Lessons from past approaches towards human rights and corruption point to pursuing them together in future
Transparency International UK, London
Transparency International UK, London
*Please note this article is correct as of May 2021.
There is no longer any doubt that corruption undermines the enjoyment of human rights and that these two policy agendas are linked.
International corporate corruption and business impacts on human rights have gained new public prominence. Civil society, investors and consumers increasingly expect business to proactively respond to and manage these risks, whether mandated by law or not. Where governments previously emphasised legislation to combat corruption, legislatures and international bodies now seem more focused on protecting human rights and the environment. Despite this new emphasis, lawmakers must continually keep corruption in view.
This year, the European Commission plans to issue legislation that would impose mandatory human rights and environmental due diligence. This article highlights the linkages between the anti-corruption and human rights and advocates for a mutual reinforcement of efforts to achieve robust and coherent legal obligations for companies that prevent both corruption and human rights violations.
Corruption and human rights – how the risks and impacts are interlinked
Corruption can have a devastating and longstanding impact on human rights, and it can occur in every sector and context. For example, within industries requiring large tracts of land, secrecy and bribery is particularly prevalent in land-acquisition deals. When officials accept bribes from companies for access to or to register land, this can deprive indigenous peoples from access to their ancestral land and result in extreme environmental degradation. Within the supply chain, corruption in public procurement is the government’s top corruption risk and excludes businesses from fair tendering processes. This results in key public services vital to the realisation of human rights being only partially delivered or not at all.
Other examples include anonymous companies that may serve as vehicles for corrupt practices, including money laundering, bribery, and tax evasion. In December 2018, Transparency International UK revealed how 1,201 opaque companies in Britain’s overseas territories had been used to inflict over £250bn in economic damage through corruption over the past few decades alone. Again, this movement of illicit wealth diverts resources available for public services that give effect to economic, social and cultural rights – instead lining the pockets of the corrupt.
In addition, opaque and disproportionate corporate lobbying practices can lead to corruption and conflicts of interest. It is well known that some companies have used aggressive lobbying to block policies to tackle climate change. Environmental degradation and climate change interfere with the enjoyment of human rights such as the rights to life, water and sanitation, food, health, development, gender rights and an adequate standard of living.
Not a blank slate – transparency in human rights developments
Transparency requirements in the business and human rights field already exist, as some regulations now require companies to report on human rights breaches in their supply chains. Led by the 2012 California Transparency in the Supply Chain Act, some jurisdictions have passed similar regulations requiring companies to disclose how they address human rights risks in the supply chain. These regulations include the United Kingdom’s Modern Slavery Act (2015) and the Australian Modern Slavery Act (2018).
In contrast, anti-corruption disclosure legislation has been scattered and enforcement frequently toothless, often applicable only to specific sectors or anti-corruption risks. For example, with regards to the information on how companies manage their corruption risks, the 2014 European Union Non-Financial Reporting Directive requires public companies with more than 500 employees to disclose information on environmental, social, human rights, employee and anti-corruption matters necessary for understanding a company’s impact. However, in 2019, the European Parliament concluded that the disclosures ‘are insufficiently developed’ and launched a consultation into the revision of the Directive, of which an amended draft is expected at the end of April. Furthermore, the EU Fifth Anti-Money Laundering Directive, which requires corporates to disclose beneficial ownership information and which originally only applied to banks, has since been updated to apply to more sectors as legislation catches up with the understanding of the industries enabling and facilitating money laundering.
As a result of weak or poorly enforced anti-corruption transparency legislation, meaningful and quality corporate disclosures have been more limited than human rights disclosures. This leaves businesses to navigate voluntary disclosures outside of legislative demands, exacerbating the inconsistent corporate reporting we see today. Two reasons for this have been the lack of a comprehensive business case and a lack of guidance for anti-corruption corporate transparency. With that in mind, in March 2020 Transparency International UK launched Open Business. This report lays out the business case and identifies five high-risk corruption areas that businesses need to address and report on in order to mitigate their corruption risks. These are:
- anti-corruption programme transparency;
- beneficial ownership transparency;
- country-by-country reporting;
- organisational transparency; and
- corporate political engagement transparency.
Open Business specifically calls for companies to be transparent about their anti-corruption activities. It is not enough for a company to say it is addressing corruption risks or that it is behaving ethically, the company needs to demonstrate it too.
Due diligence: anti-corruption took a lead, let’s keep it at hand
Legislation criminalising corruption in the form of the payment of bribes to foreign public officials dates back to the 1970s, when the United States passed the Foreign Corrupt Practices Act. Global anti-corruption frameworks then developed in the 1990s and 2011 saw the passage of the UK Bribery Act, then the most advanced anti-corruption legislation within any European country.
Further legislation in other jurisdictions and international frameworks, such as the OECD Convention on Combating Bribery and the United Nations Convention against Corruption, have also set a global standard on paper, if not in practice. These legislative and international frameworks require anti-corruption due diligence processes for companies operating in countries where this legislation applies and progress in past decades presented a promising direction of travel for tackling corporate corruption through anti-corruption due diligence. However, while there are some recent examples of activity in integrity due diligence guidance updates, in practice there is still a long way to go. In the case of the EU, only three of the 27 Member States (France, Germany and Italy) impose legal obligations on larger enterprises relating to the prevention and detection of corruption.
As noted above, certain countries have passed legislation relating to transparency within supply chains to tackle human rights abuses. However, there are just a handful of national laws that require corporations to conduct human rights due diligence, and even less that require transparency. The French Corporate Duty of Vigilance Law is the most progressive example.
In the last year, several organisations have issued guidance to emphasise that businesses must evaluate the differences and synergies of these two areas, learn from each other and join forces where suitable. We agree with Business at the OECD that ‘[l]everaging synergies between human rights and anti-corruption efforts may have mutually reinforcing effects and serve to avoid duplication of efforts’.
Even if the focus of anti-corruption due diligence and human rights differ, there are significant points of overlap that companies may use to their benefit given the expense, time commitment and operational impact of the assessments. A recent report by the European Parliament, with recommendations to the European Commission on the direction of legislation on corporate due diligence and corporate accountability, explicitly states that ‘comprehensive transparency requirements are a crucial element of legislation on mandatory due diligence’. The benefits from transparency include the better oversight and control given to suppliers and manufacturers and a better understanding of supply chains.
Transparency also facilitates increased public trust from stakeholders and consumers that the products they are consuming have been produced in a fair and safe way, free from human rights concerns.
A harmonised legal framework
Investors, consumers and some groups of companies are welcoming these legislative developments which bring consistency to the treatment of corporate impacts on human rights and the environment. Alongside our colleagues from Transparency International EU (TI-EU) we hope to capitalise on this support and ongoing legislative advances. Transparency International advocates for robust anti-corruption provisions in the EU legislative proposal which intends to introduce mandatory human rights and environmental due diligence for companies operating in the EU. TI-EU’s research makes the case for a strong alignment amongst the EU Member States on specific standards in the fight against corruption.
Transparency International seeks a harmonised legal framework that allows companies to adopt group-wide policies that shall apply to all the entities operating in the EU, with no or only minor differences from Member State to Member State. Any discrepancies in these standards only serve to hinder the achievement of a level playing field.
Strengthened legislation at the EU level raises the bar for corporate behaviour beyond the EU and offers a model of legislation for other countries to follow, including the UK. The legislation at EU level could also apply to those companies operating in the UK but registered in a European country, or UK registered companies that operate within the European Union – requiring them to increase their due diligence requirements.
On 10 March this year the European Parliament adopted an own-initiative report with recommendations to the Commission on corporate due diligence and corporate accountability. This document sets out the types of business-related adverse impacts that will be part of the scope: we are pleased to see that the Parliament recommends that the upcoming European Commission draft directive on corporate due diligence in supply chains should include anti-corruption provisions such as non-compliance with OECD Guidelines for Multinational Enterprises on Combating Bribery. We welcome this development and hope the European Commission incorporates this recommendation in the upcoming regulation.
The need for collaboration on anti-corruption and human rights
It is also positive to see a range of actors now engaging holistically on the issues of corruption and human rights. The introduction of mandatory human rights and environment due diligence legislation provides an opportunity to harmonise, and render more effective, approaches to prevent corporate corruption and human rights abuses. There is a role here for business, legislation and civil society to work together to ensure that the synergies between the two issues are not lost when developing legislation across jurisdictions.
As a community of actors seeking to reduce corruption and end human rights abuses, we can and should support each other’s efforts, and share learnings and resources. This includes widening the conversation to ensure that opportunities are not lost for the two issues to be robustly and effectively addressed.
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