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Business and Human Rights Newsletter

No.3 【Oversight of Companies Strengthening in the International Community】

In the field of business and human rights, the United Nations Guiding Principles on Business and Human Rights ("Guiding Principles"), is without a doubt the key international guideline for businesses. At the nation-state level, EU member states have started developing their national action plans to implement the Guiding Principles, including by way of increased regulation of corporate activities, and the UK, the Netherlands, Denmark and Finland have already launched their plans. The US has also initiated its drafting process. Meanwhile, the United Nations Human Rights Council (UNHRC), which unanimously endorsed the Guiding Principles in 2011, held its first formal meeting this month to discuss the elaboration of a new treaty for business and human rights. In this newsletter, we provide background as to why there is a move to build a new framework (treaty process) for business and human rights - despite the existence of the Guiding Principles - and what this might mean for Japanese businesses.

The UN and Business and Human Rights: Stakeholder Intentions

The endorsement of the Guiding Principles by UNHRC in 2011 was an epoch-making event in the history of the UN: it was the first international document endorsed by the member states that clearly identified a "corporate responsibility to respect human rights", and was also unanimously endorsed by the UNHRC's 47 member states representing all the regions in the world. With that endorsement, companies are now formally recognised as an important actor in the context of the UN's foremost human rights institution.

However, it is not the first time the UN has shown considerable interest in business activities. In the 1970s, when companies in developed countries were expanding their presence in the developing countries, the UN had already started discussions about the need to regulate the activities of transnational companies. The UN Commission on Human Rights, the precursor to the UNHRC, published the final draft of the "Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights" in 2003. The document was attempting to impose new international obligations on companies in a broad range of areas from human rights (e.g. elimination of discrimination and labour rights) to the environmental and consumer protection. Due to the divergent views on the new framework between developing and developed countries, as well as business and civil society, the discussion at the UN reached a stalemate.

Against this back drop, in 2005 Harvard professor John Ruggie was appointed as the UN Secretary-General's Special Representative for Business and Human Rights. To build meaningful consensus among stakeholders, he proposed a completely new approach -- the Guiding Principles. The principles themselves are not a new legal framework; rather they are a set of principles to outline existing international human rights norms and standards relevant to business, and they clarify corporate social responsibilities in the area of human rights. Through these efforts, and with the endorsement of the Guiding Principles, the UN reached an international consensus on business and human rights for the first time in its history.

Increased demand for corporate accountability at the UN

However, three years later in 2014, the UNHRC made a decision to initiate an open-ended consultation process to draft a binding treaty on this topic. The decision was supported by a majority of developing country member states at the UNHRC, whereas many developed countries were opposed. In the past several years, business and human rights discussions between states, civil society and the private sector at the UN-level have sought to reach a multi-stakeholder consensus on the issue; however developing countries' enduring demand for coercive measures has once again been brought to the fore.

The inaugural session of the treaty consultation process was held from 6 to 10 July 2015 in Geneva. It was primarily a brainstorming session, and representatives from government, business, academia and civil society exchanged their initial thoughts. It is not yet clear how long the treaty drafting process will take, nor what will be its outcome. However, if a treaty is prepared, it is likely to require states who choose to become signatories to enact or strengthen domestic regulation concerning human rights and business. Japan, together with other developed countries including the US and EU, did not participate in the initial treaty discussion in July, opposing the idea of creating new legal obligations in the area of business and human rights. However, the drafting process continues even without their involvement.

Of course, many states are choosing to tighten regulatory requirements even without such a treaty. As just one example, Eurozone companies over a certain size are required by law to disclose information on their activities related to human rights.

Moreover, even where regulation is absent, it is becoming increasingly necessary for companies to collaborate with stakeholders to meet rising social expectations, including by developing human rights policies and implementing human rights due diligence. Indeed, despite the unanimous endorsement of the Guiding Principles at the UN, NGOs continue to highlight cases of human rights abuses by companies in which victims are left without remedy. As such, pressure on Japanese companies from the international community to adequately address any human rights impacts is likely to increase, and one day a fabric of legal requirements may be imposed on them to do so, in particular if operate in developing countries that ratify such a new treaty.

As a part of the drafting process, the UN and the international community will undoubtedly focus their attention on whether companies making adequate progress on accountability in the area of human rights. If the weight of opinion is that the Guiding Principles are not sufficient in persuading companies and governments to take adequate measures, proponents of a binding treaty may be successful in garnering support for the tightening of regulations on businesses. Will companies be able to implement the Guiding Principles effectively? The international community is closely looking at how the private sector will address this challenge.

Update: Unilever publishes First Report pursuant to the Human Rights Reporting Framework

Reporting Framework and 
Implementation GuideIn the previous newsletter, we reported on the world's first Human Rights Reporting Framework published in February 2015. The world's first human rights report fully compliant with this framework was published by Uniliver at the end of June(*1). In line with the framework, Unilever identified eight salient human rights issues to the company, i.e., discrimination, fair wages, forced labour, freedom of association, harassment, health and safety, land rights and working hours, and disclosed their process for identifying these priority areas as well as the company's plans for addressing them. This report is drawing attention as a model for companies to disclose their human rights efforts.