The business case for human rights? Why financial risk is a dangerous argument

Credit: Alejandro Ospina

A new paradigm is emerging in the business and human rights field. It is best summarized by a 2020 letter from the “Investor Alliance for Human Rights,” which calls on governments to introduce mandatory human rights due diligence:

“Put simply, mandatory human rights due diligence makes good business sense for companies, investors, and governments alike. This type of regulation increases the robustness of corporate risk management processes, helps investors achieve higher risk-adjusted returns, and contributes to economic growth.”

Essentially, proponents assert that there is a business case for respecting human rights and, accordingly, no inherent conflict between modern economic systems and a world without corporate abuse. I offer three critiques of this reasoning.


Traces of the business-case paradigm throughout the years

In 2004, the UN Global Compact published a study titled “Who Cares Wins,” arguing that the financial sector should take into account environmental, social, and governance (ESG) factors to increase shareholder value while at the same time contributing to the sustainable development of society.

John Ruggie, the main architect of the UN Guiding Principles, noted in 2013 that harming human rights harms both people and companies, for example, because affected communities revolt against infrastructure projects, potentially interrupting operations. In 2015, the Office of the High Commissioner of Human Rights published an op-ed arguing that human rights abuses are not just morally wrong, they are also bad for business, and “sustainable profits can only stem from stable societies.” The first systematic review of this argument was undertaken in a 2018 report by influential business and human rights NGOs, which found clear and significant financial impacts of human rights violations on businesses.

Starting from these loosely associated interventions, the business-case paradigm has risen on the back of the ESG agenda, which emphasizes how non-financial factors impact companies’ financial performance and risk exposure. The last stream of EU legislation is a testament to this view: the Corporate Sustainability Reporting Directive, the Sustainable Finance Disclosure Regulation, and related acts base their existence on the importance of sustainability and human rights information for business decisions. Nevertheless, the business-case paradigm has conceptual flaws that impede its usefulness for the business and human rights field. 


The importance of fundamentally opposing instrumental reason

Human rights are conceptually incompatible with any instrumentalization. The preamble of the Universal Declaration of Human Rights refers to the inherent dignity of humans. Correspondingly, human rights are traditionally understood as natural rights, only to be recognized and respected, not to be created or abolished. Conceptualizing respect for human rights as a business opportunity relocates them into the realm of instrumental reason, where concerns are not pursued for their own sake but as means to an end—in this case, the end of profit maximization. 

Accepting such a reframing would also imply a willingness to abandon the means if, at some point, they cease serving the end. This move would contradict not only the theory and history of human rights but also existing international human rights law and businesses’ obligations under national and regional legislation. 


Corporate power in an uncertain world

Corporations had to deal with political, social, and ecological uncertainty long before the first management consultant came up with the term “ESG.” Over the course of history, they have developed many strategies to deal with such uncertainty, none of which included letting people live their lives undisturbed. As Amitav Ghosh recounts vividly in The Nutmeg’s Curse, the Dutch East India Company, when met by resistance from the inhabitants of the Banda Islands at the beginning of the seventeenth century that increased the cost of business, decided to extinguish the Banda people through massacres, starvation, and forced displacement. As a result, the nutmeg trade flourished. In modern days, the French multinational company Lafarge operated a cement plant in civil-war era Syria, which increased its risk exposure considerably. Instead of evacuating its plant and ensuring the safety of its employees, executives decided—as a risk management measure—to bribe ISIS fighters in order to continue operating in the region. 

These examples show that the tensions arising from the internal contradictions of capitalism, which cannibalizes the resources it requires, are more often resolved to benefit capital rather than humans. Stressing that human rights violations can be costly for corporations, the business-case paradigm leaves out this option and idealizes business behavior. However, reality shows that there are very “successful” models of running profitable commercial enterprises that do not involve respect for human rights. 

At a more systemic level, the neoliberal agenda, which was supposed to shield corporations from popular control, was crafted by the Mont Pelerin society against the backdrop of democratizing tendencies within US corporations and economic scholarship. Through technocratic, political, and cultural techniques, as well as through brute force, corporations have managed to secure financial returns in volatile environments, making this the very essence of the capitalist craft.

In contrast, every achievement throughout the history of labor and human rights that resulted in heightened respect from corporations was the result of political contestation and real-world struggles. I do not doubt that such developments can actually recalibrate businesses’ calculations regarding financial risk, but emphasizing this outcome obscures cause and effect, clouding rights practitioners’ analysis of how we can encourage corporate respect for human rights. 


The fragmentation of rights and struggles

Uniting different fights, actors, and approaches is a call often voiced by those working in the human rights field. The business-case paradigm, on the other hand, feeds into the fragmentation of our work. It introduces a new fault line, dividing rights into those that are profitable to violate and those that are not. In particular, vulnerable groups who may not have the necessary means of resistance to considerably increase the cost of human rights violations for companies are left behind by this paradigm. 



Affected rightsholders and their supporting organizations may want to use the business-case paradigm in individual cases because it is a potent argument in many jurisdictions and because it opens up the opportunity for partnerships with powerful actors. However, this desire should be questioned carefully, weighing the opportunities against the risks of relying on this problematic framework.