Essential ESG: Episode 24 – In conversation with Professor Robert McCorquodale

Phoebe Wynn-Pope, Head of Responsible Business and ESG, Corrs Chambers Westgarth

Professor Robert McCorquodale, Member, UN Working Group Business and Human Rights

This episode is a recording of a live event. 

Phoebe: Welcome, everybody, to Corrs. For those of you who don’t know me, my name’s Phoebe-Wynn Pope. I head up our Business and Human Rights practice here at Corrs. Also, the Responsible Business and ESG practice. Before we begin, I’d like to acknowledge that we’re gathering on the lands of the Wurundjeri People of the Kulin Nation and pay my respects to their Elders, past, present and emerging, recognising that this beautiful country has never been ceded. I am so delighted to be joined tonight by Professor Robert McCorquodale, an old friend, and an esteemed international lawyer, barrister and academic. I think probably most of you in the room know him, or have read his work, or at least, are about to go and buy his new book. And if you weren’t, you should be, and you will be after this session, I’m sure. Robert is currently a Member of the UN Working Group on Business and Human Rights, and has over 30 years’ experience advising businesses, governments, civil society globally. He’s appeared in the Australian High Court, the UK Supreme Court, and at the ICJ. And his latest book, which is sitting up here …

Robert: Subtly. Subtly.

Phoebe: …Business and Human Rights, subtly, reflects his experience and commitment, and I know that it’s been a fantastic resource for the new Business and Human Rights Masters course at Melbourne University. So, there you go.

Robert: Subtle play.

Phoebe: It’s being used and active in the marketplace. So, tonight we’re just really going to have a good discussion. But I thought, Robert, welcome to – and welcome to Australia. Robert, you will gather, is Australian, but is living overseas. And so welcome down under. I’m sorry it’s so cold, but at least not raining.

Robert: That’s true. Having been in Sydney, it’s great. It’s not raining.

Phoebe: That’s true. Although there is a drought down here, so we should be really praying for rain. But anyway, let’s begin with a bit of background. Can you give us a bit of an overview of the mandate of the UN Working Group for those who don’t know it, and what it actually means to be a Member, and what you’re doing.

Robert: Thank you, Phoebe. It’s a real pleasure to be here and be amongst the fabulous growth of business and human rights within Australia. And of course, you and I have known each other a long time, and you’re a great mentor and innovator in this area. So, I have to say, even when I began looking at this area – scarily enough, about 30 years ago – I’d never heard of the Working Group. It obviously didn’t exist 30 years ago. But its main role came out of the UN Guiding Principles where it was decided that the way to take the Guiding Principles forward, to interpret it, to implement it, to apply it, to engage about it, was to create this Working Group. And it’s comprised of five Members from each of the regions under how the UN divides regions. So I have a colleague from Latin America and the Caribbean; I have a colleague from Asia Pacific; I have a colleague who represents Africa; and I have a colleague who represents Central and Eastern Europe. I represent the remaining part of that which goes by the ridiculous title of WEOG, which stands for Western Europe and Other Group. And from what I’ve said before, the “others” are everybody else who doesn’t fit in any of those other things, including, shamefully maybe, Australia and New Zealand, because at the time when these were developed, the Australian Government was in no way going to be involved in part of Asia. A couple of other tiny countries who you probably think about such as USA and Canada; and Israel and Turkey. So it is the most non-geographic region. So, what we do – well, just, actually – we are appointed for six years at a time, and so it’s about the third group of Working Group Members, and we aren’t paid a salary or anything like that, so I’m here for 10 days completely voluntary, which is pretty appalling, but we have no money. And the idea of the UN is that you’re more independent if you’re not paid. Of course, it also has a consequence – what does that mean for people who may be a lot better than me who will never apply to be on Working Group. We have really four main activities. The first one is: we produce thematic reports clarifying what is in the UN Guiding Principles, or maybe taking it further. So, for example, the most recent one is Artificial Intelligence and how it’s applied by companies. Are you using an AI thing in a way that the algorithm ends up excluding certain people, for example. We each lead different ones. The one I did last year was on the finance sector, for example, and I met some of you during that. And thanks to Phoebe’s work we did a great consultation in Australia. And our reports are always based on engagements not just an academic report sitting there looking at the activities. You actually go and speak to people, you get submissions, and that kind of thing. So it’s a different form of report. The second thing we do is we do country visits, so we deep dive into various countries. We’ve been recently to Japan and to Colombia. There will not be a Working Group visit to Australia because if you have a Member from that country, you don’t visit it. We also have a complaints mechanism politely called a communications process. And we receive communications from anywhere, you do not need to exhaust domestic remedies, and we will then review the complaint, prioritise it, etc, and then take that forward. And we’re the only mandate in the whole of the UN system and Human Rights, which has a business focus. So that all the others will be dealing with governments, states, they will not be dealing with business, though they may indirectly deal with business. And I think in the last 10 years or so, we’ve done over 1,000 of them. We probably get over about 300 a year, of which we probably deal with about 100. So it’s quite a hard thing when you’re all part time and trying to fit that in. And the fourth thing we do, is we have this big forum in Geneva. Last year, I think there were about 3 or 4,000 people there which, when I think when I started, it wasn’t even an area, and there were, you know, five people maybe even working on it. I mean, it’s extraordinary to think that these people from all different sectors come along. We also do information notes. For example, we did an information note about why climate change was a business and human rights issue, which we’ll come on to. And we sometimes do amicus curiae before courts, and so we have lots of other bits and pieces we do. Does that help?

Phoebe: I think that helps really well, and gives everyone a good overview, and we might do a deep dive into some of those areas. So I know that the financial institutions consultation and report that you came out with last year, so I’m sure everybody would be really interested to hear your main findings out of that.

Robert: Sure. Okay, so one of the interesting things is we didn’t try and cover the whole of the financial sector because that’s just incredibly hard. We focused on the investors dealing with ESG – Environmental, Social and Governance. Why? Because at least vertically, they’re meant to be dealing with human rights. And so we looked at those investors, and a whole lot that ranges from the big institutional investors to private equity, to those who are engaged in other ways for portfolios and things. So it still was a lot of different institutions. Some of the things we found: firstly, there is no one standard or definition of what is an ESG. And related to that, is a lot of them relied on ratings agencies or other of those kind of bodies, which are similarly, not very good on this. I mean, they often don’t really have a human rights question. They may ask questions about labour rights, for example. And in that they may say how many women are employed in your institution? And if they say more than 50%, they get a tick – which tells you nothing at all about how they’re treated, what their salaries are, any of those kind of things. So, that’s deeply problematic and there is a little bit of change on that. The other thing that we found is some good practices. There are some investors out there really engaged and concerned about this. And I think that’s important to recognise. Probably the area of greatest weakness is access to remedies. That the financial sector tends to pretend it is one removed from it. It says any of the kind of investment we do, it’s their problem if there’s a human rights, or an environment, or a climate change issue. And that is a concern because in fact, they can contribute to it. Whether or not they want to, or not, they can contribute to it. So there is this sense to which trying to find some of the ways to remind them that they should have access remedy and there aren’t very many good evidences of practices on that. So, those are some of the things we found.

Phoebe: And these reports, tell us about the AI report first, and then I’ll ask you about the impact and how they’re used.

Robert: So the AI report was interesting because, it’s like, how do ordinary companies use it? And the frightening thing is – most of them never think about it. They just will use AI. It’s simpler; we may get rid of a few staff; and we’ll just go ahead and do it, which is concerning because there are real issues about the use of AI, the procurement of AI – including by governments. We all know governments who procured AI at what was a cost of, I don’t know, $200,000, is now $2 billion and things are still not right. I mean, you see that in the healthcare system all the time – so looked at really where they were not thinking about the procurement, and they were not thinking about the consequences. And that includes the courts. The courts sometimes use artificial intelligence in their, some would call it profiling, but in dealing with some of their engagement, and not realising there are concerns about this – including the fact that most AI is created by men. There are very few women involved in the creation of AI, which I think is a concern.

Phoebe: So I’m going to ask a question without notice on that. Sorry. We’ve been doing quite a lot of work on responsible AI and what that looks like and there’s limited, there’s the EU Act, but there’s actually limited regulation in other parts of the world and in fact, a pushback against regulating AI because it’s going to inhibit creativity and innovation and things. What are the key things that people who are going down this track and using AI really need to think about when they’re going through this process, and in your consultation, did you see some really good examples of good practice?

Robert: Sadly enough, not very many because there are surprisingly few examples of good practice. Partly because to some extent, there’s not been the thinking there are human rights potential consequences of AI. It’s seen as a cost reduction and an efficiency process more than a kind of a has an outcome or a consequence. So there are few. There are some. We do identify a few, but not a great number. And I think what we identified is those who are doing it well have actually done human rights due diligence about the use of AI. And that’s on some level of course what should be done. I can tell you, mostly that’s not done. And so where they have done it, actually it works much, much better and it usually is where they’ve done it at the stage of procurement. So not just leaving it – oh, we’ve got it, now let’s think about its consequences. 

Phoebe: Yes, well that’s a good warning. I think that thinking through the uses right from the design of the AI as well, right? So that that black box which is difficult to know what data is used and all the way through.

Robert: And as lawyers, it’s always hard to know well, where’s the responsibility for AI when, say, using a drone: is it the person that created the drone; is it the actual person moving it? That can be tricky.

Phoebe: Very. But very interesting. So these reports, you do the study, you write the reports, you talk about the reports, and then, tell us about how you see those being used and influencing behaviour because I think that’s really what it’s about, right? It’s not just about the report.

Robert: And being both an academic and a practitioner, I’m always interested in impact. What do things actually have as a consequence. And I can tell you two consequences – not yet of the artificial intelligence report because that’s only just come out a couple of months ago, but finance has now had a year. There is already a group of investors who are pushing hard against rating agencies and saying – you need to think of human rights across all three E, S, and G. For example, I mentioned solar panels. Solar panels – great. That’s good for E. Wait a minute, 85% are made by Uyghurs in China. Is that really still a tick? And what about in governance? If governance is done in such a way that’s harassment of staff or whatever labour kind of consequences. So they are doing some great work on that which I’m helping a little bit in. So that’s one way. And secondly, because as I say, one of my concerns was about access to remedy, there are now some Dutch banks who we gave that as an example, and they’re now beginning to engage a bit more in these things. So there are some of those kind of, where you see that. And you see, for example, Principles of Responsible Investment which is a collective group of investors, they are now working forward on this now that we’ve highlighted some of these issues.

Phoebe: Well it’s a very important role that you play, Robert. I think being able to bring those concerns to light, but also the best practice to give people that model to go forward. Now, there’s been some recent cases, and most particularly interesting is the ICJ advisory opinion on climate change, and I’m really interested in your thoughts about the links between climate and human rights, and business activity and climate and human rights are pretty obvious. But an advisory opinion at the ICJ is its own very special beast, and I wonder if you could talk a little bit about how you think that will influence the way we think about human rights and business as we go forward and transition our economies.

Robert: I guess I’ll start with the interesting thing – the UN Guiding Principles, despite being adopted in 2011, makes no reference to climate change. But particularly, not even any reference to the environment. So you also think where we have moved as societies that that seems crazy just 13 years ago. But that’s 13 years of significant change. And then there was a movement from the General Assembly to create the right to a clean, healthy, and sustainable environment, and there was a sense to which – and I know express resistance by a group of employees, particularly the International Organisation of Employers who said well, there’s no such thing as the right to a clean, healthy environment. We shouldn’t take any notice of it – and so the decision by the ICJ is quite significant because it makes it very clear there is a state responsibility on this area. But it’s not as surprising as you think. There are previous cases. There’s the Pulp Mills case in Uruguay which they said a state has a responsibility not to allow trans-boundary pollution. So it is a development. The big surprise for me was it was unanimous. I mean that is highly unusual in the ICJ. And that it was very, very clear. There is this right and there is a state duty. But the other case, which only came out a couple of months before, as you know, was by the inter-American Court of Human Rights, which also had an advisory opinion on climate emergency. And they took it one step further. They said “Yes, it’s an obligation on states, it’s also a responsibility to business”. Rather proudly I say they relied on the working group’s report on this. And that’s quite an interesting statement because although the first one is important and they do refer to business, the second one says actually there is a business responsibility on this end which is a challenge to fossil fuel companies here. It’s a challenge to investors. It’s a challenge to what governments should then do. Of course, as you know all too well, it’s an advisory opinion. It’s not as such directly binding. But of course it’s a decision by – at that level of the international court.

Phoebe: Thank you. So if we’re thinking about those binding obligations on States to do more on climate change and that link with human rights, then do you see an avenue for that to filter down in terms of an expectation that States we will do more in regulating and insuring they stick to that 1.5 degrees target or do you think it’s a nice statement of international law and the customary law that sits around that but will not have so much impact. 

Robert: I think the impact, yes it will come on States but it will actually probably more likely come from investors and consumers because they will say ‘listen, you the State and you the business – this is a serious decision, you should be thinking about this.’ Because if you think about it, that kind of individual investor absolutely demands climate change and environment being part of this. That’s how ESG funds have grown at a huge rate, so I think there will be that pressure and the big difference is it’s not then saying ‘we think it’s saying’ well they think here’s an international standard and I think that changes the dynamic and in fact in some ways, all of you are here as part of the business and human rights lawyers association, I think it changes how lawyers can make these arguments to their clients and heavens I’ve been a lawyer 40+ years which is scary and there’s always that sense, it just helps to have something you can point to, whether it’s an advisory opinion or not, it just changes the nature of the advice. 

Phoebe: Yes and in a very helpful way in this instance. I think we were all surprised by how strong it was. 

Robert: Yes I was amazed. 

Phoebe: So I’m going to ask one more question. I think we are all watching – at one stage it was almost on a daily basis to see what was happening to regulation in Europe.

Robert: Yes. 

Phoebe: Because it seemed to be shifting every other week, at the beginning of this year and it seems to have sort of settled down but I wonder if you would mind just giving us an update. 

Robert: It’s probably the main thing I have been doing most of this year. So the way I would see it is that it was a huge step the corporate sustainability due diligence directive and it seemed to be great, we could move forward as lawyers, we can work forward what this means and then there was a change in European parliament membership. There was this strange thing called the omnibus and it’s heavily political, however, and I think this is important however, no matter how much is reduced from the corporate sustainability due diligence directive, there will be mandatory human rights due diligence. There is no sense in which the omnibus will take that away. It may limit the scope. In terms of companies, it may limit the scope in terms of human rights. It may even limit the scope in who can be a victim in this but there will be mandatory rights and that’s a huge step and one sometimes has to take these small kind of steps before you can take it further and I think that’s important and I put it in the context of the other laws that have happened within the EU, including in particular the German Supply Chain Act because the government did not want to bring that in, and the government had said in its national action plan, well we won’t bring any laws on mandatory human rights due diligence because we’re told by companies they’re doing it and then they did an actual survey of companies and they found, surprise, surprise, 17% were actually doing it, and so they brought in the law, and so there will be those kind of pressures over time. Probably the thing that I’m disappointed in is two fold. One, they are actually asking business about this. I’ve done surveys. I did a huge survey – 650 companies in the EU – what do you want? Why do you want this law? 80% plus said ‘we want these laws’. Why? Because they want certainty. They want clarity. They want coherence and competitiveness. They want to know actually that if they’re doing this, their competitor is not undercutting through child labour or whatever. So it’s a step. It’s a backward step, but it’s a step forward and also – just one other thing, it causes confusion until things are where it’s at for Australian businesses, which will be affected by this and US businesses as to what they are meant to do, because there’s a completely different story there. 

Phoebe: Thank you. I think I’m going to close it off there. So Robert thank you so much for joining us. It’s been an absolute joy to have you. 

Robert: My pleasure.