Half of global businesses at risk of human rights breach claims

As calls to criminalise corporations involved in human rights abuses are renewed, a new global study has found that almost half of businesses never undertake due diligence into human rights risks despite the danger of reputational damage, fines, and legal claims.

The study, published today by the British Institute of International & Comparative Law (BIICL) and Norton Rose Fulbright, shows that just 51 per cent of 152 major companies performed human rights assessments of their operations and supply chain to comply with international regulations.

Of these businesses, 77 per cent identified actual or potential human rights impacts, and 72 per cent recognised adverse effects linked to the activities of their third-party relationships. By contrast, only 19 per cent of respondent companies, who did not conduct due diligence, identified potential or adverse impacts and only 29 per cent found adverse effects linked to their third-party relationships.

Professor Robert McCorquodale, director of the BIICL, said that national and EU laws had made the human rights performance of companies an 'increasingly important corporate issue', but businesses were still failing to follow 'the international standard in this area'.

In 2011, the United Nations' Human Rights Council endorsed the Guiding Principles on Business and Human Rights, a set of guidelines for states and companies to prevent, address, and remedy human rights abuses. Yet, according to McCorquodale, these principles are not being followed.

The main challenges given for conducting a due diligence process included a lack of information on country-specific risks and difficulty assessing how deep to delve into a supply chain. By contrast, the main incentives (67 per cent) for undertaking the process were the avoidance of legal risk and reputational damage. Compliance with regulatory reporting requirements and adherence to local law were also highlighted (60 per cent).

Of those businesses that had undertaken due diligence, nearly 60 per cent indicated they had received allegations of human rights impacts in the past.

Robin Brooks, a partner at Norton Rose Fulbright, commented: 'There is an emerging body of legal claims in a number of different jurisdictions against companies for human rights abuses in their supply chains and we expect this to continue. Businesses must also be mindful of any gap between public statements they make about their approach to human rights and reality.

'Businesses which do not address human rights impacts in their operations in a substantive way may cause adverse human rights impacts and unsubstantiated statements about their human rights practices may be used to establish a duty of care they owed to impacted individuals.'

The report comes as companies conducting business in the UK '“ and with a turnover of £36m or more '“ prepare to publish their annual statements on the steps taken to eradicate slavery and human trafficking in their business and supply chains, pursuant to the Modern Slavery Act. However, there have been renewed demands for the government to do more to tackle corporate crimes.

This month, Amnesty International called on the UK government to hold companies criminally accountable for serious abuses, including those committed oversea, and has developed a set of corporate crime principles to advance the investigation and prosecution of such cases.

'No company, however powerful, should be above the law, yet in the last 15 years no country has put a company on trial after an NGO brought evidence of human rights related crimes abroad,' said Seema Joshi, head of business and human rights at Amnesty. 'The inability and unwillingness of governments to meet their obligations under international law and stand up to rights-abusing companies sends the message that they are too powerful to prosecute.'

Amol Mehra, director of the International Corporate Accountability Roundtable, added: 'We need a sea-change in the approach of governments and law enforcement to these cases '“ corporate actors need to know that they will be held to account for corporate crimes and victims need to know that they will have justice for the harm caused.'

Amnesty's report is just the latest call to action. A 2015 report from the University of Liverpool recommended that the powers of the International Criminal Court Statute be extended to prosecute companies for human rights abuse. One of the report's authors, Professor David Whyte, remarked: 'There is growing demand for new human rights mechanisms that can meaningfully hold corporations to account for the violations they commit.'

Meanwhile, a report from the UN Committee on Economic, Social, and Cultural Rights, published in July, recommended that companies operate in a way that properly respected human rights, including a clear regulatory framework and appropriate enforcement mechanisms.

Commenting at the time, Jonathan Smithers, the then president of the Law Society, said: 'Solicitors have an important role to play in helping their clients work in a way that recognises the importance of human rights. This is more than just strict legal compliance, but recognising the real value that solicitors can add to their clients' business to take advantage of the fact that business ethics matter to their consumers.'

Writing in Solicitors Journal, Sarah Smith, the Law Society's human rights policy adviser, has explained that law firms have 'much to gain from getting up to speed on business and human rights issues'.

'For those who represent and work with companies, new policy, legislation, and normative requirements will require new advice and guidance,' she said. 'Growing awareness among companies will drive an increase in requests for legal advice as part of their efforts to manage financial, legal, and reputational risks associated with human rights issues.'

Smith added that, where clients are unaware of such risks, there is a 'growing role for lawyers to raise awareness regarding such exposure and to support clients to proactively manage human rights issues'.

Allegations of abuses perpetrated by corporations or their supply chains have increasingly been thrown into the spotlight in recent years, such as with FIFA's decision to controversially award Qatar with the 2022 World Cup. In November, the Corporate Human Rights Benchmark will publish its first human rights performance rankings of the world's largest publicly listed companies.

John van der Luit-Drummond is deputy editor at Solicitors Journal

john.vanderluit@solicitorsjournal.co.uk | @JvdLD