By Prof. Kariuki Muigua SC, OGW, Ph.D, FCS, FCIArb, Ch.Arb, Managing Partner, Kariuki Muigua & Co. Advocates & Member, Permanent Court of Arbitration (PCA).
ESG are increasingly driving corporate respect for human rights. It has been observed that as companies increasingly recognize the reputational and financial risks of adverse human rights impacts, corporate human rights commitments and due diligence practices have become more prevalent. The relationship between human rights and corporate sustainability practices is recognized under the United Nations 2030 Agenda for Sustainable Development. The Agenda represents a shared blue print for peace and prosperity for people and the planet in the quest towards the ideal of Sustainable Development.
The Agenda envisions attainment of the ideal of Sustainable Development through 17 Sustainable Development Goals (SDGs) which seek to strike a balance between social, economic and environmental facets of sustainability. It has been argued that human rights and the 2030 Agenda for Sustainable Development are inextricably linked. The 2030 Agenda is explicitly grounded in international human rights. It has been asserted that the 17 SDGs seek to realize the human rights of all, and more than 90% of the targets directly reflect elements of international human rights and labour standards.
The United Nations Guiding Principles on Business and Human Rights provide a framework for realizing Environmental, Social and Governance standards within the human rights framework by enshrining the corporate responsibility to respect human rights. They are the world’s most authoritative, normative framework guiding responsible business conduct and addressing human rights abuses in business operations and global supply chains.
The Principles are grounded in recognition of States’ existing obligations to respect, protect and fulfil human rights and fundamental freedoms; the role of business enterprises as specialized organs of society performing specialized functions, required to comply with all applicable laws and to respect human rights; and the need for rights and obligations to be matched to appropriate and effective remedies when breached.
Among the fundamental principles under the framework is that business enterprises should respect human rights. This means that they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved. Embracing the United Nations Guiding Principles on Business and Human Rights can therefore promote corporate respect for human rights under the ESG agenda.
In addition, The Hague Rules on Business and Human Rights Arbitration flow from the UN Guiding Principles on Business and Human Rights and provide a framework through which business entities can be compelled to comply with ESG standards through arbitration. Further, the Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises on Responsible Business Conduct are recommendations jointly addressed by governments to multinational enterprises to enhance the business contribution to Sustainable Development and address adverse impacts associated with business activities on people, planet, and society.
The Guidelines provide that Multinational Enterprises should respect the internationally recognised human rights of those affected by their activities. They further urge Multinational Enterprises to avoid causing or contributing to adverse human rights impacts and address such impacts when they occur; seek ways to prevent or mitigate adverse human rights impacts that are directly linked to their business operations, products or services by a business relationship, even if they do not contribute to those impacts; have a publicly available policy commitment to respect human rights; carry out human rights due diligence as appropriate to their size, the nature and context of operations and the severity of the risks of adverse human rights impacts; and provide for or co-operate through legitimate processes in the remediation of adverse human rights impacts where they identify that they have caused or contributed to these impacts.
One of the key goals of ESG is to foster sustainable, responsible or ethical investments. The OECD Guidelines can help Multinational Enterprises achieve this goal by integrating human rights due diligence in their investment practices. Further, the International Labour Organization (ILO) Declaration on Fundamental Principles and Rights at Work seeks to foster respect for fundamental human rights and freedoms at work.
The ILO Declaration stipulates that in seeking to maintain the link between social progress and economic growth, the guarantee of fundamental principles and rights at work is of particular significance in that it enables the persons concerned to claim freely and on the basis of equality of opportunity their fair share of the wealth which they have helped to generate, and to achieve fully their human potential.
It sets out fundamental human rights and freedoms that should be upheld by all persons including states and businesses among them being the freedom of association and the effective recognition of the right to collective bargaining; the elimination of all forms of forced or compulsory labour; the effective abolition of child labour; the elimination of discrimination in respect of employment and occupation; and a safe and healthy working environment.
The ILO Declaration is an expression of commitment by governments, employers’ and workers’ organizations to uphold basic human rights and values that are vital to social and economic lives. At a continental level, the African Commission on Human and Peoples’ Rights through its Resolution on Business and Human Rights in Africa states that respect for human rights norms and principles by business enterprises in the countries of operation is a prerequisite for the Sustainable Development envisaged in African Union’s Agenda 2063.
The Resolution seeks to foster effective domestication of applicable regional human rights standards on business and human rights and the development of mechanisms for their effective implementation. It urges Africa to embrace a human rights-based approach to development.
At a national level, the Nairobi Securities Exchange (NSE) ESG Disclosures Guidance Manual encourages listed companies to assess impact of ESG issues to their organisations (such as climate change and human rights) in addition to their organisations own ESG impacts to society (such as material resource use and emissions) when determining material ESG impacts for disclosure. It requires listed companies to report on several ESG issues including their impacts on human rights, and how they manage these impacts. The NSE Disclosures Guidance Manual is therefore important in enhancing respect for human rights by listed companies in Kenya by requiring them to report on their human rights practices in their ESG Disclosures.
From the foregoing, it emerges that human rights are well placed within the ESG framework at the global, continental and national levels. However, it has been pointed out that some corporations fail to connect human rights standards and processes with ESG criteria and investment practices because of a prevailing lack of understanding on how human rights issues should be reflected in social criteria, environmental and governance indicators.
In addition, it has been contended that in most instances where human rights are considered in the ESG framework, they are limited to the ‘S’ tenet of ESG and not incorporated in other factors. Further, it has been argued that the human rights criteria adopted by most companies is limited to addressing climate change, advancing diversity and safety in the workplace, and striving for ethical supply chains. It has been pointed out that while these issues are critically important, they do not reflect the full spectrum of human rights.
As a result of the foregoing, it has been contended that ESG as a framework does not sufficiently capture harms to people (and resulting risk to business) or guide decisions that take human rights into account. Further, it has been argued that ESG can easily fail to identify and address notable human rights harms. It is therefore necessary to embrace human rights within the ESG framework in order to foster sustainability.
*This is an extract from Kenya’s First Clean and Healthy Environment Book: Actualizing the Right to a Clean and Healthy Environment (Glenwood, Nairobi, January 2024) by Hon. Prof. Kariuki Muigua SC.
