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Round Table Conference:

“The challenge of better practice in the Oil and Gas Industry: Dialogue between European Civil Society Groups and Multinational Oil Companies” (Mülheim an der Ruhr, Germany, 1-3 November 2000)

sponsored by Bread for the World (Brot für die Welt) and Evangelische Akademie Mülheim an der Ruhr

Presentation by Christopher Avery: “Business and Human Rights in a Time of Change – new roles for the global players"

I’m pleased to be involved in this conference, particularly because of the agenda’s practical focus.  My talk will address changes I’ve seen over the past few years, and suggest some priorities for future action.

 Before I launch in, I should explain what I now spend my time doing, since the agenda describes me somewhat mysteriously as “International Lawyer; former Legal Advisor and senior manager at the International Secretariat of Amnesty International”: 

After working 12 years with Amnesty, I have spent the past 5 years focusing on the issue of business and human rights in my personal capacity.  Indeed I want to make clear that everything I say today is presented in my personal capacity…I no longer have any formal link with Amnesty. 

In 1996-97 I carried out field research in South Africa, India, Thailand and the Philippines, examining to what extent corporations were contributing to human rights and sustainable development through their community projects.  My focus was particularly on those companies working in partnership with NGOs on grassroots projects.

After returning to London I had the opportunity to discuss human rights issues with multinational companies when they were first considering adding human rights principles to their codes of conduct.  I have chosen not to do any paid consulting for companies, in order to maintain independence, but I think it is important for human rights advocates and business people to engage with one another in a serious way…another reason I am pleased to be at this conference.

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More recently I wrote this 100-page report, Business and Human Rights in a Time of Change, published by Amnesty International UK Section in February 2000.  It is a broad survey of the subject.  My aim was to pull together in one place a summary of recent initiatives by human rights advocates, companies, governments, the United Nations and other intergovernmental organisations, and others.  The report conveys how quickly events are moving, and how important it is for companies and for human rights advocates not to be left behind. 

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 I also have set up a resource website on Business and Human Rights (www.business-humanrights.org), which contains:

 - reports and guidelines by various organisations and authors (including the text of the Amnesty-published report that I wrote); 

- recent United Nations and ILO reports; and 

- links to more than 100 other websites dealing with business and human rights: the websites of NGOs, companies, the UN and other intergovernmental organisations, etc.  

I would like to add to the website a link to Bread for the World’s draft Principles for the Oil Industry, which I find very impressive.

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As you know it’s not easy these days keeping abreast of all the fast-moving developments relating to business and human rights.  I’d like to quickly draw your attention to two information sources I have found very helpful -- you may want to consider subscribing if you are not already doing so:

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World Monitors is a consulting group in New York that helps companies address human rights and other social issues.  They issue a weekly online newsletter that summarises 10 to 15 developments each week, and guides you to further information on each development.  Unfortunately it costs money to subscribe, but for me it is the single best source of information.  You can go to their website and look at a sample past newsletter before deciding whether you want to subscribe.   

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Another good source of information is the free e-mail service that Jonathan Cohen at United Nations Association of the USA provides.  He collects together news about developments relating to business and social issues, and sends them by e-mail every week or two to a long list of interested people.  If you want to join his list to receive his e-mails, all you have to do is send him an e-mail and ask to be added.

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Now I would like to identify some recent changes we are seeing in this field:

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1. Human rights organisations are changing. 

Let’s take Amnesty International as one example.  When I worked at Amnesty in the 1980s and early 1990s, business issues were not on our radar screen.  That has changed, and Amnesty has now started hiring people to work exclusively on business issues.  Several of Amnesty’s national sections are doing impressive work on business issues, and they often engage with corporations headquartered in their countries.

Amnesty International’s Secretary-General, Pierre Sané, was invited in 1998 to speak to an international conference of oil company executives and government ministers about human rights.  The very fact that Amnesty was invited to the conference – and that Amnesty had something to say to the conference -- was a sign of how human rights had jumped onto the agenda of business, and how business had jumped onto the agenda of human rights organisations.  Amnesty’s Secretary-General included the following statement in his speech to that conference:

“It is a company’s responsibility to anticipate and provide for human rights problems at any point in its operations in the same way that it has learnt to anticipate environmental problems.  Policies need to be explicit and open.  Mistakes may still be made, but secretiveness leads to the suspicion that these are at the best carelessness, at worst collusion.”  [Offshore Northern Seas 13^th International Conference and Exhibition, Stavenger, Norway, 25-28 Aug 98]

And it’s interesting to note that one of the driving forces of Amnesty International’s work on business has been Sir Geoffrey Chandler, formerly a senior executive at Royal Dutch/ Shell, now an Amnesty activist.  Sir Geoffrey is the clearest demonstration to me that the world of business and the world of human rights are not necessarily mutually exclusive. 

2. The general public is changing.

Public opinion is growing more sceptical and more demanding.  Companies are realising that in a human rights or environmental dispute they can no longer depend on public opinion to give them the benefit of the doubt…in fact, just the reverse. 

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 [MORI-conducted opinion poll, 1995, for The Oil Industry International Exploration & Production Forum]

In the aftermath of the Brent Spar affair (the 1995 controversy surrounding Shell’s proposed deep-sea disposal of an oil installation), a MORI-conducted poll reflecting public opinion in seven West European countries showed the following levels of confidence in statements about the environment:

65% confidence in statements by academics;

27% confidence in statements by the oil industry (in Spain and Germany the figure was closer to 10%); 

63% confidence in statements by environmental groups; and 

29% confidence in government statements. 

3. Companies are changing.

Many companies now explicitly refer to human rights and the rule of law in their codes of conduct, their policies, and their public statements. 

Chris Gibson-Smith of BP Amoco recently observed: “As human rights has risen on the corporate agenda, multinational businesses are realising that the successful company of the 21^st century will be one that can manage its social and environmental performance as effectively as its business one.”

Shell worked with human rights experts to put together an impressive primer for training its managers on human rights issues.  Shell’s new business principles say Shell companies have a responsibility to “express support for fundamental human rights in line with the legitimate role of business”.  Contrast that with what Shell Nigeria’s general manager reportedly stated during the period of military rule in Nigeria: “For a commercial company trying to make investments, you need a stable environment.  Dictatorships can give you that.”

BP, Shell and many other oil companies including those represented in the room today, are engaging with human rights organisations.  Their approach is increasingly open: admitting they did not always get things right in the past, and admitting they do not have all the answers for the future.

Many companies have made some real progress in the past 5 years, incorporating human rights provisions into their codes, providing human rights training to their employees, reviewing their supply chains and security arrangements with human rights concerns in mind.  I congratulate those of you in this room, both from companies and from NGOs, who have played a role in that process.  But there is still a long way to go to ensure that the reality on the ground matches the promises in the codes.  Two participants in this conference (Patterson Ogon, Ijaw Council for Human Rights; Isaac Osuoka, Oilwatch Africa Network) are working on cases in the Delta area of Nigeria where they point to links between multinational oil companies and the state security officers committing human rights abuses.

4. The United Nations and other intergovernmental organisations are changing -- putting business on their human rights agenda.

Calls for business to respect human rights are not based only on morality and enlightened self-interest.  International law puts a clear responsibility on business. 

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As many of you know, the preamble of the Universal Declaration of Human Rights calls on “every individual and every organ of society” to promote and respect human rights.

A leading international law professor, Louis Henkin of Columbia University, recently made this comment about the preamble:

“Every individual and every organ of society excludes no one, no company, no market, no cyberspace.  The Universal Declaration applies to them all.” 

The UN Secretary General and the UN High Commissioner for Human Rights are calling on business to play a greater role in promoting human rights and development.  The International Labour Organization and the OECD have adopted principles for multinationals addressing human rights issues. 

The UN Sub-Commission on the Promotion and Protection of Human Rights has started drafting a set of human rights principles for companies. 

All these international standards are important in defining more precisely than the Universal Declaration what are the specific responsibilities of business.  I am confident that over the coming decades further international standards will be adopted on this subject. 

As for international mechanisms for actually enforcing the human rights obligations of business, unfortunately there really is no effective international court or forum where complaints about specific abuses by a specific company can be heard.  Too often national courts provide no adequate remedy for the victims of abuses by multinationals -- because it is not possible to get jurisdiction over the multinational, or because international human rights standards are not adequately protected in national law or practice, or because the host country government and/or home country government lack the political will to hold companies accountable. 

So too often victims are left without a chance to even have their complaints heard.  This then feeds into growing popular resentment towards globalisation and the power of multinationals.  There is a need for some sort of regional or international forum to fill the gap and to let both complainants and corporations be heard, in a way that will not threaten those companies which are behaving properly.  I’m glad to see that Richard Howitt (Member of the European Parliament) will be speaking at this conference about the European Parliament’s initiative (requesting the European Commission to establish an independent body of experts to monitor implementation of a code of conduct for European companies operating in developing countries, to identify best practices, and to receive complaints), because that is exactly what is needed. 

On the subject of establishing the legal accountability of business under international human rights law, an important research project is underway which I want to bring to your attention.  It is sponsored by the International Council on Human Rights Policy, which was established in 1998 to conduct research of practical relevance to organisations working in the field of human rights.  You can think of the International Council as the leading independent “think tank” on human rights issues…based in Geneva, it commissions input from the best and brightest human rights advocates in all regions of the world.  One of their main projects underway now is looking at business and human rights, specifically: 

• how international human rights law applies to business;

• what mechanisms exist to enforce human rights obligations on business;

• what are the current obstacles to effective enforcement; and

• whether there is a need for new international standards or new international mechanisms. 

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Now on to a subject I feel strongly about: the positive responsibilities of companies.  I believe insufficient attention is being given to the positive responsibilities of companies…by that, I mean two things: 

1. the responsibility of companies to promote human rights by using their influence and access to governments to urge respect for the rule of law; and

2. the responsibility of companies to use their skills and resources to contribute more effectively and more meaningfully to community development projects, education projects, environmental projects, human rights education projects, etc.  I’m not just referring to philanthropy, but to how well a company really joins with civil society to address these issues effectively at a grassroots level.

Regarding the positive responsibilities of oil companies, one other issue arising in countries like Angola is the need for more transparency about how much money is being paid by oil companies to the government for signature bonus payments and social bonus payments.  Only if those amounts are disclosed can it be determined to what extent the Angolan government is using that money for social development projects, and to what extent that money is being diverted into armaments or Swiss bank accounts while children in Angola starve to death.  I realise that oil companies respond that they are prevented by contractual confidentiality agreements with the government of Angola from disclosing the amount of these payments, but there is a growing sense that oil companies and well-intentioned governments and international institutions need to get together to find some way of making this process more transparent. 

Last week I was speaking with a former United Nations human rights officer who has discussed human rights issues with multinational oil companies in Africa.  He argues that oil companies have an incentive to play more of a leading and constructive role on human rights issues than some of them are currently doing.  His argument is that because of the nature of their exploration/drilling projects and their massive investments, oil companies have a 25-year perspective in the societies where they operate…a much more long-term perspective than governments or NGOs tend to have.  The oil companies have a long-term stake and should therefore recognise their enlightened self-interest in seeing civil society strengthened, in seeing greater respect for the rule of law, in seeing poverty and development issues more effectively addressed, etc.

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For the remainder of my presentation I want to examine how one company -- Nike -- has addressed (and failed to address) human rights issues.  I realise that this conference focuses on the oil industry, but I believe the experience of this apparel company provides lessons for all NGOs and for all companies. 

I made every effort to research Nike in a careful and balanced way.  I spoke directly with Nike critics, and with Nike managers.  I tried to reflect Nike’s achievements as well as its shortcomings.  I sent an advance copy of my draft to Nike, giving them a chance to comment or correct any inaccuracies before the material was published (chapter 5 of my report Business and Human Rights in a Time of Change deals with Nike). 

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1996: Accusations were made that Nike’s Asian factories were sweatshops where workers were underpaid and mistreated.  The allegations were specific and strong. Nike’s initial response was all too typical of companies facing allegations of human rights abuses: it denied everything and attacked the critics, saying they had “suspect motives” and were engaging in irresponsible criticism, using outdated information.    Nike tried to defend itself by citing its code of conduct, another tactic often used by companies when their human rights record is criticised.  Nike issued the following statement:

“Wherever Nike operates around the globe, it is guided by principles set forth in a Code of Conduct that binds its productions subcontractors to a signed Memorandum of Understanding.  Every Nike subcontractor is subject to systematic, unannounced evaluation carried out by Ernst & Young.  Our own reviews, as well as Ernst & Young’s, have shown that the Code of Conduct is complied with in all material terms.”

1996-97: As negative publicity continued, Nike took some steps to try to defuse the criticism.  The company joined Business for Social Responsibility, as well as President Clinton’s Apparel Industry Partnership.

March-April 1997: Nike sent Andrew Young to investigate alleged abuses in its Asian factories.  Andrew Young is a black American civil rights leader, former U.S. Ambassador to the U.N., and former mayor of Atlanta. 

Young took a 15-day tour of 12 Nike factories in Asia.  His generally favourable report about Nike’s record was strongly criticised on the grounds that he failed to do a serious job of fact-finding and investigation…it ended up backfiring on Nike, and damaged Young’s reputation.

Young spent only 3 to 4 hours in each factory, his visits were pre-announced, he did not re-visit any factories, he used Nike interpreters during his interviews with workers, he had no way of knowing whether the interpretation was accurate.  Asian human rights organisations noted that management of apparel factories typically tell workers beforehand when visitors are coming and ask them to behave well and clean up the workplace…and that workers probably assumed that the well-dressed foreigner was part of Nike and that they should therefore be careful what they said.  Nike paid Young and his consulting agency for the report…both Young and Nike refused to disclose the amount of payment.

The lesson of the heavily-criticised Young report: today a company cannot clean up its image by hiring a high-profile consultant to do a one-off evaluation.  Any monitoring process must be seen to be independent, thorough, sound and ongoing.

Nov. 1997: An internal report by Nike’s auditing firm, Ernst & Young, was leaked to the press by a disgruntled employee.  It ended up on the front page of the New York Times.  The audit found workers at a Nike factory in Vietnam were exposed to carcinogens that exceeded legal standards by 177 times, and 77 percent of employees suffered from respiratory problems.  The report noted employees at the site had to work 65 hours a week, far more than allowed by Vietnamese law…they were paid $10 per week.  This report was delivered to Nike in January 1997 but it was kept secret while Nike continued saying that there was no basis to criticise its human rights record.  So Nike had this report before Andrew Young went to Asia…but Andrew Young was not asked to visit this factory, and his report did not address these serious health and safety issues.  As one observer stated: “Either Nike withheld the Ernst & Young…audit from Andrew Young, or Andrew Young and/or his staff negligently or recklessly ignored the Ernst & Young report.” 

As for Ernst & Young, interviews of Nike workers at Indonesian factories indicated that Ernst & Young monitoring teams focused on 2 things: product quality and production quotas.  Every single worker interviewed said that Ernst & Young monitors had never asked questions about workers or factory conditions.

Ernst & Young, PriceWaterhouseCoopers and other private auditing firms have failed repeatedly in their monitoring of human rights conditions.  Specific shortcomings of auditing firms were detailed by Massachusetts Institute of Technology Professor Dara O’Rourke, in a September 2000 report entitled Monitoring the Monitors: A Critique of PriceWaterhouseCoopers Labor Monitoring (available at http://web.mit.edu/dorourke/www/index.html).  Professor O’Rourke accompanied PriceWaterhouseCoopers auditors on factory inspections in China and Korea, and evaluated their findings for a factory in Indonesia.  There is increasing criticism that private auditing firms lack the independence and lack the experience in social issues to enable them to be the primary monitors of human rights issues.  They can certainly contribute to the human rights monitoring process, but they should not be the ultimate assessor.

May 1998:  In a major speech to the National Press Club, Nike’s CEO Phil Knight made a dramatic about-turn: he announced that Nike would tighten air quality standards at its overseas factories to meet U.S. standards, would raise the minimum age of its workers, and would allow independent local labour and human rights experts to participate in factory inspections (and publish summaries of their findings).  He was remarkably candid in his speech, going so far as to say: “It has been said that Nike has single-handedly lowered the human rights standards for the sole purpose of maximizing profits.  The Nike product has become synonymous with slave wages, forced overtime and arbitrary abuse.  I truly believe that the American consumer does not want to buy products made in abusive conditions.”

That speech was welcomed by human rights advocates, but they cautioned that it was necessary to wait to see what happened in practice. 

Early 1999: Nike hits a new low: it was discovered that Joseph Ha, Nike Vice President and a Special Assistant to Nike’s CEO, made the following remarkable statement in an 11 January letter to Cu Thi Hau, President of the state-run Vietnam General Confederation of Labour:  

[TRANSPARENCY 10]  

This letter was intended by Joseph Ha to be kept private, but it became public when the Vietnam General Confederation of Labour innocently published it in its official newsletter, then BBC radio picked it up. 

When the letter became public, sources about labour conditions in Vietnam dried up.  Because Nike had equated monitoring of Nike factories with political subversion, people inside Vietnam became worried about what might happen to them if they continued the monitoring work.

When international human rights organisations found out about the Ha letter they expressed outrage at Nike, particularly concerning what they considered to be “anti-democratic and authoritarian values” reflected in the letter. 

The U.S.-based human rights organisations that sit with Nike on the Apparel Industry Partnership called on Nike to publicly reverse the position outlined in the letter and to make clear to the Vietnamese Government that Nike values the work of human rights monitors. 

  In response, Nike argued that Vice President Joseph Ha was not speaking for Nike when he wrote the letter: 

[TRANSPARENCY 11]

It seemed odd for Nike to argue that a letter on Nike letterhead from a Nike Vice President – a man who was one of only two Special Advisors to Nike CEO Phil Knight – did not represent the views of Nike.  

I believe the strong public criticism of the Ha letter reflects public concern that some companies endorse social responsibility in their public statements, then turn around and send a very different message in their private discussions

In my opinion, one legacy of the Ha letter will be: in future, when business people say they are promoting human rights through “quiet diplomacy” with government officials, the burden will be on the company to convince sceptics that such private discussions are in fact taking place, and that the right issues are being raised.  

October 1999: Responding to pressure from student protest groups in the U.S., Nike became the first large apparel company to disclose the names and locations of overseas factories which make athletic gear carrying the names of U.S. universities. 

November 1999: Business Week magazine reported that a labour rights organisation had interviewed 2300 workers at 5 Nike factories in Indonesia and found that more than half the workers said they had seen colleagues yelled at or mistreated, and one-third said they had been compelled to work overtime.  

Late 1999/early 2000: Nike says it’s giving priority to implementation of its code of conduct.  President Clinton’s Apparel Industry Partnership has evolved into an independent monitoring mechanism, the Fair Labor Association, with the participation of some respected human rights organisations, so as soon as it gets up and running there will be some form of independent monitoring of conditions at Nike’s factories.

October 2000: A few weeks ago BBC Panorama (weekly investigative television program by BBC) broadcast a hard-hitting program investigating labour conditions in Cambodian factories producing clothes for Nike and the Gap. 

I only have time to show you a 4-minute excerpt from this show…the section where the BBC producers tracked down a group of female workers in one of the Cambodian factories, and discreetly interviewed them in their residence.  

I believe the Nike case study is instructive…I do not consider it an exceptional case.  Too many other companies have been through a similar process, and too many other companies in future will – I fear – react as Nike has reacted.  

One lesson:  If Nike and other companies had been more open and constructive in addressing abuses at the outset, they could have prevented damage to their reputation, and damage to their financial bottom line…and more importantly the abuses would have been remedied sooner rather than later.   

But the main lesson of Nike and similar cases is the following: codes of conduct and voluntary initiatives will never be enough.  It shouldn’t be left to the BBC to find the abuses.  There must be genuine, sustained independent monitoring…no exceptions.  Whatever a company tells you about its human rights policies, the most important questions to ask about its code of conduct are: Does your code refer to the full range of human rights guarantees (for example, by referring to the Universal Declaration of Human Rights), rather than just selectively mentioning a few human rights standards chosen by the company?  Do you have a system of genuinely independent monitoring?  Who is doing the monitoring?  (If the answer is Ernst & Young or PriceWaterhouseCoopers, that is not enough.)   What are the guarantees of the monitor’s independence and competence?  Are you involving stakeholders in the monitoring process?   How often is the monitoring carried out?  Are the results of the monitoring published?  Those are tough questions for an NGO to ask, and tough questions for a company to answer.  But NGOs owe it to the victims of human rights violations to ask those tough questions, and companies owe it to the victims to provide clear answers.   

I agree with the following statement made in Royal Dutch/Shell’s 1998 social report.  Referring to human rights and environmental disputes, Shell said: “People are withdrawing their trust in traditional institutions unless it can be demonstrated that such faith is warranted – what has been called a move from a ‘trust me’ to a ‘show me’ world.” 

What ultimately matters is not policy, but independently verified conduct.  Very few companies in the world have so far established a genuinely independent, effective, and transparent monitoring system for their human rights conduct.  Precedents for effective independent monitoring do exist.  For example, in 1996, after a garment manufacturer in El Salvador supplying the Gap had been accused of labour abuses, agreement was ultimately reached on a system of periodic on-site visits to the factory by independent monitors.  The Independent Monitoring Group of El Salvador was composed of the Human Rights Institute of the University of Central America, the Human Rights Office of the Archdiocese of San Salvador, and the Labour Studies Centre. 

More attention needs to be paid to the substantive content of company codes of conduct.  A company should not be permitted to use its code as a means of picking and choosing only certain human rights standards for which it wishes to be held accountable.  Too many companies refer to human rights very selectively in their codes of conduct; some of them may be doing this to divert attention from their obligation to respect other internationally-recognised human rights standards not mentioned in their codes.  International human rights guarantees are universal, interdependent and indivisible.  At the very least, a company’s code of conduct should refer to its commitment to respect the Universal Declaration of Human Rights before proceeding to list specific human rights pledges particularly relevant to the company.  It is essential that codes of conduct explicitly refer to fundamental internationally-recognised rights of workers guaranteed by conventions of the International Labour Organization, including the right to freedom of association and the right to collective bargaining.  These two rights are enabling rights, meaning they are necessary to enable workers to protect their other rights .

A company code with adequate content and effective independent monitoring can play an important role in promoting and protecting human rights.  But voluntary codes of conduct can never be a substitute for vigorous oversight of corporate behaviour by local authorities, national governments (both home and host governments) and the international community.  Independent monitoring is essential to give meaning to codes of conduct, but should not be allowed to undermine (or to distract attention from) effective enforcement of national law and international standards.