Gerald Pachoud

Gerald Pachoud is an independent Corporate Responsibility and Human Rights policy expert and former Special Representative of the UN Assistant Secretary General on Business and Human Rights.

Five years ago, I was contacted by Trafigura to “discuss human rights”. Trafigura? It was surprising, yet interesting.

Five years later, Trafigura has made real progress on human rights. It has developed a coherent human rights policy framework, contractor due diligence and responsible sourcing programmes, plus a commitment to build transparency and enhance disclosures, including disclosing payments to governments under the Extractive Industries Transparency Initiative (EITI) so that citizens can hold their governments to account.

2021 marked the 10th anniversary of the United Nations Guiding Principles on Business and Human Rights (UNGPs), the authoritative standard for corporate respect for human rights. In many ways, the Trafigura journey is illustrative of these past ten years of implementation of the UNGPS. Basically, they have provided a global consensus, as well as a baseline, on how companies need to respect the full range of human rights in all business contexts – something that was hotly debated before 2011.

The concept of human rights due diligence at the core of the Guiding Principles has provided business with a concrete management system to human rights, to know and show how firms can prevent or address impacts to people arising in their own operations and across their value chain. Said differently, the Guiding Principles have provided the authoritative definition on what it means to be a “responsible business,” integrating it in both policies and practices that a full range of external stakeholders, from civil society to investors to public authorities, can assess on their own.

The clarity brought by the Guiding Principles, combined with their wide uptake in States and businesses during the last decade, has also paved the way for regulation, evolving from specific issues such as ‘conflict minerals’ in the US and in the European Union, or modern slavery and forced labour, for example in the UK, Australia or Indonesia. It has also led to more comprehensive laws in France, Germany and Norway, as well as a potentially high impact project of a comprehensive business and human rights regulation at the European Union level and at the United Nations.

More broadly, this trend mirrors the emergence of ESG (Environmental, Social and Governance) regimes, soft and hard, with regulators and policymakers globally strengthening rules and practices. It is difficult seeing this changing anytime soon, as much as the ‘E’ echoes the alarm raised on climate change, the ‘S’ echoes the risks of adverse business impacts on people, and the ‘G’ underlines the need for quality corporate governance to create value.

Few sectors are more impacted by this trend towards ESG in general, and human rights in particular, than the energy sector, including the oil and gas industry. Some companies are adapting to this new environment, many others are still lagging behind. But there is no doubt that these regulatory developments, as well as increased pressure from investors, highlight the fact that companies that adopted the Guiding Principles did the right thing – not only in a moral or idealistic sense, but they understood it as a pure business strategic decision, seeing and adapting to the market conditions of the very near future, rather than just today.

The implementation of the Guiding Principles, and of the corporate responsibility to respect human rights, are still in their early days and undoubtedly face a number of challenges and growing pains.

First, the doctrine of shareholder value maximisation remains widespread among executives and in boardrooms of companies, public or private. Adopting a human rights approach is still too often perceived as going against the bottom line. More tangibly, the drive to mandatory corporate human rights due diligence at national and regional levels has the potential to respond to this challenge, and to accelerate uptake of serious human rights policies and practices by business.

Second, the drive towards legalisation is not without challenge itself. Attention needs to be paid to ensure that the various requirements on corporate human rights due diligence are not diverging too much from jurisdiction to jurisdiction, and are always at a minimum aligned with the Guiding Principles, including avoiding perfunctory ‘check box’ diligence approaches.

Third, despite the rise of ESG, human rights are still perceived largely disconnected from ESG criteria, with many companies dealing with each issue completely siloed from each other. This, in turn, leads to suboptimal practices in all fields. A key step towards more coherence, and a clear signal to business to deal with sustainability, climate change and human rights as one, has been made by the 2020 EU taxonomy for sustainable activities which specifically requires that businesses’ economic activities can “only qualify as environmentally sustainable where they are carried out in alignment with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights”.

Finally, businesses need to be able to track the effectiveness of their human rights performance. At the moment, there is no clear data to assess this performance, nor a clear definition, and thereby standardisation, of corporate human rights data. In particular, most of the information is centred on activities – what is done, rather than the outcome or what has been achieved, without identifying the degree to which human rights efforts are successful in producing the desired results. Moving from quantitative to qualitative data remains to be identified or defined.

Looking ahead, the world’s transition to a green economy is front and centre for most sectors, and essential for energy companies. It is, of course, critical that businesses take ambitious steps to combat gradual climate change up to extreme weather events. It is gradually better understood that addressing climate change impact is addressing human rights impacts. However, simply being ‘green and looking at environmentally friendly, low-carbon forms of energy does not mean there are no human rights impacts, as demonstrated, for instance, by the challenges linked to the exploitation of cobalt.

Trafigura makes trade happen, and makes it its mission to do that responsibly. This is a journey of continuous improvement. Progress has been made in many areas, yet challenges remain, including, in the green economy of today, playing a significant role in constructing a green market aligned with human rights.