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Human rights and corporate conduct - where are we?

AUTHOR: John Hancock   DATE: 30.03.02   ISSUE 1, 2002

Steve Frenkel: Does Amnesty’s new interest in labour rights signal a shift in focus from rogue states to rogue corporations?

Tim Budge: In 2001 we expanded our mandate. Human rights really involve people’s relationship with business as well as with government.
Frenkel: The violent protests against globalisation left many feeling that human rights campaigners are anti-business. What about Amnesty?

Richard Boele: Far from it. Our UK Business Group was ostracised for being too cosy with business.

Frenkel: Are Australian businesses supporting human rights?

Boele: BHP gets a gong. I was impressed with their thinking.

{	(L-R Prof. Steve Frenkel, Tim Budge, Rohan MacMahon, Richard Boele.)

Frenkel: But BHP’s history in labour relations is exactly counter to the ILO [International Labour Organisation] declarations and even more so against OECD [Organisation for Economic Cooperation and Development] guidelines. Are they playing some game?

Boele: I don’t think so. People thought The Body Shop was anti-union, but in 1998 they promoted the Universal Declaration on Human Rights (UDHR) in their shops in 30 countries.

Frenkel: What about stakeholders versus shareholders? The Europeans are further down the stakeholder path, while shareholder capitalism still rules in Australia. Does Amnesty push stakeholder capitalism as the way to go?

Budge: In a sense that’s one of the drivers in updating our mandate. But our focus is still on grave abuses of human rights. Things like shareholder capitalism are outside our mandate, certainly outside our expertise.

Boele: Amnesty supports the idea of consumers acting as agents of change in corporate behaviour. Our members can and do use their purchasing power to influence businesses, and many of them are shareholders.

Frenkel: Is there an opportunity for you to develop some expertise in the area of economic rights that enables you to stand above other NGOs and speak with some authority?

Budge: We have a million members. That’s our market niche. When we speak on an issue, we do it with the support of our membership.

Frenkel: Where do you see the biggest problems?

Boele: The resource sector. When India opened up to mining investment, 14,000 companies applied for licences in 18 months. The companies that succeed will be in partnership with the Indian government. Who do we hold accountable?

In South America, up to 80 per cent of undiscovered mineral resources are under indigenous land. The companies who say, ‘We’re going to take a human rights approach h to working with those communities’ have a better success chance of getting access to those resources.

We saw that here in the Northern Territory when Normandy Mining broke ranks and said, ‘Look, we’re going to have to deal with this native title issue’. That set Normandy apart from the others. As a result, they have a better reputation among Aboriginal communities.

Frenkel: How widely are you willing to expand the concept of basic human rights? Directors and managers and shareholders wonder where it will all end. If there’s to be an ever-widening cascade of ‘basic’ human rights – protected at shareholder expense – where’s the payout?

Boele: The most immediate payout is probably stronger morale and loyalty among [a company’s or organisation’s] people. The British press accused Shell of complicity in Nigerian human rights abuses that climaxed with the execution of environmentalist Ken Saro Wiwa in 1995. Shell’s brand image took a terrible beating. But I talked to Shell executives in the UK who were more concerned about the beatings their kids took at school. They were targeted because their dads worked for Shell. No surprise Shell committed to the UDHR one year later.

A similar thing happened to BP after the BBC broadcast [stories about] human rights abuses in Colombia [where BP operated].
The following year they had difficulty recruiting the best graduates.

Frenkel: How many companies around the world have declared their support for the UDHR?

Boele: My last count was only eight or nine supporting the whole thing. It is still a fairly small club.

Frenkel: So we have this huge disparity between political support and corporate support. In 1948, 48 countries signed the original Universal Declaration on Human Rights. By the 1992 meeting in Vienna there were 171. Why are so many corporations so out of step with the politicians on this issue?

Budge: You say politicians.When governments commit to the UDHR we assume the people of those countries support it.

Frenkel: Is there a framework in place for international companies to sign up, as there is for countries?

Budge: The UN is looking at the issue of corporations and human rights very seriously. A draft of guidelines has been in process for about 18 months, and major corporations have been active in that.We’re hoping the UN will formally adopt the guidelines.

Frenkel: That raises a question for some managers: Australia is a signatory to the UDHR. Is the Australian government obligated to punish companies that violate it?

Boele: The short answer is yes and no. The UDHR is public international law, which is notoriously difficult to enforce. I don’t think anyone’s ever tried.

Budge: The UDHR has moral force.

Boele: Basically all public international law resorts to moral rather than legal force. It’s the sort of thing Geoffrey Robertson runs hypotheticals on rather than the sort of thing you litigate.

Budge: But the moral force is very real. In 1996 Shell was [angry about being] cited in a UN report on human rights abuses in Nigeria. But it realised then that it had to take it seriously.

Frenkel: But there was no marketplace reaction in terms of sales or share price. We accept that Shell was worried. Its brand was muddied. Executives’kids were targeted. But did margins shrink? Did the share price plummet? No, its share price went up because it announced a $1.2 billion LNG project – in Nigeria, of all places.

Boele: Shell was embroiled in an environmental fiasco at the same time. So it’s hard to say whether it was that or Nigeria, but anecdotally they suffered a consumer slump in Europe around that same time.

Frenkel: That raises another question managers might ask. So much of the rhetoric on this issue has been ‘crime and punishment’ instead of ‘investment and reward’– is there any way you can make a case for positive action? Does a corporation make more money by being a better global citizen?

Boele: There doesn’t seem to be conclusive evidence yet. But my sense of it is that evidence will emerge, for the simple economic reason that most of these businesses operate in mature markets. For them to lose 1 or 2 per cent share in a volume-driven, margin-based business would have to hurt them.

It may be a while before they see the brand damage being done, but it will tend to leak through to the bottom line. And when you compare the cost of the damage to the cost of ‘preventive medicine’,it’s a bargain. Companies learned to do that with health, safety and environmental issues. They can learn to do it with human rights.

{	Shareholder capitalism still rules in Australia. Does Amnesty push stakeholder capitalism as the way to go?

Frenkel: As risk management?

Boele: Exactly. If you say to a board of directors,‘There’s a good chance you’ll lose 1 to 2 per cent market share for the next five years, unless you do something relatively simple and inexpensive to prevent it,’they’d say,‘Go do it’. No question.

Frenkel: The food fight [over genetic modification] in Europe certainly supports your view.Vigilante consumers brought Monsanto to their knees. Had they taken a stakeholder approach before trying to ram those products down people’s throats, they certainly would have reduced the financial damage.

Or would they? Going back to my ‘investment and reward’comment: the NGOs and the popular media are only interested in punishing miscreants, not rewarding good citizens. How would it compromise your independence to publicise companies that are doing good?

People from Nike have told me that 98 per cent of their factories do the right thing. But if Nike comes out and says,‘We’re great; we’re socially responsible, and here’s this report’, nobody will believe them. Isn’t there an opportunity for NGOs to counteract a biased press? You do that in places where the press is protecting the government.

Budge: It’s a possibility. I’m not sure what’s planned at international level, but it seems to me that’s a valid role for Amnesty as a research organisation.

Boele: The UK business group produced a report on companies engaged in Saudi Arabia and the potential human rights risks. In Australia we produce ‘Geography of Risk’.The first risk map had 17 countries on it, and BHP [Billiton] operated in seven of them.

Rohan MacMahon: The media is part of this debate, because bad news gets printed and good news doesn’t. Part of the reason Amnesty has business groups is to have a dialogue and build good relations with the corporate sector. It’s not about our saying,‘You naughty people’.It’s about our recognising the old two-way dialogue between individuals and governments is being superseded by a three-way dialogue between individuals, governments and businesses.

Frenkel: What can managers do to get started? Most know about triple-bottom-line accounting and social auditing. But how can managers really develop KPIs [key performance indicators] on the issue of human rights?

Boele: Hit www.amnesty.org.au and download our ‘Just Business Code’.It’s an eight-page document that gives you a good introduction to the issue.

Budge: We’ve introduced a number of companies to accounting firms that offer ‘triple-bottom-line’auditing.

Frenkel: The companies I’m familiar with have developed their own systems as part of TQM [Total Quality Management].There is a Social Assurance standard, SA-8000.

Boele: Normandy Mining put their community relations monitoring system on top of the ISO, but they added 12 performance criteria. Instead of auditing systems, they audit performance. The next one will include an external component, so the auditor can ask people in the community,‘How do you think Normandy are performing against these 12 criteria?”

MacMahon: The idea of a ‘balanced scorecard’is much more acceptable than it was five or eight years ago.Telstra brought a lot of traditional HR measures into balanced scorecard reporting. It doesn’t even raise eyebrows any more.

In a more traditional dirty industry like mining, I wouldn’t be surprised to see green measures in the same kind of balanced scorecard reporting. In terms of stakeholder activism for human rights, we can look at the green movement as something to learn from – both as activists and as managers.
by John Hancock

For more information on the business of human rights: United Nations – to download the Universal Declaration on Human Rights (UDHR), go to: www.un.org/Overview/rights.html. Amnesty International Australia — go to: www.amnesty.org.au/whatshappening/ business/index-7.html and ‘Just Business’ to download guidelines on introducing human rights principles in day-to-day operations. SustainAbility – this pioneer ‘triple-bottom-line’ consultancy has information on human rights and corporate conduct issues and resources available to managers. Go to: www.sustainability.com.