The need to consider the impact of business operations and relationships on human rights is a growing feature of the corporate landscape, says Louisa Soper. Operational, social, economic, geographical and political factors inherent to the mining industry mean players at all levels of the metals and minerals supply chain should pay close attention to their human rights footprint.
In early September the UK government published its national action plan for implementing the UN Guiding Principles on Business and Human Rights, sending a clear message to businesses that they must understand and manage their human rights impacts both domestically and abroad. The UN Guiding Principles are highly relevant to the mining industry and this article explains how understanding the impact of the Guiding Principles and taking on their recommendations is vital to companies' future success.
Over the past two decades the significance given to the protection and promotion of human rights as a part of the wider concept of corporate social responsibility has grown considerably. As guardians of international law, states have traditionally held the primary responsibility of ensuring human rights standards are observed. While businesses have for a long time addressed some human rights standards through their internal operations, for example, implementing occupational health and safety policies, maintaining environmental protection standards and promoting equal opportunities, their responsibility has been limited to complying with the domestic laws set down at state level. However, this "public/private" distinction is becoming increasingly blurred by a growing recognition that businesses' actions and operations can severely impact on the enjoyment of human rights of others. Increasing focus on transparency and moral accountability for corporate entities through, for example, bribery and corruption legislation, has contributed to a shift in emphasis towards businesses taking greater levels of responsibility for the adverse impacts of their own operations wherever, and with whomever, they do business.
Any new large scale project is bound to have human rights implications and how those implications are assessed and addressed is of growing importance. Whether one is dealing with the development of a new mine in Central Africa or introducing fracking to the Home Counties in England, the scope for complex and sensitive human rights issues to arise is very real.
While some voluntary codes and practices already exist to encourage businesses to comply with international human rights standards (such as the UN Global Compact), prior to 2011 there were no detailed uniform guidelines in existence which provided practical recommendations for states and businesses alike to address their human rights impacts. In June 2011, the United Nations Human Rights Council unanimously endorsed the UN Guiding Principles on Business and Human Rights ("UNGPs"). The UNGPs set out a 'three pillar' approach with respect to businesses and human rights – the Protect, Respect, Remedy framework.
THE UNGPS' 'THREE PILLARS'
Under the second pillar, businesses should: (i) avoid causing, contributing to or being linked to adverse human rights impacts; (ii) seek to prevent or mitigate adverse human rights linked to their operations; and (iii) should address such impacts when they occur.
UNGPS' RECOMMENDATIONS TO BUSINESS
In addition to the UNGPs there are many other multi-stakeholder initiatives ("MSIs") and other principles relevant to the mining industry. For example:
- Voluntary Principles on Security and Human Rights (established 2000) . an MSI that promotes implementation of a set of principles that guide oil, gas, and mining companies on providing security for their operations in a manner that respects human rights.
- Equator Principles III ("gEP III") (the third edition was released in June 2013) . an agreement amongst 76 global financial institutions to apply environmental and social standards to certain investment decisions. The most recent edition expressly refers to the UNGPs and recommends conducting human rights due diligence in specific ghigh risk circumstancesh.
Such principles are now driving businesses to consider their human rights impacts outside the traditional parameters of CSR and treat them as a standalone risk which can be measured and reported on, much like any other compliance issue.
Currently, none of these principles are legally binding but, they are clearly gaining traction at government level and among intergovernmental bodies and it is expected that, over time, they will become the uniform global standard for UK business.
Operational, social, economic, geographical and political factors inherent to the mining industry mean players at all levels of the metals and minerals supply chain should pay close attention to their human rights footprint in order to comply with the UNGPs and other principles.
The UNGPs state that companies should take responsibility for human rights impacts throughout their supply chain.
POTENTIAL HUMAN RIGHTS IMPACTS OF THE MINING INDUSTRY
Industry participants should therefore carry out an appropriate level of human rights due diligence of both "upstream" and "downstream". As metals and minerals are used by a variety of end users, such due diligence can have a wide reach at the 'downstream' end.
It should be noted that operations in, or supply chains linked to, areas of conflict/political instability can implicate companies with adverse human rights impacts, even if they are not directly involved. The fact that companies operate in states with poor human rights records does not mean they should not adhere to the UNGPs.
Human rights due diligence is not merely another layer of corporate administration. A pro-active approach to human rights issues can generate competitive advantages.
Currently the UNGPs and other principles are not legally binding. In these tough economic times, why then should companies incur added costs of adhering to such principles if failure to do so does not create any immediate risk of civil or criminal sanction? Some incentives to adhere are set out below:
Enhanced operational efficiency: Actual or perceived involvement with human rights abuse can cause significant disruption to operations (eg investigations by domestic or international bodies, protests by stakeholders, NGOs or other interested parties, etc).
Reduced reputational risk: 'Social good' is increasingly a factor in the decision making of investors, consumers and other end users. Therefore, damage to a company's reputation caused by actual or perceived involvement with adverse human rights impacts can negatively affect its access to capital and markets.
Improved access to financing: For example, signatories to EP III are required not to provide certain loans to projects where the borrower will not or is unable to comply with the social requirements of EP III.
Investor pressure: There are increasing opportunities through 'ethical investors' who seek to invest in companies demonstrating commitment and leadership in the areas of human rights and sustainability.
Avoidance of legal claims/fines: The UNGPS have already been adopted into significant intergovernmental standards, such as the OECD Guidelines for Multinational Enterprises and the IFC Performance Standards on Social and Environmental Responsibility. This is significant because the OECD has the power to investigate a complaint.
TAKE CONTROL OF YOUR HUMAN RIGHTS FOOTPRINT
- Always consider human rights risks/challenges of the project/target jurisdiction
- Choose partners carefully . undertake due diligence, convey human rights expectations at an early stage, etc
- Where appropriate refer to third party standards in contracts . UNGPs, MSIs, etc
Joint Venture Agreements
- Select roles and responsibilities carefully . which partner is best placed to manage human rights issues?
- Seek financing from institutions that have a clear set of human rights standards to establish leverage over partners
- Stipulate operating procedures that address human rights
- A minority shareholder may seek to exert control on human rights issues by, amongst other means:
- Having decisions on important human rights issues reserved for unanimous shareholder approval
- Requiring the majority shareholder to report on human rights issues (this should be backed with an appropriate audit right for the minority shareholder)
- Update M&A due diligence checklists to include human rights issues
- A purchaser may find it difficult to price liabilities related to human rights impacts . instead, it should consider estimating the cost of bringing a target into compliance with its standards
Supply Chain Contracting
- Communicate human rights expectations for suppliers and service providers by developing codes of practice, standard terms and conditions and other policies
- Similar to joint ventures
- Consider use of contract stabilisation clauses
- Engage the community and include grievance resolution mechanisms
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