Submission by ICCR's Human Rights Working Group to the UN High Commission on Human Rights

September 24, 2004

Dzidek Kedzia
Chief, Research and Right to Development Branch
Office of the High Commissioner for Human Rights
United Nations, CH-1211 Geneva, 10
Switzerland

Dear Dzidek Kedzia,

The Promoting Human Rights Working Group of the Interfaith Center on Corporate Responsibility (ICCR) is pleased to submit comments to the United Nations High Commissioner on Human Rights on the responsibilities of transnational corporations and other business enterprises with regard to human rights.

ICCR is a coalition of nearly 300 faith-based institutional investors representing over $100 billion in invested capital. ICCR members own shares in many large transnational corporations and have pressed corporations to adopt policies on a range of social issues, including human rights, labor rights and the environment. In addition to religious institutional members, ICCR has 25 associate members and 54 affiliate members who join in company actions to promote corporate social responsibility. These institutions include socially responsible investment firms, public pension funds, union pension funds, foundations and universities.

Since its founding in 1971, human rights has been a central element of ICCR's mission. ICCR members have focused on a number of human rights struggles, including apartheid South Africa, calling on companies to withdraw until the apartheid system was dismantled; abuses of marketing infant formula to poor families in the developing world; egregious human rights violations by the military dictatorship of Burma; labor rights abuses in the Maquiladora sector in Mexico; human rights violations in supplier factories around the world producing for US retail companies; and the need for every company to adopt comprehensive, verifiable and transparent human rights policies and practices. Through filing shareholder resolutions, holding on-going meetings with top management and public campaigns, ICCR members and associates have put human rights on the agenda of corporations as a moral and a business issue. ICCR members use the Principles for Global Corporate Responsibility: Bench Marks for Measuring Business Performance (www.bench-marks.org), a document created by ICCR and its partners around the world, to guide their corporate accountability work.

Business and human rights context. Transnational companies operating in today's global economy face significant challenges arising from diverse cultural, political and economic contexts. How a company responds to the human rights agenda has a significant impact on its business performance and the public's perception of the company. Unocal has come under concerted pressure from international human rights groups, religious shareholders and a lawsuit for participating in the building of an oil pipeline through Burma, whose government has a well-documented record of systematic human rights violations, including the use of forced labor. Likewise, Shell International faced criticism from human rights groups for its muted response to the Nigerian government's human rights abuses and executions of nine Ogoni leaders, including Ken Saro-Wiwa. Talisman Energy was forced into selling its oil development assets in Sudan as a result of pressure from human rights activists and shareholders. Credible allegations had been made that Talisman's oil development infrastructure (e.g. airfields) were being used by the Sudanese military to conduct military operations against civilian populations.

These examples have had negative impacts on the companies involved. A crisis can act as a wake-up call for top managers of companies. It is far better however to have a corporate human rights policy in place that is comprehensive, transparent, verifiable and consistently applied. To make sound investment decisions, investors need to know how a company is addressing human rights, since an increasing number of investors are concerned about human rights and the risk posed to a company that neglects its human rights obligations.

Why the United Nations Human Rights Norms are a major step forward. In ICCR's current work with over 50 companies on human rights, we hear from many top managers that it is difficult to understand all the international human rights agreements and how they apply to business. Though international human rights covenants include business (as an 'organ' of society) they are designed primarily for governments. The UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with regard to Human Rights (UN Norms) help address this confusion and eliminate any ambiguity about the obligations of private sector actors. The UN Norms are a concise distillation of internationally agreed upon human rights instruments such as the Universal Declaration of Human Rights, the International Labour Organizations' core labor conventions and the wide range of other international agreements related to human rights. The Norms help connect the dots for companies between international human rights agreements and the obligations of companies. UN Norms provide concrete guidance for companies adopting comprehensive human rights policies covering such areas as equal opportunity, security, rights of workers, respect for national sovereignty, consumer and environmental protection and provisions for implementation.

The key impact of the UN Norms for transnational corporations is the clear definition of the role of corporations as promoters of human rights "within their respective spheres of activity and influence" while affirming the primary role of government in promoting human rights and preventing abuses. The commentaries on each provision are especially helpful in providing guidance to companies designing their own policies and practices consistent with the UN Norms.

Comparison to other initiatives. A number of existing initiatives for business include respect for human rights, but do not explain and define what this concretely means. For example, the United Nations' Global Compact states ten core principles related to human rights, labor rights, the environment and corruption. However, the expectations of how companies are to implement these core principles are not clearly delineated. The Global Compact has become an important learning center for companies that have joined and fully participate, but many major companies are not a part of the process. The Global Compact continues to take a voluntary approach and is reluctant to play a role in creating norms that set obligations for corporate participants. The OECD Guidelines for Multinational Enterprises do address corporations specifically on a range of issues including the environment, bribery, employment and industrial relations. In 2000, the Guidelines were revised and an explicit reference to human rights was included. Enterprises should "respect the human rights of those affected by their activities consistent with the host government's international obligations and commitments." This is a welcome addition to the OECD Guidelines, but the Guidelines do not spell out how companies are to implement this general statement. The UN Norms provide a clearer framework for companies as they develop and "road test" human rights policies in their "spheres of activity and influence."

Advantages for Investors. Investors are increasingly aware of the potential risks to their portfolios of human rights violations committed by companies in their portfolios. A growing body of research suggests that higher standards of corporate responsibility may be correlated with improved profitability. Risks to shareholders associated with corporate violations of human rights include: damage to firms' reputations; lawsuits; interruptions of operations because of work stoppages; and loss of public trust in corporations.

Religious investors have long been concerned about the human rights records of companies in their portfolios. More recently mainstream investors, such as public pension funds, now include human rights criteria in their proxy voting, shareholder advocacy or investment decisions. Just as we seek to hold companies accountable to rigorous financial and accounting standards, investors concerned about human rights seek to hold companies accountable to consistent standards of social responsibility. The UN Norms provide well-defined expectations for corporations in the human rights area, allowing investors to measure the performance of companies against consistent standards and against peer companies. By contrast, because current human rights documents do not apply specifically to companies, their application may be open to diverse interpretations by different stakeholders, leading to confusion and conflict.

A clear set of standards would help reduce risk to investors in a number of ways:

-A corporation guided by a comprehensive set of human rights standards is less vulnerable to lawsuits.
-By following a generally accepted set of human rights standards, companies dependent on brand image may be less likely to suffer damage to their reputations as a result of publicized violations of human rights.
-In bargaining with suppliers, licensees and contractors, companies could avoid disputes over human rights protections by making use of clear standards.
-Standards create a level playing field, benefiting all companies, especially those willing to take a leadership role in promoting human rights.
-Companies that agree to adhere to the UN Norms demonstrate to investors their commitment to human rights, restoring confidence after corporate scandals and highly visible human rights abuses have eroded trust.
-Companies that adopt the UN Norms and effective management systems would reduce their exposure to potential legal action under the Alien Tort Claims Act or the International Criminal Court.
-Companies that promote and protect human rights help to create stable communities and engender economic growth, creating a better environment for business.

Implementation strategies-a critical dimension to promoting human rights norms. Without implementation steps, human rights policies are likely to be public relation exercises rather than serious steps to incorporate human rights into every aspect of business decision-making. The UN Norms in section H, "General Provisions of Implementation," suggest a number of ways the transnational corporations and other business enterprises should implement the human rights principles articulated in the Norms. There are three essential areas for implementation by business.

First, companies shall adopt corporate policies consistent with the Norms, incorporating the Norms in contracts with contractors, suppliers and licensees and periodically report on all measures taken to implement the Norms. It is ICCR's experience working with companies that unless explicit human rights policies are adopted, including ways to measure results, there is little chance of making consistent progress on human rights at the company or community level. Where companies incorporate human rights policy, human rights training of all personnel-managers, employees, suppliers, security agencies-and on-going stakeholder engagement with all parties affected by its operations, human rights promotion can become a reality and performance will likely improve.

Second, the Norms call for periodic monitoring and verification of company performance on implementing the human rights norms. A number of companies have established internal monitoring systems of their workplace codes of conduct, auditing factories for compliance. Others have used a combination of internal and external monitors to check whether basic standards are enforced at the factory level. Still others have used independent monitors made up of non-governmental organizations from local communities where factories are located, an approach supported by ICCR members. The Norms underscore the need for independent, transparent monitoring and verification of human rights policies and suggest that this could be done by the "United Nations, other international and national mechanisms already in existence or yet to be created." Clearly, no one institution or agency currently exists to fulfill this need. This is a critical area that requires further development and experimentation, one where the Norms, and the multi-stakeholder process surrounding the Norms, have the potential to create a consensus on what constitutes effective human rights monitoring and verification and what agencies need to be created.

Third, the Norms call on companies to periodically report on measures they have taken to implement the human rights protections set forth in the Norms. Public reports to shareholders and other stakeholders on how the company is implementing human rights policies is essential for assessments to be made and progress to be tracked. In November 2003, ECC Kohtes Klewes and Fishburn Hedges, consulting agencies of Germany and London respectively, sponsored the first worldwide Global Stakeholder Report on non-financial reporting. Over 1,600 people from around the world were interviewed for this first empirical study of the attitudes of diverse stakeholder groups to corporate sustainability reporting. Human rights was the single most important issue for stakeholders of all regions and groups. 62.8 percent of the respondents stated that the issue was "very important." However, human rights is rarely treated substantively in corporate reports and is often missing altogether. By emphasizing the role of transparent public reporting, the Norms can play an important role in increasing the number of companies that report on their human rights performance and contributing to the development of a common human rights reporting framework.

Implementing the UN Norms is Doable for transnational corporations. The UN Norms provide a vehicle for corporations to "road test" the Norms in their business operations. The implementation of the Norms are challenging but doable. ICCR members and associates have engaged a number of companies and worked in various levels of collaboration to assist in the development of human rights policies and practices. A number of companies in the apparel, footwear and toy industries have adopted and improved workplace human rights codes for their vendors and suppliers. Other companies from the automotive, auto parts, equipment, extractive and consumer products industries have developed human rights codes for their owned operations and for their suppliers. There are about 75 companies in the US and Europe that have human rights policies, many based on the Universal Declaration of Human Rights and the International Labor Organization's core labor standards.

For example, Alcoa adopted a human rights policy based on discussions with ICCR members and other stakeholders. Ford Motor Company adopted a human rights code that includes the ILO core labor standards and is implementing it code throughout the company and to first-tier suppliers. The Gap includes basic labor rights in its Code of Vendor Conduct, has put substantial resources into internal and independent monitoring of supplier factories and recently issued its first public report on social responsibility performance. McDonald's is implementing its code of conduct throughout its supply chain, emphasizing a systems approach that supports human rights compliance over time. Occidental Petroleum recently agreed to adopt a formal human rights policy after ICCR members and associates filed a shareholder resolution calling for the development and implementation of such a policy. Reebok's human rights program includes monitoring of its supplier factories and engagement with non-governmental organizations and unions to conduct worker education and training. The Walt Disney Company has strengthened its code of conduct, its monitoring of its vendors and licensees and stakeholder engagement and is working to achieve a greater level of compliance with labor and environmental standards that can be sustained over time. There are a number of other companies that are addressing human rights issues in some form with varying levels of effectiveness.

The UN Norms are a welcome addition to voluntary corporate codes of conduct. While these codes are important in focusing on factory conditions for workers, many are not built firmly on the internationally recognized human rights standards that make up the UN Norms. Some standards are shaped more by the culture of a company than by human rights conventions. The Norms provide a common template for all companies, establishing the expectations for minimum standards for human rights performance, which can create a level playing field for all companies.

Conclusion. The Promoting Human Rights Working Group of the Interfaith Center on Corporate Responsibility strongly supports the UN Norms and views the Norms as a significant development towards the creation of a human rights accountability framework for corporations of all sizes. We therefore encourage The High Commissioner to include in the report to the UN Commission on Human Rights:

I. Affirmation of the important work begun by the Sub-Commission on the Promotion and Protection of Human Rights, and to continue strengthening the UN Norms through a multi-stakeholder consultation process;
II. Invitation to corporations to begin to utilize the Norms and the Commentary as a tool to develop their own programs, policies and practices in the human rights arena;
III. Continuation of an open and transparent process to further develop the UN Norms so that the Norms, built on already agreed upon human rights conventions, covenants and treaties, become the clear articulation of the global community's expectations for corporate behavior with regards to human rights.

As investors, we welcome the UN Norms as an essential element of corporate social responsibility and we pledge to participate in the process that further refines the implementation strategies to make the Norms a living reality. Thank you.

Best Wishes,

David M. Schilling Doris Gormley John Wilson Bob Walker
Interfaith Center on Jesuit Conference Christian Brothers Ethical Funds
Corporate Responsibility Investment Services

Co-signers--Promoting Human Rights Working Group Members:

John Celichowski, OFM, Capuchins
Claudio Pennisi, E. Capital Partners, Milan, Italy
Nora Nash, OSF, Sisters of St. Francis of Philadelphia, PA
Patricia Marshall, SBS, Sisters of the Blessed Sacrament, Social Justice Office
Susan Jordan,SSND, Midwest Coalition of Responsible Investment and the Sisters of Notre Dam Cooperative Fund
Susan Mika, OSB, Benedictine Sisters, Boerne, Texas, Socially Responsible Investment Coalition
Louise Milone, Service Employees International Union Capital Stewards Program
Donna Meyer, Ph.D., CHRISTUS Health
Lillian A. Healy, CCVI, Congregation of the Sisters of Charity of the Incarnate Word, Houston
Ruth Kuhn, SC, Region VI Coalition for Responsible Investment, Sisters of Charity of Cincinnati
Stella Storch, Congregation, Sisters of St. Agnes, Wisconsin
Agnes Schneider, OP, Racine Dominicans, Wisconsin
Ruth Rosenbaum, Ph.D., Center for Reflection, Education and Action
Claire Regan Sisters of Charity of New York (Elizabeth Seton Federation)
Carol Cook, BVM, Sisters of Charity of the Blessed Virgin Mary
Adam Kanzer, Esq., Domini Social Investments LLC
Mary Brigit Clingman OP, Dominican Sisters, Grand Rapids, Michigan
Timothy Smith, Walden Asset Management
Seamus Finn, Missionary Oblates of Mary Immaculate
Annette M. Sinagra, OP, Dominican Sisters of Adrian, Michigan
Linda Hayes, OP, Dominican Sisters of Springfield, Illinois
Joe La Mar, Maryknoll Fathers and Brothers
Frank Rauscher, Aquinas Funds
Mark Hallinan, SJ, Society of Jesus, New York Province
Judy Byron, OP, Northwest Coalition for Responsible Development
Valerie Heinonen, OSU, Mercy Investment Program; Sisters of Mercy, Detroit; Dominican Sisters of Hope; Ursuline Sisters of Tildonk
Kathy Wright, SL, Sisters of Loretto Investment Committee
Barbara Aires, SC, Sisters of Charity of St. Elizabeth, New Jersey
Lauren Compere, Boston Common Asset Management