State Responsiblity and Corporate Self-Regulation

By Jason MacLeod on November 1, 2011 — 2 mins read

The Ruggie Report made an astute observation when it came to the human rights enforcement gap. It stated –

 

The root cause of the business and human rights predicament today lies in the governance gaps created by globalization – between the scope and impact of economic forces and actors, and the capacity of societies to manage their adverse consequences. These governance gaps provide the permissive environment for wrongful acts by companies of all kinds without adequate sanctioning or reparation. How to narrow and ultimately bridge the gaps in relation to human rights is our fundamental challenge.

 

If the State does not have the infrastructure to address complex issues of corporate irresponsibility, environmental degradation or human rights abuses, the corporation is, in many ways, the regulator of its own behavior.  This self-regulation of corporate behavior, especially when the bad actor is itself, exemplifies this gap in governance.  In an earlier UN report entitled, Business and human rights- mapping international standards of responsibility and accountability for corporate acts, the authors surveyed country’s policies of regulation and adjudication of corporate activities relating to human rights.  They found –

 

very few report having policies, programmes or tools designed specifically to deal with corporate human rights challenges.  A larger number say they rely on the framework of corporate responsibility initiatives, including such soft law instruments as the Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises, or voluntary initiatives like the United Nations Global Compact.

 

The advent of globalization brought an accelerated development/exploitation agenda to many lesser developed countries.  The “race to the bottom” of domestic enforcement regimes in the countries, whether through investment contracts or agreements acknowledging the “flexible requirements” of the business, has resulted in these governmental policies that rely on international organizations or the corporation itself.  This relationship between the abused, abuser, and the state portray a discordant relationship founded on the natural resource principle, capitalism and profit.  Those in power misused it.

Corporations operate in LDCs because of the cheap labor, lacks regulations, and cheap production costs.  Relying on “soft power,” whether that is through self enforcement or a international certification body, is clearly a gap between globalization and state protection of its citizens.  The bargaining power between the LDC and the Corporation further exacerbates this relationship.  The corporation exercises imperial exploitation – once the labor or natural resource is exploited, they move to another site.  State protection is essential to reign in the exploitative nature of a for-profit transnational corporation based in an LDC.   The report, Business and human rights- mapping international standards of responsibility and accountability for corporate acts, further concluded –

 

Judging from the treaty body commentaries, and reinforced by the Special Representative’s questionnaire survey of States, not all State structures as a whole appear to have internalized the full meaning of the State duty to protect, nor its implications with regard to preventing and punishing abuses by non-State actors, including business.  Nor do States seem to be taking full advantage of the many legal and policy tools at their disposal to meet their treaty obligations.  Insofar as the duty to protect lies at the very foundation of the international human rights regime, this uncertainty gives rise to concern.

 

States must unequivocally take up responsibility of protecting its citizens against corporate induced human rights abuses.  Relying on corporate self-regulation will result in a drawn out process that is uneven in its enforcement and application.  By focusing on state responsibility and the legal tools available is another powerful tool for LDCs to fight back against corporate exploitation and imperialism on their soil.