Aligning Business Efforts to Combat Corruption and Respect Human Rights

Over the past 25 years, there has been a significant evolution in businesses’ obligations both to combat corruption and to respect human rights. The late-1990s saw the emergence of a global anti-corruption norm, which resulted in the 2003 United Nations Convention Against Corruption (UNCAC). Although the United States stood alone in criminalizing the bribery of foreign officials for many years under the 1977 Foreign Corrupt Practices Act (FCPA), today businesses around the world risk prosecution for bribery and have responded by adopting comprehensive compliance programs.

For human rights, the 2000 United Nations Global Compact encouraged companies to respect human rights, avoid complicity in human rights abuses, and work towards the elimination of forced labor, child labor, and discrimination in employment. Businesses did not have clear guidance on the nature of these responsibilities until the 2011 United Nations Guiding Principles on Business and Human Rights (UNGPs). The UNGPs outlined a human rights due diligence (HRDD) process that businesses should follow to prevent or mitigate adverse human rights impacts connected to their operations and clarified when businesses should contribute to providing a remedy to victims.

Today, it is well accepted that corporations should combat corruption and respect human rights wherever they operate. Unfortunately, these efforts are often conducted in parallel within the organization. In a new paper, I argue that corporations should instead work to align these two efforts.

This is an especially important time for corporations and their stakeholders to start thinking of such alignment because corporations are now being forced to formalize and report on their HRDD processes. Although the UNGPs are soft law, several European countries, such as France, Germany, and the Netherlands, have adopted legislation to mandate HRDD. Most recently, in June 2023, the European Parliament approved a draft of the Corporate Sustainability Due Diligence Directive (CSDDD), which would require certain companies, including some U.S. companies, to conduct due diligence on human rights and environmental matters. Moreover, ESG investors are also starting to demand information on corporations’ human rights performance.

One reason that businesses should align their efforts is that corruption and human rights violations are highly correlated. A business operating or having business relationships in an area with a high risk of human rights violations is also likely to encounter high levels of corruption in that region. Likewise, a business that identifies a high risk of corruption in a region should also expect to find a high risk of human rights violations.

This relationship is not always apparent. Recent reports – one by the International Council on Human Rights and Transparency International and another by the United Nations Human Rights Council Advisory Committee – seek to show this relationship more clearly. The first  report shows that corruption not only can have a directly adverse impact on human rights, such as a business interfering with the right to a fair trial by bribing a judge, but also can have indirect and remote impacts.  An example of an indirect impact would be violating human rights by paying bribes to avoid health and safety violations. An example of a remote impact would be corruptly influencing the outcome of an election and causing the election of an official who takes actions that adversely impact human rights.

The second report encourages us to look beyond individual rights and consider the impacts of corruption on specific groups and society in general. Corruption most significantly harms vulnerable groups, such as women, the poor, indigenous people, and minorities. Corruption also diverts government funds away from efforts for the progressive realization of economic, social, and cultural rights. In addition, corruption undermines confidence in government and the rule of law.

Together, these reports show the strong relationship between corruption and human rights. They also allow us to recognize the widespread consequences of corruption. Thus, businesses must not simply view corruption as a criminal matter but should also consider how corruption connects them to adverse human rights impacts in multiple ways.

Businesses should also seek alignment in their anti-corruption and human rights efforts because that will help them decrease redundancies and, more importantly, enhance the effectiveness of both efforts. Corporations combat corruption through the implementation of anti-bribery and corruption (ABC) compliance programs. Key features of these programs include policies and procedures, risk assessments, employee training and communication, internal controls, and proper oversight. To respect human rights, businesses should undertake human rights due diligence (HRDD).

In practice, there is significant potential overlap between ABC compliance and HRDD, as a business’ HRDD process should focus on identifying actual or potential adverse human rights impacts and then taking appropriate action. Thus, businesses can achieve significant benefits by aligning these efforts. For example, when starting a new project or entering a new region, companies can coordinate ABC and HRDD in site visits, interviews with suppliers and other business partners, and other types of data collection. Not only would such efforts reduce costs, but it would create opportunities to understand how corruption and human rights are connected. In addition, the identification of a risk in one area should alert the company to potential problems in the other area. For instance, the United Nations Working Group on Business and Human Rights stated that if a company’s ABC efforts reveal labor inspectors demanding payments, then the company should be aware that inspected companies are at high-risk for poor working conditions.

Likewise, training programs and grievance mechanisms can be aligned to both lessen redundancies and enhance ABC and HRDD efforts. Through training, companies can ensure that employees are capable of recognizing red flags for corruption and human rights and are alert to the connections between the two areas. For grievance mechanisms, an aligned approach allows the company to process information in a manner that recognizes links between the two issues.

Alignment does not mean complete integration. As many critics of the UNGPs’ use of the term “due diligence” have pointed out, HRDD should be focused on risks to the rights holder and not on the financial or reputational risks to the company. As most companies view ABC as a criminal matter rather than a way to be a responsible company, the focus is solely on avoiding prosecution for bribery. Thus, any alignment efforts should ensure they do not restrict the goal of the company’s HRDD.

State actors, non-governmental organizations, and other stakeholders should also seek to better understand the connections between corruption and human rights. In some cases, their efforts to improve human rights may fail if the risks of corruption are not adequately considered. For example, one study reported that government efforts to improve factory safety in Bangladesh were frustrated by corrupt inspectors and auditors; the efforts to increase auditor efficiency simply made the auditors more efficient at collecting bribes. In other cases, efforts to combat corruption can also support human rights. For example, states have adopted beneficial ownership laws to combat corruption. These laws can also assist the victims of human rights abuse by allowing them to identify and then hold the violator’s true corporate owners accountable.

Overall, combatting corruption and respecting human rights requires that we better understand the relationship between the two and consider that relationship when designing and implementing efforts related to ABC and HRDD.

This post comes to us from Professor David Hess at the University of Michigan’s Stephen M. Ross School of Business. It is based on his recent paper, “Aligning Business Efforts to Combat Corruption and Respect Human Rights,” available here.