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17 November 2021

Business, Human Rights and the Environment—Using Macro Legal Analysis to Develop a Legal Framework That Coherently Addresses the Root Causes of Corporate Human Rights Violations and Environmental Degradation

School of Law, Faculty of Humanities, University of Essex, Colchester CO4 3SQ, UK
Sustainability2021, 13(22), 12709;https://doi.org/10.3390/su132212709
This article belongs to the Special Issue Business, Human Rights and the Environment
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Abstract

This article applies ‘macro’ legal analysis to the challenge of legal reform related to corporate responsibility for human rights violations and degradation of the environment. It recognises that the approaches from different communities of lawyers to the negative impacts on human rights and the environment caused by companies, sometimes operate in isolation from each other, are not always mutually supportive, can lead to a fragmentation of effort, and may not address the root causes of the problem. In particular, this article analyses the extent to which existing approaches tend to address symptoms of the issues, rather than the root causes themselves. It makes the case that in this regard specific root causes exist within the frameworks of corporate law in all jurisdictions and various aspects of international economic law too. To carry out the study, it employs macro legal analysis, a methodology not previously applied in this field, as a means of developing an understanding of the legal frameworks that, it argues, influence corporate decision making that can affect human rights and the environment. It undertakes an analysis that incorporates relevant corporate law, World Trade Organisation (WTO) law, international investment law, the law relating to multilateral development banks (MDBs), and international insurance law. By using this form of anlaysis it is possible to show how legal frameworks can operate in unison, reinforcing each other providing a cumulative effect that can influence corporate decision makers. Finally, based on the results of the analysis, it suggests a possible strategy of macro-level reforms that could be applied to the re-design of relevant legal frameworks to better facilitate the full protection of human rights and to achieve net zero degradation of the environment. As a result it seeks to demonstrate how this approach can be strategically applied by both human rights and environmental lawyers as a common pathway towards effective legal reform.

1. Introduction

Within the general field of business, human rights and the environment, a strong body of work over numerous decades has successfully established the causative links between companies and harms suffered by individuals, communities, and the environment. This has involved demonstrating that certain harms can be attributed to the operations of multinational companies (MNC), even where that harm is caused further down supply chains, or through more diffuse corporate or contractual structures. However, problematising the issues at the heart of this phenomenon is more difficult. In fact, identifying the systemic root causes of corporate human rights violations and environmental degradation is still a significant challenge. It can be argued that the international community has focussed a considerable level of attention on addressing the symptoms of the problem, rather than the root causes [1,2]. A significant proportion of research in this arena focuses on the outcomes of corporate decision making rather than the legal factors that place commercial pressure on companies to make decisions in the way that they do. Without adequately addressing these types of root causes, the international community potentially misses the opportunity to plan and conduct reform which could ensure that all corporate decision making ultimately resulted in ‘fully protected’ human rights and ‘net zero’ degradation of the environment. (Naturally the choice of terms ‘fully protected’[3] and ‘net zero’ [4] within these contexts can raise debate. For example, it can be argued that the quality of the environment should be improved rather than merely aiming for ‘net zero’ degradation. However, these terms are used to indicate the levels of protection that arguably are possible through the types of reform that are ultimately advocated.)
This article seeks to demonstrate how certain root causes of decision making that lead to corporate human rights violations and environmental degradation can be identified, how they act in concert with each other with a cumulative effect, and how they can potentially be addressed. It contends that those root causes can be found within international frameworks of corporate and international economic law, and that it is possible to recalibrate priorities and obligations where they are identified, in order that companies are predisposed to operate towards specific human rights and environmental outcomes. In doing this, it questions the over reliance on some of the existing approaches to the analysis of corporate responsibility. It argues that by focussing exclusively on single areas of law, it is possible that important factors pertaining to other legal disciplines are sometimes overlooked. It therefore seeks to demonstrate that by including the adoption of, what is termed as a ‘macro’ legal analytical approach [5], fresh perspectives can be discovered which can lead to new evidenced based pathways to reform. In this context, macro legal analysis entails the structured consideration of a of a range of relevant areas of law from different legal disciplines that affect and influence the decision making of companies. It asserts that macro legal analytical perspectives can assist in providing a pathway towards a more coherent reform agenda. With regard to corporate responsibility, it generally represents a departure from existing and orthodox approaches to legal research in this arena which tend to focus on specific legal disciplines and voluntary mechanisms rather than a fuller range of relevant legal disciplines through an inclusive and integrated methodology.
To carry out this study, a three-stage process is undertaken. Firstly, it considers traditional approaches to the issues in question. In other words, it addresses the way that human rights law and environmental law at both the national and international levels interface with the issue of corporate human rights violations and environmental degradation. It analyses the dissimilarities and similarities that they have and the manner in which this affects reform initiatives. It then considers the initiatives that have been taken by the international community to respond to the challenges of corporate human rights violations and environmental degradation. It asserts that the majority (although not all) of the responses that have been adopted address the symptoms rather than the root causes of the issues at hand. This is because they rarely address the underlying corporate law and international economic law frameworks that, this article argues, are largely responsible for predisposing corporate decision-makers to make commercial decisions that can negatively impact human rights and the environment.
This leads to the second stage, which draws on the theory of macro legal analysis, and which has not to date been applied in this context. As macro legal analysis is dissimilar to conventional forms of legal analysis, the article proceeds to explain its operation. It explains that in this context it is a process through which it is possible to assess the different laws from a variety of sources that affect an issue, where that issue is impacted by a number of different legal frameworks. It argues that this method has important application to the field of business, human rights and the environment because corporate decision making is dominated by commercial pressure derived from different legal frameworks that are generally regarded as discrete legal disciplines, but which can have a tendency to reinforce each other when acting in concert. It then explains how the results of macro legal analysis can be used as a way of developing legal and policy responses that coherently address the range of integrated factors that may be identified. Following this it proceeds to conduct a specific form of macro legal analysis that is applicable to corporate responsibility. To do this, it focuses on specific aspects of corporate law, WTO law, international investment law, the law of multilateral development banks and international insurance law to assess and highlight their individual and cumulative impacts upon corporate decision making.
The third and final stage demonstrates how the results of the analysis can provide strategic and evidence-based pathways to reform that would address root causes that drive corporate decision making. It suggests a coherent and integrated style of reform that would be applicable across relevant legal frameworks and which would complement existing approaches. In doing so, this article questions the way that we tend to consider ‘human rights law’ and ‘environmental law’ in this context and suggests that macro legal analysis can operate in tandem with micro legal analysis to enhance approaches to reform. In this sense, it can have ramifications for the way that we learn law and the way that we consider solving legal problems that are associated with more than one international legal framework. In other words, by suggesting that there is a significant and to date unexplored role for macro legal analysis within the context of corporate responsibility, it contends that there are also reforms that potentially need to be made to the way that academic lawyers in certain fields are trained in order that they are adequately equipped to adopt this type of analysis where it is appropriate to do so.

2. Problematising Existing Approaches to Corporate Responsibility within the Context of the ‘Root Causes’ of Corporate Decision Making

The entry point in any discussion of the effectiveness of efforts to control and constrain the negative impacts that companies have had upon human rights and the environment is to examine existing initiatives. This section does this but includes an analysis of the extent to which those approaches address what this article argues are root causes of corporate decision making that can have negative outcomes for human rights and the environment. In other words, it considers the extent to which those initiatives reform or seek to reform aspects of legal frameworks that can prevail upon companies by making it commercially and legally expedient to reduce financial overheads to the point that human rights and the environment can potentially be negatively impacted. Such legal frameworks may include but are not necessarily limited to those of corporate law, WTO law, international investment law, multilateral development banking law and international insurance law. In doing so, it also comments on some of the main issues that affect the practicality of applying human rights and environmental law directly to corporate decision making in this context.
Ostensibly at least human rights law and environmental law have the most obvious potential application in this context; therefore, it is important primarily to consider why these two branches of law do not necessarily achieve their objectives or operate effectively to modify corporate decision making. Clearly, human rights law and environmental law have developed separately from each other for historical and technical reasons. Human rights law in the contemporary sense began following World War II with the Universal Declaration of Human Rights in 1948 [6]. In the following two decades, the International Covenant on Civil and Political Rights (ICCPR) [7] and the International Covenant on Economic Social and Cultural Rights (ICESCR) [8] were drafted and finally signed in 1966. Therefore, the development of human rights internationally had a significant head start on international environmental law both in terms of theory and practice. Contemporary concern for the protection of the environment did not emerge until the 1960s and 1970s. It was not until 1972 that the United Nations (UN) convened the first major international conference relating to the protection of the environment in Stockholm, the UN Conference on the Human Environment (UNCHE) [9]. Therefore, from these different historical starting points, it is understandable that human rights law and environmental law have developed along different trajectories and have ultimately resulted in different institutions and seemingly different priorities.
However, more importantly in understanding the reasons for the different approaches and separation between human rights lawyers and environmental lawyers and their networks, are the differences in the fundamental precepts that govern and underpin these respective branches of law, and what that means to their development. On the one hand, human rights law is underpinned by principles such as equality, liberty and democracy; on the other, environmental law is underpinned by principles such as precaution, the polluter pays principle and intergenerational equity. Equally, both fields of law are sub-divided into many other categories of specialisation. Human rights lawyers may specialise in areas such as the use of torture, the right to an adequate standard of living, or workers’ rights. Environmental lawyers may specialise in areas such as biodiversity, climate change or transboundary pollution. As a result, where the operations of businesses have negative impacts on both human rights and the environment, human rights and environmental lawyers will inevitably use different bases through which to evaluate the issues. For example, if a factory had allowed toxins to leach into a watercourse or a lake negatively affecting a local community, a human rights lawyer might view this through the lens of the right to life, the right to health, the right to water or the right to an adequate standard of living. Conversely an environmental lawyer might analyse it through planning law, the law relating to environmental impact assessments, or water quality law. Both of course would be right to follow those respective approaches, but it illustrates the challenge of developing a coherent language when lawyers are considering the broad topic of corporate responsibility for human rights and the environment.
This example also demonstrates that there is a very strong nexus between many human rights and the environment [10,11,12]. As a result, certain human rights have been used for the protection of the environment, and new human rights that relate specifically to environmental protection have emerged in many national constitutions and also in a number of regional human rights treaties [13,14]. At the UN level, through the UN Human Rights Council special procedures system, specific work has developed since 2011 to analyse and understand those rights and their development [15]. However, whereas the majority of the issues that they ultimately relate to are involved in addressing the actions or operations of companies, those rights themselves do not directly address companies as non-state actors [16].
This leads to the general point that because public international law does not apply directly to non-state actors, companies are ultimately only legally responsible to comply with the applicable law within whichever jurisdiction they are operating in. Therefore, where States have enacted laws to regulate human rights and environmental issues as a result of international law obligations, or autonomously simply due to their own national policies, companies are of course obligated to comply with them. As such, there are of course many laws such as The Clean Water Act [17] and the Clean Air Act [18] in the United States, the Working Time Directive [19] and the Ambient Air Quality Directive [20] in the EU, the Child Worker Protection Laws in Australia [21,22,23,24], and the Canada Labour Code [25] which are consistent with international human rights and environmental law standards. In many countries, especially developed countries these laws may be effectively implemented and enforced. Some countries, however, either have not enacted laws that are consistent with international human rights or environmental standards, or they have enacted such laws but do not implement or enforce them effectively. Where companies operate in those jurisdictions, negative outcomes for human rights and the environment can and often do result [10].
As a consequence, the international community has responded to this issue with a variety of initiatives [26]. Most of them have had some degree of success but it is without doubt that the pace of change still leaves many violations of human rights and degradation of the environment. Relevant initiatives by international organisations can be traced back to the 1970s when the UN started to respond to the unwanted human rights and environmental impacts of trans-national corporations (TNC) [27]. Reports from that period include an attempt to develop an operable code of conduct for TNCs [28]. In 2000, the UN launched its Global Compact [29], a voluntary membership scheme that corporations can subscribe to, which requires that they report on the actions that they have adopted relating to human rights and environmental issues [29]. It has been widely accepted by many large corporations, states and the NGO community although its non-mandatory nature means that it does have limitations [30].
In 2003, an initiative that was derived from the UN Office of the High Commissioner for Human Rights attempted to create a set of norms that, if accepted by States, would create binding human rights and environmental obligations for TNCs [31]. Whilst those norms did generate significant support from civil society groups, many States and lawyers were critical of the approach that they represented and as a result they were not taken any further [32]. On the back of this attempt to create legally binding human rights and environmental obligations for companies, the UN in 2005 appointed John Ruggie as the Special Representative of the Secretary General (SRSG) to consider how responsibility for human rights issues could be incorporated into business practice [33]. Ruggie’s extensive work resulted in a final report which advocated a ‘protect, respect and remedy’ approach [34]. This confirmed that states are expected to ‘protect’ human rights, but also that businesses are expected to ‘respect’ human rights and that greater and more effective judicial and non-judicial remedies should be made available for the victims of human rights violations resulting from business activities. Ruggie’s approach successfully brought together states, businesses, and civil society in a consensus that further work was needed to confirm how businesses could ‘respect’ human rights and this catalysed a range of initiatives and developments that have had significant influence on business practice [35]. Rather than seeking to modify law itself, Ruggie’s approach was to develop a sense of international responsibility that all businesses should abide by and which was framed in the UN Guiding Principles on Business and Human Rights [36]. These principles were further developed into processes of human rights due diligence (HRDD) [37] that require businesses to carry out checks into any potential human rights implications of their business undertakings [38], including those relating to their supply chains [39]. These processes do not necessarily impact the root causes of corporate decision making directly but ameliorate the effect that they have on decision-makers, by placing a responsibility on them to take a broader range of factors into account when decisions are made.
An important development in certain jurisdictions over the past fifteen years has been the amendment of corporate law to modify the responsibilities that companies have towards human right and environmental issues [40,41,42,43]. These are important initiatives that represent exceptions to the general trend in the field of corporate responsibility for human rights and environmental issues. This is because they represent the partial reform of legal frameworks that this article argues, represent root causes of corporate decision making that can affect human rights and the environment. These reforms are discussed further in the next section.
Another example of an international organisation taking steps to provide clear expectations for companies regarding those stakeholders that are affected by their operations are the initiatives developed by the Organisation of Economic Cooperation and Development (OECD). It has developed a set of guidelines addressed to governments which formalise principles that multinationals should comply with [44]. However, as a non-binding initiative, it does not have any intrinsic impact upon the law or legal frameworks that this article argues are part and parcel of the root causes of corporate decision making that can have negative impacts upon human rights and the environment.
There have also been the numerous interventions of non-governmental organisations (NGOs). In particular, NGOs have publicised those operations of companies that have been prejudicial to human rights and the environment. Additionally, certain NGOs have been active in developing independent non-binding frameworks, guidelines, codes and standards for businesses that are often integral to non-mandatory reporting schemes [45,46,47]. The advantage for businesses in complying with these types of frameworks is that they can demonstrate transparency and potentially good performance in relation to the environmental, social and governance (ESG) risks associated with their operations and avail themselves of what is sometimes termed as a ‘license to operate’, which in turn can have a beneficial impact on their business [48]. (The term ‘environmental, social and governance’ or ‘ESG’ tends to be used as a term of reference for investors and businesses to consider environmental, social and governance issues in terms of the risk that they can pose for a business. Therefore, it overlaps with what the academic and international community may refer to as ‘corporate social responsibility’ [49] or simply ‘corporate responsibility’ [50] for environmental, social and governance issues, but is not synonymous.)
Many of these initiatives involve multiple stakeholders including companies or associations of companies working in conjunction with NGOs and sometimes governments too. An example of this type of initiative is the Forest Stewardship Council (FSC) [47]. This was developed in conjunction with a number of stakeholders and has resulted in voluntary standards for businesses in the timber industry [51]. Compliance with FSC standards will lead to certification which is internationally recognised [52]. Some customers will ensure that they only purchase timber that is FSC certified and as such there can be a tangible commercial benefit for companies to participate [53]. Another type of scheme is that which some stock exchanges have now developed to rank the ESG performance of listed companies. For example the Dow Jones and FTSE have developed indices and listings for companies that comply with specified ESG reporting criteria [54]. For the purposes of this analysis, it can be emphasised that notwithstanding the immense value of these types of initiatives, they do not intrinsically address what this article argues are some of the root causes of corporate decision making, found in international legal frameworks, that ultimately have negative impacts on human rights and the environment.
In sum, such initiatives tend to provide voluntary incentives for companies to comply with, rather than mandatory legal requirements. Therefore they do not fundamentally change legal frameworks that companies operate under, which include those found in corporate law, WTO law, international investment law, the law relating to multilateral development banks and international insurance law. This article contends that it is necessary to understand the impacts that those legal frameworks have on the decision making of corporate actors to have a clearer picture of the reasons why companies make the types of decisions that that they do vis à vis human rights violations and environmental degradation; it contends that this understanding can be sought and found through macro legal analysis.

5. Conclusions

This article has demonstrated that the law which affects and influences the relationship that companies have with the human rights violations and environmental degradation goes much further than the challenge of the application of human rights and environmental law to non-state actors in jurisdictions that may have fragile and ineffective legal systems. The common complaint for international lawyers is that public international law does not apply to non-state actors and hence the international system of law has been accused of being ‘quasi-feudal’ [157] in its nature and that there are questions relating to its adequacy do deal with range of different factors that influence the realities of a globalized world [153]. However, whilst this is true, this article demonstrates that there are other important issues at stake. This is because apart from the lack of direct application of international human rights law and international environmental law to companies, the extant framework of corporate and international economic law has a significant influence on the way that companies make decisions that impact upon human rights and the environment.
The use of macro legal analysis can have the effect of highlighting the relevance and influence of a diaspora of operative law. In this context it includes, but may not be limited to, corporate law, WTO law, the law of MDBs, international investment law and the international system of insurance law. When it is considered that most companies usually operate within highly competitive commercial environments, it is of little surprise that these legal frameworks are highly influential. Macro legal analysis, helps us to develop a clear perspective of the way that these legal frameworks can potentially reinforce each other and create a commercial environment for companies that steers them in the direction of specific priorities. Those priorities become particularly pronounced when profit margins can be slim and the additional costs of going further than basic compliance with regulations relating to externalities can undermine commercial success.
What this can mean for the impasse that sometimes exists between the approaches of human rights and environmental lawyers is ironically that both groups would benefit from looking further than their own specific disciplines and looking at macro legal analysis as a method of finding the commonalities that impact upon both their sets of objectives. This is because by focusing solely on human rights law or environmental law, there is the potential that the broad and very powerful landscape of legal rules that, to a large part, represent the root causes of the ways that companies make decisions in practice, are not factored into reform proposals or as is often the case, get ignored completely. It can be argued that it is in this common ground that both human rights and environmental lawyers can have a unity of purpose and approach.
The specific macro legal analysis that was undertaken led to certain macro level reform proposals to the registration requirements of companies that operate internationally, the insurance requirements for such companies, aspects of corporate law at national levels, and the coordinated integration of human rights and environmental responsibilities within WTO law, IIAs and the charters of MDBs. Whilst some of these reform proposals are novel and could potentially be attributed solely to the process of macro legal analysis, not all of them are. For example the argument that directors duties should be expanded to include responsibilities towards human rights and the environment is by no means new [48]. However, the article has shown that what macro legal analysis is able to achieve is a clearer understanding of the way that different legal frameworks complement each other and cumulatively contribute to the commercial pressure that corporate decision-makers are under to relegate considerations relating to human rights and the environment to the status of secondary concerns, where commercial success in the form of profit maximisation is usually the primary. What it has also shown, is that just as our understanding of the ways that numerous legal frameworks operating in concert can have specific effects on corporate decision-makers, a coordinated programme of reform that addresses all those legal frameworks is more logical than seeking to address each one of them isolation from each other. A coordinated package of reform across all of the relevant legal frameworks can lead to relevant institutional consistency of standards, efficiency and complementarity of purpose. It can also assist in leading to level playing fields for business.
What this article also helps to demonstrate is that there is something profound that needs to be considered in the way that lawyers undertake legal analysis in this context. Law firms in legal practice have individuals specialising in specific sub-disciplines of law as a matter of practical and commercial expediency. This in part contributes to the way that lawyers are trained in universities. This approach generally also extends to research into law too. As a rule, micro rather than macro legal analysis is favoured as the ‘correct’ method of assessing the law and pathways to reform. Therefore, there are two obstacles that face academics seeking to undertake macro legal analysis. The first is that this approach is not one that is generally adopted as an accepted practice. It invites the criticism that it does not incorporate the depth of subject matter analysis that micro legal analysis includes. The second is that regardless of the academic merits of utilising macro legal analysis, undergraduate and postgraduate education is not geared to this approach. In other words, there are institutional barriers that are integral to the way legal researchers are trained. The macro legal analytical approach has some overlaps with certain types of comparative research but as a rule, it is not one that many forms of legal education equip scholars to undertake.
It can be argued that for certain issues which have strong intersections with a range of different legal frameworks, especially at the international level, that macro legal analysis should be undertaken. This is particularly the case with complex global issues that involve international economic systems. This is due to the underlying influences that those international economic systems and the law relating to them have on international actors. In this instance macro legal analysis has been applied to business, human rights and the environment, however, it is arguable that it is equally applicable to global environmental governance and climate change too [5]. What the research does not suggest is that macro legal analysis replaces the need for micro legal analysis, it suggests that it has a particular application to certain types of legal problems and in those instances should operate in tandem with micro legal analysis.
In essence, existing approaches to the failure of companies to comply with the human rights and environmental expectations of the international community will continue to have a certain degree of success if they focus on seeking to persuade companies to incorporate ESG concerns into their decision-making. They will succeed as the so-called ‘licence to operate’ increasingly demands that companies demonstrate that they are good ‘corporate citizens’ [48]. However, many of the measures that have been taken to date are non-mandatory and do not directly address the root causes of human rights violations and environmental degradation which are in part facilitated by an international system of laws that pre-dispose commercial decision-makers to make decisions that prioritise profit. By addressing that framework of law with the aid of macro legal analysis, it is more than possible to re-design the international legal frameworks within which companies operate, to ensure that the only outcome of the operations of any company is one that fully protects human rights and leads to net zero degradation of the environment.

Funding

This research received no external funding.

Institutional Review Board Statement

Not applicable.

Data Availability Statement

Not applicable.

Acknowledgments

The author wishes to thank Surya P. Subedi, Onyeka Osuji, Olga Martin-Ortega and three anonymous reviewers for helpful comments on earlier drafts of this article. Any errors are those of the author.

Conflicts of Interest

The author declares no conflict of interest.

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