EU-CHINA HUMAN RIGHTS NETWORK
Working Paper on Corporate Social Responsibility
DIALOGUE SEMINAR ON HUMAN RIGHTS
BEIJING, 28-29 JUNE 2004
The Secretariat of the EU-China Human Rights Network
at the Irish Centre for Human Rights would like to acknowledge the work of
Mr. Daniel Aguirre in the preparation of this discussion paper
The EU-China Human Rights Network is a project funded by the European
Commission. The opinions, findings and conclusions expressed do not necessarily
represent the views of the European Commission.
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Corporate Social Responsibility and Human Rights
Outline of Report
Many within the international community are confused by the title “CSR.” They
believe it to be merely good business ethics, however, it is much more than that and is
having an increasing legal impact, particularly in the areas of human rights law, labour
law and environmental law. Corporate Social Responsibility (CSR) refers to this
responsive trend by MNCs to conform with the wishes of the international community.
This paper will outline the developments in the attempt since the 1970s to regulate these
powerful organs of society by the rest of the international community. In doing so it
examines the foundations for an evolving legal framework which has gained momentum
due to the blatant violations by MNCs of human rights and the overall inequality that has
emerged under the dominant global economic order. It presents CSR as a vital first step
in this evolution, representing a compromise which reveals that MNCs recognize their
position of influence and responsibility concerning human rights and sustainable
development and the international community’s concern for this situation.
Corporate responsibility is concerned with how a company runs its core business,
interacts with its business partners and how it invests in its host communities.1 However,
great confusion surrounds the exact definition, with many on the right insisting CSR is
voluntary, concerned only with the corporation’s direct sphere of influence, while those
on the left insist on legal accountability and CSR extending to a wider sphere of influence.
Given this problem, rather than searching for a universally-applicable definition, it can be
more productive to think in terms of the purposes of corporate responsibility, which are:
to act as prerequisite for investment in developing countries; to help overcome market
A good definitional approach to CSR is: A) The basic ‘non-negotiables’ – obey the law and stay in business: Taking
the actions necessary to remain a viable business entity and to protect legal licence to operate in order to avoid major
fines, litigation, reputation damage and in serious cases even imprisonment of executives. In short, being profitable and
legally compliant. B) The complex non-negotiables – manage risk and minimise harm: Protecting existing corporate
value and reputation, managing risks and protecting societal licence to operate. It calls for clear standards on corporate
governance, implementation of internationally accepted standards on human and environmental safety in company
processes and products and identification of new risks that may have a material effect on corporate value, such as
climate change, HIV/AIDS and security risks. C) The ‘negotiables’ – create positive solutions beyond what is required
by law, risk management and protection of short-term value ‘Going beyond business as usual,’ creating new societal
value as well as corporate value and taking a leadership position on crucial development issues. It involves delivering
creative and innovative solutions to practical problems and projects or to public policy issues. In short, taking actions
that are not required by law or to stay in business, but which have beneficial impacts for host countries and
communities, as well as the company, In Human Rights and the Private Sector: An International Symposium Report
Novaritis Foundation for Sustainable Development and The Prince of Wales International Business Leaders Forum.
Available at: http://www.stiftung.novartis.com/pdf/symposium_human_rights_report.pdf
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inefficiencies and gaps in governance; and to provide a means for public and private
sectors to cooperate in order to overcome social challenges.
This voluntary regime of self-regulation has increased the awareness within the
international community to the problems it addresses and has allowed for greater
consensus on regulation to be forged. Shareholders and CEOs, who are not robots but
human beings, should be commended for their efforts at changing business attitudes.
CSR should provide a complementary to the developing framework of enforceable
international law. This paper concludes however, that human rights promotion,
protection and realization remain the responsibilities of states under international law and
should not be allowed to be completely shifted to the private sector. A combination of
voluntary initiatives, directly binding regulation on MNCs and the adherence by states to
their duties under international law is the only way to ensure the realization of an
equitable and just global society based on human rights
Introduction: The Political Context of Corporate Social
Responsibility
The rapid expansion of global markets and the dominance of multinational corporation is
one of the key features of globalization. This phenomena resulted from the triumph of
deregulation, privatization and market liberalization which is flourishing as the centrally
run economies adapt to capitalism. Before this period, the regulation of the world’s
economy, in order to reduce exploitation and poverty while increasing growth and
development was considered economically and socially beneficial.2
This international consensus unraveled in the 1970s with the rise of a neo-liberal theory
proclaiming that such regulation impeded the smooth functioning efficiency of the
free-market which slows economic growth.3 Proponents of this position insisted that
left to itself, the free market would provide equality, growth, improved living conditions
more efficiently and effectively than an international regime of regulation. They claim
that human rights abuse would be temporary and be worth while as the long-term growth
of the economy would raise living standards for all and provide massive profits for a
small percentage of the population which could then be reinvested into the community.
The result was massive deregulation, including that of the world economy and
2
Hepple, Bob. Papers on the Joint Japan-US-EU Project on Labor Law in the 21st Century: A Race to the Top?
International Investment Guidelines and Corproate Codes of Conduct, in 20 Comparative Labour Law and Policy 347,
Spring 1999. p.353
3 Deakin and Wilkinson., Labour Standards- Essential to Economic Progress.
Institute of Employment Rights,
London. 1996. p.1
3
international standards which were considered as exogenous inefficiency. Replacing them
was a system of voluntary compliance and free markets.
The shift to voluntary regulation of global trade is a direct result of the rise of corporate
power in the 1980s. Voluntary private codes are considered more attractive to the
powerful Multinational Corporations (MNCs) who dominate the agendas of the world
trade and development organizations.4 Corporations were the driving force behind vast
increases in profits and economic growth. However, the global economy, unfettered,
had increased national and international inequalities as it showed regard for sustainable
development and human rights law. It is in this context that the world witnessed a
renewed outpouring of support for corporate responsibility. During the 1990s, every
sector of the international community, from grass roots civil society movements to the
UN to the MNCs themselves, recognized to some degree the responsibility and impact of
private operations on the enjoyment and realization of human rights. A subject basically
unheard of has vaulted to the top of the agenda within the human rights law discourse and
even in boardrooms of MNCs. Faced with this scenario, the international community
had to find ways other than binding regulation to persuade business to become socially
responsible. The CSR movement was born.
The human rights disasters of the 70s and 80s brought much publicity, but only as a
global civil society emerged in the 90s did the international business community concede
responsibility and accept that human rights are not the sole concern of governments.
The renewed support for the interdependence of all human rights has brought the full
range of human rights to the table when addressing global trade and CSR. The outcome
has been a piecemeal attempt at accountability, with civil society calling for legal liability,
while governments and MNCs cling tightly to voluntary agreements.
Despite this anti-regulation position, MNC’s have increasingly adopted these CSR
initiatives such as private voluntary codes of conduct designed to regulate their own
behavior. This movement towards accountability is generally a reaction to the tremendous
pressure from civil society. Global communications have ensured public knowledge of
human rights abuse and has resulted in demands for responsibility for exploitation.5
Companies want to appear to be morally responsible in order to avoid negative publicity,
and even worse, boycotts. The result has been the rapid growth of CSR initiatives.
Kearney, Neil. “Corporate Codes of Conduct: The Provatised Application of Labour Standards,” in Picciotto and
Mayne (eds.), Regulating Intenational Business: Beyond Liberalisation.
Macmillian Press Limited. London, 1999.
p.239
5 Piepel, Klaus., “The Ethics Deficit in Corporate Trade: Social Labelling and Codes of Conduct,” in
Trocaire
Development Review 1999, p.170
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CSR: Changing Business Attitudes
The development of CSR indicates that the international business community accepts
their responsibility for more than just the bottom line of profit maximization. They are
the engines of growth in the modern economy and have direct and indirect affects on the
enjoyment of human rights for millions. In accepting this massive responsibility
through, participation in national and international CSR schemes the adoption of private
codes of conduct and through positive involvement with local communities, MNCs have
taken the paramount step towards fulfilling their roles as influential organs of society and
as full fledged members of the international community in the absence of binding
regulation6
Human rights are rapidly entering the mainstream corporate agenda due to increasing
demands of civil society, ethical investors and demands from the knowledgeable and
skeptical public for accountability and transparency. 7 Many corporations now make
reference to various social issues, including human rights and sustainable development in
their policy or in codes of conduct. This is in sharp contrast of the 1970s when the
corporate ethos was dominated by Milton Freidman’s premise that “The one and only
social responsibility of business is to increase profits.”8 Giants such as General Electric
have recognized that, “these times will not allow for companies to remain aloof and
prosperous while the surrounding communities decline and decay.”9 Instead of sticking
to an insular view, corporations have recognized their interdependence with the
community. They realize the critical importance of obeying human rights law and
achieving sustainable development.
Corporate reputation has become an important but increasingly fragile commodity in the
era of global communication and increased consumer activism.10 Financial institutions,
investment banks, credit rating agencies, insurers and pension funds all recognize the
potential for companies with poor human rights records to negatively affect the value of
their investments. Furthermore, in the absence of a good human rights environment, the
situation can deteriorate to one in which the company is forced to abandon its operations
Kearney, Neil. “Corporate Codes of Conduct: The Privatised Application of Labour Standards” in Picciotto and
Mayne (eds.), Regulating International Business: Beyond Liberalisation. MacMillan Press Ltd. London, 1999. p.239
7Kinley, David , Human Rights as Legally Binding or Merely Relevant? in Bottomley and Kinley (eds.) Commercial
Law and Human Rights. Dartsmouth Publishing 2002 p.69
8 Freidman, Milton. “The Social Responsibility of Business is to Increase Its Profits” New York Times Magazine (13
sept. 1970)
9 Welsh, Jack. A CEO Forum: What Corporate Social Responsibility Means to Me; Wanted Teachers and Leaders, in
Business and Society Review, No. 81 (Spring 1992) p.88
10 Fombrum, Charles. Reputation: Realizing the Value from the Corporate Image (Boston: Harvard Business School
Press,) 1996 p.10, 32
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as is increasingly occurring in the developing world. Pressure is building on business to
respond before they are required to respond. 11 Additionally, a good human rights
environment promotes worker productivity, opens markets, promotes stability through the
rule of law; promotes international trade and bolsters a company’s public image as well
as their ability to attract and retain good employees. 12 Major MNCs are now
recognizing the value of human rights discourse. Examples of private CSR initiatives
such as the Publish What You Pay campaign 13and the Extractive Industry Transparency
campaign,14 the Global Reporting Initiative15 provide frameworks of best practice for
such endeavors.
CSR is defined by the Conference Board of Canada, 16 an independent CSR monitor, as
involving human resource issues such as diversity hiring practices; environmental issues
such as management of greenhouse gas emissions; community issues such as use of local
suppliers in procurement; human rights issues such as consideration of human rights
practices in investment and procurement; and governance issues such as whether the
company audits its social and environmental practices and whether it has a formal code of
ethics. 17 However, human rights experts would claim that CSR also must involve
responsibility, within their “sphere of influence” for human rights; abiding by the law in
letter and spirit, not just the bare minimum while institutionalizing the value of attaining
and maintaining higher standards; and the recognition of an interactive existence with
society, which implies contributing to the global community as well as extracting from
it.18
The approach to human rights realization promoted by CSR is one of a ‘Race to the
Top”19 This concept advances the theory that the internal operations of MNCs that
utilize the various CSR initiatives provide better human rights standards than domestic
firms. Their advanced technological, managerial and operational techniques will result
in a spill-over of best practice to domestic firms. This vast international MNC
production chain employs seventy three million people, which provides links for new
11Kinley,
David , Supra note 7, p.72
Avery, Chris. Business and Human Rights in a Time of Change. Amnesty International UK Report. pp. 17-20
13 Publish What You Pay Campaign, available at: http://www.publishwhatyoupay.org/
14 Extractive Industry Transparency. available at:
http://www.transparency.org/pressreleases_archive/2003/2003.06.17.statement_g8_revenues.html *
15 Global Reporting Initiative: Available at: http://www.globalreporting.org/
16 Conference Board of Canada, available at http://www.conferenceboard.ca/
17(Newspaper Reference) Mcfarland, Janet. Start Spreading the Good News, Conference Board tells Business: Many
Companies not Publishing the Progress in Corporate Social Responsibility Practices, in Globe and Mail, Thursday,
May 27, 2004 - Page B5
18 Addo, Michael K., (ed.) Human Rights Standards and the Responsibility of Transnational Corporations. Kluwer
Law International, 1999 p. 20
19 Barenberg, Mark. Globalization and Labor Law: Legal and Extra-legal Norms Across Multiple Regimes
(Japan/US/EU Joint Research in Labor Law: Response to New Challenges in the 21st Century, 1998).
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human rights regulation to occur through contractual engagement within and between
MNCs and foreign countries.20 Furthermore, the discerning glare of an active western
civil society that accompanies large MNCs ensures that they cannot act with impunity, no
matter how remote the location or subsidiary company is located. Companies will be
forced to adopt models of best practice or risk costly reputation damage. Corporate
social responsibility, says the U.S. Council for International Business (USCIB), is "good
business" helping to maintain "the competitiveness of companies over time and in highly
diverse parts of the world."21
The Evolving Legal Dynamic Concerning Regulation
The Gap in International Law
The traditional approach to human rights law dictates that the various human rights
conventions and covenants imply that human rights are held by the individual and that
states are the only duty bearers. This doctrine was relevant in a time when international
business and economic interdependence was less prominent. Since international business
is now mobile enough to avoid stringent national regulations, or influential enough to
persuade against the adoption of such regulation, this doctrine no longer appropriately
regulates the international community. Domestic law is equally impotent as MNCs
consists of international entities beyond national jurisdictions in terms of economic
resources and decision making responsibility. The MNC has transcended national legal
systems through decentralization and ignored the international law system.
The vast economic and geographic expansion of global trade led by MNCs poses further
difficulties for regulation and accountability. Famously, MNCs have now become larger
economies than many states. One outstanding example is that of General Motors being
a larger economy than all but seven nations.22 This economic clout is reflected across
the board and the trend is for even more expansion. The last ten years have seen
unprecedented growth of the multinationals. In 1991 three MNCs were among the top
28 economies of the world compared to 15 in 2000.23
20
Hepple, Bob. Papers on the Joint Japan-US-EU Project on Labor Law in the 21st Century: A Race to the Top?
International Investment Guidelines and Corproate Codes of Conduct, in 20 Comparative Labour Law and Policy 347,
Spring 1999. p.350
21 United States Council for International Business, Position Paper on Codes of Conduct (1998). Available at:
http://www.uscib.org/index.asp?documentID=1358
22 Only the economies of the United States, Germany, Italy, the United Kingdom, Japan, France and the Netherlands
are larger than General Motors. See Global Policy Forum, Comparison of Revenues Among States and TNCs, at
http://www.globalpolicy.org/socecon/tncstat2.htm
23 Nations v. Corporations, at http://www.ratical.com/corporations/NvC. html
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International and national law must adapt effectively if there is to be any hope of
regulating an increasingly dynamic globalized world. Inherently, the law is slow and is
formed by reaction to the needs of the international community. This is intrinsically
problematic when dealing with the MNCs’ extraordinary influence. National laws that
concern corporations are often watered down in order to attract essential MNC
investment. 24 International law, although a key avenue for defining the role and
responsibility of MNCs within society, has been overwhelmed by the free market
economic doctrine, relegating it to a marginal role only.25 However, law is continuously
evolving over the last thirty years and has begun to reflect and answer the concerns of
society, culminating with the CSR movement.
The Development of CSR Regulation
The international community first began to react as the domination and seeming
unaccountability of MNCs emerged in the 1970s as major scandals began to surface.26
With the Emergence of the New International Economic Order, came political impetus
for binding regulation as it was these developing nations that were baring the brunt of
corporate human rights abuse and social irresponsibility. The UN created a Commission
on Transnational Corporations, 27 who were to create binding regulations for MNCs
stating that “transnational corporations shall respect human rights and fundamental
freedoms in the countries in which they operate” 28 and prohibiting discrimination
while ensuring that MNCs did not interfere with domestic politics and respected
fundamental human rights.29
The UNCTC issued drafts in 1978,30 1983,31 198832
and 1990.33 However, despite years of debate, they never materialized as the voluntary
era took hold.34
Simultaneously, the Organization for Economic Cooperation and Development (OECD)
24
Stone, Christopher., Where the Law Ends. The Social Control of Corporate Behavior (Harper and Row 1975) p.95
Addo, Michael K., Supra note 18, p.9
26 A notable example is the ITT interference with the government in Chile. Kinley, David , Human Rights as Legally
Binding or Merely Relevant? in Bottomley and Kinley (eds.) Commercial Law and Human Rights. Dartsmouth
Publishing 2002 p.27
27 Economic and Social Council Resolution 1913 (LVII) (December 5, 1974)
28 See Development and International Economic Cooperation: Transnational Corporations, U.N. Economic and Social
Commission, 2d Sess., Agenda Item 7(d), at 1, U.N. Doc. E/1990/94 (1990).
29
Joseph, Sarah, “Taming the Leviathans: Multinational Enterprises and Human Rights” in Netherlands
International Law Review, XLVI: 171-203, 1999, p.181
30 CTC, Transnational Corporations: Codes of Conduct, Formulations by the Chairman, UN Doc E/C 10
2/8
(1978)
31 CTC, Draft Code of Conduct on Transnational Corporations, UN Doc E/1983/17/rev 1 (1983).
32 CTC, Draft Code of Conduct on Transnational Corporations, UN Doc E/1988/39/add 1 (1988)
33 CTC, Draft Code of Conduct on Transnational Corporations, UN Doc E/1990/94 (1990)
34 Stephens, Beth . Stefen A, Riesenfeld Symposium 2001: The Amorality of Profit: Transnational Corporations and
Human Rights, in 20 Berkeley Journal of International Law 45, 2002. p.64
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issued a set of voluntary Guidelines for Multinational Corporations which were a follow
up to the International Chamber of Commerce’s Guidelines for International Investment.
They are designed to strike a balance between national interests and foreign direct
investors. The guidelines affirm that every country, subject to international law, has the
right to determine the conditions under which MNEs operate within its jurisdiction. They
spell out guidelines for a wide range of MNE activity, mostly commercial, but with some
relating to human rights such as collective rights, freedom of association and labour and
environmental conditions.35 The Guidelines represented supplementary standards of
behavior of a non-legal and non-binding nature.36 However the Guidelines are now
almost three decades old and are considered standard practice for corporate operations.
The ILO’s Tripartite Declaration of Principles Concerning Multinational Enterprises37
addresses the social conduct of four entities: governments, workers and employers
organizations and MNCs. The Declaration calls for all parties to respect national laws
and regulations, give consideration to local practices and obey relevant international
legislation. 38 The principles deal specifically with human rights issues such as
employment equality, treatment and security, the conditions of work including, wages,
working conditions, safety and health as well as industrial relations topics such as
freedom off association and the right to organize collective bargaining and consultation.39
The Guidelines of conduct in these areas are informed mainly by the relevant ILO
conventions, which are applicable only to states. However, they can be applied to
MNEs through the declaration’s framework of voluntary compliance. 40 This tripartite
system has become a valuable measurement of CSR accepted by all members.
Following this increase in the interest in the conduct and responsibility of corporations
came a decline as the developed world witnessed unprecedented economic boom times.
Global trade was at the forefront with the MNC as its locomotive of economic growth.
The only type of controls concerning CSR put forward against private interests were
centered on politically acceptable conflict situations such as Northern Ireland and South
Africa. The most renowned of these early concepts were the Sullivan Principles,41
Blanpain, Richard (ed.) “Review of the OECD Guidelines for Multinational Enterprises: Possible
Revisions of
the Chapter on Employment and Industrial Relations” in Multinational Enterprises and the Social Challenges of the
XXIst Century. Kluwer Law International. The Hague/London/Boston 2000, p. 37
36 Ibid., p.31
37 ILO Tripartite Declaration Concerning Multinational Enterprises and Social Policy, available at:
http://www.ilo.org/public/english/standards/norm/sources/mne.htm
38 Diller, Janelle M.
“Social Conduct in Transnational Enterprise Operations: The Role of the ILO” in
Multinational Enterprises and the Social Challenges of the XXIst Century. Kluwer Law International. The
Hague/London/Boston 2000, p. 20
39 A Social Clause for Labours Cause, ANC-ICTUR Project, p.8
40 Diller, Janelle M.
Supra note 38, p. 20
41 Sullivan Principles for U.S. Corporations Operating in South Africa, 24 I.L.M. 1496 (1985) (citing "The (Sullivan)
Statement of Principles" (Fourth Amplification), Nov. 8, 1984).
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which constitutes an attempt to regulate corporations in South Africa during Apartheid,
and the Macbride Guidelines in Northern Ireland.42
This rapid economic growth came with a price. Massive inequality and exploitation was
a direct result of unbridled neo-liberal economic policy. The backlash against this unfair
development lead to the rise of an active, global civil society, which advocated for
regulation of the worlds economy in order to ensure social equality, human rights and
sustainable development. This movement culminated in the now infamous “battle of
Seattle” in 1998 at which thousands of protesters of all walks of life voiced their
disapproval of the prevailing system. The international community responded in kind as
human rights discourse and environmental regulation surged to the top of the political
agenda. Once again a concerted effort to regulate human rights responsibilities within
the global trade system was underway. A number of varying initiatives, both public and
private burgeoned during the 90s.
Some notable attempts include: The UN Special Task Force’s recommendations
regarding human rights law; 43 The UN Sub-commission on the Prevention of
Discrimination and Protection of Minorities; 44 Furthermore, the Sub-Commission
working group produced a Draft human rights code for business. 45 Importantly, Mary
Robinson, the then acting High Commissioner for Human Rights, presented Business
and Human Rights: A Progress Report46 at Davos World Economic Forum outlining
necessity, challenges, opportunities and achievements of corporate human rights
protection by promoting accountability and responsibility for business. 47 Progress was
made in this regard by the 1995 Copenhagen World Summit for Social Development
report48 and the UN Development Programme’s Human Development Report 2000.49
Most importantly, in terms of CSR development was the launch of the UN’s Global
Compact.50 It has come to represent the embodiment of the voluntary CSR regime. It is
of great import as it lists some of the world’s largest and most influential companies as
members. It has two key aims. Through a multi-stakeholder dialogue approach to
identify problems and finding solutions , the global compact attempts to reinforce
42
MacBride Principles, available at: http://www1.umn.edu/humanrts/links/macbride.html#principles
Report of the Task Force of the Executive Committee on Economic and Social Affairs of the United Nations (UN ,
Geneva, 21 January 1999) s 6
44 Resolution 12/1998 www.unhcr.org
45 UN Documanet E/CN.4/Sub.2/2000/WG.2/WP.1/Add.1 (25 May 2000)
46 available at the UNHCHR website: www.unchcr.ch/busines.htm
47 Report of the United Nations High Commissioner for Human Rights, E/1999/96 (UN, Geneva, 29 July 1999)
48 Copenhagen + 5 Review:
www.un.org/esa/socdev/geneva2000/index.html
49 Human Development and Human Rights: www.undp.org/hdro/HDR2000.html
50 U.N. Secretary-General Kofi A. Annan, A Compact for the New Century, at http://www.un
globalcompact.org/un/gc/unweb.nsf/content/thenine.htm (last visited Apr. 14, 2001)
43
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dialogue through examples and identifying best practice while providing outreach
networks for action at the country, regional or sectoral level.
This initiative is an offspring of the failed efforts of the UN to provide a system of direct
binding regulation. However, by inviting MNCs, NGOs industry associations, employer
organizations and professional bodies to join the UN and voluntarily endorse the Global
Compact’s principles and subsequently receiving approval from hundreds of them, it has
helped to create a measurement of what the international community considers customary
practice. The Global Compact's nine principles in the areas of human rights, labour and
the environment enjoy universal consensus being derived from: The Universal
Declaration of Human Rights, The International Labour Organization's Declaration on
Fundamental Principles and Rights at Work and the Rio Declaration on Environment
and Development The nine principles concern human Rights, Labour Standards and
the environment. 51 The Global Compact has helped to increase awareness of the
concept of corporate social responsibility around the world. Furthermore, it is an
innovative response to the challenges of globalization, being based on consent to
universally recognized values.
There is a broad set of regional CSR guidelines and regulation. The European Union
and the North American Free Trade Area both set out well established principles for
conduct within their jurisdictions. The European Union has enacted plenty of
legislation governing the conduct of MNCs within its territory.
Such initiatives
include the Maastricht Agreement on Social Policy of 1991, the Treaty of Amsterdam of
1997,52 as well as the initiatives taken by the European Parliament.53 The Council of
Europe has been active in this field as well, with plenty of updates to the European Social
Charter of 1961.54 North America is also covered by such an agreement, with the North
American Free Trade Agreement that includes a Labour Side Agreement of 1993 which
51
The nine principles are:
Human Rights
Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights within
their sphere of influence; and
Principle 2: make sure that they are not complicit in human rights abuses.
Labour Standards
Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective
bargaining;
Principle 4: the elimination of all forms of forced and compulsory labour;
Principle 5: the effective abolition of child labour; and
Principle 6: eliminate discrimination in respect of employment and occupation.
Environment
Principle 7: Businesses should support a precautionary approach to environmental challenges;
Principle 8: undertake initiatives to promote greater environmental responsibility; and
Principle 9: encourage the development and diffusion of environmentally friendly technologies
52 The Treaty of Amsterdam, 2 October 1997, entered into force on 1 May 1999
53 Blanpain, Richard (ed.) Supra note 35 , p. 46
54 European Social Charter, available at: http://conventions.coe.int/treaty/en/treaties/html/035.htm
11
ensures the promotion of domestic laws within NAFTA.55 However, European business
is also guided by the EU’s standards for operation in the developing world. 56
International Trade and Aid Agreements have begun to adopt ”social clauses.” They
become standard features in many bilateral and multi lateral agreements and almost all
EU agreements.57
The global economic and development regulatory bodies have adopted limited human
rights agendas concerning the conduct of business. The World Bank, 58 the Asian
Development Bank,59 International Monetary Fund60 and the WTO have all addressed
the main issues involved with development, economic growth and human rights, which
invariably addresses the role of corporations. This acknowledgment helps to build a case
for their universal recognition.
Further proof of the significance of human rights to the international community
concerning global trade and corporations was the death of the OECD’s Multilateral
Agreement on Investment (MAI,) which declined due to concerns over unregulated
investment and the enjoyment of human rights. 61 Initiatives have occurred on the
national level as well, with the proliferation of Apparel, Mining and Petroleum Industry
codes.62
All of these initiatives indicate recognition of the MNC’s significant role in international
trade, domestic economies and social welfare of the world’s population. The increased
influence of MNCs on domestic policy has ensured that they must recognize their role in
promoting human rights as well as favourable economic conditions. There are people
behind the corporate veil. They have accepted responsibility for the power and
influence that they wield through CSR.
Private codes of conduct have become a key element in the debate over improving
international labour standards and upholding international human rights.
The
55
North American Free Trade Agreement, available at:
http://www.nafta-sec-alena.org/DefaultSite/legal/index_e.aspx?CategoryID=42
56 Resolution on EU Standards for European Enterprises Operating in Developing Countries: Towards a European
Code of Conduct, European Parliament, Resolution A4-0508/98.
57 Kinley, David , Supra note 7, p.31
58 World Bank Group Issue Brief: Development, Human Rights and Judicial Reform.
www.worldbank.org
59 Asian Development Bank, available at: www.adb.org/documents/
60for example see: IMF Fact Sheet, The IMF’s Poverty and Growth Facility (1 September 2000) available at:
www.imf.org/external/np/exr/facts/prgf.htm also see: IMF Fact Sheet, Social Dimensions of the IMF’s Policy Dialogue
(30 March 2000) available at: www.imf.org/external/np/exr/facts/social.htm
61 Kinley, David , Supra note 7, p.32
62 Bureau of National Affairs, Inc., Voluntary "Model Business Principles" Issued by the Clinton Administration, May
26, 1995, Daily Rep. For Executives, May 31, 1995, http://www.itcilo.
it/english/actrav/telearn/global/ilo/guide/usmodel.htm
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International Labour Organisation (ILO) defines such codes as “a written policy, or
statement of principles, intended to serve as a basis for a commitment to particular
enterprise conduct.”63 There is an important role for these private codes of conduct to
play, however. In an ideal situation, they would play a complimentary role to
international regulation, supplementing implementation and enforcement mechanisms
with private initiatives. 64 The codes could be the catalysts for a new regime of human
rights protection that penetrates the corporate veil of irresponsibility and unaccountability.
Until then, they should at least serve two purposes: that of guidelines for industry best
practice and of performance evaluation.65 The codes are at least an acknowledgement of
human rights responsibility. They promote awareness and acceptance of international
responsibility and can end some of the worst forms of abuse. If implemented properly,
it may foster an environment conducive to trade union activity which is a step in the right
direction.66
These initiatives demonstrate that the governments and international business are taking
the issue of regulating the international economy seriously with regard to factors other
than increasing economic profit. These agreements all attempt to ensure certain
standards of behavior are maintained despite the lack of regulation. Indeed, as the next
section outlines, it appears as though this trend has advanced the regulatory movement as
displayed by the UN Norms for Business currently circulated by the Human Rights
Commission.67
The UN Human Rights Norms for Business68 represent a major step forward in the
process of establishing a common global framework for understanding the
responsibilities of business enterprises with regard to human rights. The Working Group
of the Sub-Commission for the promotion and protection of human rights developed them
through an open process of consultation with governments, businesses, NGOs and unions
over a period of nearly four years. They provide coherence to human rights obligations of
non-state economic actors. The Norms do not create new legal obligations, but simply
63
ILO Working Party on the social dimensions of the liberalistaion of International Trade. November
1998,
ILO, 1998, No. 26, p.11
64 Diller, Janelle M. Supra note 38,
p.26
65 Hoffman, Kamm, Frederick and Petry.
Emerging Global Business Ethics. Quorum Books,
Westport and London, 1994. p. 94
66 ICFTU-ITS Paper.
“Labour and Business in the Global Market,” in R. Blanpain (ed.)
Multinational Enterprises and the Challenges of the XXIst Century. Kluwer Law Publishing, 2000. p. 109
67 See generally David Weissbrodt, The Beginning of a Sessional Working Group on Transnational Corporations
Within the UN Sub-Commission on Prevention of Discrimination and Protection of Minorities, in Kaminga &
Zia-Zarafi, Liability of Multinational Corporations Under International Law, Kluwer Law International, The Hague pp.
119-38.
68 Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human
Rights, U.N. Doc. E/CN.4/Sub.2/2003/12/Rev.2 (2003), available at:
http://www1.umn.edu/humanrts/links/norms-Aug2003.html
13
codify and distil existing obligations under international law as they apply to companies.
They clearly state that companies have only responsibilities "within their respective
spheres of activity and influence." By bringing together the voluntary initiatives,
universal human rights law and labour standards, the UN Norms have set a solid
foundation for binding law to develop. It is difficult to seriously oppose this instrument
if companies and governments are already in principle adhering to its provisions through
other programs.
Aside from this development outlined, domestic legal systems have begun to adapt to the
threats to human rights posed by a lack of international law. It is now accepted that
MNCs violate international law when they directly violate or are complicit in
contravening international law applicable to individuals. 69 Principles that apply to
individuals clearly regulate MNCs. The concepts outlined above apply to corporations
(legal persons)70 as well as private individuals (natural persons.) 71 This compliments
the widespread recognition of corporate accountability in domestic legal systems. 72
When taken into consideration that international law has been applied to corporations
since the Nuremburg Tribunals,73 the case for corporate regulation as well as individuals
through international law seems solid. So far, there has not been a single case in the US
holding that a corporation is “legally incapable of violating the law of nations.”74
Moreover, the Courts of Great Britain have begun to relax forum non conveniens rules in
order to allow for plaintiffs to bring cases against British corporations in England rather
than in the place where the violation took place. 75 This has opened the door for
numerous cases concerning health and labour standards.76 While no verdicts have been
passed in any of these cases, they have drawn international attention and have
permanently damaged some MNCs’ reputations. The Directors of MNCs must sacrifice
short-term profits in order to build stable local communities that enjoy human rights.
The value of accepted universal regulation is obvious in that it could help avoid nasty
Paust, Jordan J., “Human Rights Responsibilities of Private Corporations,” in Vanderbilt Journal of International
Law, Volume 35, Number 3 May 2002, p.803
70 Various international and national documents use the terms "juridical person," "legal person," "juristic persons" and
"corporations" to refer to the organizations recognized as having legal status. Clapham, Andrew. Liability of
Non-State Actors: Lessons from the International Criminal Court, in Addo, Michael K. (ed.) Supra note 18p. 152,
n.24
71Ibid. Addo, p.8-9
72 It is a general principle of law that corporations are subject to domestic law. Paust, Supra note 69, p.803
73 Clapham in Addo, Supra note 18 p.160-71
74 Talisman, 244F.Supp. 2d, 308; 2003 US Dist. Lexis 4085, (**40) p.74, 2.a.
75 Meeran, Richard., The Unveiling of Transnational Corporations: A Direct Approach, in Addo, Supra note 18, p.
162
76 For example, see: Ngcobo and Others v. Thor Chemical Holdings Ltd., TLR 10 November 1995;
Sithole & Others v. Thor Chemical Holdings Ltd. and Another, TLR 15 February 1999; Connelly v. RTZ [1996] 2 WLR
251; Lubbe & Others v. Cape PLC; Afrika and 1539 Others v. Cape PLC [1999] A no. 40; Mphahlele & 336 Others
v. Cape PLC [1999] M No. 146
69
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situations such as the ones previously mentioned where the MNC’s reputation is dragged
through the litigation process.
International Law Formulation
These developments bring the issue into view for the international community and its
nation states. However, the paramount significance lies in the formulation of
international law. The inclusion of human rights law in EU, multilateral and bilateral
agreements between states and international organizations legitimizes human rights law
and sets valuable precedents in the field. This is especially so when they refer to
established human rights instruments. Furthermore, they recognize the primacy of
human rights law over domestic and other forms of international law. This primacy is
based on the fact that many of the norms are jus cogens, particularly ones found in the
UDHR.77
Secondly, the UN Charter states in art.103 that the charter takes precedence
in all conflicts of law. One of the principle obligations of the UN Charter is that states
observe international human rights law standards, which is even recognized in article
XXI of the GATT.
When the developments as outlined in this paper are viewed holistically, it is apparent
that the drive for CSR is simultaneously developing a framework for international law on
the subject. The evolving nature of international law ensures that mutually agreed upon
customary norms become binding over time. A plethora of universally agreed upon
voluntary instruments and associations, when combined with universal human rights law
applied internationally and domestically over time becomes a solid indicator of what
behavior constitutes customary practice regarding MNCs, their operations and human
rights. As Beth Stevens argues:
It is interesting to note, however, that the United Nations at the time of its foundation made a
similar "peace with power" with surprising results, drafting an aspirational human rights code that
has since evolved into a powerful human rights platform. The Universal Declaration of Human
Rights was drafted as a non-binding document because the states belonging to the United Nations
refused to agree to binding norms. 78
While The United Nations described the Universal Declaration as originally "a manifesto
with primarily moral authority,"79 half a century later, the document is now considered to
Simma and Alston, “The Sources of International Human Rights Law: Custom, Jus Cogens and General Principles”
(1992) Australian Yearbook of International Law 82
78 Stephens, Beth . Stefen A, Riesenfeld Symposium 2001: The Amorality of Profit: Transnational Corporations and
Human Rights, in 20 Berkeley Journal of International Law 45, 2002. p.68
79 United Nations, The International Bill of Human Rights 1 (U.N. Dept. of Public Information, 1988).
77
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be binding, in important part, if not in total.80 What is significant about this development
is that the regulations concerning global trade and human rights are no longer confined to
academic theory but are appearing in domestic judgments, views and comments of
international human rights courts and committees and even the manifestos of
corporations themselves.
The Primacy of the “Horizontal” Human Rights Law Approach
The advance of regulation through CSR initiatives has been a welcomed development of
the last decade. However, it remains paramount that human rights discourse is not left
to the private sphere alone. The Chairperson of the sessional working group on the
working methods and activities of transnational corporations81 stressed the relationship
between transnational corporations and the State. He recalled the fact that the
International Covenants on Human Rights and the Declaration on the Right to
Development established that States are the primary duty bearers of human rights and that,
as a consequence, each State needed to regulate foreign investment within its jurisdiction
through the horizontal application of human rights law. The international covenants on
civil and political rights as well as the social, economic and cultural rights are ratified by
the majority of states, and impose an obligation on these governments to regulate the
conduct of MNCs within their jurisdiction in order to uphold the principles contained
within them. CSR and Direct regulation binding corporations under human rights law
should only be used as a complimentary system to the established international human
rights law incorporated and enforced domestically.
Conclusion
CSR has played a positive role in the development of a legal frame work for human rights
regulation in the private sphere. Additionally, it has raised awareness throughout the
entire international community about this problem concerning development and human
rights discourse. CSR will be an excellent compliment to a system of human rights
regulation that is enforceable in either domestic or international courts of the future and
will help ensure MNCs have the tools at their disposal to avoid such litigation.
Unfortunately, some members of the international community would prefer, for a variety
of reasons, compliance with such a system remained on a voluntary basis. They claim
80
See Hurst Hannum, The Status of the Universal Declaration of Human Rights in National and International Law, 25
Ga. J. Int'l & Comp. L. 287, 317-39 (1995/1996). Hannum concludes that although there is insufficient international
support to find that the entire Declaration constitutes binding customary international law, there would seem to be little
argument that many provisions of the Declaration today do reflect customary international law. Id.
81 United Nations, COMMISSION ON HUMAN RIGHTS, Sub-Commission on the Promotion and Protection of
Human Rights: Fifty-fourth session. Agenda item 4 UN Doc. E/CN.4/Sub.2/2002/13, 15 August 2002. p.3 para.12
16
that the many positive contributions MNCs make are overlooked or purposely
ignored. The evidence is clear that MNCs have helped raise living standards around the
world and have acted as engines of development and growth through the economic
activity they generate, their transfer of technology and skills, and improved labor, health,
safety, and environmental conditions.82 They insist, similar to human rights experts that
taken together the voluntary regime provides adequate standards for business.
However, this influential lobby does not recognize the problems concerning
implementation, monitoring and enforcement of such a voluntary regime. There is a
real danger that this type of regulation can be used as a public relations boost while on
the ground it is business as usual. For companies legitimately interested in CSR, a
universal set of regulations and guidelines would only benefit, as they would not lose
competitive advantage in the short run to companies who cut corners in terms of human
rights responsibility.
Most businesses now recognize that CSR is vital for long term sustainable growth.
Most of the main proponents of human rights in the corporate world have done so after
suffering major public relations controversies resulting from human rights related
disgraces. Shell, Nike and Rio Tinto now all readily cite the Universal Declaration of
Human Rights in their corporate policies. Shell, in doing so, provides an excellent
example of the detrimental effects of civil instability and political uncertainty on
investment, reputation and operations. They now advocate the use of their commercial
leverage to promote social as well as financial ends.83 Shell still maintains, however,
that the primary responsibility for regulation is with national governments and
international bodies. Nike claims to actively engage with NGOs to aid in human rights
matters such as development and employment initiatives.84
The scenario is much like that of business in the past. Just as no one would have
anticipated environmental issues being discussed in the boardrooms of the international
business community 20 years ago, today human rights are in a similar situation. The
trends point to similar developments. It is time for the human rights advocates and civil
society to work with the business community within the established and enhanced
framework of the international community and solve these pressing issues. The
prominence of this concern within human rights discourse and indeed the international
community in general indicates the gravity of the matter. All of the international
82
United States Council for International Business Position Paper on Codes of Conduct, 1998, available at:
http://www.uscib.org/index.asp?documentID=1358
83 See The Shell Report 1998 under “Issues and Dilemmas” at www.shell.com/download/2872/pages/issues06html
84See:
www.nikebiz.com/labor/faq.shtml
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community, including corporations but with the primary focus of states, must live up to
its responsibility to regulate through international law for the good of society as a whole
with human rights as a basis for dignity and equality. CSR is an important first step in
such a process.
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