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The U.N. Special Representative for Business and Human Rights, John Ruggie, has released his final report, Guiding Principles on Business and Human Rights: Implementing the United Nations "Protect, Respect, and Remedy" Framework. The report will now be submitted to the U.N. Human Rights Council for consideration at its June 2011 session.
The Guiding Principles are intended to provide concrete and practical recommendations on how best to operationalize the "Protect, Respect, and Remedy" Framework first introduced by the Special Representative in 2008. The Framework is built around the following three "pillars":
- States have a duty to protect against human rights abuses by third parties, including companies;
- Companies have a responsibility to respect human rights; and
- Victims of human rights abuses must have access to effective remedies.
The Guiding Principles represent the conclusion of a six-year effort by the Special Representative to provide guidance and coherence to debates regarding the impacts of business activity on human rights. As stated in the introduction:
[U.N. Human Rights] Council endorsement of the Guiding Principles, by itself, will not bring business and human rights challenges to an end. But it will mark the end of the beginning: by establishing a common global platform for action, on which cumulative progress can be built, step-by-step, without foreclosing any other promising longer-term developments...The Guiding Principles' normative contribution lies not in the creation of new international law obligations but in elaborating the implications of existing standards and practices for States and businesses; integrating them within a single, logically coherent and comprehensive template, and identifying where the current regime falls short and how it should be improved.
We have previously discussed an earlier version of the report, which was released in December 2010 for public comment. In the coming months, we will publish a series of posts looking at the Guiding Principles and the implications of the Special Representative's recommendations, especially those that are directed at companies.
One of the issues we will explore in future posts is the potential for companies to be "linked" to human rights abuses through business relationships, including those with suppliers and clients. The final version of the Guiding Principles is more explicit than the previous draft in addressing concerns around business relationships, and states that the responsibility to respect human rights includes a requirement that companies "[s]eek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts."
With regard to business relationships, the Guiding Principles discuss the concept of a company's "leverage" over entities that may be the direct cause of adverse human rights impacts. As defined in the Principles, "[l]everage is considered to exist where the business enterprise has the ability to effect change in the wrongful practices of an entity that causes a harm."
Companies are expected to take "appropriate action" to prevent or mitigate adverse human rights impacts that may be associated with their operations. The final version of the Guiding Principles states that "appropriate action" will vary according to whether the company "causes or contributes to an adverse impact or whether it is is involved solely because the adverse impact is linked to its operations, products, or services through a business relationship." Appropriate action will also vary according to "the extent of [the company's] leverage in addressing the adverse impact."
One of the issues we will explore in future posts is the concept of "leverage" and the ways in which companies should evaluate both the extent, and the implications, of their leverage in different business relationships. The Guiding Principles emphasize the role of human rights due diligence as a central component of the corporate responsibility to respect human rights. Through this due diligence, companies should assess the potential for adverse human rights impacts with regard to their own activities, but should also assess the degree to which they may be linked to abuses through the activities of business partners. In situations where adverse human rights impacts are directly linked to a company’s operations, products or services by their business relationships, and stakeholders perceive that companies have the leverage to prevent or mitigate abuses by other entities, companies will find themselves under pressure to either exercise this leverage or to end the business relationship.
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Retailers and manufacturers seeking to evaluate the potential applicability of The California Transparency in Supply Chains Act to their businesses should make certain that they are aware of recent changes in the California Revenue and Tax Code. Specifically, Section 23101 of the Revenue and Tax Code was amended in a way that creates a more expansive definition of "doing business" in the state for taxable years beginning on or after January 1, 2011. 
The Securities and Exchange Commission ("SEC") has 
Gare Smith and I recently co-authored an 
