UN Special Representative John Ruggie needs to propose a clear human rights performance framework for companies, argues Rory Sullivan

Institutional investors (pension funds, investment managers, insurance companies) have a vitally important role to play in the protection and promotion of human rights through their investment decisions and through their engagement with companies.

Yet, having spent the past eight years in the investment industry, preceded by a number of years working with Amnesty International on business, trade and investment issues, I have been struck by the extent to which human rights has remained so clearly off the agenda for mainstream institutional investors.

While issues such as climate change, health and safety, and bribery and corruption are routinely considered in investment decision-making and discussed in company-investor meetings, human rights has nothing like the same profile or level of traction.

The major reasons appear to be the lack of consensus on the specific human rights obligations of companies and the lack of pressure from civil society for investors to take action.

The lack of consensus on the human rights obligations of companies (notwithstanding the efforts of organisations such as Amnesty International and, perhaps most significantly, the UN Sub-Commission on the Promotion and Protection of Human Rights) has made it difficult for companies, even those that take a highly proactive approach to managing their human rights issues, to demonstrate that all relevant human rights issues have been identified and properly managed.

Policy over outcomes

It has also made it very difficult for investors to properly assess corporate human rights performance. This has meant that investor engagement has tended to focus on corporate human rights policies, systems and management processes, rather than on the human rights outcomes that should result from these processes.

In relation to the lack of pressure from civil society for investors to take action on human rights, there are two distinct issues, namely the lack of a cohesive view across the NGO community about the human rights expectations of companies and the relative lack of focus on the role that institutional investors can play in protecting and promoting human rights.

These points are related. The absence of a clear NGO campaigning agenda has made it difficult for investors to engage effectively with companies on human rights outcomes (rather than just management processes). It has also meant that NGOs have – with the notable exceptions of project finance and specific issues such as bribery and corruption – seen limited value in seeking to influence investors.

The question is why we have ended up in such an unsatisfactory situation given that in 2004 most of the leading NGOs across the human rights, environmental and development movements had explicitly supported the Draft Norms proposed by the UN Sub-Commission on the Promotion and Protection of Human Rights?

A game changer

Perhaps the most obvious is that, following the business backlash against the Draft Norms, the appointment of the United Nations Secretary General’s Special Representative on Business and Human Rights (John Ruggie) in 2005 changed the nature of the entire debate.

Many NGOs considered the appointment as a major step forwards, seeing it as the UN putting its institutional weight behind efforts to develop a coherent set of standards for companies and to establish effective implementation processes.

Over the past five years, the UN Special Representative and his team have done important work in analysing and describing the intersection between business and human rights.

The ‘Protect, Respect and Remedy’ framework that has been advanced by the Special Representative – and endorsed by the UN’s Human Rights Council – envisages that companies should conduct due diligence to avoid infringing human rights and should establish systems and processes to enable them to effectively manage their human rights impacts.

These are sensible proposals and fit comfortably within the enlightened and proactive approach to social issues management that investors expect of companies.

However, these proposals are nowhere near enough. If we wish investors to pay much more attention to corporate human rights performance we need two things. First, the Special Representative needs to propose a clear human rights performance framework for companies (probably similar to the UN Sub-Commission’s Draft Norms).

Second, the major human rights and development NGOs need to press the Special Representative to develop such a framework and, equally importantly, press companies and investors to support and ensure the effective implementation of such a framework.

The central question

I recognise that these there are arguments that could be made against these suggestions: formal rules and frameworks are an old fashioned response to the complexity of the modern world, it is inappropriate to reduce human rights to a set of formal rules or prescriptions, such a framework could be ‘regulation through the back door’, such a framework could undermine the consensus that has been reached around the Respect, Remedy and Protect framework.

While these are all valid arguments, they do not address the central question of how we ensure that institutional investors play their proper role in holding companies to account for their human rights performance.

If we want investors to make a meaningful contribution to the protection and promotion of human rights, they need a clearly defined normative framework, supported by civil society and backed up by effective institutions. The question is not one of intellectual purity; it is one of how the capital markets can be harnessed to support the delivery of international human rights.

Rory Sullivan is a member of the Ethical Corporation advisory board, and was previously Head of Responsible Investment at Insight Investment. He is the editor of Business and Human Rights: Dilemmas and Solutions (Greenleaf, 2003) and the co-author of the 2008 UNEPFI CEO Briefing on Human Rights. rory@rorysullivan.org