The following is based on remarks by Assistant Secretary of Human Rights, Democracy, and Labor Michael H. Posnerat the RFK Compass Conference
Rules of the road are emerging for a global economy that is changing very quickly. Issues such as the environment, good governance, and human rights are becoming increasingly vital for businesses seeking to compete profitably, but also conduct themselves in the right way. This is a conversation we probably wouldn’t be having ten years ago, and we certainly wouldn’t be having 25 years ago. The terms “business” and “human rights” did not go together.
Today I will offer my perspective on the intersection of business and human rights as somebody who has worked in human rights outside of government as a longtime advocate, and now for three years working for President Obama and Secretary Clinton as a government official. I will discuss four points: 1) American leadership and the American brand, 2) what we mean when we talk about business and human rights and what are the obligations of business, 3) a closer examination of five industries wrestling with these questions, and 4) best practices for companies and investors.
American leadership and the American brand
As I travel the world, I see how much people look to the United States and U.S. companies for leadership. They look to us because of what we represent as a country: the pursuit of human rights and individual liberty is the hallmark of the American brand.
The U.S. government’s pursuit of human rights is not only based on American values or American standards. We base our human rights engagement on the universal standards enshrined in the Universal Declaration of Human Rights that apply to all people, everywhere. And as Secretary Clinton keeps saying, we aim to lead by example. U.S. advocacy of human rights is more powerful when accompanied by a strong example of how we deal with these issues in our own home. I’m proud of the things we’ve done in that regard.
There is a tendency to undervalue the power of the American brand and what it represents to people around the world. In my travels, I spend a lot of time meeting with civil society activists, many of whom are harshly critical of the United States or express resentment of American power. But there is also an undeniable appreciation and admiration for what this country represents. Oftentimes the same people who excoriate us are eager to enlist our help in advancing education, eliminating corruption, creating free markets, and developing a truly democratic political system. So we have to ignore the background noise – it will continue – while being true to who we are, leading by example, and reaching out to people who understand what we are and who aspire to be like the United States.
While the United States Government in 2012 is by far the most powerful government in the world, it maintains this position at a time when governments have much less power than they have had historically. On the negative side, governments today are struggling with the risks posed by terrorist organizations that owe no allegiance to a state. On the positive side, non-governmental organizations, many of them formed in the last 20 or 25 years, are now assuming more functions previously served by governments. Fully half of the 100 biggest economies in the world are not states, but private companies. If you compare gross domestic product and revenues, Wal-Mart would be the 23rd largest economy in the world. Hewlett Packard, which is number 11 on the Fortune 500, has an economy the size of Vietnam or Morocco.
Governments have to adjust to the fact that we don’t have the power we once did, while private companies are adjusting to the much larger role – financially, socially, and politically – that they are now playing. Understanding the role of companies in this new landscape is one of the biggest challenges for global policymakers at the beginning of the 21st century.
What is business and human rights?
People sometimes conflate corporate social responsibility and business and human rights. Corporate social responsibility often means corporate philanthropy or public-private partnerships to achieve social aims, both of which can be vital avenues that lead to positive outcomes around the world, such as drug companies providing anti-malarial drugs at free or reduced cost, or athletic companies supporting women’s participation in sports in countries where women have been denied such opportunities, or initiatives to partner with government on an issue like clean cook stoves. These kinds of initiatives are commendable and we applaud companies that take steps to address poverty, global warming, public health, increasing women’s participation, and other objectives.
Business and human rights is often a more challenging endeavor for companies, not because combating poverty is easy, but because business and human rights requires companies to take a hard look at their own operations. Business and human rights is about the actions companies take in situations in which they – knowingly or inadvertently – are causally related to violations of human rights.
What is the appropriate role for business in trying to address these issues? What is the appropriate role for business in a world where states are less powerful and companies have greater power than they have been historically?
Let’s begin with the question of what are human rights. The genius of Eleanor Roosevelt and the other drafters of the Universal Declaration of Human Rights is that they took away the notion that governments bestow rights. Coming out of WWII and the Holocaust, they enshrined in the Universal Declaration the notion that every person is entitled to certain rights by virtue of their humanity. These universal standards include civil rights – the right to a fair trial, freedom of expression, association, assembly, etc. – as well as economic, social, and cultural rights, such as the right to health and education.
The harder question is who is responsible for what. Under the UN system, the primary responsibility for protecting rights falls to states. Either individually or through the UN, states have a duty to protect universal human rights. But the world we live in is not perfect, to say the least. Many states either lack the capacity or the willingness to protect their own people.
The emerging conversation about business and human rights goes to the question of the responsibility of companies in a global system where states have the primary duty to protect rights, but where the reality is that many states are not up to the task. This leads us to the question of the rules of the road for companies: what are the responsibilities of companies with respect to human rights, and how can businesses respect human rights while being innovative and successful?
Last year at the UN, governments adopted a set of Guiding Principles on Business and Human Rights, which were developed over the course of six years by Professor John Ruggie of Harvard. The Guiding Principles lay out a framework of “protect, respect, remedy,” whereby governments have a duty to protect rights, companies have a responsibility to respect rights, and both governments and companies must work to provide access to remedy when rights are violated. These principles are an important first step in laying out a theoretical framework for the responsibility of business, but they are an insufficient guide when it comes to addressing specific situations.
A closer look at five industries
As we think about the responsibility of business to respect human rights and how this responsibility plays out practically, it’s useful to look at five industries where business leaders already are addressing these challenges in practical ways:
Extractives: It’s no surprise that violence and conflict follow resources, especially in poor countries, and that extractives companies require serious security services to protect their investments and operations. For more than a decade, companies have worked with human rights groups and governments in an initiative called the Voluntary Principles on Security and Human Rights to address companies’ responsibility to respect human rights in some of the most difficult places in the world. Nineteen oil and mining companies are part of this initiative, along with seven governments, and ten non-governmental organizations.
The Voluntary Principles provide a framework for the responsibility of companies and guidelines for what companies can and should do to respect human rights in their operations. But what does this effort mean practically? Let me give you an example. Three weeks ago, I was in Tripoli, where the U.S. embassy brought together 12 oil companies, the oil minister of Libya, as well as representatives from the British and Canadian governments and the UN. We had a two-hour discussion of how to implement the Voluntary Principles in a place where oil pipelines are being attacked on a daily basis by militias that are outside the control of government.
Manufacturing: The second area where companies have taken on challenges related to business and human rights for many years relates to the sourcing of materials and products in the manufacturing sector.
Fifteen years ago, when I was outside of government, I worked with officials in the Clinton administration, large apparel companies, other NGOs, and universities to create the Fair Labor Association (FLA). This group set up a system to monitor factories in the apparel and footwear supply chain for companies like Nike, adidas, Liz Claiborne, and H&M. The FLA has been conducting audits for more than a decade; these monitoring missions, together with innovative projects undertaken under the auspices of the FLA have made a tangible difference in the way workers – and especially young women workers – are treated in the workplace and in their communities.
Let me give you a sense of what this kind of effort looks like on the ground. Last month, I was in China with Secretary Clinton for the U.S.-China strategic and economic dialogue. I went to Shenzhen to visit a factory run by a company called Foxconn, which is the largest producer of electronic gadgets in the world and a major supplier to Apple, which recently joined the FLA. Despite the fact that Foxconn has invested a lot of money in facilities, training, and other benefits, workers are dissatisfied. They feel a sense of disempowerment and a lack of agency with respect to decisions about to their working environment. In a dramatic display of this dissatisfaction, 18 workers attempted suicide at Foxconn in 2010 by jumping out of dormitory windows at the factory.
As you’re probably aware, these suicides became the inspiration for Mike Daisey’s play, The Agony and the Ecstasy of Steve Jobs, which was later turned into a “This American Life” episode on NPR. While many of the allegations in the Daisey play were later disproved, the public attention around Foxconn, particularly among young people, sparked a heated debate about the role of a company like Apple in protecting the rights of the workers making its products.
To their credit, Apple and Foxconn, took the bull by the horns. Apple joined the FLA and they committed with Foxconn to identify and remedy the problems that were causing such deep disaffection. The FLA spent three weeks in the factory and conducted over 3,500 surveys of workers. Based on this assessment, the FLA published a sharply critical report that made 15 recommendations and which Apple and Foxconn agreed to make public. When I went FoxConn, the head of the company spent the afternoon with me, describing the steps that Foxconn is taking and the resources they are marshaling to address the concerns outlined in the FLA report. Apple and Foxconn have a long way to go, but this kind of practical, collaborative approach that responds to public scrutiny and draws on lessons learned from others in similar industries is part of what it means to be a leading company in the 21st century.
Information and communication technology: As I’m sure you’ve seen, there is a lively global debate on how to keep the Internet free. Secretary Clinton has given three major speeches on Internet freedom and the United States’ strong defense of freedom of expression, association, and assembly online. The United States is leading the charge for Internet freedom, but we can’t do it alone. We’re partnering with other governments in a new Freedom Online Coalition that Secretary Clinton launched last November in The Hague, and making major investments in tools and training to keep the Internet open around the world.
Especially in the Internet industry, where the infrastructure is owned and operated by networks of private companies, business has an important role to play in a principled defense of openness online. Beginning in 2006, companies like Google, Yahoo! and Microsoft have come together in an initiative called the Global Network Initiative to develop principles and identify best practices to defend freedom of expression and privacy online.
Agriculture: Coffee, cocoa, cotton, and other agricultural products are produced by tens of thousands of small farms, often employing child labor. If a company sources Uzbek cotton, that cotton is being picked every year by kids who were taken out of school by the government and forced to work long hours in the field. If you buy a candy bar, the cocoa is probably coming from West Africa, places where much of the work is being done on small farms, again using child labor.
In response to this trend, Senator Harkin wrote into the Farm Bill three years ago a provision that instructed the executive branch to study child labor in the agricultural sector and establish a working group under the direction of the U.S. Department of Agriculture. The working group includes government officials, NGOs, and representatives from private industry. I represent the State Department in this group, and working with companies, as well as labor rights advocacy groups, over the last two years, we have developed guidelines to address these problems. Now our task is to make these guidelines real.
Financial sector: And finally we come to the financial sector, where so many of you in this room work. You are one degree removed from the other industries I’ve described, but you, too, can and should consider human rights in your operations and investments. It is no longer enough for companies and investors to defer to compliance with often-weak local laws. It is clear in many places around the world that universal standards are not being realized and local governments either don’t have the capacity or the willingness to protect the rights of their people.
Five best practices for smart companies
So what can and should you be doing? For those of you in this room who are making investment decisions, I want to outline set of five principles that might be seen as best practices for investors in thinking about business and human rights across different industries:
- Develop broad principles: The first step for companies confronting human rights issues is to acknowledge responsibility and develop broad principles to guide their actions. The best companies do this not only at the company level, but also at the sector or industry level. It is also critical that a company’s senior leadership visibly support these principles.
- Develop internal systems: Making principles real requires people, resources, and leadership. This is not a matter of public relations, but of dedicated staff positioned within the company to influence the way it operates and positively affect human rights.
- Develop internal benchmarks: In order to assess progress and effectiveness, companies need internal benchmarks and metrics to manage performance on human rights.
- Work with external stakeholders: Companies don’t succeed if they don’t engage. Smart companies find ways to draw on the expertise of other companies, NGOs, academic experts, and other investors to develop sophisticated responses to complex human rights challenges.
- Act collectively: It makes sense for companies within an industry to work together to figure out how collectively how they can make a difference. I have described several examples today, including the Fair Labor Association, the Voluntary Principles on Security and Human Rights, and the Global Network Initiative. Many of you here today have worked in the last several years through the UN to establish principles for responsible investment. I encourage you to think about how your industry can work collectively to address human rights issues in a systematic way.
In conclusion, I want to remind you that you are in this room because you are highly successful and because you are innovative, you’re smart, and you know how to win. My challenge to you is to take those same attributes and apply them not only in the traditional sense of increasing profit, but in using the power of the investment community to enhance respect for human rights in the 21st century.