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Plenary Remarks at World Mines Ministries Forum Toronto, Canada, March 3, 2006

John G. Ruggie

By John G. Ruggie

Last summer, United Nations Secretary-General Kofi Annan appointed me as his Special Representative for business and human rights, pursuant to a resolution of the UN Human Rights Commission. The Commission had become increasingly concerned about corporate related human rights abuses in a variety of sectors, including mining, and adopted what became my mandate as a means to identify ways of achieving progress.

A great deal has changed in the industry over the past several years, especially on the corporate social responsibility front. Individual firms and industry associations, such as the International Council on Metals and Mining, have worked to improve company performance, and that progress not only should be recognized but also emulated.

At the same time, in the media outlets I follow there has been extensive coverage in the past few months alone of a string of not-so-good news. What is striking about it is how perennial the issues raised are – how, despite extensive efforts, similar challenges recur, year after year. This suggests that there are deep structural problems in this sector that haven’t yet been dealt with adequately, and they include human rights.

Just yesterday, my first interim report to the Secretary-General and the Human Rights Commission was made public. It was meant to be a broad framing of human rights challenges related to business, not an examination of any particular sector. But as it turned out, the extractive industries forced themselves onto my radar screen like no other.

To get an overall sense of patterns of alleged corporate human rights abuses, I surveyed sixty-five instances recently reported by NGOs. It seems reasonable to assume that the NGOs would have picked particularly egregious cases or firms already targeted for a campaign, so these reports are not likely to be a representative sample of all situations, but of the worst.

The extractive sector – oil, gas, and mining – utterly dominates the sample, with nearly two-thirds of the total. It also accounts for the most allegations of the worst human rights abuses, up to and including complicity in crimes against humanity, typically for acts committed by security forces protecting company facilities and assets; large-scale corruption; violations of labor rights; and a broad array of abuses in relation to local communities, especially indigenous people.

Pushing on, I next asked: In what socio-political contexts did the sixty-five cases of alleged abuses take place? Here, too, the patterns are striking and not entirely unexpected.

The cases occurred in twenty-seven countries. They are mainly low-income countries, or on the low side of the middle-income category. Moreover, nearly two-thirds of them either recently emerged from or still are in conflict. Lastly, these countries are characterized by “weak governance.” On a “rule of law” index developed by the World Bank, only one of the twenty-seven falls above the average score for all countries. On the Transparency International Corruption Perceptions Index – where “zero” is labeled “highly corrupt” and “ten” is described as “most clean” – their average score is 2.6. And on the Freedom House index of political systems – where “not free” is ranked as one, “partially free” two, and “free” three – their average is 1.9.

The most prominent feature of these patterns, then, is the negative symbiosis that exists between the worst corporate-related human rights abuses and host countries that are characterized by a combination of relatively low national income, current or recent conflict exposure, and weak or corrupt governance.

This authority vacuum – or governance gap – often leads responsible companies to stumble when faced with some of the most difficult social challenges imaginable, or to try and perform de facto governmental roles in local communities for which they are ill equipped. Less responsible firms take advantage of the asymmetry of power they enjoy to do what they will. This governance gap must be bridged by efforts from all sides if companies are to sustain their social license to operate, and if the people of the countries involved are to benefit from the enormous potential contributions that mining can make to economic and social development.

I strongly suspect that if such a survey had been conducted five years ago the footwear and apparel industry would have ranked higher than it does today. In the interval, at least the premium brands have taken the challenge of corporate responsibility and accountability more seriously, by adopting codes, establishing monitoring systems, and sharing best practices.

How effectively is this happening in the mining industry? It is too soon to comment on the ICMM Principles, but I will follow their further operationalization and implementation with great interest.

A number of collaborative initiatives have been launched recently in the extractive sector to tackle some of the most pressing challenges, comprising business, civil society and governments. Corruption and the misallocation of public revenues have been endemic to this industry. They undermine the rule of law, impede the pursuit of social objectives, and contribute to conflicts that frequently foster human rights abuses.

The Extractive Industries Transparency Initiative (EITI) marks a modest beginning in establishing revenue transparency. A voluntary initiative for governments, once they join it becomes obligatory for extractives companies operating in those countries. The World Bank aggregates and publishes the taxes, royalties and fees paid by firms.
Started in 2003, currently ten countries implement EITI’s provisions and another eleven have endorsed them. But many countries that should participate do not.

The challenge of collaborative revenue management is even greater than achieving transparency, as witnessed by the possible termination of an innovative World Bank brokered agreement whereby the government of Chad had committed a significant fraction of its revenues from the Chad-Cameroon pipeline to specific development needs. The increased strain Chad now faces from the internationalization of the Darfur crisis in neighboring Sudan makes the prospect of restoring the previous formula unlikely.

The Kimberley Process Certification Scheme was launched in 2002 to stem the flow of conflict diamonds, the trade in which has fuelled devastating conflicts and human suffering in Africa. Implementation by governments is variable, and some key countries do not participate. But knowledgeable NGO sources consider the initiative to be among the more effective. No doubt this outcome is facilitated by the industry’s concentrated market structure and the fact that its chief product is a high-end luxury good. A number of officials, industry sources, and civil society actors have urged the creation of similar certification schemes for other mining sectors, including gold – a topic that is on the agenda of a South African consultation I am convening later this month.

The Voluntary Principles on Security and Human Rights (VPs), adopted in 2000, address the critical nexus between the legitimate security needs of companies in the extractive sector and the human rights of people in surrounding communities, which can be and often have been abused by security forces. In American slang, we call this a “no-brainer” – something that is obviously in everyone’s interest.

And yet, the initiative still includes only four states – the US, UK, Netherlands and Norway – although I understand that Colombia is cooperating fully and may join up formally, as may others. Sixteen companies have signed up, but not all are equally active. A number of leading NGOs also participate, but unless there is rapid progress on clear membership and performance criteria they could end up walking away.

Potentially better news came last week from the International Finance Corporation, which adopted new performance standards for the extractives sector that will become a requirement for IFC loans above US $50 million. They include standards for community health, safety, and security; labor conditions; pollution and abatement; integrated social and environmental assessments; and management systems. On security, the IFC distilled several key elements of the VPs, including security-related risk assessments. In turn, the performance standards will be included in the project lending policies of commercial banks that adhere to the so-called Equator principles, which account for some 80 percent of all global project finance. Of course, it remains to be seen how the implementation of these new standards unfolds.

In short, fragments of collaborative governance are emerging in a variety of areas, specifically tailored for their characteristic dilemma situations. Financial institutions and the investment community are becoming an important vehicle for generating multiplier effects, not only socially responsible investment funds but also gradually also mainstream institutions concerned about social and environmental risk exposure.

At the same time, there can be little doubt but that these arrangements have weaknesses as well. One is that most choose their own definitions and standards of human rights, influenced by but rarely based directly on internationally agreed standards. Those choices have as much to do with what is politically acceptable within and among the participating entities than with objective human rights needs. Much the same is true of their accountability provisions.

Moreover, these initiatives tend not to include determined laggards, who constitute the biggest problem and of whom there are many in the mining industry. Nor do they include transnational state owned enterprises, which thus far have slipped through the fragile net of external social, financial and jurisdictional constraints. Finally, even when taken together, these fragments leave large areas of human rights uncovered, and human rights in many geographical areas poorly protected.

Let me conclude by sketching out a few of the many steps that need to taken by all stakeholders in the hope of bridging some of the most critical governance gaps.

First, we need clearer standards and greater uniformity in precisely what they mean, along with more widely shared understandings of such key concepts as corporate complicity and spheres of influence. These issues are at the heart of my mandate, and I look forward to continuing to work with all stakeholders in advancing the agenda.

Second, we badly need better tools. The ability of companies fully to meet their human rights obligations depends in considerable measure on the availability of effective impact assessment tools, at national and project levels. No standard tools are currently available; all past efforts have employed ad hoc approaches. Human rights impact assessment today is as underdeveloped as environmental impact assessment was a generation or so ago, but the extractive industries are under such social and environmental stress that the time available to catch up is short.

Third, and most important for this audience, governments need to become more actively engaged. To date, too many of them have responded to the tumultuous evolution of business and human rights over the past decade as though they were mere spectators – watching a match between companies, communities, and human rights groups. I include not only host but also home governments. Some may believe they are doing business a favor by standing aside – or even in the way of greater progress. Others simply may not rank human rights high enough in their priorities to pay attention, or their officials may enjoy the private benefits of an undesirable and unsustainable social status quo – and believe me, in its worst forms the situation is unsustainable.

I applaud those governments that have been trying to find common ground, and hope that their numbers multiply – as I applaud the individual companies and business associations that are working with them to translate the curse of natural resources into a blessing.

Thank you.

 

John G. Ruggie is the Evron and Jeane Kirkpatrick Professor of International Affairs and Special Representative of the UN Secretary-General on Business & Human Rights]. Petroleumworld not necessarily share these views.

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Petroleumworld 03/19/06

Copyright ©2006 John G. Ruggie . All Rights Reserve.

 

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