Statement by Mr. Dante Pesce, Chairperson, UN Working Group on the issue of human rights and transnational corporations and other business enterprises at the 32nd session of the Human Rights Council

16 June 2016

Mr. President, Excellencies, distinguished delegates, ladies and gentlemen,

I am honoured to present to the Human Rights Council today the reports of the Working Group on Business and Human Rights.

You have before you our main thematic report as well as four addendum reports relating to the Working Group’s visit to Brazil and forums and consultations convened by the Working Group in the past year.

Let me first turn to the Working Group’s thematic report which examines the duty of States under the UN Guiding Principles on Business and Human Rights with respect to State-owned enterprises (SOEs).

How significant are State-owned enterprises, and why are they of concern to the Working Group?

SOEs are active in diverse sectors – prominent in the energy and utilities sectors, they are also in infrastructure, logistics, telecommunications, and banking, among others. Despite waves of privatization in the 1980s and 1990s, States the world over still manage large SOE portfolios - in fact, SOEs have risen as significant actors in the global economy. The proportion of SOEs among Fortune Global 500 companies has grown from 9.8% in 2005 to 22.8% in 2014, with US$389.3 billion of profit and US$28.4 trillion in assets. SOEs also increasingly operate transnationally.

Despite their global presence, SOEs do not feature prominently in the business and human rights agenda. Little attention is paid to SOEs’ human rights impacts, and even less so to the duties of States to ensure that they respect human rights.

Aims and focus of the report

Distinguished delegates,

As commercial entities, SOEs should respect human rights like any other private enterprise. At the same time, SOEs are distinct to other companies in that the State is their main or sole shareholder.
The Working Group’s report aims to clarify how a State should behave as company owner and the ways in which its ownership model aligns with its international human rights obligations. Our report seeks to assist States in implementing their duty to protect against human rights abuses by SOEs by suggesting a range of action-oriented measures that States can take. More generally, the report raises awareness about the duties of the State as an economic actor, elaborated upon in the Guiding Principles on Business and Human Rights, in Principles 4, 5, & 6. Our report today focuses specifically on the implications of Guiding Principle 4.

Guiding Principle 4 underscores that “States should take additionalstepsto protect against human rights abuses by business enterprises that are owned or controlled by the State, ... including, where appropriate, by requiring human rights due diligence.” This raises important questions: Why are States explicitly expected to take additionalsteps to protect against human rights abuses by SOEs? Is it not sufficient that States take appropriate steps to ensure that allcompanies, irrespective of structure and ownership, respect human rights?

Mr. President,

There are compelling reasons for States to take “additional” steps to ensure SOEs respect human rights:

First, it is a matter of legal obligation: The State has a legal obligation to protect against human rights abuses. A human rights abuse by an SOE may also constitute a violation of the State’s own international law obligations when the acts of the enterprise can be attributed to the State.

Secondly, it is a matter of (national) policy coherence: The Guiding Principles are very clear that greater expectations are placed on States in relation to those enterprises they own or control. This is because of the close relationship between the State and the enterprises, and the means at the disposal of the State for monitoring and ensuring respect for human rights by them. Government departments and entities tasked with exercising State ownership - often within Ministries of Finance or Economy – must act in a manner that is compatible with the overall human rights obligations of the State.

Thirdly, it is a matter of legitimacy and credibility: The State should not ask less of companies that are closely associated with it than it asks of private businesses. The human rights record of a State-owned enterprise is often associated with that of the State and vice-versa. There are significant expectations for States to “get their own house in order”.

Finally, it also is a matter of international policy coherence: International guidelines on SOEs, notably the OECD Guidelines on Corporate Governance of SOEs, have been developed to help foster the efficient, transparent and accountable performance of SOEs. Central to these is the concept of “active ownership” - how governments should exercise the State ownership function to avoid the pitfalls of both passive ownership and excessive State intervention. In our report, we demonstrate how the UN Guiding Principles and the OECD Guidelines on Multinational Enterprises on the one hand, and the OECD Guidelines on Corporate Governance of SOEs, are mutually reinforcing. From an operational point of view, the corporate governance framework offers a useful anchor for implementing human rights requirements.

Suggested measures for additional State action

Ladies and gentlemen,

The Guiding Principles do not specify what types of “additional steps” States should take to ensure the enterprises they own or control respect human rights. The Working Group’s report thus suggests a range of measures that States could take in this regard, building on international standards and guidelines on corporate governance and lessons from national practices. In this regard, let me thank again those States that responded to the Working Group’s 2015 survey on ‘the State as an economic actor’.

Broadly speaking, the measures the Working Group suggests are of two types: (a) first, the WHAT - what should be States’ expectations and requirements with regard the enterprises they own or control when it comes to human rights?; and (b) the HOW – i.e. the concrete tools, policies and measures States could take to ensure their human rights requirements are implemented. Let me flag now some of the most important measures we suggest.

With regard to the “WHAT” – States expectations and requirements, we suggest four measures:

• First, States should set clear expectations in law and/or policy that SOEs not only respect human rights throughout their operations, but that they should be role models in this regard. For instance, one State requires that: “State-owned enterprises shall act as role models with regard to sustainable business,” which encompasses the requirement to comply with the UN Guiding Principles and the OECD Guidelines for Multinational Enterprises. For another, State-owned enterprises “are required to play an exemplary role.”
• Second, States should require that SOEs conduct human rights due diligence in their operations at home and abroad. A number of States require State-owned enterprises to take action to prevent abuse of human rights abroad and through their business relationships specifically.
• Third, States should require systematic and meaningful reporting on environment, social, and governance factors that includes human rights. Many States  already require SOEs to report annually to their owners, including on sustainability and human rights.
• Fourthly, on remedy: It has been difficult to find any practice in this regard, perhaps because the role of the State as an owner is limited and distinct to the other ‘arm’ of the State – namely the judiciary. Nonetheless, the department exercising ownership should make sure that: (a) SOEs cooperate fully with judicial and non-judicial grievance mechanisms; and (b) that should ensure that effective operational-level grievance mechanisms are available for human rights abuses that they may be causing or contributing to.

With regard to the “HOW” – the State could ensure its requirements are implemented:

• Our main recommendation is that States use existing ownership models to  set human rights expectations and oversee their implementation. Ownership models have been developed to allow SOEs full operational and managerial autonomy while ensuring that expectations of the State as shareholder are met. A few States already explicitly use their ownership model to ensure that State-owned enterprises respect human rights: They state their (human rights) expectations in ownership policies, and spell out the tasks of the ownership entity to ensure these expectations are implemented.
• In this regard, boards are a key vehicle for States to manage their relationship with SOEs and the requirements they set. The Working Group recommends that boards have explicit mandates to ensure and monitor the implementation by SOEs of human rights standards, and account for it.

Our report includes additional recommendations related to ownership arrangements, including on oversight and setting up human rights targets, and capacity building.

Mr. President,

Most States do not seem to fully understand what taking “additional steps” to protect against human rights abuse by State-owned enterprises means in practice. Nor does it seem obvious to many SOEs that they have a responsibility to respect human rights. In the view of the Working Group, it is now time for States to follow through the good examples set by a few governments, and implement existing standards and guidance.

As a first step, States should review their policies and practices with respect to SOEs, identify and implement measures for action, based on the Working Group’s recommendations. State-owned enterprises themselves, irrespective of State action or inaction, should strive to be role models on human rights. We also encourage other stakeholders (international organizations, UN bodies, national human rights institutions, civil society organizations, and business associations) to prioritize advocacy, research and action on the human rights impacts and responsibilities of SOEs,mindful that little attention has been paid to them so far. This will also help States and SOEs move forward.

To conclude, let me stress that this does not mean that States should pay less attention to ensuring respect for human rights by fully private enterprises. The ultimate goal is the full respect for human rights by all enterprises, irrespective of size, sector, operational context, structure or ownership. As States work towards that goal, there are nonetheless compelling reasons for them to lead by example and do their utmost to ensure that the enterprises under their ownership or control fully respect human rights. This will only strengthen their legitimacy in setting regulations and expectations towards private businesses.

The Working Group now calls on States to demonstrate that leadership. We look forward to cooperating further with those States wishing to embark on this path.

Country visits

Distinguished delegates,

Let me now turn to the country visit carried out by the Working Group. Over the past year, the Working Group conducted country visits to Brazil (7 - 16 December 2015) and to the Republic of Korea (23 May - 1 June 2016), and the Working Group has confirmed a visit to Mexico later this year (29 August – 7 September 2016).

At this session, we are presenting the report on the Working Group’s visit to Brazil (A/HRC/32/45/Add.1). The Working Group would like to thank the Government for its assistance in organizing the visit and the commitment it has expressed to move forward on the implementation of the UN Guiding Principles on Business and Human Rights.

During the visit, we heard testimonies from affected communities in different parts of the country about cases related to the energy and extractive industries, agribusiness, and construction. This included hearing from people affected by the mining and environmental disaster caused by the Fundão tailings dam rupture in Mariana. A common concern expressed was that measures to mitigate adverse human rights impacts were conceived and implemented without effective and meaningful prior consultation.

We also learned about the various human rights safeguards already in place and about efforts under way to better address and mitigate the human rights impacts of business operations and large scale development projects. We were particularly impressed by the work of the Federal Public Ministry prosecutors and state-level prosecutors, as well as by the work of a vibrant civil society. Still, we found that much more needs to be done to support rights holders, in particular those who are in a vulnerable situation.

In the report, we draw attention to the great risks facing indigenous communities and human rights defenders who raise their voices against business-related human rights abuse, as reflected in an alarmingly high death toll.

We also note with concern initiatives that seem to be going in the wrong direction, such as the suspension of the ‘dirty list’ which effectively named and shamed companies caught using slave labour in their supply chains, and legislative initiatives that would weaken the legal definition of slave labour, lessen social and environmental safeguards in infrastructure licensing processes, and negatively affect the demarcation of indigenous land. We also highlight the need to address concerns about undue corporate influence on regulatory and policymaking processes.

The challenges we highlight in the report are well-known to the Government, and Brazil has the tools to address them. In doing so, we encourage the Government to step up awareness-raising and capacity-building efforts and to develop a full national action plan on business and human rights, based on multi-stakeholder dialogue, involving the Government, businesses and civil society, including members of affected communities.

UN Forum on Business and Human Rights

Mr. President,

I would like to now say a few words about the other reports before you.

The Working Group has the pleasure of guiding the annual UN Forum on Business and Human Rights, which is firmly established as the world’s biggest annual gathering on this topic. Under the theme of “Tracking progress and ensuring coherence”, the fourth Forum, held in November last year, sought to identify ways to track progress (or lack thereof) in strengthening protection against business-related human rights abuse and to improve policy coherence with policies relating to trade, investment and sustainable development. We had a record 2,300 participants (some 400 more than last year) from some 130 countries. The high level of interest was also reflected in the 140 proposals received for the organisation of side sessions.

The report with the summary of Forum discussions (A/HRC/FBHR/2015/2) will be presented to the HRC in a separate session next week. In addition, our third addendum report contains lessons and recommendations from Forum sessions that featured concrete examples of multi- stakeholder action to address and protect against business-related human rights abuse.

Multi-stakeholder engagement will feature again at this year’s Forum, which takes place from 14 to 16 November here at Palais des Nations. The year’s overall theme is “Leadership and Leverage: Embedding human rights in the rules and relationships that drive the global economy”.

We plan to deepen the Forum discussions in Geneva by drilling down on four broad areas:

• First, we will explore the urgent need for greater State leadership on resolving business and human rights issues, focusing particularly on the State’s role as an economic actor.
• Second, we will push for greater business leadership and a better application of leverage to prevent, mitigate and address human rights impacts across supply chains and other business relationships.
• Third, we will examine the way that money and financial markets drive or undermine progress to implement the Guiding Principles.
• Fourth, we will include a strong focus on the third pillar of the Guiding Principles - “access to effective remedy” - and the impacts suffered by affected individuals and groups.

All relevant stakeholders, including States, may propose session ideas that relate to the Forum title by the 31st of July. Details about the process are available on the 2016 Forum webpage.

Asia Regional Forum and public policy consultations

It is my pleasure to report that in April the Working Group convened the first Asia Regional Forum on Business and Human Rights, in Doha. It brought together some 400 participants from across Government, business and civil society and provided a platform for dialogue on some of the main business and human rights issues facing the Asia Pacific region. For both the annual and regional forums we are seeing an increase in the participation of business representatives, now accounting for around one fourth of total participants.

Finally, the Working Group was also able co-organize with the Regional Office for South America of the Office of the High Commissioner for Human Rights, a public policy consultation for Latin America and the Caribbean. The consultation formed part of our ongoing efforts to promote the development of National Action Plans on Business and Human Rights. It was held at ECLAC Offices in Santiago.

The Working Group would like to express its thanks to the Governments of Qatar and the Governments of the Netherlands, Norway, and Switzerland for their support to these events.

Key insights and recommendations from the Asia Regional Forum and LAC public policy consultation are presented in the Working Group’s second and fourth addendum reports.

Closing

The Working Group wishes to hold another regional forum on business and human rights, and also wants to explore a number of options to promote peer learning in relation to business and human rights issues, national action plans on business and human rights, and public policy related to responsible business conduct. We will alert stakeholders to such opportunities once plans are finalised. We look forward to continued engagement with States, business and civil society over the coming months.

I thank you for your attention and look forward to our discussion today.