Image: Miko Guziuk (Unsplash)
What is the problem?
Globalisation has given corporations the ability to have complex international supply chains. This provides the opportunity for corporations to cut costs and maximize profits. Unfortunately, it also allows corporations to choose to operate in countries with low levels of law enforcement or protection of human and environmental rights. Some companies also hide behind a ‘corporate veil’ by acting through subsidiaries which they control. There are many cases of multinational corporations disrupting communities and ecosystems with little-to-no repercussions.
One example is the Shell oil production in Nigeria. In 2008 a group of Nigerian farmers launched a court case against the Royal Dutch Shell for losses suffered to health, livelihood and land caused by two oil spills in 2008 and 2009, Shell admitted that their subsidiary was liable for the spills. There have been many reports of the negative impacts these spills have had and continue to have on the community. One study showed that a baby born within close proximity to the oil spill is twice as likely to die in their first month.
In January 2021, the Royal Dutch Shell was ordered to pay compensation to farmers who claimed their farmland and fish ponds were poisoned from the oil spills. Although this judgment has been claimed as a victory because it may open a floodgate of more litigation against Shell and other corporations involved in oil exploration in the region, it took 13 years to receive this ‘victory’. How many decades will it take for individual cases, such as this, to be ruled against multinational corporations to create precedence? More efficient and reliable legal solutions are, reformed regulations which legally compel corporations to ensure their productions and supply chains do not cause damage to individuals, nor the environment. Mandatory Corporate Human Rights Due Diligence could provide such an obligation and prevention.
What is Human Rights Due Diligence?
The concept of Human Rights Due Diligence (HRDD) was first introduced in the United Nations Guiding Principles on Business and Human Rights (UNGPBHR) which was unanimously supported by the United Nations Human rights council (UNHRC). These guidelines provided, for the first time, a globally recognised framework for governments and businesses to prevent and address the adverse impact on people and the environment from their activities. Governments and businesses are encouraged by the guidelines to identify and assess risks, not only from their direct actions but indirectly through their supply chain.
Why are reforms needed
Unfortunately, these guidelines are voluntary and enforced only by international norms and the hope that corporate image can persuade businesses to choose human rights over revenue. Only a few companies actually abide by these guiding principles. Corporations that choose not to abide by these guidelines may have more growth opportunities. This leads to unfair competition in the market between those who do their HRDD and those who do not.
Considering the following statistics, it is clear that voluntary corporate due diligence is not effective enough. Firstly, fifty percent of the biggest corporations in Europe have been linked to adverse human rights and environmental impacts. Secondly, forced labour generates annual profits of $150 billion. According to the 2019 Corporate Human Rights Benchmark, half of the 200 largest listed companies from agricultural, apparel, extractives and information technology sectors fail to meet any of the five basic criteria for HRDD.
How close are the reforms?
Mandatory Corporate HRDD is not an unachievable goal. France has already legislated HRDD for their biggest companies. The French 2017 law on the duty of vigilance requires all French companies with more than 5000 employees in France and over 10 000 employees globally to undertake due diligence. Non-compliance with this law leads to sanctions and payment of damages.
Additionally, the European Union (EU) has passed due diligence rules for the import of minerals from conflict areas. This falls under Regulation EU 2017/821 which changed the certification scheme from voluntary to compulsory. It applies to EU importers of tin, tantalum, tungsten, ores and gold which originate from conflict or high risk areas. These importers must check that these minerals and metals do not contribute to conflict, forced labour or illicit activities. This regulation entered into force in January 2021.
The EU has tabled a proposal for mandatory Corporate HRDD. This legislation would not only decrease the abuse of human rights and the negative impact on the environment but it would also level the playing field among all companies which operate in the EU market, improve legal clarity, establish effective enforcement and sanction mechanisms which would improve the access to remedy for those affected. Access to remedy for affected persons is important but not currently easy as evident in the 13 year case against Shell outlined above.
Impact on Africa?
The tabled EU Mandatory Corporate (mHRDD) policy would apply to all EU companies and external companies which operate within the EU market. This would make it much easier for those affected by actions such as oil extraction by EU companies to claim remedy without needing to wait for case precedence to do so. Currently, domestic justice systems are preferred to deal with complaints by communities against the actions of international corporations, within Africa, many of these domestic justice systems face legal and procedural challenges and do not often result in justice. If the EU passes mHRDD, these cases can be taken directly to the court of the corporation headquarters and justice would be more prevalent as the legal right to remedy for non compliance with mHRDD would exist and just need to be proven.
Unfortunately, EU corporations are not the only ones whose supply chains operate in Africa and pose a threat to communities and the environment. More countries or multilateral groupings need to pass HRDD into legislation to ensure the cohesive protection of people and the environment. This would also prevent companies from simply relocating to avoid these restrictions.
The African Continental Free Trade Agreement (AfCFTA) has recently begun its implementation stage.Considering how this agreement will increase intra-African trade and increase the number of Intra-African value chains, it would be advisable that signatories to this agreement consider agreeing on mHRDD in preparation for these evolutions. This would not only prevent future damage to communities and the environment and provide a pathway to remedy for any violations, but it would also create a level playing field between African corporations who operate in Africa.
Laura has a degree in BPolSci International Studies from the University of Pretoria and is currently completing a level 4 NALP paralegal diploma. She hopes to complete her honors in International Relations and pursue a career in the field of Public International Law and Human Rights. Laura is one of the permanent members of the writing staff at The Art of Politics.