This presentation is a companion piece to a larger work that looks at the grand tension between the corporate model of wealth generation and human
rights abuses. I advocate that the integration and implementation of pre-emptive risk management
tools can operationalise corporate human rights obligations within the UN Ruggie framework. In the
context of a case study analysis of water privatisation in Argentina, I have placed specific focus on the
corporate operationalisation of (human rights) due diligence utilizing a Human Rights Impact
Assessment model in its ex-ante project planning as an effective risk aversion-profit generation
model.
Corporate Responsibility and Sustainability 2009 - South Africa
Human Rights Impact Assesments And Corporate Responsibility
1. Slide 1
The Role of Human Rights Impact
Assessments in the Corporate
Operationalisation of Human Rights.
Slide 2
The Corporation and Social
Responsibility.
Adrian Reyes
2. Slide 3
Corporations & CSR
• The tension between corporate wealth
generation and social responsibility
• Stakeholder models and the challenges
they bring to CSR
• Corporations and project planning:
integrating the social into the financial?
• A Rights based approach
•The tension between corporate wealth generation and social responsibility
•Two views on corporations
•Those who believe corporations exist solely for maximizing returns to shareholders –
they believe only people can have a social responsibility
•The other side believe corporations like people, must be involved in society – business
should actively promote the public interest
•Stakeholder models and the challenges they bring to CSR
•Investor Model: ‘shares are just a commodity’, investment maximization first priority.
•Owner Model: shares are their main source of wealth, Need to maximize return over a long-
term basis and requires social involvement
•one share is used as a commodity just to build profit and the other share is used as a way to
build wealth in society and the corporation.
•Corporations and project planning: integrating the social into the financial?
•A Rights based approach should be taken on a pro-active level: before the corporation even
initiates a project
•Why?
•Corporations are closer to the ground where human rights abuses occur.
•Companies have the direct responsibility to respect, protect and fulfill
3. •It is largely a voluntary duty now but the social and legislative expectations of
corporations are changing.
•Corporations cannot change the world, but they can protect the world within their
sphere of action
•Benefits:
•Reputation of company and products
•limiting risks to human rights is limiting the risk of damaging your reputation.
•working on human rights reduces legal claims and litigation, saving possible
legal costs.
•Enhance employee productivity:
•Improving working conditions could lead to more motivated and productive
workers.
•Attractive investment climate
•Enhance current and future income
•Transparency and managing human rights builds trust with stakeholders, such as
NGOs, the community, customers, companies within the supply chain or even
investors.
•Useful for companies seeking to be listed on Social Responsible Investment
Indices (SRI)
•Contribution to sustainable development:
•Amelioration of sub-par conditions in host economies
•contributing to economic growth and creating jobs
•reinforce poverty reduction strategies in the country of operation
•promote human rights through representative and inspirational action
•Contribution to CSR through Corporate Norming
•Large multinationals that incorporate human rights into their activities will serve
as normative examples to other large MNCs and reset the market standard to
one expectant of a human rights model to corporate action
•Effective risk identification and management
•Identifying potential human rights abuses and modifying a project to avoid them
saves time on the ground and money spent on defending resulting abuses.
4. Slide 4
The International
Legal Framework
• International law on Human Rights
– Legally binding on states
– Normatively binding on Corporations
• Corporations and International Law.
– The failure of regulation in the
developing world
– Lack of enforceability
– Low corporate onus = shopping for
most favourable jurisdiction
International law on Human Rights
Legally binding on states
Normatively binding on Corporations
Corporations and International Law.
The failure of regulation in the developing world
Lack of enforceability
Low corporate onus = shopping for most favourable jurisdiction
5. Slide 5
Human Rights Impact
Assessments
Adrian Reyes
Slide 6
What are HRIAs?
HRIA
6. •Corporate Social Responsibility goes beyond ordinary statutory obligations.
•It requires a due diligence process.
•The main objective of conducting a Human Rights Impact Assessment (HRIA) is to identify, understand
and manage corporate impacts in the field of human rights.
•Originally developed to help affected communities highlight suffered abuses, but an emerging use now
is by companies to avoid such abuses.
•An HRIA helps a company to gain a thorough understanding of the (potential) impact of corporate
activities, a better understanding of the stakeholders perspectives, and ways to manage corporate
impacts in a process that benefits all involved.
•Integrates internationally recognized human rights principles into a company’s business model
•Universal Declaration of Human Rights (UDHR)
•UN Global Compact (UNGC)
•OECD Guidelines for Multinational Enterprises
•ILO Conventions and Declarations
•Other project specific international standards can be integrated depending on the industry
•Creates a standard of behaviour for each identified human rights indicator that is not a minimum of
behaviour but a standard that meets the most stringent international standards for that indicator
7. Slide 7
A Rights Based Approach
•HRIAs should become a part of every business’ culture = engaging stakeholders, employees and
populations in host countries
•Effective integration of a Rights Based Approach leveraging the HRIA as the tool for reforming the
project planning culture of the corporation results in a cyclical corporate business model where the
HRIA can be utilized at each step to plan, evaluate and report on a company’s actions
Slide 8
Types of HRIAs.
1. Community HRIA Guide for Foreign
Investment projects
2. Guide for Conflict Sensitive Business
Practice: Guidance for Extractive Industries
3. Human Rights Impact Assessment and
Management Process
4. International Business Leaders Forum and
International Finance Corporation
methodology
5. Human Rights Compliance Assessment
6. Human Rights Risk Tools
•The challenge of integrating HRIAs is the lack of one internationally recognized tool
•The plus of this is that HRIAs can be selected based on the scope of the project and the industry the
corporation is in
•It is important to select the appropriate tool for the business model of the corporation to ensure that
all potential ramifications of investment/development are identified
8. Slide 9
The Appropriate Tool.
A. Purpose, social focus N. Practicality of the tool
B. Scope O. Costs
C. Normative framework and P. Timeline
thematic issues
D. Cross-sector
E. Country focus
F. Location business management
system
G. Operational or planning
H. Kind of assessment
I. Target users
J. Approach
K. Indicators
L. Participatory approach
M. Results
When choosing an HRIA tool, a corporation should keep in mind the totality of their project:
A. Purpose, social focus
B. Scope
C. Normative framework and thematic issues
D. Cross-sector
E. Country focus
F. Location business management system
G. Operational or planning
H. Kind of assessment
I. Target users
J. Approach
K. Indicators
L. Participatory approach
M. Results
N. Practicality of the tool
O. Costs
P. Timeline
9. Slide 10
Sample HRIA
•Developed by the Danish Institute for Human Rights as a supplement to a full HR assessment
•The HRCA Quick Check comprises approximately 10% of all the questions contained in
the entire HRCA database and relates to some of the most essential human rights
issues a company must consider in relation to its activities.
This check was developed in cooperation with a group of development finance institutes to provide
companies
and investment funds with a condensed assessment covering key human rights issues.
•There are three types of indicators in the tool: policy, procedure and performance.
•The policy indicators seek to determine whether your company has policies or guidelines in
place to address the human rights issue of concern in the main question.
•The procedural indicators inquire whether your company has appropriate and sufficient
procedures in place to effectuate the policies,
•and the performance indicators request verification of company performance.
10. Slide 11
:
Case Study
•My case study will look at an already played out corporate investment scenario and the role HRIA
played and could have played in the context of a single human right: The human right to water
Slide 12
The Human Right to Water
Adrian Reyes
11. Slide 13
General Comment #15
The State Obligation
Water should be:
1.Sufficient.
2.Safe and acceptable.
3.Accessible.
4.Affordable.
The Non-State Obligation
Water policy should incorporate:
1. Cooperation
2. Incorporation
2. Prioritization
Although only two UN treaties specifically mention the right to water, it is inferred in many other UN
accords and the UN has issued commentary on the need of states to provide water as a human
right. Currently General Comment 15 from the Office of the High Commissioner for Human Rights
enumerates the state and non-state obligations regarding water rights
• State Obligation:
Water should be:
1.Sufficient.
2.Safe and acceptable.
3.Accessible.
4.Affordable.
2. Obligations of non-state actors:
•Co-operate effectively with States Parties in relation to the implementation of the right to water
•Incorporate human rights law and principles into both policy and action;
•Give priority to the most vulnerable or marginalized groups of the population in the provision of aid
and the distribution and management of water and water facilities
12. Slide 14
Evolution of Water Privatization
in Argentina
•Water decree formalizes regulatory framework for water and sewage
1992 •Argentina signed bilateral investment treaties for the promotion and protection of investment with France, Spain and Britain.
•Original 30-year contract is signed, containing tariff structure and expansion plans.
1993
Aguas Argentinas
•Aguas Argentinas requests an extraordinary review of tariffs. It receives a 13.5% increase in tariffs in July 1994. The infrastructure charge – which was compulsory for all users
receiving new or improved connections -- is raised by 40%.21
1994
•The contract is renegotiated. Tariffs paid by residential users increase 37%. The infrastructure charge is replaced with another charge.
1997
•The company asks for another extraordinary review. Tariffs paid by residential users increase 5.31%.
1998
•A five-year review of tariffs leads to two more increases – 10.4% in 2001 and 4.4% in 2002.
2001
•The government of Argentina declares a state of economic emergency and devalues the peso.
2002
•Aguas Argentinas requests arbitration at the International Centre for Settlement of Investment Disputes in Washington, which is part of the World Bank, claiming the terms
of the contract have been violated.
2003
•The government of Argentina cancels the contract with Aguas Argentinas, citing non-compliance by the company = the presence of nitrates in the water supply.
2006 •Government replaced Aguas Argentinas with a state-owned body, Agua y Saneamientos Argentinos Sociedad Anónima
Slide 15
Case Study of Aguas Argentinas
& The Republic of Argentina
•Analyze the investment strategy of Suez.
•Contrast & compare with the actual
experience of the Argentine stakeholders.
•Apply a HRIA model in the context of General
Comment #15 to the facts to see how its
utilization could have affected the experience
of both sides and any shortcomings.
•Utilize the HRIA results and the Ruggie report
to provide suggestions for a way forward.
13. Slide 16
The Suez Position
Adrian Reyes
•Did not implement a stakeholder interaction model until 2003
•This social engineering strategy developed a “water for all” model that Suez uses in subsequent
contracts
• Involve the communities in all of the decision-making processes
• Use innovative technologies
• Over and above water, ensure the sustainability of the projects
•However contract was cancelled by Argentine government in 2006
•The total net income earned prior to the devaluation more than tripled the initial equity investment.
•High shareholder returns came from a combination of a highly leveraged capital structure and tariff
increases.
14. Slide 17
The Argentine Stakeholder
Position
Adrian Reyes
•Suez failure to comply with contract was more severe in the poorest areas.
•did fulfill the targets in those districts for which the costs of service expansion seemed to be low and
the economic well-being of users offered the most attractive income stream.
•The non-fulfilment of targets implies the failure to supply water to more than 1 million people and
sewerage to about half a million people.
•Increasing tariff structures made water and sewage access not just functionally but financially
impossible for many
•Effectively denied the human right to water to the poor sectors of Buenos Aires society
Slide 18