Human rights abuses in multinational businesses draw immediate public attention and cause the reputation of the company to take a deep dive. Remember how many years it took for Nike to regain its reputation after their child labor scandal started back in the 1990s?
Regaining lost reputation requires actions in many different fields, the legal arena being one of them. So, what judicial tools are available to battle human rights abuses?
International and National Legislation
As discussed in my previous blog post, international human rights conventions oblige countries to comply with their standards and implement corresponding national legislation. However, this national legislation often only reaches the companies established in that state.
Severe human rights abuses usually occur farther from home in the subsidiaries or supply chains of multinational companies, as was the case with Nike. Given that national legislation doesn’t reach that far, the respect for human rights has traditionally relied on companies’ voluntary commitment to soft law mechanisms, such as international standards and guidelines.
However, now things seem to be changing. Europe is taking steps to introduce hard law measures to spread the corporate veil to cover operations further down multinational supply chains.
The United Kingdom on the Front Line
The UK introduced the Modern Slavery Act last October. The act obliges companies exceeding a turnover threshold (£36 million) and doing business in the UK to prepare an annual public statement. This statement should cover the actions the company has taken to ensure that slavery and human trafficking are not taking place in its operations. The act requires that the statement is published on the company website with a link in a prominent place on the homepage. The act increases transparency of supply chains regarding possible abuses.
One notable feature of this act is the wide scope of application: all corporations doing a certain amount of business in the UK are obligated to prepare this public statement. Thus, it not only applies to companies incorporated in the UK, but also to those incorporated, for example, elsewhere in Europe, but operating in the UK.
France Tried to Take Things One Step Further
The French parliament introduced the so called Rana Plaza Bill, which aimed to hold French parent companies legally accountable for human rights abuses conducted by their foreign subsidiaries. Multinationals opposed this proposal heavily, saying it would harm their competitiveness. The chosen legislative path was deemed to be too aggressive in the current economic climate, and the proposal was overruled in the Senate. However, the French legislative procedure allows for the reopening of this issue. Thus, this case may not yet be closed.
EU-wide Obligations Upcoming Up
Despite France’s retreat, there is already something more wide-spread on the horizon. The EU Parliament has accepted a directive that obliges large public-interest companies to disclose relevant information on non-financial matters, such as respect for human rights and anticorruption issues. National legislation is to be in place by the end of 2016, and the first obligatory non-financial reports covering the financial year 2017 should see daylight in 2018.
What Should Corporate Executives Make of All This?
My first recommendation is that, if you’re involved in the management of a multinational, you should keep a close eye on this issue, as it is clearly gaining increased attention on the agendas of legislators. The media and various NGOs have worked hard to raise awareness of human rights issues for several years.
The bottom line, however, is this: companies are obliged to obey and respect human rights globally, as these matters should be implemented in respective national constitutions. Thus, it doesn’t really matter whether a specific hard law measure is in use in any given country. Companies simply cannot opt out of human rights in their operations.
Senior Associate, MBA, Castrén & Snellman Attorneys Ltd
The blog was first published in January 21, 2016 by C&S Blog