But a new book, Beyond Voluntarism*, says international human rights rules provide a clear basis for extending obligations from states to companies and that a trend to do so is already under way. "Companies would be short-sighted, and governments negligent, to ignore this trend," it says.

The study, based on two years of research, comes at a time of intense interest in the human rights records of companies, from business, governments, pressure groups, investors and consumers. Last week Amnesty International and the International Business Leaders Forum published maps showing the risks that multinational companies face in 34 countries where human rights abuses occur.

The study says that only two bodies - the Organisation for Economic Co-operation and Development and the International Labour Organisation - currently operate international procedures that directly scrutinise whether companies are respecting human rights. These rely on voluntary co-operation by multinational companies and have not been very effective.

However, there are growing pressures for compliance. Governments are negotiating or endorsing standards that place obligations on companies over human rights issues such as the sale of conflict diamonds. A United Nations expert body, the Sub-Commission on Promotion and Protection of Human Rights, has prepared draft principles for business enterprises that foresee placing direct obligations on them.

National courts are also playing a part. Lawyers have brought cases in the US, the UK, Australia and Canada to hold companies accountable for actions they have allegedly committed overseas, including Chevron and Royal Dutch/Shell in Nigeria and Unocal in Burma.

International standards, in particular the Universal Declaration of Human Rights, refer to the obligations of businesses and have considerable force as "soft law". "At some point, and some would argue this point has already been reached, the soft law duties of companies will be recognised as, or consciously transformed into, unambiguous and binding legal obligations . . ."

These obligations should complement voluntary approaches to human rights such as the United Nations Global Compact, says the book. It accepts that international legal rules can be difficult to apply and will not change corporate behaviour overnight, and that voluntary approaches may work more easily and adapt to the circumstances of individual sectors or companies.

However, the effectiveness of voluntarism relies on business expediency or a company's sense of charity. It overlooks the role of states, "many of which are unwilling or unable to influence the behaviour of companies effectively, or to protect their citizens from abuses that may occur".

Legal regimes provide a better basis for consistent and fair judgments. "In the absence of a framework of legal accountability, voluntary approaches will often be ineffective and will remain contested."
Is there a danger that focusing on legal duties is premature and could scare off well intentioned companies? The book disputes this. Businesses committed to respecting human rights should have nothing to fear and something to gain from such a development, it says.

Enlightened companies can find it hard to differentiate their voluntary commitments to human rights from those of competitors who are less serious about compliance. "Where clear minimum standards exist, companies that do more can rightly claim to be more socially responsible. As things stand ...the most inadequate voluntary code can be hyped by the company concerned, while even excellent ones are difficult to defend against critics."

*Published by the International Council on Human Rights Policy, an independent Geneva-based research organisation www.international-council.org or www.ichrp.org