“Americanism not globalism”

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The unenlightened self-interest of Donald Trump

When you visit the magisterial Lincoln Memorial in Washington DC you can read not just the words of the 16th US President himself, but also buy copies of all the great speeches made there. Perhaps the most famous being Martin Luther King’s “I have a dream” speech made in 1963. Donald Trump’s oratory in Cleveland Ohio last night, accepting the nomination for US President from the Republican Party (the Party of Abraham Lincoln), will be in many books about speeches – but perhaps not in the same section as you might find Lincoln or King.

Trump’s speech was no less effective than a King speech but its purpose was to divide not to unite. For whenever Trump talking about coming together and making America strong it was, implicitly or explicitly, at the expense of others – Mexicans, Muslims, and – one would assume from his one-sided take on recent violence in the US – African Americans too. For the rest of the world the message was also clear: American interests to come first. But of course, every US President must put their country’s interests at the heart of their policy, but this was not the “enlightened self interest” of Alexis de Tocqueville but a different variety – perhaps more the self interest of Donald Trump himself.

Some today have already compared his effect on the audience to that of European dictators of the 1930s who also rose through democratic systems (no names necessary here). I would not go so far perhaps, but parallels with Richard Nixon or Ronald Reagan only take us so far: Trump goes beyond into deeper more visceral territory. That many of his claims are not supported by any facts apparently matters little at all to many of his supporters. We saw some of this in the recent Brexit debate in the UK. During a CNN interview broadcast globally shortly before the speech, Trump’s own campaign manager dismissed the FBI’s figures on falling crime rates, not by providing better figures but by questioning the integrity of the FBI itself. It is a Presidential campaign that has now started to attack the foundations of the US state itself – the police are “good”, federal agents are “bad”.

Such was the hatred directed towards Hilary Clinton that it is almost certain that her security detail will have been reviewed this morning. As we saw in the UK with the murder of one of our own politicians recently, shouting “Britain First” as he plunged the knife, “America First” will have its own looney and violent fringe that now feel increasingly legitimised.

So when Trump says “Americanism not Globalism” it is not really clear what he means – which seems to suit him fine. But it suggests less free trade, less solidarity with other nations and that a Trump administration will be less bothered by upholding international law. Trump’s comments on NATO have already sent shock waves amongst the NATO periphery from Kiev to Helsinki about what might be in store. It is not beyond the realms of possibility that something small and symbolic might happen even next month if Russia is barred from the Rio Olympics.

Trump’s “Americanism” also reminds me of another speech, one made by a head of state in Geneva in 1936 as his country was being bombed and invaded by Mussolini. Haile Selassie begged the League of Nations to uphold international law and save his small country from aggression and invasion. It fell on deaf ears. The USA was not even there to hear it, having never joined the very organisation that Woodrow Wilson had helped create as it retreated away from internal affairs for nearly two decades (1920s and 1930s). So far, Trump has done much to embolden America’s enemies and very little to keep either America or the World safe. The USA has played a very important role in maintaining the balance of power in Europe and East Asia. Trump’s “Americanism” might throw this all away.

How to restore the lack of trust

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“The self-preservation society”. Today’s European Union (#Brexit) referendum has exposed deep issues of mistrust 

One of my favourite films growing up was “The Italian Job”. Not the horrible Hollywood makeover but the 1969 British original. A bunch of plucky mainly cockney criminals robbing an Italian bank in Turin and then attempting to escape over the Alps into Switzerland. Criminals yes, but with a touch of Robin Hood. There is something in every British soul that identifies with the under dog even if the film ends with Michael Caine and the other crooks trapped in a bus on the edge of a precipice. They end with the dilemma: should we edge forward to try and collect the gold or retreat safely but let the gold fall. It sounds a bit like today’s referendum.

Whichever way the UK’s EU referendum goes today (and I very much hope we remain in the European Union), the “leave campaign” has been remarkably successful. Led by some of the most privileged people in British public life, they have been able to portray themselves as the under dogs. Today’s vote is very much a vote against the perceived establishment (or establishments). Just about every British organisation (political parties, businesses, trade unions, NGOs, international organisations, global experts) are for “Remain” and yet around 50% of the population will vote against their advice. The more the Remain side marshall a serious organisation to speak, the more it seems to strengthen the “Leave” campaign.

The real revelation of the campaign then has been the depth of this distrust of officialdom within large sections of the population. This seems to have built slowly over many years- in part the result of the 2008 financial crisis but also the wider effects of globalisation felt everywhere in the world: widening the gaps in society between those that benefit and those who do not. Think only of how the Bernie Sanders or Donald Trump campaigns in the USA have exploited this. In the UK, the Leave campaign has been able to tap into this distrust against the elites even though it is a campaign run by an elite of its own. If “Remain” wins today’s referendum – this distrust will not go away, if “Leave” wins the distrust is likely to grow when the disaffected see that the promises made on trade, expenditure and immigration cannot be met.

The irony is that the leaders of both sides of the debate, David Cameron and Boris Johnson, both went to the same elite private school and university – and have been debating room rivals for many years. It seems that their private views on the EU are almost identical – they have (for reasons of political power) picked opposing sides of the debate – as any private school debating society does. The problem is the consequences of this petty rivalry will be profound, not just for the UK but also for the rest of Europe. Perhaps this is just the British way – to follow ‘our betters’ – the fictional Robin Hood himself was no man of the people in most versions of the story, rather he was an Earl looking to reclaim his status. Those that really try to push ideas that will change the lives of working people, such as Thomas Paine, tended to get exiled for sedition and forgotten by many British people – he is more remembered for his role in the French revolution or the US War of Independence.

But the referendum has revealed a deep mistrust in all types of organisation that needs to be rebuilt. This requires some serious thinking. As I debated on the BBC’s Moral Maze a couple of weeks ago – we need to understand the new forms of social contract that are developing in our societies and each organisation needs to be clear about how it relates to specific communities and where its accountability lies. Legal licence to operate is no longer sufficient for business and political licence is no longer sufficient for governments – both need also to develop their social licence. Yes, OK, I have written a book on this (yawn), but now is the time for some though questions about legitimacy, trust and consent whichever way the referendum result goes tonight. Sitting in a bus on the edge of a precipice is not a sustainable option.

Could closing tax havens be David Cameron’s greatest legacy?

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The Panama Papers and the London Anti-Corruption Summit

Forget the referendum on membership of the European Union, the real threat to the UK’s sovereignty comes not from Brussels but from tax havens, money laundering and sanctions avoidance. The revelations over the past 24 hours from the 11 million documents leaked from the Panama-based law firm Mossack Fonseca to the International Consortium of Investigative Journalists points so many fingers in so many directions that it is difficult to know where to start. So why not turn to a Prime Minister who has already promised to show leadership on this issue?  The same one who has asked his country to weigh its membership of the European Union in the balance in the June referendum.

The UK Prime Minister’s international Anti-Corruption Summit on 12 May 2016 is to be welcomed. However, the UK and its offshore dependencies have particular questions to answer if London is to lead the charge. Taken as a whole, the Union flag flies over more tax loopholes than any other, yet it barely makes the UK’s mass media. Even today’s revelations will not sustain enough domestic scrutiny unless the Prime Minister sets in place fundamental reforms that might become his greatest legacy. If we look around the world, the worst abusers of human rights, the most corrupt of politicians and dirtiest of all businesses have much to thank those corners of the world where money (and other assets) can be squirrelled away, quietly and with few questions asked.

Some transparency would be a start – a registry of all businesses based in the tax havens is an essential first step. However, many will continue to ask why such loop holes continue to exist when it is clear they benefit all those who enjoy levels of impunity – be they the super rich, the corrupt or sanction breakers. Prime Minister Cameron has to make the case convincingly that his government is serious about its intent to no longer be a provider of shadow and shade to people who care little about the interests of Britain or its people.

This will take particular courage because today’s allegations even reached the financial dealings of David Cameron’s own father, but then many world leaders will be touched by this scandal over the weeks ahead. Prime Minister Cameron could make a difference by not defending the indefensible (as some world leaders will try) but by setting a new legacy for his own country and for generations to come.

We hope that the Prime Minister will also shine a light on other places where reform is badly needed, such as major sports bodies for example. But condemning the likes of FIFA now requires very little political capital and raises the issue about why governments were silent for so long about corruption in sport. The Panama Papers have raised the game and set a new standard for leadership on transparency and anti-corruption. The 12 May London Summit must tackle the issue of tax havens head on. Perhaps by doing so, the Prime Minister can also show the British people that sovereignty is undermined in sunnier places than Brussels.

Children’s rights and the internet

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The following is my keynote speech delivered at the UNICEF/GSMA conference on Children’s Rights and the ICT sectors in London today. I would like to thank the Institute for Human Rights and Business for letting me reproduce it here.

By 2050 there will be nearly 10 billion people on this planet and 2.6 billion of them will be children. The aim of the 2015-30 Global Goals on Sustainable Development is to “leave no one behind” and it is vitally important that we leave no child behind in a world where national inequalities are growing in most countries. As Anthony Lake, the Executive Director of UNICEF said at the 2016 Mobile World Congress in Barcelona two weeks ago, mobile technology allows us to reach these children and there is both a moral and a practical case to do so.

One third of the world’s births are never registered –making the fight against social exclusion all that harder. Mobile technology can clearly help here, from birth registration, to education, to vaccination programmes and helping control epidemics and the spread of disease.

Mobile technology is a lifeline for the refugees across Europe and upon its borders. Humanitarian agencies have noted that refugees are in need of shelter, food and water, and Wi-Fi. Innovative projects are providing charging stations and wi-fi hotspots to help refugees stay in touch with family back home.

An increasing number of refugees are children – sometimes unaccompanied. This weekend, Save The Children estimated that 38% of those refugees on the border between Greece and Macedonia are children. Mobile technology has a role to play in reuniting refugees and IDPs fleeing conflict.

I salute the companies and other organizations in this room that work with UNICEF, UNHCR and other organizations to help these vulnerable children connect to protection as well as some limited but vital opportunities for education and health.

But when we look at our own societies, including here in the UK, we know there are dangers also in the relation between children and ICT. Only last week, Stephen Kavanagh, the Police Chief Constable leading the fight against digital crime in the UK, called for new legislation to tackle the “unimaginable scale of online abuse”. Some of these crimes might never have been imagined only a few years ago, such as the malicious use of intimate photographs or the way that social media and messaging services can be used to groom children, leading to abuse.

This at a time when the UK is also discussing one of the most fundamental pieces of legislation in recent years, in the form of the Investigatory Powers Bill. Protecting both security and privacy, on the one hand, or child rights, on the other, is highly complex but an essential reflection of the age in which we live. Child rights themselves include freedom of expression and the right to participate in society – so we cannot disconnect our children from the world of ICT, nor would any of us want to. It is often said that children don’t care about privacy, because they seem so comfortable with sharing the minute details of their lives online. But as a society, it is our responsibility to instill the value of privacy in our children, and educate them about internet safety and etiquette. Privacy matters.

Child rights, like digital rights, need to reflect the full breadth of human rights and so I will talk a little about this wider approach: how the ICT sector and human rights fit together when we approach complex dilemmas.

As Hilary Clinton – then US Secretary of State said at the Freedom Online Coalition in The Hague in 2011 – the Internet is not just a human rights issue, it is a ‘new frontier’ in the whole human rights discussion. If ICT had been around in 1948, Eleanor Roosevelt might have needed to include it in the Universal Declaration for Human Rights.

In strictly human rights terms, the upside of mobile is huge, from freedom of expression, to the right to information, education, health or employment – ICT can be and is a enabler of rights. But more than this, mobile devices can be a life-saver – helping to protect the right to life itself: they can record information of abuses perpetrated by others – they are a vital tool for human rights defenders.

But there are challenges that needs to be carefully managed – every industry, every field of life, has its risks, its potential negative impacts that need to prevented or mitigated, and when abuses happen, they need to remedied. This is true of child rights as it is any other area of human rights – in fact is especially the case given the vulnerability of children and the over-arching duty to protect them.

The work of my own organization, the Institute for Human Rights and Business, has I believed over several years helped the ICT sectors develop its human rights voice on a number of key dilemmas though our “Digital Dangers” programme – and a shout out to my colleague Lucy Purdon who leads this work. We are not a consultancy – we take no money from business for specific projects unless they are multi-stakeholder leadership platforms. Therefore we believe what we say when we talk about these dilemmas and I think others listen carefully.

I think we were the only election monitors in history to be embedded in a private company when Lucy was within Safaricom during the 2013 Kenyan Presidential elections. The 2007 Presidential elections had seen bulk SMS being used as a key tool for those inciting hatred and violence across the country – as a result of which over one thousand died, and 600,000 people were displaced: including children and their parents. The key dilemma for Safaricom during the 2013 Presidential elections was how to mitigate the risks of their bulk SMS platform being used to incite violence, and how to act without infringing other rights such as privacy and freedom of expression. How does a company make such decisions in real time? The second in the Digital Dangers series saw Lucy embedded with Ericsson in Stockholm during 2014, perhaps a safer human rights environment, but the dilemmas are no less stark. The study explored some of the challenges network vendors face in respecting human rights when their technology is misused by third parties, in particular regarding interception of communications, and the due diligence processes that could be put in place to reduce the possibility of misuse.

A third report was with Telenor in Pakistan in 2015 on the issue of the human rights impacts of mobile and internet network shut-downs, exploring the role of the company, the responsibility to mitigate the impact on the population and efforts to improve government transparency and accountability.

As more and more people become connected to and rely on mobile and internet services, and telecommunications become an indispensible cornerstone of the economy, government ordered network shutdowns become increasingly disruptive, even endangering the right to life which the government is likely trying to protect

This is all tricky stuff – but this is the reality of business and human rights. The UN Guiding Principles on Business and Human Rights and other related standards give us an invaluable conceptual framework but the application can be tricky when you have competing interests, competing human rights, and competing demands even from the same government. We live in a post-Edward Snowden revelations era when none of us can be naïve about such things.

Our children are growing up in the Age of Big Data – the first time in human history where their opinions and behavior are recorded by public and private actors not just for their own lifetimes, but potentially for the lives of their children and their children’s children. Profiles will be created and decisions made about our children’s future that they may never know or have control over.

The Internet of Things connects many household objects to the internet- including baby monitors and children’s toys. Already there are concerns about the security of these devices, which if hacked could allow strangers into our children’s bedrooms and playrooms.

We are at the beginning of the Big Data revolution – an exciting time and there is no doubt that Big Data has many upsides and benefit. But in order to fully realize this potential, now is the time for asking difficult questions and embed protections from the start- a much better strategy than trying to retro-fit protections, or having to correct a damaging and costly mistake later.

As our children grow, what are the long-term consequences of decisions we make now to meet short-term legitimate security or commercial needs? How many of us, or our children, understand the meaning of the consent box that is so easily ticked before downloading the latest app? Does consent actually mean anything when it is more tacit than active, when it is not informed? This is why our next Digital Dangers initiative is to launch a multi-stakeholder platform on a rights-based approach to the management and use of Big Data across the ICT sector and a range of other industries.

I am proud, as a member of the UK Foreign Secretary’s Human Rights Advisory Group and also that this country has finally woken up to terrible things inflicted on many vulnerable children over decades in this country. Criminals – sometimes of celebrity status – have held position of power and influence, within the media, church, sports or elsewhere, to abuse children. We must not let such abuse persist by morphing into new modalities on the internet. If some of our most vulnerable children are also on the borders of society itself – as was the case for hundreds of girls exploited by sex traffickers in cities such as Rochdale – they must not be overlooked by any of us. We must empower children to speak up and speak out, safe in the knowledge we as a society will believe and support them. Modern technology can be a great tool for amplifying voices. Let’s ensure we amplify their voices, and we listen, and we act.

The UN Guiding Principles on Business and Human Rights offers a very good place to start when we consider the human rights due diligence that companies embrace in order to prevent and mitigate risks, as well ensuring full and adequate remedies for all children and their guardians. This is why we are very pleased that UNICEF and GSMA have been so active in this area, from benchmark and training to your current work on the UNICEF Child Rights Self Impact Assessment Tool. I am also please that today’s agenda recognizes the complexity of navigating some of the issues where there are clearly competing interests and, sometimes, competing human rights at stake. They are indeed dilemmas.

None of this, of course, takes away for the need for strong and transparent national legislation, whether the issue is national security or the protection of children from on-line sex crimes. Legislation works best if it also aligns with international law as most of the companies in this room are operating over dozens of jurisdictions. But law in this area is highly complex as we have seen with the UK’s Investigatory Powers Bill.

We also know that some governments, in some parts of the world, might be tempted to use a misinterpretation of child protection to create technologies and legal requirements that might be used to suppress other vulnerable groups, such as human rights defenders – including those advocating for child rights. Industry and Government are best served if they sit with UN agencies, civil society and communities in an ongoing process to understand this complexity. Human rights due diligence, whether it be legally enforceable or under the leadership of the industry itself, will work best when it tackles what are the most salient risks and in ways that avoid unintended consequences. As we know from the current standoff between Apple and the FBI in relation to unlocking an iPhone – solving one problem can create another.

I very much look forward to our discussions here today and to learning more about the important work UNICEF, GSMA and its member companies are undertaking.

How to stop bad things happening

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The importance of non-financial due diligence (its more interesting than it sounds)

We should no longer wait for people to fall off ladders – or to be killed in factory fires – before setting clear codes of behaviour, including steps to prevent the bad thing happening in the first place. Any business that does not take such steps might be found to be negligent or reckless – a criminal offence in some cases. So it is with all other business and human rights issues. Whether we support internationally binding treaties to hold businesses to account, or market-based incentives, or a mix of the two – the due diligence question is central to any discussions on accountability.

This commentary is based on conference I co-moderated in Copenhagen on 25 November with over 100 representatives from government, business, civil society and trade unions. I am grateful for the permission of the Mediation and Complaints-Handling Institution for Responsible Business Conduct (the Danish “National Contact Point”) for letting me reproduce parts of my report here. The full report is available on their website.

1.  Overview

Non-financial due diligence is now a critical element of the major international mechanisms developed by governments to provide greater incentives and requirements for business to act responsibly. The 2011 United Nations Guiding Principles on Business and Human Rights (UNGPs) define such due diligence as:

An on-going risk management process that a reasonable and prudent company needs to follow in order to identify, prevent, mitigate and account for how it addresses its adverse human rights impacts. It includes four key steps: assessing actual and potential human rights impacts; integrating and acting on the findings; tracking responses; and communicating about how impacts are addressed.”

The OECD takes a similar approach but spans issues beyond human rights alone. In relation to supply chains, the OECD defines due diligence as:

“A comprehensive, proactive process to identify the actual and potential negative social, environmental and economic impacts of an organizations decisions and activities, with the aim of avoiding and mitigating those impacts.”

So, it is clear that non-financial due diligence is, firstly, about understanding various types of risk and potential adverse impacts and then, secondly, developing systems of prevention and mitigation to eliminate or reduce them to acceptable levels. In addition, due diligence is also related to remedy. The ‘National Contact Point’ (NCP) system of the OECD is one of the state-based non-legal remedies that attempts to mediate grievances concerning international companies and due diligence is a central aspect in many of these cases.

Due diligence is fundamental in two ways:

  • First, when harm has occurred, it needs to be established whether the business had undertaken adequate due diligence in light of the context and the salient non-financial issues it was facing?
  • Second, even if a harm has not occurred, is the business undertaking adequate due diligence when there is a real risk of a harm occurring?

Although most human rights issues, for example, have yet to be codified in the way health and safety law has, the principle is the same: those responsible should not wait for the harm to occur if a business is behaving without due care and attention. The UN Guiding Principles on Business and Human Rights, upon which the revised 2011 OECD Guidelines on Multinational Enterprises are in part based, call this “knowing and showing”. And so the critical questions are: “How much knowledge is enough?” and “How transparent should a business be about having such knowledge?”

Although due diligence is not a new concept (financial due diligence has existed for generations, and anti-bribery measures have developed over the past generation), its application to social issues (i.e. human rights) is relatively new and also requires a fresh approach. National Contact Points sit at the fulcrum of a fine balance: ignore the non-financial due diligence undertaken by companies that still make mistakes then there is little incentive to undertake the due diligence in the first place; but, on the other hand, to overly reward a business for its due diligence when a harm has occurred is to undermine accountability. Getting this balance right – setting an expectation for ‘reasonable’ due diligence – is precisely where many NCPs find themselves today.

It is therefore not surprising then that due diligence is the fastest growing area of OECD NCP cases. Whilst only a minority of cases get beyond the initial assessment phase overall, due diligence related cases are more successfully resolved than others. There are also a number of trends showing that now a wide range of business relationships are being presented to NCPs for consideration well beyond direct investments: from supply chain to financing to other types of specialist services.

2.  Background to the OECD Guidelines and the NCP system

The OECD Guidelines on Responsible Business Conduct is the most comprehensive, government-backed, international corporate responsibility instrument. They place a legal obligation on the 46 adhering Governments (34 OECD member states, and 12 non-OECD states) to:

  • Promote the use the Guidelines as an essential component of open trade and investment policies;
  • Establish National Contact Points to further the effectiveness of the Guidelines.

The revised Guidelines themselves cover a broad-range of corporate responsibility issues, in other words: Disclosure; Human Rights; Employment and Industrial Relations; Environment; Bribery, Bribe Solicitations, Extortion; Consumer interests; Science and Technology; Competition and Taxation. Since 2001, 256 complaints have been filed by NGOs and individuals, and a further 175 have been filed by Trade Unions. Of the NGOs cases: due diligence has figured highly in a significant percentage of them: 65 cases have been due diligence specific, 124 have related to business relationships (71% of which have related to due diligence) and 186 have related to human rights (of which 98% have related, at least in part, to due diligence).

The new version of the Guidelines were adopted by the 2011 OECD Ministerial Council Meeting and the then US Secretary of State, Ms. Hillary Clinton, remarked:

“If you look at these guidelines, they will be helping us determine how supply chains can be changed so that it can begin to prevent and eliminate abuses and violence. We’re going to look at new strategies that will seek to make our case to companies that due diligence, while not always easy, is absolutely essential.”

In the case of Supply Chain Due Diligence, the OECD has developed a five-step approach for how businesses should conduct due diligence:

Step 1 – Establish strong management systems: Policy, internal capacity, supplier engagement, internal controls over supply chain

Step 2 – Identify, assess and prioritise risks in the enterprise supply chain: map supply chain, prioritize based on severity of harm (sector, counterparty, and site for high-risk issues), use existing networks

Step 3 – Manage risks in the supply chain: inform senior management, fix internal systems, build leverage, use existing supply chain networks, workers reps, non-traditional partnerships, build capacity

Step 4 – Verify supply chain due diligence: where relevance, monitor, audit assurance, etc.

Step 5 – Communicate and report on supply chain due diligence: with due regard for commercial confidentiality and competitive concerns.

A number of observations can be made about how due diligence should be understood in relation to these Steps:

  • First, the nature & extent of due diligence depends on the size, context and severity of the impact. This is highly context specific but having said this, there need to be comparatives – so NCPs need to look for benchmarks for what could reasonably be expected of a company in such a context in due diligence terms. Sometimes law itself codifies the due diligence requirement, other times it might be multi-stakeholder approaches, guidance published by authoritative bodies (such as the EU, OECD or UN), other NCP cases, export credit requirements and so on. Obviously, the due diligence expectation is heightened in countries of particular human rights concern, or where the business sector itself is hazardous. Whilst the due diligence expectation on small companies might be less generally, this will not always be the case. For example, the law does not exempt small companies from being racist or sexist in their recruitment practices, and so it is on issues such as fundamental health, safety and discrimination issues. It is also the case that small companies in some business sectors can have a very high human rights impact (such as internet applications that impinge on the right to privacy or freedom of expression, or private security firms, for example).
  • Second, prioritizing of risks by business is acceptable and in fact essential, as due diligence costs time and money – but the prioritization must be based on the risks to rights-holders and not to the business itself. In the UNGPs, this is what is meant by “saliency” – the issues that are most relevant to the potential risks and negative impacts faced by rights-holders. This is a human-centric approach, which might be different from classic materiality tests required by existing national law. Whilst no issue or human right should be dismissed a priori, business can focus in on salient issues for most of their due diligence. What is important is that rights-holders and other stake-holders are involved in the verification of what these salient issues are, and that the process is reviewed periodically, as the nature of a business, or its external operating environment, is subject to change.
  • Third, there is no ‘zero tolerance’ requirement – it is about working with suppliers, and other business partners, in order to best prevent and mitigate risks. If a supplier, customer, contractor or other business partner is found to be impacting negatively on human rights, or operating below reasonable due diligence standards itself, then the company in question should engage in remedial activities – the scale and urgency of which are determined by the risks posed by the other business. Businesses should never be in a position where they are causing or contributing to the abuse of human rights, or impacting negatively on other requirements of the OECD Guidelines.
  • Fourth, it is not just ‘one layer deep’ – depending on the severity of the impact, due diligence might need to extend multiple steps down a supply chain. Just as the size of the company is in itself no exemption from due diligence, nor is the position of a supplier within a complex supply chain. Companies might expect first tier suppliers to take full responsibility for the second tier and so on, but in reality it is about the severity of the impacts themselves and the nature of the relationship along the value chain. For example, it might be, for commodities with extremely high human rights impact, that it does not matter if the brand at the end of the chain is ten or twelve steps removed – it is still expected to prevent and mitigate the risk.
  • Finally, business must use its own leverage and build additional leverage by working with others wherever possible, including with competitors. The greater part of non-financial due diligence should be a “pre-competitive” issue as leverage is greater when industries come together, sometimes also with other stakeholders, to act. Companies are required to “know and show” and therefore some level of transparency is necessary – whether this be full public disclosure, or sometimes sharing within multi-stakeholder contexts in ways that are clearly not violating anti-trust requirements.

3.  Some of the challenges

One business reflection was that human rights language can be too abstract and the use of the term ‘due diligence’ can also be ambiguous. It is often not tangible enough for the business manager not educated in human rights, and therefore mapping human rights onto management language was seen to be essential. One example is the language of risks. Many in business will assume that “risk” means “enterprise risk” and not “the human risk to individual people”. It is also not always useful to frame human rights risks as reputational risks – as sometimes they are not, or the reputational risk is too small to maintain the attention of senior business managers. Another perspective was that there is now serious legal risk for those businesses failing to undertake due diligence on issues relating to human trafficking or forced labour, for example, and the withdrawal of ‘social licence’ by communities or customers can hit the bottom line of many major companies.

It is clear from the discussion that non-financial due diligence, particularly that not codified in law, can be hard to quantify in a company. It is hard to put a value on prevention, on the valued added of measures that to ensure that something does not happen. The cost to a company due to industrial action, or a community blocking access roads to a mine for example, can be calculated, but it is much harder to set against this the value of mitigations that have reduced the likelihood of negative impacts on rights holders. This suggests that a “cost-driven” business case for non-financial due diligence can be the wrong way to look at it, as it will almost always be impossible to measure the effectiveness of due diligence in such a way. Due diligence might be an issue of legal compliance, or a compliance with internal codes but the business case beyond this is better set in “social licence” terms – that it maintains long-term relationships between a company’s activity and the society in which it operates. In other words, the business case for non-financial due diligence needs to be made in societal terms – the loss of trust and legitimacy that will be made if it is not employed, as well as the reputational and legal consequences of acting in a reckless or irresponsible manner.

Several at the event reflected that the full array of incentives needed for the level playing field are not yet in place, and that some companies will continue to ignore requirements that are not legally binding. Due diligence regulation is emerging in relation to particular issues (such as corruption, conflict minerals, human trafficking or high risk countries) but NCPs themselves should operate as if the knowledge requirement is clear and well stated. In other words, the threshold for “known” and “should have known” should be regarded as being equal. Wilful ignorance should never be a defence when it comes to not carrying out adequate levels of due diligence.

 4.  Lessons learned

NCPs seem to have a relatively high number of cases on due diligence for what is a relatively new issue. This is particularly complex in relation to supply chain management and contractual partners. One of the main problems is to identify and get closer to understanding of when a company is directly linked to what goes on in its supply chain. Given the company needs to focus of the scale of the abuse, and its relationship to it, sometimes it means attempting to manage issues that are twelve layers down the supply chain.

A key reason for the rejection of many cases by NCPs is insufficient documentation to demonstrate the direct linkage to the company. However, paperwork should not become the standard here – cases should focus less on whether the company had the knowledge or not and more on whether the company should have had it within that specific (high risk) context. Then it is up to the company to demonstrate whether or not its own due diligence procedures were adequate for the challenges its affected stakeholders faced.

There are a number of external benchmarks that NCPs can use when assessing whether a company had done enough due diligence:

  • The law. Direct legal liability is beyond the jurisdiction of NCPs, but other laws – particularly those that mandate disclosure – increasingly incentivise due diligence. Sometimes governments have issued specific due diligence guidance relating to this legislation that represents a clear benchmark.
  • Other due diligence requirements from government. Increasingly Export Credit Agencies (ECAs) are employing non-financial due diligence which might well inform similar contexts to the company in question, or possibly the company itself has already undergone due diligence by an ECA. Similarly, a number of governments are developing their own due diligence requirements for public procurement which might well be relevant (sometimes this relates to specific issues such as human trafficking or forced labour).
  • Multi-stakeholder initiatives and approaches can also set pre-competitive due diligence requirements that represent a relevant benchmark for NCPs to refer to, even if the company in question is not a member. The Bangladesh Accord, below, is an example of this.
  • Publicly available specific due diligence guidance developed by authoritative international bodies might be relevant, such as that produced by the OECD (e.g. Textiles, Finance, Conflict Minerals), European Union (e.g. ICT, Oil and Gas, Recruitment Agencies), and national governments (e.g. the UK government’s guidance on Cyber Security companies), National Human Rights Institutions or Multi-government-backed regional centres (e.g. the Sector-Wide Impact Assessments in Myanmar on Oil and Gas, Tourism and ICT).

5. Conclusion

The OECD Guidelines and UNGPs have become the building blocks for much international thinking on responsible business conduct through other bodies such as the EU, ISO, ILO, G7 and now even a number of global sports federations. But the whole “Protect, Respect, Remedy” project of recent years will only be successful if “knowing and showing” becomes commonplace, in other words expectations of knowledge of non-financial risks and impacts become clearer and that not knowing ceases to be a defence (the gap between “known” and “should have known” disappears). This is a fundamental shift from thinking of many corporate lawyers for decades, when it has been assumed that knowledge over non-financial risks, particularly those that sit outside the direct control of the company, is not in the interest of senior managers. Over the past five years, governments have started to send the opposite message – that they expect businesses to actively seek such knowledge and act on it.

Therefore, more work on non-financial due diligence is essential, and NCPs have a significant role to play – not least because their statements do not just set retrospective expectations on individual companies, but begin to set expectations for other companies in similar contexts.

The question: “how much due diligence is required?” can only be fully answered in relation to the specific context of the specific business relationship or investment. NCPs and other decision-makers will be looking to benchmarks from other similar contexts. Given that there are an increasingly number of publicly available resources from credible sources (i.e. from government-backed organizations with multi-stakeholder involvement) relating to specific high-risk markets, products/services or high-impact issues, these need to be mapped and fully available to all NCPs. So the answer to the due diligence question will always be different for each company in each context, but comparisons will be made between contexts also. Non-financial due diligence is becoming a pre-competitive issue for all businesses and there is now a business case to sit down with governments, competitors and other stakeholders to agree what represents adequate due diligence looks like before complaints arise.

Donald Trump: the joke is over

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Sometimes it is best to ignore bad things. A buffoon businessman, who makes silly remarks to enhance his (and yes it almost always a ‘his’) public profile. They exist everywhere. But we are right to be concerned when the buffoon decides to run for the nomination to be a candidate for President of the United States of America. And concern must shift into alarm when he decides to incite religious hatred and propose a discriminatory policy that is the anathema of the values upon which the USA is based. To advocate for an embargo on all Muslims entering the country is analogous to the kind of thing that a silly little Austrian man was banging on about in the 1920s – and many laughed at him then.

I don’t think anyone reading this commentary will be a Donald Trump supporter – so we might feel this is all obvious – best to go back to ignoring the clown. But I propose that his comments of last night have crossed the Rubicon. And more important, it is of all our responsibility to act, even if we are not Americans.

It is unlikely he will be selected as the Republican Presidential candidate but the impact of his remarks will outlive his presidential ambitions. The joker’s legacy will have been to legitimize religious hatred in the eyes of the world – one of the richest men in America, a TV star, part of the establishment. As with Marine Le Pen in France, “Daesh” (also known as ISIS or “Islamic State”) will be delighted – extremists feed off each other. Trump is not genocidal, but he is violating the norms of international law: the very discrimination that the US opposed in apartheid South Africa, Northern Ireland or during the country’s own Civil Rights movement. Has Trump never heard of Muhammad Ali (voted “Sportsman of the Century” by the millions of average Americans who read Sports Illustrated)?

So Trump has become not just America’s problem, he is now a problem for the whole world. We might never ever know the first victim of his rhetoric – the frontline of hatred against Muslims is often hidden from the cameras, it might be dark night at a Hungarian border crossing, a fishing village in Myanmar or in the woods of Republika Srpska. But Trump will have delighted Muslim-haters everywhere. The trial of the Norwegian mass-murderer Anders Brevik reminds us all that we don’t have to be Muslim for our children to feel the wrath of Muslim-haters. Trump is another face of the new fascism that stains our world. If Trump was a devout Muslim instead of being a devout Christian, which he claims he is, Muslims would be asked everywhere to distance themselves from him. We do not ask Christians to apologise for Trump – and rightly so – but we should not ask Muslims to apologise for extremists that claim to follow their faith.

Any finally, although we might not live in the USA, it doesn’t mean that we cannot take a stand. Trump is a very rich man, and he loves his sports. He loves to buy sport and to associate with his peers. At a time when we are looking at how best to clean up Mega-Sporting Events, lets also make sure we are not tainted by the islamophobe. For those who love their golf, do not play at a Trump owned golf course, be it in Scotland, the Republic of Ireland or elsewhere. One of these, in Scotland, has frequently hosted the British Open Championship – so this is not an academic point. A muslim golf player at this event might feel about as welcome as Jesse Owens did in Berlin in 1936. If you are a sponsor, do not sponsor events held at these courses, do not supply the hotels, the bars and so on. If you are a golf fan, do not attend.

Trump has the right to play his hand in American politics – even if his campaign is now morally bankrupt. But business and sport are different. Not everyone has the right to own a business or a sports club – it requires a certain level of responsibility and due diligence. Trump the politician cares nothing of ethics, but ethics should be concerned about Trump the businessman. I note that one of the websites of a Trump owned Scottish golf course lists Prince Edward, Prince Andrew, Bill Clinton, Rod Stewart and Jack Nicholson amongst the famous visitors. I suggest they might like to think again before visiting again and perhaps to have their names removed.

Sport is for all, even if the USA is not (according to some).

Climate change offers no moral high ground

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Today, world leaders will be in Paris to mark the opening of the COP21 climate change summit. The world cannot afford another failure, as was witnessed in Copenhagen six years ago. This time, the USA and China seem ready to do a deal and to bring most of the current and future largest carbon emitting nations with them. Yes, it is true that Obama, now approaching his last year in office, cannot bind the US Congress on whatever target he agrees to, and also that China might also struggle to meet its own commitments in the cold light of day. However, the alignment between the stars is much more auspicious than was the case in 2009.

The joker in the pack, and on many environmental and social issues in the G20 these days, is India. It is clear from his opinion piece in the Financial Times (FT) today, that Prime Minister Modi will play the “justice” card over the coming two weeks. This is politically pragmatic for the world’s second largest nation in terms of population (and soon to become its largest). It is a core premise of the climate justice movement that the world’s poor – who are the least responsible for carbon in the atmosphere are also likely to be the most vulnerable when faced by the results of rapid increases in global temperature – from crop failure, unpredictable weather to forced migration. The Pope made a similar point when speaking to the US Congress and United Nations in September.

India has one of the dirtiest energy mixes and is still very reliant on coal for producing much of its electricity. Modi makes the case that even a four-fold increase in coal burning will still not bring the country anywhere near the per capita emissions of most richer countries and so there is plenty of carbon “headroom” before it too needs to converge with the reduction targets essential for other governments to make this week. “The lifestyles of a few must not crowd out opportunities for many still on the first steps of the development ladder”, Modi writes. It is undoubtedly true that two whole generations of global politicians have failed to inject the renewables agenda with the ambition required (a fact in which most voters are also complicit) and that we might indeed have had better options on the table in Paris now if they had. Mary Robinson, and other leaders of the climate justice movement, are right to demand a global agreement on climate change that is not just sound in scientific terms but also socially equitable.

The persuasiveness of this argument comes from its historical perspective. Some in the climate justice movement go further, demanding that the governments of the west, and their companies, have more than a moral duty to change course, they also have a historic debt to be repaid (particularly if evidence of the risks of fossils fuels was suppressed). In such an unequal world, why should the poor of India be denied their own industrial revolution? Most activists will fudge the issue of India’s coal-powered electricity and instead point to the need for much greater investment in renewable energy everywhere, as Bill Gates has also signalled over recent days and Modi himself backs the new “international solar alliance”. There is also much room for greater efficiency within the way power is transmitted within India – the country needs huge amounts of new electrical infrastructure. But Modi will push the question of justice in part to protect the status quo within this own country. Unlike Gandhi (who he likes to quote), he is no revolutionary.

A point not fully acknowledged by Modi in his FT opinion piece is that future generations also have a need for justice. He takes Gandhi’s idea of trusteeship as his moral steer and it is a good one to take – it is the essence of sustainability: making decisions today with future generations in mind. But to do so from the concept of justice, is perhaps the most radical proposition that world leaders must reflect on in Paris this week. If unlike human rights and most existing moral codes that deal only with the living, we must consider the survival of our species itself and the rights of countless generations yet to be born, then the inequalities of the past 300 years are not the only issue of justice at stake and should not be the overriding moral argument. In such a landscape, there is no moral high ground for Modi or anyone else to attempt to occupy and that all world leaders will share in the guilt if a comprehensive agreement is not reached over the next two weeks. True climate justice requires nothing less.

“Only real markets have social licence”

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Mark Carney’s speech at the Bank of England’s Open Forum 2015 today

This morning in London, Mark Carney reflected on the progress the Bank of England, and other Central Banks across the G20, have made in reforming financial markets. When using the term “social licence” he is clear that he means legitimacy in the eyes of society – NGOs, trade unions and the wider public. “Finance”, he claims. “must become a true profession… only a third of people believe that markets operate in the interests of society” Drawing on his Mansion House speech earlier in the year, Carney is robust in stating that we “must end this tide of ethical drift”. Misconduct must be met with real (and large) penalties and governments must uphold the highest standards of accountability. Fine words, but words which must be matched by action.

What has already been achieved?

Financial markets are growing. Within the G20, there are now $75 trillion assets under management. Banks must be more resilient because they can no longer rely on the state – in the future private financial institutions must be allowed to fail. Robust market infrastructure is a public good.

In the UK, for example, there has been progress since 2008. Liquid assets of banks increased four times in the UK, the system is more robust. George Osborne, UK Chancellor of the Exchequer, followed Carney in detailing how bad things were in 2008. “For too long too many financial benchmarks were rigged by insiders, banks claimed to be adequately capitalised when they were not, it is now – seven years after the financial crash – that we can be honest about its causes and effects.” Banking regulation is now back in the hands of the financial regulator and UK banks are “much safer”.

What more needs to be done?

It is clear that there is much more work ahead if the UK is indeed to become the financial technology (“FinTech”) centre of the world. London-based financial markets are already six times greater than UK GDP and this is set to grow to fifteen times. This disparity represents a power gradient. How does UK society really feel that it benefits from hosting such vast revenue flows? This question is also one that all Central Banks across the G20 must be prepared to answer.

What is stopping markets from being truly sustainable and benefitting society as a whole? This needs to be the real benchmark for our work ahead across the whole G20. Both Carney and Osborne claim that FinTech will enable greater transparency and accountability. This remains an open question, in particular because of concerns over privacy and encryption that the UK is currently dealing with in other legislation. Another unanswered question is the cultural change needed in the City of London for public trust to be restored. Most people joined the financial sector when the incentives were very different and most of them are still there – very few have been penalised. How will we know that the cultural shift has been achieved? I hope we will hear more from Messrs Carney and Osborne on this issue over the months ahead. Perhaps the creation of a global corporate human rights benchmark for the world’s 500 largest companies will be part of the solution.