Human Rights Due Diligence

The TakeAway: Integrating Human Rights Due Diligence into Risk Management May Help Prevent Future Oil Spills and Market Meltdowns

We consider the collapse of the global banking system in 2008 as a financial debacle, and the collapse of the Deepwater Horizon oil platform this year is an environmental catastrophe.  Yet both also qualify as human rights disasters, according to John Ruggie in a blog posted on the Harvard Law School Forum on Corporate Governance and Financial Regulation over the weekend.  Ruggie, a Harvard Kennedy School Professor and United Nations Special Representative to the Secretary-General (SRSG) for Business and Human Rights, makes this link to illustrate the risk companies face for failing to implement “human rights due diligence.”  That’s a term he coined in 2008 “to describe what companies should do to meet their responsibility to respect—i.e., not infringe upon—human rights, and to demonstrate to others that they do.”

How does this apply to the BP oil gush?  When reports of last April’s rig explosion in the Gulf of Mexico began to circulate, shock over the death of 11 people on the fiery platform quickly gave way to horror at images of oil-covered birds and anxiety about oddly shaped slicks on aerial maps.  The outrage of subsequent months focused on the environmental catastrophe, but there are very human costs, too.  The impact of the disaster on life and livelihoods continues to affect many throughout the Gulf region even after the containment, according to a survey published earlier this month by Columbia University.

The study, conducted by the National Center for Disaster Preparedness at the Mailman School of Public Health, examined the impact on 1,200 people, including children and families living within 10 miles of the coastal region.  Among the findings:  a decline in household income, job loss, increased mental and physical problems, and uncertainty about moving to another location.

These social impacts fall under the human rights umbrella, an area often overlooked in discussions about corporate obligations.  Human rights is a term often reserved for so-called “Third World” or “developing” nations, not here in the US.  Yet business and human rights are more closely linked throughout the world than many people think.  Ruggie’s piece, based on a longer article by Kennedy School Senior Fellow John Sherman, shows what happens when business fails “to anticipate and plan for catastrophic risks [that] can devastate companies, society, communities, and the environment.”  Ruggie and Sherman emphasize that corporate actions – and risk management processes – can have an impact on human rights.

Human rights due diligence is an integral component embedded in something called Enterprise Risk Management (ERM), a discipline that arose from the proposed sinking of the Brent Spar tanker and the Ken Saro-Wiwa execution in Nigeria in mid-90s.  Ruggie and Sherman call ERM a “moral technology” that requires companies to assess the financial implications of all risks, be they economic, social, or environmental.  Human rights due diligence is the second of three interrelated “pillars” of the SRSG’s “Protect, Respect, Remedy Framework” for business and human rights.  Following the SRSG framework requires a company to:

• have a human rights policy;
• assess its human rights impacts (referred to as “Human Rights Impact Assessment”, or HRIA);
• integrate its policy into its management and culture in order to manage its impacts; and
• track and monitor performance.

Organizations have been slow to enact Human Rights Impact Assessments, though some pioneering work is underway – such as Oxfam’s Poverty Footprint methodology, which looks beyond individual companies to community impact.  But the HRIA methodology traces back to 2002, when BP commissioned the first one – for its Tangguh Liquid Natural Gas Project in Indonesia.

Apparently, BP has not continued to apply human rights due diligence.  One can only imagine what might have happened had BP conducted better risk management, addressing environmental as well as human rights impacts and the “potentially overlapping but different risk perspectives of their external stakeholders.”  Perhaps then it would have determined that the risk of a “runaway spill” infringing on fundamental human rights outweighed the pittance saved by cutting corners and compromising safety.