World closer to holding firms accountable wherever they operate

Swiss citizens last November voted in a referendum that proposed making Switzerland’s multinational companies responsible for their actions overseas. The Responsible Business Initiative could have marked the beginning of greater control over the behavior of multinationals, not just in their home countries but also overseas.

Though a thin majority of people voted in favor, the proposal was defeated since it did not meet the second condition — a majority of cantons needed to have backed the move, but only a third did. If it had passed, this would have been a huge win for activists, notably those in developing nations that have been fighting the double standards applied by large firms, which project themselves as green warriors and responsible companies at home but play havoc with the environment and communities overseas, especially in poor countries.

Swiss mining giant Glencore is a perfect example. Headquartered in Baar in the pristine valleys of Switzerland, there is nothing polluting about the company’s headquarters or its presence in the country. But, halfway across the world in the Democratic Republic of the Congo, Glencore is regularly accused of widespread water pollution and labor abuses. Unfortunately, there are no laws in Switzerland obliging Glencore and other such companies to audit their human rights or environmental practices or hold them accountable for misconduct abroad.

This is just one example of how companies behave, or rather misbehave, in developing nations, flouting weak environmental and workers’ rights laws in those countries. According to research published in 2013, nearly two-thirds of historical carbon dioxide and methane emissions during the industrialized period 1854 to 2010 can be attributed to just 90 companies producing energy and cement. And a report by Harvard Business Review on 1,800 multinationals found that, in countries with tight ecological regulation, these companies had about 29 percent lower emissions in their home countries (read rich nations) and any tightening of regulation at home prompted them to export carbon emissions and other pollution overseas, leading to 43 percent higher emissions abroad.

It is in this context that the ruling of the UK Supreme Court last week, when it held petroleum giant Royal Dutch Shell responsible for the actions of its subsidiary in Nigeria, needs to be welcomed. The case involved a group of fishermen and farmers who were fighting Shell’s Nigerian subsidiary over repeated oil spills in the Niger Delta.

Five judges sitting at the UK’s top court held that Shell had a duty of care to the Nigerian petitioners over the actions of its subsidiary, and hence was liable for compensation. They also agreed with the petitioners that they were unlikely to get justice in a Nigerian court and so the case against Shell and its subsidiary ought to be heard in London. The order could open a Pandora’s box of claims against hundreds of large multinationals whose subsidiaries have been operating, often with impunity, across the developing world.

The ruling should serve as a warning not just to Shell, but also other UK multinationals that clearly adopt different standards for different countries and have so far been able to get away with even criminal activities overseas, as the issues never reached the British courts.

This is not the only such ruling to emerge from the UK courts. In 2015, more than 1,800 villagers from Zambia filed a claim against Vedanta Resources, another mining giant, for water pollution caused by its subsidiary’s copper-mining operations. The petitioners stated that pollution from the mine damaged their lands and livelihoods. Two years ago, the court crucially ruled that the case could be heard in the English courts. And, just last month, Vedanta agreed an out-of-court settlement in the case, marking a landmark win for the people who had previously been the silent and powerless victims of global giants, which had never thought twice about their activities and the long-term damage they caused.

The rulings in the UK were also significant wins for millions of people around the world who have suffered due to the hypocritical attitudes of companies, especially the behemoth multinationals, which resolutely refuse to apply their best practices equally around the world.

Fortunately, the Swiss and British are not the only examples of citizens or the judiciaries of rich nations forcing their big businesses to be equally accountable for their activities whether at home or in the Third World. Governments are now beginning to legislate to ensure that their multinational companies follow the same human rights and environmental norms wherever they do business, and this paves the way for courts to allow the victims of these multinationals’ failings access to their legal systems.

One of the strongest pressures on companies for good behavior all over the world is set to come later this year, as the European Commission is due to finalize a draft law that will make supply chain due diligence mandatory for companies, including on their human rights and environmental performance.

While these moves are welcome, much greater and concerted pressure needs to come from new US President Joe Biden, as no American firms are currently feeling the heat over their pollution and violations of human and workers’ rights overseas. After all, US companies are by far the largest polluters and it is time they too were reined in by their own home government.

It may also be the right time for multilateral bodies like the UN to develop a global good practices charter for companies to follow. Anyone not adhering to these basic values should not just be shamed, but also heavily penalized as a deterrent to other CEOs who might be looking to make a quick buck by polluting a Third World nation.

Such a charter would encourage companies not to choose profit over responsibility, ensuring the same conditions for environmental preservation and community relations with the weakest communities in the poorest countries as with the strongest communities in the richest nations.