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Can Big Business Police Itself on Supply-Chain Human Rights? It’s Complicated.

Codes of conduct and other voluntary regulatory mechanisms have not only failed to hold businesses to account for supply-chain human-rights abuses, but they also serve to “entrench corporate power” by preventing civil society from acting as an agent of change, a blistering new report claims.

The study of 40 international multi-stakeholder initiatives (MSIs)—including fashion-linked groups such as the Alliance for Responsible Mining, the Better Cotton Initiative, the Ethical Trading Initiative, Fair Wear Foundation, Fairtrade International and the Worldwide Responsible Accredited Production—came to the conclusion that the “grand experiment” of allowing standard-setting organizations to promote corporate accountability has failed.

MSIs, though manifold and omnipresent, are ineffective tools for holding corporations liable for abuses, protecting rights holders against human-rights violations or providing survivors and victims with access to fulsome remedial action, wrote MSI Integrity, a Berkeley, Calif.-based human-rights organization that has probed the effectiveness of voluntary efforts by corporations.

While MSIs can be “important and necessary venues” for promoting learning, dialogue and trust building between corporations and other stakeholders, which can sometimes result in positive outcomes, they are no substitute for effective public regulation and enforcement at local, national and international levels, it added. They are, in short, not fit for the purpose of protecting human rights. And despite their rapid proliferation after first emerging in the 1990s as a big-business-prescribed response to revelations of sweatshop labor, deforestation, corruption and other instances of corporate malfeasance, most have remained immune to critical interrogations about their impacts or effectiveness.

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Two “features” have intrinsically stymied the capacities of MSIs to protect human rights, MSI Insights said. For one thing, the initiatives are not “rights holder-centric,” meaning they heavily favor corporate interests in taking a top-down approach to addressing the people and working conditions that are their supposed focus. Though MSIs derive their legitimacy from the centrality of civil-society stakeholders (such as labor-rights groups) or rights holders, this perception wavers in practice. In fact, only 13 percent of the MSIs in the study included affected populations in their governing bodies, and none had a majority of rights holders on their boards.

“Centering rights holders is essential, however, for the efficacy of any initiative that purports to address human rights,” the report’s authors wrote. “Rights holders hold critical information for ensuring that standard-setting and implementation processes respond to their lived experiences. For example, what rights issues and remedies are of greatest importance to be addressed? What sort of whistleblower protections or oversight systems are needed for people to feel safe reporting alleged abuse? Are interventions actually working? Top-down approaches risk failing to harness the knowledge or trust of those whose lives or rights are at stake.”

Nearly one-third of the MSIs studied did not have grievance mechanisms for workers or communities to directly report abuses, the organization said. Out of those that did, almost all came up short meeting internationally recognized criteria for effective access to remedy—such as being transparent, accessible and equitable—as established by the United Nations Guiding Principles on Business and Human Rights.

The study further found that fewer than one in five initiatives includes rights holders in their governing bodies, and only five of the 20 oldest MSIs have directly measured their impacts on rights holders within the past five years.

The second limitation of MSIs is their failure to fundamentally restrict corporate power or address the power imbalances that drive abuse. Companies have “preserved their autonomy and safeguarded their own interests” throughout the design, governance and implementation of these initiatives while allowing governments and international organizations to abdicate their responsibilities, MSI Insights said. As a result, MSIs have become an almost-talismanic default response by corporations tackling human-rights scandals. But this apparent compromise between no regulation and mandatory government regulation is often no compromise at all.

“The mechanisms most central to rights protection, such as systems for detecting or remediating abuses, have been structurally weak,” the report noted. “This has meant that MSIs are capable of achieving positive outcomes where there is genuine commitment on the part of corporate members to change; however, when that goodwill breaks down—as it often has—MSIs have been able to do little to protect human rights.”

For MSIs to remain relevant, they need to be recognized for what they are: tools for corporate engagement rather than instruments for human-rights protection, MSI Insights said.

“To the extent that MSIs set standards and adopt practices that are human rights-maximizing—which is not always the case—they can also potentially have a positive role in norm creation and policy reform,” the group said. “However, MSIs should no longer be viewed as institutions that robustly ensure that their corporate members respect rights, provide access to remedy, or hold corporations accountable for abuses. They are simply not sufficiently resourced or structured to carry out these difficult functions. Regulation is needed for these purposes.”

And as long as corporate decisions continue to be made by executives or board members whose legal remit is to prioritize the interests and profits of shareholders, businesses will “continue to run the unacceptable risk of making decisions that harm people and the planet,” MSI Insights added.