Making Progress: Human Rights as An Essential Element of Sustainable Business

The below is a speech Mike Posner delivered as part of the Annual Human Rights Lecture at the Australian Human Rights Centre at the University of New South Wales. 

“I am honored to be here this evening and very excited to be back in Australia for the first time in more than 20 years. I am greatly appreciative to Andrea Durbach and the Australian Human Rights Centre for inviting me, and the Maurice Blackburn firm for supporting this lecture. I want to say a special thanks to my friend, Justine Nolan, who has organized a wonderful but exhausting program of meetings for me this week. She warned me of her intention to run me ragged and she has succeeded, probably beyond her wildest expectations. I plan to sleep the entire way back to New York. Justine and I first worked together in the mid- 1990s when she was living in California. Since 2013 we have rekindled our collaboration at what is the first human rights center at a business school at New York University’s Stern School of Business.  Justine is smart, hard-working and principled, but what I most treasure about her is her utter irreverence and sense of fun. Every successful enterprise needs a Justine Nolan in the mix and we are lucky to have found ours. 

 My topic tonight is “Making Progress: Human Rights as an Essential Element of Sustainable Business”. This title implies two important but not obvious assumptions.  The first is that global companies have an obligation to adhere to human rights standards in their core business operations. The second is that some companies are tackling these challenges and beginning to make real progress. I believe both are true. But before I make this case, I want to frame my comments in a broader context.  

Seventy years ago, in the aftermath of World War II and the holocaust, the United Nations established a Commission on Human Rights. In 1948, under Eleanor Roosevelt’s inspired leadership, the Commission produced, and the UN adopted, the Universal Declaration of Human Rights.  It is a remarkable document, predicated on the notion that every person is entitled to basic human rights by virtue of their humanity. This was a radical notion in 1948, and even today some governments resist this concept. But recent history is trending the other way. Over the last 68 years a majority of UN member states have adopted a series of binding human rights treaties based on the Universal Declaration. The majority of these treaties have been ratified by most states, placing the primary duty on them to protect these rights.

But while most governments now pay homage to these rights on paper, many lack the will or capacity to translate these principles to practice and to protect their own people. And not incidentally these are often the very places where global businesses have expanded their operations, and that are central to their business models. These companies, operating in different industries, confront distinct human rights challenges. Let me give you a few examples.

In Africa more than 150 Australian mining companies often are operating in unstable environments. According to the International Consortium of Investigative Journalists, 380 people have died in and around Australian mining operations in Africa since 2004. These breaches of security pose daunting human rights risks for oil and mining companies, especially those operating in places like the DRC, Nigeria, Iraq or Papua New Guinea. To address these risks they must rely on government security forces or private security contractors. Through a multi-stakeholder initiative called the Voluntary Principles on Security and Human Rights, a few industry leaders like BHP Billiton here and Barrick from Canada are beginning to develop key performance indicators relating to these security issues. Others need to follow.

In Bangladesh more than 200 global brands and retailers, including Australian companies like Best and Less and Just Jeans, manufacture their products in Bangladesh because wages and production costs are so low. Three years ago a factory complex at Rana Plaza collapsed killing more than 1100 factory workers, mostly young women.  In the aftermath the global brands and retailers formed two industry led associations, the Accord and Alliance, to inspect 1900 factories, those of their principle suppliers. But that’s only the beginning of the story. Last December two of my colleagues Sarah Labowitz and Dorothee Baumann-Pauly  authored a report documenting 7100 garment factories in Bangladesh producing for export. Most are subcontracting factories, operating on the tightest margins, and with the least outside attention or support. A few industry leaders like H&M and Uniqlo are making efforts to track their true supply chains, which is an important first step. But most global brands say they prohibit subcontracting, despite clear evidence that this is central to their ability to produce large quantities of cheap products expeditiously. And despite the thousands of factory inspections, after three years very few factories have been fixed. In Bangladesh and elsewhere we need to discuss which of these costs should be borne by global brands, and if not by them, who will foot these bills? 

In Thailand, the fishing sector is a major economic driver, and major food and pet food companies have expanded their operations there. Globally more than 58 million men and women work in fishing.  According to a recent US government report, human trafficking is a common practice in fishing in Thailand and 31 other countries. Given the size and remote nature of this industry, and the absence of global regulatory systems, we are just beginning to have a serious discussion of how companies including major food chains should address these serious human rights challenges in their supply chains.

In the Arabian Gulf leading construction firms rely on millions of migrant laborers, mostly from South Asia to do the work. These migrant workers endure life threatening heat and hazardous working conditions. Typically, they actually pay recruiters the equivalent of half a year’s wages simply to get these jobs. Yet these global construction firms, often working in partnership with Gulf governments, have yet to act collectively to develop and implement industry standards and ways of addressing these human rights challenges.   

The list goes on and on. Internet companies struggle to address privacy concerns in the post-Snowden environment, and efforts of governments like the Chinese to constrain free expression. Food and beverage companies grapple with child labor in cocoa production in West Africa.  Electronics firms seek precious metals for their products in war-torn provinces of Africa, but only a few, like Intel, are effectively tracking their supply chains.

These are some examples of human rights challenges facing global companies today. With the rise in social media and instant global communications, the scrutiny on these global companies is certain to escalate. Given the extensive presence of these companies in complex environments, and the benefits they derive, the key questions are to what extent do these businesses bear responsibility for addressing these challenges and how should they do so, consistent with their core business imperative to make a profit?

Before tackling these questions, I want to emphasize the economic progress these global companies have helped engender. Since the early 1980s a globalized economy has lifted literally billions of people out of extreme poverty. The numbers are stunning.  According to the World Bank in 1980 half of the world’s population was living at or below the level of extreme poverty. Today that number is less than 25%. This progress has been most dramatic in Asia. In 1980 77% of East Asians were living below the extreme poverty level. Today that number has shrunk to 14%. The major driver of this change has been the private sector, which has created hundreds of millions of new jobs. 

But despite this remarkable progress there are intense and escalating debates about global economic inequality, concerns that have begun to take center stage. In Austria, for example, where earlier this week Norbert Hofer of the far right Austrian Freedom Party was almost elected President.  His supporters were attracted to his platform of xenophobia and animus towards refugees, but he also tapped into their growing fears about the global economic system. Next month in the United Kingdom voters will decide whether to exit the European Union, with a growing Brexit movement fueled by perceptions of an unfair European trading system. And as you may have noticed self-styled maverick American presidential candidates of the left and right are generating outsized attention by attacking the effects of global trade, especially with Asia. In these and other places there is intense and growing opposition to the global trading system that is perceived to be unfair. Larry Summers, the former US Treasury Secretary has called this the “revolt against global integration.”  

I see at least three overlapping forces behind this revolt. First, the richest people on our planet now control staggering wealth and power. In January OXFAM reported that the 62 richest people in the world are worth 1.7 trillion dollars, equal to the bottom half of the world’s population, 3.5 billion people. According to Forbes there now are 27 billionaires in Australia, twice the number there were in 2010.  During this same timeframe Oxfam says the income of the 3.5 billion poorest people in the world actually has fallen by a trillion dollars a drop of 38 percent.  And women are disproportionately affected by this growing inequality. 

A second important driver of discontent is weak national governance.  In far too many places local governments are not protecting their own people. This has left the poorest people on our planet most vulnerable to environmental and labor harms. Expanding global supply chains have exacerbated these problems, allowing consumer demands for cheap goods and services to drive down wages and dilute local regulatory controls. In a highly competitive global economy, weak governments often compete with one another to maintain their market share rather than prioritizing basic protections of their own people.

Third, most global companies, insulated from the facts on the ground by buyers, sourcing agents or local managers, have not taken stock of their end-to-end supply chains or to make sustainable human rights practices central business priorities. And the relatively few CEOs that embrace this agenda do so at the risk of alienating the investment community, especially in the US, with its singular focus on short -term earnings. 

In the 1990s a number of companies adopted internal human rights codes of conduct and hired monitors to visit factories, farms or mining sites to identify the risks. Then, in 2011 the United Nations Human Rights Council adopted Guiding Principles on Business and Human Rights, authored by Harvard Professor John Ruggie. The Guiding Principles established a broad framework that says governments have the primary duty to protect human rights, companies also have a responsibility to respect those rights and effective remedies need to be developed. The Guiding Principles created a sensible foundation for work in this area. But as Professor Ruggie has noted, we are now at the “end of the beginning.”

So what does the next phase look like and how do we get there? First, it is time for large global companies to acknowledge the centrality of investing in long-term sustainable business models. These investments will not be cost free but over time companies that make these human rights and environmental investments will succeed in attracting the best people to work for their companies, increasing efficiency, reducing worker turnover, and mitigating risks to their brand reputation. Companies need to acknowledge centrality of supply chains and that their responsibility extends up and down those chains not only for the quality of the product sold but for the working conditions of the people who are manufacturing, mining, farming or fishing for their product.  It is a smart business strategy to take this broader and longer-term perspective.  

Second global companies need to develop industry-wide standards and performance metrics to motivate collective action. The recently published Report of the Global Citizenship Commission, chaired by former British Prime Minister Gordon Browne, endorsed this approach, concluding “Multi-stakeholder initiatives that hold businesses accountable to agreed standards through reporting and monitoring can help drive a race to the top and give consumers and investors the information they need and are now demanding to guide their purchasing and investment decisions.”   

We need to move beyond the era of pilot projects, where individual companies are each determining and reporting on their own version of “due diligence”, in the human rights realm. Corporate lawyers here and elsewhere should be urging their clients to adopt this more forward-looking model.  

On a parallel track, governments in industrial states also need to ramp up their efforts to apply appropriate reporting and regulatory muscle to encourage these efforts. Government reporting requirements do not by themselves guarantee accountability but they are a useful tool and often a good first step.  Over the last 30 years laws like the US Foreign Corrupt Practices Act and the UK’s Anti-Bribery Act have provided powerful tools in combatting the scourge of corruption. Early efforts to apply a more ambitious model to labor are beginning to emerge as some governments are restricting the import of goods that are the product of forced or child labor. In places like the US and Australia, government purchasing practices are the logical place to start implementing these controls.  

And when addressing chronic problems like labor violations in Thai fishing or Bangladesh factory safety, we need to work collectively to develop and adopt cost sharing plans among industry, governments, international financial institutions and philanthropy.  It is neither reasonable nor right to assume that global brands can or should foot the bill for everything that needs to be fixed. But they do bear some responsibility commensurate with the benefits they derive. The shared responsibility model, which we developed with the World Economic Forum, allows a more open discussion of the real risks and costs, and a fair allocation of financial responsibility across the private sector, governments, international institutions like the World Bank and private philanthropy.

Recently the Ford Foundation announced a new strategic focus on global income inequality that it calls “the defining challenge of our time.” But for philanthropic agencies to succeed in tackling inequality, the private sector also needs to step up, and to embrace human rights as a central business priority fully integrated in daily business operations. This is a central focus of our work at the Center for Business and Human Rights at NYU Stern. It is an important mission at a critical time. And we are eager to find collaborators, here in Australia and elsewhere, as we venture down this path. 

I want to end with this quote from Eleanor Roosevelt: ‘Where, after all, do universal human rights begin? In small places, close to home - so close and so small that they cannot be seen on any maps of the world. Yet they are the world of the individual person; the neighborhood he lives in; the school or college he attends; the factory, farm, or office where he works. Such are the places where every man, woman, and child seeks equal justice, equal opportunity, equal dignity without discrimination. Unless these rights have meaning there, they have little meaning anywhere. Without concerted citizen action to uphold them close to home, we shall look in vain for progress in the larger world.'

Thank you again for inviting me here this evening."

 

Mike Posner, Co-Director, Center for Business and Human Rights, Stern School of Business, New York University. Chair of Global Agenda Council on Human Rights.