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Opinion

Looking Forward 2015: The “Pillar II” Policy Shift in China and Business Practices in the UNGPs

In China, human rights have long been a political or public law topic, dealing exclusively with the state-individual relationship.  Businesses and the private sector in general, had no standing in China’s human rights policies and legislations.  Actually, in 2004, the Chinese Constitution was amended to specially include the clause “the State respects and protects human rights”, belatedly making the State’s human rights commitment while defining the addressee of human rights obligations constitutionally.

In this sense, the endorsement of the UNGPs by the Chinese government at the UN Human Rights Council in 2011 represented a significant change at the Chinese policy level concerning the fundamentals of human rights.  Although after 3 whole long years, the Chinese government has not yet introduced any national policy regarding the domestic implementation of the UNGPs, and while no government department has made any public reference to the UNGPs in its policies or statements, the “pillar II” policy shift is nevertheless happening, from keeping human rights a solely government issue (“duty to protect”) to making it a private concern, too, i.e., including businesses’ responsibility to respect, the pillar II of the UNGPs.

This shift has been demonstrated by various policies made after the adoption of the UNGPs.  For instance, since late 2011, the policy focus of the regulation of overseas Chinese investment has shifted from protecting Chinese investment and personnel to guaranteeing social license based on due diligence and localization.  The Guidance on Environmental Protection in Foreign Investment and Cooperation promulgated by the Chinese Ministry of Commerce (MOFCOM) and the Ministry of Environmental Protection (MEP) in 2013 requires Chinese enterprises “respect religious belief, cultural traditions of local community residents…fulfil environmental protection responsibility and…safeguard labour rights”.  The Regulation on Overseas Investment as amended by the MOFCOM in 2014 explicitly added an article requiring that the investing enterprise shall make sure the overseas enterprise receiving its investment “abide by local laws and regulation of the host country…fulfil social responsibility, do well in environmental and labour protection, and promote local integration”.  The same trend can also be seen in domestic investment regulation.  The Interim Measures for the Social Stability Risk Assessment of Major Fixed Asset Investment Projects, made by the National Development and Reform Commission (NDRC) in late 2012, demand due diligence on “protection of people’s rights and interest” so as to prevent potential social stability risks. 

It is clear that the need for a more welcoming environment for the investment of Chinese businesses at home and abroad is a key driver for this policy shift.  But the shift also shows the need seen by the Chinese policy makers to give the private sector a role in dealing with social challenges in collaboration with the State.  “To respect and protect human rights in business activities, the State and enterprises…shall collaborate and shoulder their respective responsibility”, as put by the Chinese government statement supporting the UNGPs in June 2011 at the UN Human Rights Council. 

Such a shift in government policy seemed to have been noticed and taken up by some Chinese businesses with foresight.  For instance, almost all sectorial guide/guidance on CSR developed around or after 2011 contain some references to human rights or even the UNGPs.  In late 2012, the Guidance on Social Responsibility for Chinese Electronic and Information Industry released by the Chinese Electronic Standardization Association (CESA) for the first time in China explicitly referred to the UNGPs.  Similarly, a guide from the China Chamber of Commerce of Metals Minerals & Chemicals Importers & Exporters (CCCMC) published in 2014 contains a section on human rights, requiring business members to conduct “human rights due diligence”.

At the operational level, “human rights” appear more and more frequently in the CSR/sustainability reports of Chinese companies, despite their incomplete and sometimes grotesque understanding of the term.  More importantly, human rights impacts assessment and due diligence have begun to become a starting point for Chinese companies’ introspection on the social challenges for their operations, mostly those outside China.  When reflecting on the company’s difficulties in the Myitsone Dam project suspended in 2011 by the Myanmar Government, the CPI Yunnan International Power Investment Corporation realizes that “In the early phase of the project…the company should also have needed to conduct assessments or due diligence on Myanmar’s implementation of human rights and the political risks involved…in addition to legal and political permits, the securing of society’s permission is something that an enterprise must take seriously”, and now the company is working to set up “effective mechanisms for the remedy of rights”.  A more encouraging case is about China Minmetals Company, which signed a formal agreement with the indigenous people on land use and benefit allocation in Australia where it operates zinc mines, and the implementation of the agreement is supervised and reviewed by an independent, multi-stakeholder advisory committee. 

Such good and bad stories of Chinese companies in dealing with human rights challenges show rightly the timeliness and graveness of the government’s “pillar II” policy shift, which may have paved the way for Chinese businesses to face their human rights responsibility squarely and participate in good governance at different levels.  Yet the challenges are massive and pressing: the awareness of human rights responsibility and the visibility of the UNGPs in Chinese business community is extremely low; the uptake of the UNGPs by the Chinese government is even lower; the good practices in human rights of some Chinese companies outside China have given rise to the issue of “double standards” against their practices in China; and China’s support on a binding treaty in business and human rights at the UN may dilute its political will in promoting the UNGPs and cause hesitation among its businesses to embrace them, etc. 

To tackle these challenges, more “know” and “show” is needed, especially inside China.  In October 2014, about 20 major Chinese SOEs (“central enterprises”) received a special training on the UNGPs in Beijing, jointly organized by the State Asset Supervision and Administration Commission (SASAC) and the CSR Center of the Swedish Embassy.  This was but a good first step, and there is a long way ahead for Chinese businesses to render China and the world a responsible, inclusive and sustainable growth.  

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More from our Looking Forward 2015 series:

Business and civil society need to find common ground, William Anderson, Vice President, Social & Environmental Affairs, Asia Pacific, adidas Group

Upping the ante on addressing corruption as a human rights violation - A view from Asia, Sumi Dhanarajan, Centre for Asian Legal Studies & National University of Singapore

 

More information on business and human rights in China:

Greater China Briefings, Business & Human Rights Resource Centre, August 2014