Tag Archives: due diligence

Corporate Knowing and Showing: tell us what harm you might cause

This article was first appeared in The Jakarta Post on 6 June 2016, the article may be found here.

The basic tenet of creating an institution called corporation is to bring more benefit for the society at large. Corporations can generate economic wealth at a much larger scale than individual business. The government provide incentives for corporations, as a means to increase production, which at the end may help the government in distributing the wealth.

Unfortunately, on the other side of the coin, corporate business operations have also been accused as the main cause of environment degradation, triggering social conflicts, and human rights violations. Almost all company may be related to at least one of those issues. For instance, a global food chain company may be accused for fueling deforestation by using paper pack made from the Indonesian rain forest timber.

In the earlier day, the environment, consumers and human rights activist relied on the ‘naming and shaming’ campaign, in making the company to respond to their voices. Negative publicity and boycott on the company’s product are some examples.  This campaign assume that reputation is the most important element for company’s business. The naming and shaming campaign tries to create an incentive for corporation to stop its harmful activities.

Unfortunately, there are a number situations that could make this naming and shaming approach difficult to achieve its objectives. First, the complex structure of corporation. The layer of corporate groups and the web of subsidiaries across borders make it difficult to trace which company should be held responsible for the harm. Moreover, with its capital power, corporations can easily transfer its operation to other countries, leaving the harm unaddressed.

Second, corporations hide behind the national law and the local government protection. Many companies take the advantage on the absence of law, regulation uncertainty and weak legal enforcement in the country where they operates.  Third, to avoid being targeted to a negative publicity, company create its own voluntary standards which contains policy to respect social, environment and human rights issues. Whereas, most of these standards are used as a lip service, and many of them are lacking of public verification mechanism.

Since the birth of the United Nations Guideline on Business and Human Rights in 2011, there has been a fundamental change in the way corporations should behave towards social, environment and human rights issues. This guideline introduces a new approach which replace the naming and shaming campaign. It endorses a new rule of the game, that is the ‘knowing and showing’ approach.

Instead of blaming and punishing companies with bad publicity to stop their negative impact to society, the knowing and showing approach provide a chance for companies to take prevention steps  before the harm occurs.  Companies are encouraged to conduct assessment to know what harm they may cause to the environment, local communities, and employees. Likewise, companies are endorsed to communicate to the public, all measures that they have taken to minimise the negative impact arising out of their business operation. In this way, the company will be able to tell the real situation to the public, yet maintain its reputation.

How does this knowing and showing approach work? The UN guideline provides a practical instrument to implement this approach. This instrument is the human rights due diligence. The human rights due diligence starts with commitment by company to respect human rights, and followed by assessing what impact to human rights that the company may cause, in what way, and to what level of severance.

The result of this assessment must be known by every personnel at all level within the company, and the company must take appropriate measure to address every single identified harm, including to cooperate with government and non government institution relating with particular issue. The measure that has been taken must be evaluated, whether or not this measure has properly avoid the negative impact to occur or minimising the impact when it occurs. Finally, the company must prepare a regular report which contains all information about the above activities, and it must be accessible to the public.

Preparing human rights due diligence at the earlier phase of a project would be an ideal condition. However, this due diligence may also be conducted at any stage of a business activities, regardless of the sector and the size of the business. For instance, it is not too late for companies involved in the reclamation project in the Teluk Jakarta to conduct human rights due diligence. Likewise, it would be better for the company operating a goldmine project in Tumpang Pitu Banyuwangi to prepare due diligence, as the project has only started a few weeks ago.

However, we should bear in mind that human rights due diligence is not aiming at justifying the business project to continue. As mentioned above, it is a mechanism for the company to realise what harm they may cause, and a tool for all stakeholders to communicate and find a better solution to avoid human rights violations from occurring. When the human rights impact is so severe, there is no other option for the company, unless to halt the project. As we are all agree that human lives worth more than everything.

Leave a comment

Filed under Uncategorized