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How to Encourage U.S. Companies to Respect Human Rights BLUEPRINT FOR THE NEXT ADMINISTRATION December 2012

About Us On human rights, the United States must be a beacon. Activists fighting for freedom around the globe continue to look to us for inspiration and count on us for support. Upholding human rights is not only a moral obligation; it’s a vital national interest. America is strongest when our policies and actions match our values. Human Rights First is an independent advocacy and action organization that challenges America to live up to its ideals. We believe American leadership is essential in the struggle for human rights so we press the U.S. government and private companies to respect human rights and the rule of law. When they don’t, we step in to demand reform, accountability and justice. Around the world, we work where we can best harness American influence to secure core freedoms. We know that it is not enough to expose and protest injustice, so we create the political environment and policy solutions necessary to ensure consistent respect for human rights. Whether we are protecting refugees, combating torture, or defending persecuted minorities, we focus not on making a point, but on making a difference. For over 30 years, we’ve built bipartisan coalitions and teamed up with frontline activists and lawyers to tackle issues that demand American leadership. Human Rights First is a nonprofit, nonpartisan international human rights organization based in New York and Washington D.C. To maintain our independence, we accept no government funding. This report is available for free online at www.humanrightsfirst.org © 2012 Human Rights First. All Rights Reserved.

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How to Encourage U.S. Companies to Respect Human Rights BLUEPRINT FOR THE NEXT ADMINISTRATION

“The root cause of the business and human rights predicament today lies in the governance gaps created by globalization–– between the scope and impact of economic forces and actors, and the capacity of societies to manage their adverse consequences. These governance gaps provide the permissive environment for wrongful acts by companies of all kinds without adequate sanctioning or reparation. How to narrow and ultimately bridge the gaps in relation to human rights is our fundamental challenge.” John Ruggie, U.N. Special Representative for Business and Human Rights, 2008

Introduction When U.S. companies abuse or facilitate violations of human rights abroad, they undermine U.S. national interests in advancing security, economic development, and human rights. For example, U.S. security, economic, and other interests suffer when American companies sell surveillance technology to repressive regimes, are complicit in censorship by foreign governments, engage in unfair labor practices in foreign countries, and when private security contractors commit criminal acts in the name of the U.S. government. In the short term, these situations may create crises that require engagement by the president and other high-level U.S. officials. In the long term, they undermine the credibility and

effectiveness of U.S. efforts to advance human rights globally. The United States has a strong interest, therefore, in seeing that American companies protect human rights in their international operations. The governments of countries in which American companies operate often lack the wherewithal or political will to regulate or prosecute companies for human rights violations against their citizens. And host states themselves are often complicit in these abuses. John Ruggie U.N. special representative for business and human rights, described these “governance gaps” in his 2008 report to the U.N.: The root cause of the business and human rights predicament today lies in the governance gaps created by globalization––between the scope and impact of economic forces and actors, and the capacity of societies to manage their adverse consequences. These governance gaps provide the permissive environment for wrongful acts by companies of all kinds without adequate sanctioning or reparation. How to narrow and ultimately bridge the gaps in relation to human rights is our fundamental challenge. To address that challenge, the U.N. Human Rights Council unanimously endorsed Special Representative Ruggie’s Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework (GPs) in June 2011. The ‘protect, respect, and remedy’ framework reflects the three-pronged structure of the GPs: 1) State obligation to protect against human rights abuses by state and business actors under their jurisdiction; 2) Company responsibility to respect human rights wherever the company operates; and 3) Need for victims to have greater access to judicial and non-judicial remedies. The Guiding Principles provide a useful framework for governmental interaction with companies. Other governments are currently leading the way in developing standards and policies, and U.S. interests risk being left behind or disadvantaged if the administration does not continue and expand its own efforts. Specifically, the European Union is robustly implementing the GPs, and all member states are currently developing national

HOW TO ENCOURAGE U.S. COMPANIES TO RESPECT HUMAN RIGHTS – A HUMAN RIGHTS FIRST BLUEPRINT 1

action plans. Similarly, the Organization for Economic Cooperation and Development has integrated the GPs into its recently revised Guidelines for Multinational Enterprises. The U.S. government should consider similar efforts, and should promote human rights due diligence standards for companies as well as remedies for abuses.

This blueprint provides specific recommendations for how the U.S. government should work with companies under each of these three pillars to encourage U.S. companies to protect human rights.

U.S. companies comprise a huge segment of global business operations, and commensurately have a major impact on human rights. To protect and promote respect for human rights by companies, the U.S. government should employ a comprehensive and robust strategy to implement the GPs that leverages the interests of each government agency and its stakeholders in the private sector and civil society. The Departments of State, Labor, Commerce, the Treasury, Justice, Defense, and the U.S. Trade Representative should develop a common plan to implement the multiple dimensions of the ‘protect, respect, and remedy’ framework.


How to Encourage U.S. Companies to Respect Human Rights

The interagency working group should direct the following tasks: 

Protect: A State Obligation Under the framework’s first pillar, the state obligation to protect human rights includes: 

Ensuring that governmental departments, agencies and other state-based institutions that shape business practices are aware of and observe the state’s human rights obligations when fulfilling their respective mandates, including by providing them with relevant information, training and support.

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Enforcing laws that are aimed at, or have the effect of, requiring business enterprises to respect human rights.

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Providing effective guidance to business enterprises on how to respect human rights throughout their operation.

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Encouraging or requiring companies to communicate how they address their human rights impacts.

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Exercising oversight and promoting good human rights practices especially by businesses with which the state conducts commercial transactions.

RECOMMENDATIONS To implement these obligations, the president should: 

Establish an interagency working group on GPs implementation with mandated participation of high-level representatives from the Departments of State, Labor, Justice, the Treasury, Homeland Security, Commerce, Defense, and the United States Trade Representative, and chaired at the undersecretary level.

Examine the approaches of other governments and international bodies to implementing the GPs, and make recommendations on how the Departments of State and Labor should exchange ideas and promote international cohesion in implementation plans. 

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The recent report from the United Kingdom’s Foreign and Commonwealth Office, entitled Business and Human Rights: Implementing the Guiding Principles One Year On, gives an overview of foreign government initiatives to implement the GPs to date, including national implementation plans, intergovernment groups to promote policy coherence, new human rights reporting requirements for businesses, new requirements for adoption of human rights due diligence policies by companies benefiting from government contracts or diplomacy, and multistakeholder engagement initiatives. The U.S. government should engage with foreign governments to share best practices and to promote improved respect for human rights by the private sector. This will also help to ensure greater global consistency, contributing to a level global trade and investment playing field.

Identify existing tools that U.S. government agencies have to advance the GPs and make recommendations on how these tools should be supplemented, expanded, altered, or better coordinated. For example: 

Agencies should specifically address businessrelated human rights issues in existing reports, using the language and framework of the GPs. Relevant reports include, for example, the Department of Labor’s reports on child labor and forced labor, the Department of State’s Country Reports on Human Rights Practices and Trafficking in Persons (TIP) Report, and the International Trade Administration’s manual on business ethics.


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The Department of Labor and the U.S. Trade Representative should develop further initiatives linking trade policy with implementation of labor rights objectives. For example, trade policy is currently used to bolster implementation of internationally-recognized labor standards through the Haitian Hemispheric Opportunity Through Partnership Engagement Act of 2008 (HOPE II for Haiti), the Colombian Action Plan Related to Labor Rights, and the U.S.-Cambodia Bilateral Textile Agreement. Expanded efforts should focus more broadly on promoting respect for core rights. Examine what types and levels of training need to be offered to agency personnel to allow them to knowledgeably and effectively engage on business and human rights issues and the role of the GPs, with a particular focus on the role of trade representatives and foreign commercial officers who interact with American companies on trade or investments concerns. Examine how agency engagement on business and human rights issues can become more forward-leaning, increasing the amount of proactive engagement with companies and other stakeholders to identify emerging issues and discuss solutions (e.g. related to abusive or selective enforcement by host governments, or home government implementation of existing rules in ways that may jeopardize human rights).

aspects of the law that the U.S. Chamber of Commerce has cited as reasons for amendments that would weaken the FCPA, and thus should moot those calls for changes to the law. The Department of Justice and the Securities and Exchange Commission (SEC) should continue to advance robust FCPA language and enforcement. The Dodd-Frank Act, Section 1502 (conflict minerals sourced from the Democratic Republic of the Congo) 

Vigorously defend the SEC’s April 2012 rule for implementing Section 1502 against the recent lawsuit filed by the U.S. Chamber of Commerce and the National Association of Manufacturers (NAM), using the ‘protect, respect, remedy’ framework to make clear the obligations of the U.S. government and the responsibilities of U.S. companies regarding human rights.

Burma Investment 

The Department of the Treasury’s Specially Designated Nationals (SDN) list is meant to be a tool for identifying bad actors in the region so that businesses may more readily ensure that they do not engage in business with listed parties. The SDN list is now drastically out of date, and needs to be thoroughly updated to make it a useful tool for companies newly entering the Burmese market.

Ensure existing due diligence requirements are robustly, meaningfully, and vigorously implemented, with particular focus on the following: The Foreign Corrupt Practices Act (FCPA) 

The Department of Justice’s recently released Resource Guide to the U.S. Foreign Corrupt Practices Act is welcome, and its open, inclusive drafting process set a good model for future engagement between all interested parties. The guidance helpfully offers definitions for key terms like “foreign official,” and explains the corporate benefits of strong compliance programs. The guidance fairly and thoroughly addresses


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The State Department’s Reporting Requirements for Responsible Investment in Burma are a good step forward, but the requirements need to be expanded to ensure a solid human rights due diligence foundation is laid for Burma’s nascent 1 foreign investment sector. Specifically: 

Drastically lower or eliminate the threshold for reporting ($500,000+ or a 30+ acre land purchase).

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Make human rights due diligence mandatory for all newly investing companies, not just indirectly encouraged through reporting requirements.

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Make all reported information public by default, with justified exceptions allowing confidentiality only on an ad hoc basis.

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Better capture company subsidiaries, contractors, and business partners in reporting requirements.

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Make clear civil and criminal penalties for failure to report or underreporting.

The State Department should track key indicators of success, such as the number of companies reporting that they have sufficient human rights due diligence practices and overall decreases in the number of human rights violations in Burma.

Labor in Imported Agriculture Products, under the U.S. Department of Agriculture. 

The initiatives undertaken by civil society to aid in the understanding and implementation of the GPs, and how resulting lessons and best practices can be identified and integrated into agency policy. For example, the International Corporate Accountability Roundtable (ICAR) is developing due diligence standards and their implementation through legislation and government policy. The expertise and research that they and similar groups have developed are invaluable tools in developing effective government strategies.

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The efforts to date of businesses in implementing the GPs, focusing on identifying emerging good practices as well as obstacles, and recommendations on how government policies (including benefits) can help encourage such good practices and overcome obstacles.

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The particular difficulties that small and mediumsized enterprises face in implementing human rights due diligence, and tools and policies that would specifically help them.

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Best practices drawn from information contained in: 

Department of Labor reports on private sector involvement in child and forced labor, including the Bureau of International Labor Affairs’ (ILAB) “list of goods” produced with child or forced labor, their annual report on child labor and forced labor practices across geographies and industries, and a “web tool for best practices in supply chains” that is being developed to identify indicators to measure the compliance of U.S. trading partners with the labor rights provisions of U.S. trade legislation and trade agreements.

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Recommendations for company guidelines from the Consultative Group to Eliminate the Use of Child Labor and Forced Labor in Imported Agricultural Products, established by the Department of Agriculture.

Review and make recommendations regarding best practices for human rights due diligence by companies, and for what governments and civil society can do to increase company awareness and adoption of those practices. This study should include: 

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What new tools should be developed to broaden industry awareness, engagement, and adoption of the GPs, including due diligence practices. An example of such a tool is the company guidelines issued by the Consultative Group to Eliminate the Use of Child Labor and Forced

For further detail regarding these suggestions, see the “Joint Comment on the Reporting Requirements on Responsible Investment in Burma” (Oct. 4, 2012).


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Reports tracking the implementation of the California Transparency in Supply Chains Act, the first U.S. state-based legislation requiring companies to report on their efforts to eradicate slavery and human trafficking in their supply chains.

Require that U.S. government project financing through the Overseas Private Investment Corporation and export credit agencies be conditioned on company adoption of appropriate human rights due diligence policies and procedures. Ensure that the United States use its voice and vote on World Bank project approvals to promote company adoption of human rights due diligence policies. Work toward issuing an executive order requiring any contractors or subcontractors of the U.S. government to have in place comprehensive policies and procedures for human rights due diligence to address actual and potential human rights abuses. 

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The recent executive order “Strengthening Protections Against Trafficking in Persons in Federal Contracts” is a useful model both in its structure and substance. The executive order should phase in the implementation of its requirements. For example, the government could begin by giving notice to relevant agencies regarding the form of the prospective order and its intent, and provide training regarding challenges and useful standards to agency personnel. The next step could be adoption of “enhanced consideration” for contract bids from companies with human rights due diligence policies and procedures. Finally, the bright line requirement that bidding companies have appropriate human rights due diligence policies and procedures could be implemented. Throughout these steps, relevant U.S. government agencies should implement the other recommendations in this blueprint.

Respect: A Company Responsibility Under the framework’s second pillar, companies have the responsibility to respect human rights. The U.S. government should be well versed in these responsibilities so that it can help companies fulfill them. The responsibilities include: 

At a minimum, respecting the rights contained in the International Bill of Human Rights and the principles set out in the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work.

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Performing human rights due diligence to address actual and potential human rights impacts with which they may be involved, through their activities or as a result of their business relationships. Human rights due diligence is generally understood to include four key parts: 

Conduct human rights impact assessments to identify actual or potential adverse human rights impacts that may occur through the company’s activities or business relationships;

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Develop internal policies and practices to address the identified risks, with approval at the executive level, and ensure that the policies are understood and implemented company-wide;

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Continuously track company progress on human rights issues, drawing on feedback from internal and external sources, including affected stakeholders; and

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Communicate company efforts externally in a frequent and comprehensive manner, noting that independent verification of human rights reporting can strengthen its content and credibility.


accountability of PSPs for human rights abuses abroad and the adoption of human rights due diligence practices, including, for example, the Voluntary Principles on Security and Human Rights (VPs) and the International Code of Conduct for Private Security Providers (ICOC). As the use of PSPs continues to rapidly expand, the U.S. government must exercise greater oversight. In addition, the U.S. government must make clear that its continued engagement with these voluntary initiatives depends on adoption of credible, independent, and transparent accountability mechanisms.

RECOMMENDATIONS To aid businesses in fulfilling these responsibilities, the president should: 

Direct relevant agencies to continue to develop sector-specific consultations and guidelines to address areas posing the greatest risk of human rights abuse through business practices. Thus far, sector-specific consultation has included Uzbek cotton in the apparel industry, Congolese conflict minerals in the technology sector, and freedom of expression and privacy issues in the information and communications technology sector. Consultations of that nature should be increased. Sectors and issues for initial focus should include: 

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Supply chain tracing: In addition to the various supply chain tracing requirements that have emerged in recent years (i.e., the Dodd-Frank Act, the California Transparency in Supply Chains Act) and the voluntary supply chain initiatives (for example, the Global Compact, the Kimberly Process, the Electronic Industry Citizenship Coalition, and the Global eSustainability Initiative), there needs to be clearer guidance on strategies for supply chain tracing for businesses of all sizes and at each point in a supply chain. The sectors at greatest risk of supply chain issues include those sectors noted above—extractives, agriculture, and manufacturing. The broader sector-specific consultations with them must specifically address supply chain tracing strategies. Child labor and forced labor: The sectors that are most often involved in the use of child and forced labor—manufacturing, agriculture, and extractives—need additional guidance on human rights due diligence and risk management strategies. The recommendations of the Consultative Group to Eliminate the Use of Child Labor and Forced Labor in Imported Agriculture Products are not widely known or understood; the Departments of State and Labor can work to promote wider awareness and implementation. Private security providers (PSPs): There are multiple initiatives designed to increase the

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Dual-use technology: Developers and suppliers/distributors of technology that is capable of both legitimate and illegitimate uses– –most often censorship and surveillance––face some of the most complex human rights challenges today. Significant consultation with the Departments of State, Commerce, Defense, and the Treasury is required to consider how licensing requirements and export controls can be implemented more effectively to promote human rights.

Direct the Department of State (particularly the Bureau of Democracy, Human Rights, and Labor) and/or the Department of Labor to establish a regularly convened forum for continuing engagement between agencies, businesses, and civil society on the challenges and opportunities for implementing human rights due diligence. The broad goal should be some form of guidelines, template, or list of good practices that businesses can deploy in their own practice. Examples on which such forums should be modeled include: 

Currently, the Bureau of Democracy, Human Rights, and Labor supports significant multistakeholder initiative (MSI) dialogue on sectorspecific issues, as noted above. A new forum can build on their model, but broaden the topics addressed to capture broad human rights due diligence goals. The involvement of stakeholders should be deepened to include a broader range of sectors facing human rights issues, and to include more small and medium enterprises


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(SMEs). Broader implementation of the GPs will come from more expansive, non-sector-specific engagement.

Remedy: A State Obligation and a Company Responsibility

The United Nations Working Group on Business and Human Rights will soon hold its first annual forum on business and human rights in Geneva, bringing together stakeholders from government, civil society, and industry to discuss the state of implementation of the GPs and plans for going forward. Future engagement should follow up on themes and ideas articulated there.

The framework confers an obligation for states, and a responsibility for companies, to undertake the development and support of effective remedies for human rights abuses.

The European Commission’s “Multi-Stakeholder Forum on Corporate Social Responsibility (CSR),” brings together businesses, trade groups, nongovernmental organizations, and others in a plenary meeting approximately every two years to discuss developments in CSR and European policy. This offers a useful model for regular engagement on business and human rights issues broadly, as well as on a sectorspecific basis, though we would encourage that consultations be held more frequently. The International Corporate Accountability Roundtable (ICAR), as recently noted by the U.N. working group established pursuant to the endorsement of the GPs, “is promoting corporate accountability, access to remedy and due diligence, and is holding regional consultations to survey current gaps and make recommendations to Governments and other stakeholders on how to address them.”

Seek funds from Congress for the multistakeholder initiatives in which the U.S. government already has a voice, such as the ICOC. Congress currently appropriates funds for the VPs. That appropriation should be broadened to allow increased financial support for multistakeholder initiatives that the U.S. government is now involved in, or may become involved in in the future.

The obligations of states include: 

Taking appropriate steps to ensure, through judicial, administrative, legislative, or other appropriate means, that when such abuses occur within their territory and/or jurisdiction those affected have access to effective remedy.

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Providing appropriate nonjudicial grievance mechanisms alongside judicial mechanisms, as part of a comprehensive state-based system for the remedy of business-related human rights abuse.

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Considering ways to facilitate access to effective non-state-based grievance mechanisms.

The responsibility of companies includes: 

Establishing or participating in effective operationallevel grievance mechanisms for individuals and communities who may be adversely impacted.

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The ‘protect, respect, remedy’ framework additionally encourages states and non-state actors to form nonjudicial grievance mechanisms that meet a, helpful list of ‘effectiveness criteria.’

RECOMMENDATIONS To increase access to effective judicial and nonjudicial remedies, the president should: 

Direct the Departments of State and Justice to catalogue current remedies, and identify any weaknesses and gaps, so that there is a clear understanding within the U.S. government and among businesses and other stakeholders as to the actual state of the availability of remedies, and any improvements that are necessary to address the identified gaps.


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Direct the Department of State to renew their efforts at strengthening the National Contact Point system (NCP) for the Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises, to make it a more effective mediator of concerns regarding a company’s observance of OECD guidelines, and to make the State Department a more effective promoter of adoption of the GPs remedy obligations. The most recent reform efforts were beneficial, but key issues still remain. A renewed strengthening process should include, for example: 

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Reviewing the policies of the U.S. NCP system to ensure that the remedies offered comport with the GPs, and developing specific plans for improvement where the system falls short. Specific reference should be made to the GPs’ list of ’effectiveness criteria for nonjudicial grievance mechanisms’ which are targeted at both state-based and non-state-based mechanisms. Clarifying the complaint procedure, such that a layperson filing a complaint can have a working understanding of how the complaint will be treated and on what timeline;

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Making the entire process more transparent, such that stakeholders outside of the government can better understand the processes and challenges, and thus better engage with the Stakeholder Advisory Board (SAB) on means of improving the system;

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Making it clear that the NCP can and should, where appropriate, issue final determinations as to whether a company is in compliance with OECD guidelines.

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Increasing collaboration between the National Contact Point and the Stakeholder Advisory Board in their parallel work to publicly promote the system, increase engagement with stakeholders, and anticipate and address future challenges involving the National Contact Point system.

Promote sector-specific or company-specific grievance mechanisms that are in compliance with the GPs, particularly the above noted ‘effectiveness criteria,’ by: 

Directing the Department of State to hold a regular convening of stakeholders to discuss the state of grievance mechanisms and areas for improvement at the government, sector, and company levels.

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Ensuring the ICoC drives meaningful progress in affording effective remedy for those victimized by PSPs, and promotes mediation alternatives where remedy is ineffective.

Support corporate accountability under the Alien Tort Statute (ATS). 

In 2012, the U.S. government filed a brief to the Supreme Court in Kiobel v. Royal Dutch Shell, affirming that corporate entities can be held liable for human rights abuses pursuant to the ATS. Although the government has subsequently asserted in Kiobel that the application of the ATS is limited in cases where the abuse took place inside a foreign country, it should not retreat from the basic principle of corporate liability under the ATS in subsequent cases or in any positions on legislative changes to the ATS.


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