Business & Human Rights Series: 01 Why are Human Rights Relevant to Business?

This is the first in a series of articles on business and human rights with a specific focus on businesses domiciled and operating in Turkey. The collection of articles in this series will make up the first-ever practical guide to business and human rights in Turkey.

 

Introduction
The Legal Trend for Businesses to Respect Human Rights
Developments in Business & Human Rights in Turkey
Respecting Human Rights for Businesses: Costs & Benefits
Conclusion

Introduction

Human rights law has its origins in attempts to curtail arbitrary action by the state against its people.  States have obligations to protect, respect and fulfil the rights of natural and legal persons within their jurisdiction. With this dynamic in mind, the question for many businesses is, why should our business respect human rights? The answer lies in the growing discontent with the human rights harm created by business activity that has led to the development of human rights law instruments directed at business.

This article will provide an overview of the legal trends concerning business & human rights. Also, it will paint the larger picture for business owners and executives with regard to the costs and benefits that are attached to compliance with human rights standards, or the lack thereof, in their business operations.

Later articles in the series will offer an in-depth guide to existing and forthcoming international legal instruments in business and human rights, the components of companies’ obligation to respect human rights, systems of liability, equality in the workplace, and finally, the fundamental rights of businesses themselves.

The Legal Trend for Businesses to Respect Human Rights

Although there had been prior attempts to hold businesses accountable for their human rights impact, the turning point for the development of an international legal instrument on the issue was in 2005, when the United Nations appointed Prof. John Ruggie as the UN Special Representative on Business & Human Rights. Prof. Ruggie’s remarkable work in this post resulted in the 2011 UN Guiding Principles on Business & Human Rights (the UN Guiding Principles).[1] While the UN Guiding Principles is a non-binding soft law instrument, it is a significant step towards a coherent legal framework that ensures businesses respect human rights in their operations.

Apart from serving as an authoritative legal document itself, the UN Guiding Principles also accelerated national and international policy developments in the field. An international treaty drafting process is currently underway at the United Nations level regarding a binding treaty on business and human rights.[2] At the domestic level, the United Kingdom, Netherlands and France are among the first states to have enacted legislation requiring companies to undertake mandatory human rights due diligence.[3] Furthermore, mandatory human rights due diligence legislation is soon to be enacted at the European Union level.[4] In other parts of the world, governments are following suit and publishing national action plans on business and human rights.[5]

Developments in Business & Human Rights in Turkey

Legislative and policy developments in Turkey in the growing field of business and human rights lag behind in comparison to the European countries mentioned above. Turkey has not introduced any mandatory human rights due diligence laws nor has it established a national action plan as per Pillar I of the UN Guiding Principles.

The most relevant legislative development in Turkey concerning the obligations of businesses to respect human rights is the Corporate Governance Principles[6] introduced by Turkey’s Capital Markets Board. It states that “the corporation shall be sensitive towards its social responsibilities and comply with the regulations and ethical rules with respect to the environment, consumers, and public health. The corporation shall support and respect internationally recognized human rights. The corporation shall combat any kind of corruption, including embezzlement and bribery.

Furthermore, the Corporate Governance Principles were amended in 2020 to include environmental and social principles in line with the trend of Environmental, Social and Corporate Governance (ESG). Although they are legally unenforceable[7], large corporations operating in Turkey are, nevertheless, declaring their commitment to the Corporate Governance Principles of the Capital Markets Board and making efforts to comply with them.

Even in this domestic legal atmosphere with no binding rules, businesses operating in Turkey are not only making efforts to comply with the Corporate Governance Principles but are also taking action to comply with the UN Guiding Principles. One of the main reasons for this voluntary compliance in Turkey (and businesses elsewhere) is the unpleasant past experiences of companies in regard to grave human rights violations. Companies that have witnessed the devastating effects of human rights scandals on their competitors are taking action even though neither the international nor the domestic legal framework oblige these companies to respect human rights.

The collapse of Rana Plaza in Bangladesh, for instance, is a tragic example of grave human rights violations that led to increased human rights compliance in the garment industry. The incident resulted in more than 1000 deaths.[8] Several global brands found themselves under the spotlight for sourcing their products from Rana Plaza and not ensuring that human rights were respected throughout their supply chain.[9] The collapse of Rana Plaza and other recent tragic incidents have led responsible businesses, including those in Turkey,  to improve their human rights track record and take systematic action to ensure human rights standards are respected in their supply chain.[10]

Today, businesses are increasingly aware that they must manage and mitigate human rights risks. According to a global survey conducted in 2014 by the Economist, 83% of the surveyed senior corporate executives believe that companies have the responsibility to respect human rights and the performance of their companies in this regard have an impact on enhancing human rights protection. [11] Apart from the sentiments of senior corporate executives; investors, shareholders, consumers, governments, and civil society expect and increasingly demand businesses to respect human rights.

Such a demand also means that a statement on a company’s website declaring its commitment to respect human rights or undertaking corporate social responsibility projects are not enough. Businesses must systematically monitor, identify, assess, prevent and report their human rights impact. Businesses that have the vision to manage their human rights impact will reap the benefits in the long term. Those that lag behind will have to bear the costs.

Respecting Human Rights for Businesses: Costs & Benefits

The main goal of a company is simply to maximize profits. Sometimes, however, this goal is accomplished at the expense of the rights of individuals – the rights of  company employees, workers in the supply chain or communities affected by a company’s operations. Such human rights violations harm not only the individuals and communities but also the business itself. For a number of reasons, the potential costs that are associated with non-compliance with human rights standards in business operations clearly outweigh any reasons in favour.

Even if a government is unwilling or unable to protect the rights of individuals within its jurisdiction against the adverse human rights impact of multinational corporations, advocacy groups will organize campaigns, and local communities will push back.[12] When a business does not take its human rights impact on local communities seriously, the affected communities will gather in mass protests, disrupt the operations, and cause delays. Businesses know all too well that even a week of delay in major projects can add up to millions of dollars in costs, especially in sectors such as the extractive industries and construction.

Managing these crises expeditiously often requires the involvement of senior management. Allocation of senior staff for an extraordinary matter costs time and disrupts the regular flow of business operations. On top of that, once such events become court cases, businesses face hefty litigation fees and terrible publicity. Even if a lawsuit isn’t lost in the end, it could still take years in the courtroom – an eventual judgment lingering over a company like the sword of Damocles.

Not least, there is the reputational cost that human rights violations bring to business. Although reputational cost is not easy to quantify, it’s a cost that no business would be willing to bear. The risks attached to reputational damage include investors divesting, loss of consumer confidence in the business, and condemnation in the media.

Respecting human rights is essentially a practice of risk management, and no business would prefer not knowing the risks it faces. Businesses committed to respecting human rights will be able to identify these risks and take concrete steps to mitigate them, which will translate into business continuity, sustainability, and commercial advantage.

In the social media age, everyone is a reporter and even a seemingly innocent incident in a business’ operations, or in its supply chain, may quickly end up in the news feeds of millions of customers. One viral tweet can make the difference between attracting new customers or turning them all against the business. In this sense, systematically managing human rights risks simply means peace of mind for companies – it is a safeguard for their commercial reputation and brand image.

Apart from the mitigation of reputational costs, respecting human rights allows a business to minimize costs associated with labour disputes, and litigation initiated by advocacy groups, and victims of human rights violations. Risks can be identified and mitigated much earlier, preventing incidents evolving into a court cases. Additionally, for publicly traded companies, non-financial performance reporting is crucial for shareholder trust. A publicly-traded company reporting its human rights performance strengthens internal communication and enhances shareholder confidence.

Conclusion

For business, respecting human rights is not just a moral issue anymore. International legal developments such as the UN Guiding Principles and the Draft Binding Treaty on Business & Human Rights is moving the centre of the issue from moral concerns towards international legal obligations. States are following international developments by enacting domestic laws, and responsible businesses that are ahead of the curve are voluntarily taking action to respect human rights.

A new reality for the business world is on the horizon. How a business embraces human rights plays a crucial role in how the public and its customers perceive that business. Those that pioneer minimizing human rights risks are adding value to their business. Expectations set by the public and customers are evolving into expectations that companies set for their business partners, creating a ripple effect of compliance.

However, even with the right motivation and commitment, managing human rights risks is no easy task. Today, the opportunity for businesses is to acknowledge the intersection between business and human rights and to open the internal communication channels. No business is expected to have all the answers, but every business is expected to engage with human rights questions in a credible and systematic way.

 

[1] United Nations Human Rights Office of the High Commissioner. Guiding principles on business and human rights – Implementing the United Nations “Protect, Respect and Remedy” Framework, 2011.

[2] Elaboration of an International Legally Binding Instrument on Transnational Corporations and Other Business Enterprises with Respect to Human Rights, United Nations Human Rights Council, 26th Session, A/HRC/RES/26/9, 2014.

[3] See, Cossart, Sandra, et al. “The French Law on Duty of Care: A Historic Step Towards Making Globalization Work for All.” Business and Human Rights Journal, vol. 2, no. 2, 2017, pp. 317–323.

[4] “EU Commissioner for Justice Commits to Legislation on Mandatory Due Diligence for Companies.” Business & Human Rights Resource Centre, 30 Apr. 2020, www.business-humanrights.org/en/latest-news/eu-commissioner-for-justice-commits-to-legislation-on-mandatory-due-diligence-for-companies.

[5] See, www.globalnaps.org

[6] Official Gazette No. 02.10.2020/ 31262.

[7] Tarman, Zeynep Derya. “Turkey.” Private International Law Aspects of Corporate Social Responsibility, 2020, p. 596.

[8] “Dhaka Collapse Toll Passes 1,000.” BBC News, 10 May 2013, www.bbc.com/news/world-asia-22476774.

[9] O’Connor, Clare. “These Retailers Involved in Bangladesh Factory Disaster Have Yet to Compensate Victims.” Forbes, 26 Apr. 2014, www.forbes.com/sites/clareoconnor/2014/04/26/these-retailers-involved-in-bangladesh-factory-disaster-have-yet-to-compensate-victims/#4f73a91a211b.

[10] For a case-study on the actions taken by a Turkish apparel company that supplies goods from Bangladesh, see, https://www.businessrespecthumanrights.org/en/page/387/navigating-a-complex-apparel-supply-chain-and-a-changing-labour-market

[11] The Economist Intelligence Unit. “Road from Principles to Practice Today’s Challenges For Business in Respecting Human Rights.” The Economist, 16 March 2015.

[12] Ruggie, John Gerard. Just Business: Multinational Corporations and Human Rights. W.W. Norton, 2013, p. 18.