The Interplay between Business and Human Rights and the Rule of Law

The Interplay between Business and Human Rights and the Rule of Law

Podcast with Nadia Bernaz

Dr. Nadia Bernaz discusses the interplay between business, human rights, and the rule of law. She examines whether businesses are recipients or creators of the rule of law and the impact of strong or weak rule of law environments on corporate actors. The conversation also touches upon societal expectations and the limitations of existing benchmarks.

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Transcript of the podcast

Introduction and Importance of the Initiative

Olena Uvarova:  Hello. We start our podcast, and our guest today is not just a guest, but also the co-coordinator of this initiative – Dr. Nadia Bernaz, Associate Professor in the Law group at Wageningen University. And her book «Business and Human Rights: History, Law and Policy – Bridging the Accountability Gap» was rated as one of the best human rights books of all time. Nadia, hello. And my first question to you is: could you share with our listeners why this initiative is important for you personally and for the business and human rights field?

Nadia Bernaz: Well, thank you for this question. I’m delighted to be here and to be part of this podcast. And I think it’s important that business and human rights as a field also looks into other areas of law and, in this case, rule of law discourse and literature. Because it’s not a standalone area of academic research and activism. I think it’s important that we understand the relationships between our field and other fields and rule of law discussions, of course, are very rich, very important, and I think there are many overlaps between what we do as business or what I do as a business and human rights scholar and also what rule of law research actually is.

Business as a Recipient and Creator of the Rule of Law

Olena Uvarova: Thank you for this response. And actually, what do you think: Should business be considered as a recipient of the rule of law requirements, or is it a creator of law environment as well?

Nadia Bernaz: Yeah, that’s a good question. I think it’s clear, and I admit this is not squarely my field. Of course, usually the rule of law discussions are about public actors and it’s all about public power, accountability, following rules. The fact that lawmakers, policymakers, that their power is constrained by legislation, that the same rules apply to everyone. So that is usually the discussions with regard to the rule of law. Within this, we have, of course, human rights as one of the branches of law that tries to constrain public power and to ensure that in the course of governing, for example, minorities, minority rights are respected. So usually that’s how the debates are going. Within this, corporations, of course, are recipients of that to the extent that they are actors in the same way as citizens and in a way benefit from having a clear environment where laws are adopted through a clear process, that there’s transparency and accountability in this process. So they clearly are recipients.

But I think the interesting discussion that maybe we’ll get into in a minute is to try and look at what is the role of corporate actors in interfering or maybe contributing to an environment with a strong rule of law.

The Role of General Rule of Law Environment

Olena Uvarova: … and talking about environment of the rule of law, I’m wondering actually, what do you think what environment is more comfortable for business actors to operate with: strong rule of law or weak rule of law? Because we know that many business models actually are based on operating in countries with weak rule of law.

Nadia Bernaz: Yeah, I think that’s a big debate. And it also probably depends on what environment we’re talking about and also how bad is it? Like how weak is the rule of law? I think there’s also a spectrum there when we look at how countries advertise themselves for the business world and to attract investment, for example. Often you will hear countries say, we have a predictable legal system, we follow the rule of law, this is a safe environment, this is a safe business environment. So you can, with confidence, come and invest your money. And everything is well organized and predictable. These are the rights that workers have, for example. And so all of that generally feels that is seen as a positive to attract investment and therefore is good for business and that you would think, therefore, that private actors are interested in investing in such an environment because in the end, it’s going to pay off.

That being said, as you said, we also see for sure some businesses that operate in weak rule of law environments in places where, for example, there’s corruption or there are democratic institutions that don’t work the way they should be, there also minorities can be marginalized or are vulnerable for various reasons, and yet we see companies investing in those countries. Now, this is where I think it depends also on the sector. It is clear for companies that extract things out of the ground, whether this is oil or mining, that, of course, this is very much dependent on where the resources actually are. So in a way, if the business model is to extract gold, for example, out of the ground, then you go where it is. And perhaps that means some compromises around the environment in which you operate. So, for example, a place where the rule of law is weak, then in a way, the business model is connected to that environment. But I think it’s different for manufacturing, for example, where you need also the primary materials to make it happen, but if you make clothes, for example, it can be in Ethiopia in the same way as it can be in Vietnam or in China, it’s a factory and so it’s not as dependent on the natural resources in the ground as, of course, mining would be. So for these kind of industries that are less geographically dependent, so to speak.

It’s something I’ve been thinking of and actually don’t have a clear answer, because I still think that the majority of businesses would prefer environments with strong rule of law. And that being said, that can be, I think, an elastic. I don’t know if I can say that in English, but a concept that is not the same for everyone. So, for example, you can imagine clear, predictable laws, but that doesn’t necessarily mean that there is strong protection of labor, for example. So two things can be true at the same time. I think particularly in China, I think it’s a pretty reliable legal system in that sense. There’s predictability, which is an important element of the rule of law. But are workers’ rights protected in the way they should be? I think we can agree, especially depending on regions, that the answer is no. And companies invest there and have business there because it’s cheap and the labor is well qualified and does a great job at producing the things that we use. So, I think it really depends on which industry and which country we’re talking about.

Social Expectations and Corporate Responsibility to Respect

Olena Uvarova: Thank you very much. We discussed with you a little bit the concept of social expectations and how this concept impacts on the business and human rights framework. I have the impression that when we are talking about the rule of law environment, there is a correlation between this environment and social expectations, of course, in the concrete society and probably the weak rule of law makes these social expectations for corporate responsibility to respect human rights much lower than in the society with strong rule of law. What do you think? Can you agree with this?

Nadia Bernaz: Yeah, I think that’s a nice way to frame it because, of course, part of a democracy and functioning democratic institutions is also, and therefore part of the rule of law concept, is strong counterpowers, whether we’re talking about a strong independent press and journalists or strong civil society organizations, people who are aware and educated about their rights and about what is good practice, whether it’s business or government. So that’s for sure the expectations will depend, will be different from society to society. I think that’s, if we are going to, here speaking perhaps with my academic hat on, but if we are going to explore the links between the business and human rights agenda or research and the rule of law, I think societal expectations is a good sort of entry point to look at both issues. I would agree with that.

Rethinking the Framework of Rule of Law

Olena Uvarova: And talking about the state’s control over economic actors, what do you think is it enough the existing framework of the rule of law, or do we need to rethink it? And also, to add to this question… we have, a well-established index of the rule of law, but of course, this index is oriented towards the states as the addressees of the rule of law requirements. But probably we need to focus more on how the state controls economic actors and what is the influence of economic actors on state power for the assessment of the rule of law in a concrete country and for having this ranking of the rule of law in different countries.

Nadia Bernaz: That’s a good question. Of course, like I was saying earlier, the traditional rule of law discussion is about public actors, accountability of public actors. And of course, this is essential. This is a very important topic. Whatever I’m going to say next is not to dilute, it’s not to say that it’s not relevant to talk about public actors’ accountability anymore. It definitely is. But I find it interesting indeed that usually when we discuss the rule of law, this is pretty much in the hands of constitutional lawyers or civil society organizations working on civil and political rights, things like access to justice, transparency of public institutions. Also, the corruption of public actors is a big aspect of the rule of law discussions. But I find it interesting and I know this is the theme of the podcast series, but I find it interesting how little discussion there is regarding private actors.

Now, admittedly, this is not an area that I have looked at in detail, but I think it’s important to include the private sector in these discussions, because I think the time when you had an where you could conceptualize a state, for example, as a powerful, as a variety of public actors working together under this state umbrella and that everybody else is a non-state actor and a passive recipient of rules etc. I think this is in many countries, not the reality, whether we’re talking about established democracies in Western Europe, for example, or in other countries. The links between the private sector and the state are present. These people go to the same schools, are educated in the same universities, go to the same dinner parties. It’s a bit naive to think that there’s no influence there, and it’s not necessarily negative for human rights or democracies in general. But I think we need to recognize that those spheres do not operate in silos.

The Limitations of Existing Benchmarks

Olena Uvarova: And on the opposite side, benchmarks in the field of business and human rights or related to this field have the focus on human rights, but they can’t reflect the influence of corporate actors on the rule of law environment in a broader perspective and how corporate actors could impact political power and how this corporate capture could be reflected. Because talking about Ukraine, for example, if we take indicators of the corporate human rights benchmark, some companies which have very strong political influence, they will be on the top of corporate human rights benchmark because they have quite good situation with human rights. They could have human rights policies. They even could have human rights impact assessment procedure and so on, and they could have human rights reports or sustainability reports or whatever and so on. But at the same time, they could create this social injustice just because they have very strong political influence in the society. And I don’t have answer for myself how we can develop indicators or tools to identify this impact and how we should reflect the results of this assessment for human rights sphere. So it’s an open question for me personally.

Nadia Bernaz: I think this is really interesting. It connects to many important questions in business and human rights. So the benchmarks that we have, the corporate human rights benchmark particularly, but also other benchmarks like the one developed by our colleagues at Banktrack here in the Netherlands. They serve a purpose, of course, I think it’s important work. It also is the kind of work that whether we like it or not companies relate to this sort of ranking and quantifying human rights issues, which I know is controversial, but I think in a way is necessary if  we want to reach out to people who can be sensitive to these kind of questions. But I think those benchmarks also are a reflection of the weaknesses of the business and human rights framework in the sense that these benchmarks are, of course, company by company are very much focused on what this particular company is doing. Do they have a human rights due diligence process? Do they communicate all the elements of Pillar 2 of the UN guiding principles? And that to me is connected a little bit to the tragedy of Pillar 2, which is that we’ve now been focusing, I’m just looking at the date, our attention for almost five years on human rights due diligence, now sustainability due diligence as the draft directive of the EU is calling it.

But for me, Pillar 2 is a lot more than human rights due diligence. It’s first and foremost about corporate responsibility, which to me is a much broader concept than human rights due diligence, which by definition is technical company by company risk-based approach. Do I have any risks? Yes/no. If so, let me just do something about it. It’s very much focused on what each company is doing. While, in a way, forgetting the wider concept of corporate responsibility, which to me is much more powerful and much broader than human rights due diligence. I know we had this discussion before when we talked about solidarity as a concept also, and whether there is corporate solidarity issue, whether it is present in the UN Guiding Principles and I think I said the same thing there, which is we need to stop focusing on human rights due diligence only, because otherwise I think we’re missing a large part of the business and human rights agenda and Pillar 2. So whether we can translate that into indicators and benchmarks in the same way as the human rights due diligence process has been, I think it’s something that we need to talk about and discuss it.

But it would be interesting to translate that into numbers. I think there is value in doing this work. I remember the discussions about developing business and human rights indicators when these discussions started back in (not going to say a date because that will be embarrassing), but some time ago I was part of discussions and there were discussions around how do we deal with historical violations of rights. You know, to be clear, is it right, for example, that a well-known Dutch oil company could score decently on any human rights indicator? When we know that they have lawsuits against them, they’ve had many lawsuits against them. And there’s lots of debates about continuing dubious practices or their continuing dubious practices around the world. So how do we account for that?

I think it’s a similar discussion here with the rule of law. If we don’t have it, we’re perhaps not measuring what matters the most, but it’s going to be difficult to account for this and to transform that somehow into, I don’t know, either numbers or a spectrum of colors. But I think there’s a very interesting question. And as an academic, a methodological challenge, the kind of challenge that I like to try and solve.

Concluding Thoughts and Future Endeavors

Olena Uvarova:  Actually, it’s a very good point, you know, to have a pause. I would say not the end of our conversation, but something like a pause, because we will continue our conversations during the next podcasts and we will be back to these questions. And also we will have webinars, we can announce together with Nadia that during this fall we will have at least five webinars that we already agreed to have, and all these webinars will be focused on different aspects of the rule of law and corporate actors. And we can also say that there is a challenge for us to work on these indicators and to combine these perspectives of human rights, of democracy, of the rule of law. But it’s an interesting challenge and I hope that we will be back with some results, with some interesting results soon. Thank you. Thank you very much. It was very interesting and I’m really sure that our listeners will know more after this podcast. Thank you very much. Nadia.

Nadia Bernaz: Thank you. Bye bye.