Essential ESG: Episode 18 – Responsible business in conflict-affected and high-risk areas

Eloise O’Brien, Senior Associate, Responsible Business and ESG

Dr Jonathan Kolieb, Senior Lecturer, RMIT Graduate School of Business and Law

Eloise: Welcome to another instalment of Corrs’ Essential ESG podcast. Today, we are recording on the lands of the Wurundjeri People of the Kulin Nation. My name is Eloise O’Brien, I’m a Senior Associate in Corrs’ Responsible Business and ESG practice, and today I am lucky enough to be joined by Dr Jonathan Kolieb. Dr Kolieb is a Senior Lecturer in Law at RMIT in Melbourne and is Co-director of RMIT’s Business and Human Rights Centre, leading the Centre’s work on conflict and peace.

Eloise: Welcome Jonathan thanks very much for joining us.

Jonathan: Thank you for having me.

Eloise: A pleasure and today we want to speak about business and conflict – a very broad topic and how international humanitarian law or IHL and the use of private security fit within the broader framework of responsible business conduct. It’s a big topic we might not be able to cover every base!

Jonathan: A very big topic, yes.

Eloise: But I thought we might start by talking about ‘What is IHL and what does it have to do with business?’

Jonathan: A great starting question. IHL – International Humanitarian Law are the laws of war or the laws of armed conflict. They are over 100-150 odd years old now and they really are about regulating the means and methods of warfare, of injecting a little bit of humanity into times and situations of war. To protect civilians during wartimes, another purpose of international humanitarian law. So these are fundamental precepts perhaps best captured by the Geneva conventions of 1949 that every State, every country on the planet has signed up to. So they are universally adopted – not universally respected, but that’s a different conversation! – and the relevance to business is, well on many different levels and I can wax on about the relevance but in short I think on an ethical level they are relevant and also on a legal level they are relevant. By ethical I mean many of the international humanitarian law rules are about morality. They are about, again injecting humanity into times and situations where humanity is often lacking. So any actor, be it a business actor, military actor, governmental actor, humanitarian worker, any type of actor that is operating or has connections into conflict affected areas it just behoves them to be mindful of these precepts that have been translated into legal provisions. On a legal perspective International Humanitarian Law is binding on all actors that are closely linked to armed conflict and so it could be a business actor whose activities are closely linked to an armed conflict is actually formally strictly bound by IHL and then finally the other legal angle is accountability. Increasingly we are finding that businesses are being held accountable for breaches of international humanitarian law both in the judicial and in the non-judicial contexts as well. So for all these reasons IHL or International Humanitarian Law is relevant to business.

Eloise: And I want to pick up on something you said there Jonathan which is ‘IHL is binding’ which sets it apart from international human rights law in some ways in that it imposes binding legal obligations on business and of course the UN Guiding Principles on Business and Human Rights or the UNGPs that many of our clients are familiar with. They do actually call businesses to respect IHL as well as the human rights recognised in those core international treaties. A lot of our clients are probably more familiar with the UNGPs than they are with IHL but you’ve been involved in something recently which is trying to bring IHL more into that accountability piece that you were speaking about before through your work with the Global Sustainability Standards Board.

Jonathan: Oh right of the Global Reporting Initiative, yes. Well not so much accountability actually I would push back on that and suggest that actually it is about prevention. For me international humanitarian law and a lot of the work that I do with businesses and about businesses is about educating businesses about the relevance of International Humanitarian Law to their work and preventing the bad stuff from happening in the first place, preventing the contraventions of international humanitarian law and that really is the work that’s what has motivated the work with the Global Reporting Initiative and the GSSB – we like our acronyms. The Global Sustainability Standards Board which is an independent entity within the GRI framework and they develop sustainability standards for companies. The GRI I think first set of standards was corporate sustainability standards was released in 1999 and they’ve been working on it ever since. They’re essentially the world’s best, most highly regarded sustainability reporting framework – full stop and for the past few years they have been integrating not just environmental issues but human rights, social or people in their language people-based concerns. Material topics that should be reported on by companies that are seeking to be sustainable in their business practices. That is a long introduction to what the GRI and the GSSB are all about. So what we tried to do is over many years the Austrlaian Red Cross and us at RMIT have been working on trying to improve business respect and awareness of international humanitarian law and we tried to identify – a few years back – we tried to identify different levers for change and we saw sustainability reporting as something that was only growing in significance, both because of new laws and legislation being passed around the world, but also because of this growing expectation if you will, strengthening expectation amongst many different stakeholders and societies for companies to be really diligent and report about sustainable business practices and so we asked ourselves how do we inject international humanitarian law into that human rights conversation that was starting to happen in many corporate sustainability conversations and frameworks and then the war in Ukraine happened. That really kicked things into high gear. There were a lot of Western companies in both Russia and Ukraine that were wondering: What do we do? What do we do with our employees? What do we do with our foreign employees based in those countries or local employees? What about our assets? What about the sanctions regimes that many Western countries including Australia are levelled against Russia after the war commenced in 2022. At the same time what was happening was that the GRI, the Global Reporting Initiative, were developing a brand new standard for the mining sector and we thought that that was a good opportunity to engage them, both on the mining sector standard, as well as their broader work program for the next few years to try and talk to them about how we can get conflict and International Humanitarian Law more squarely articulated as being part and parcel of a company’s sustainable reporting obligations.

Eloise: Yes and I think touching on what you just said there – Ukraine was a really interesting example of demonstrating how many companies, how many sectors are impacted by conflict, can contribute to conflict dynamics. And also be equally impacted by conflict in terms of their supply chain resilience. I guess given the GRI standard focuses specifically on mining I would be interested to hear from you why is it the extractive sector is so exposed to these risks and really needs to be mindful of their impacts on people in conflict zones and their use of security?

Jonathan: Yes, so I should note that the GRI, the Global Reporting Initiative is industry agnostic, it applies to all industries but over the past few years what they have been doing is developing sector-specific standards. So really focusing in on asking the question ‘Are there particular topics – material topics that are likely to arise for a specific industrial sector?’ and for the extractives sector they have, or the mining sector standard as they refer to it they have already a coal sector standard, and an oil and gas sector so it is not quite extractives, but for the very first time they have included in this mining sector standard a material topic related to conflict-affected and high-risk areas and I think that’s wonderful recognition of the relevance of operating in such areas, both to a company’s bottom line but also their social and environmental performance as well and that’s the very first time in any sector standard or in the general GRI standards that they have included that topic: ‘Conflict affected and high risk areas’. So we are rapt about that. Why is it particularly relevant to the extractives? Well I should say it’s not only relevant to extractives but if you think about it mining companies have to go to where the mines are, excuse me to where the minerals are to build the mines, to extract the minerals that we need. Often these minerals are found in conflict-affected and high-risk areas. So whereas other industries might be able to pick and choose where they establish their operations, in many respects a mining company is restricted by the location of these minerals and so there are a whole host of mining companies, Australian and non-Australian for example, that are operating in conflict-affected areas of Africa as well as across South-East Asia and South America as well.

Eloise: Yes and I think it is easy for people to focus on current crises that are taking up a lot of air space in the news but there are over a hundred armed conflicts international and non-international that are currently ongoing everywhere from Sudan to Myanmar, Azerbaijan to Columbia, Ukraine, you name it. It’s happening in Gaza, everywhere. So the number of companies and the number of industries that are impacted are obviously enormous. I guess another aspect that is interesting to me of mining companies is mining operations tend to have significant environmental impacts for the local communities. They also exploit by their nature, exploit natural resources, and often that’s the subject of conflict, access to those natural resources and ownership of those natural resources.

Jonathan: Absolutely, yes the fighting over mineral resources, you can see that in the Democratic Republic of the Congo and surrounding countries for example that the mine sites themselves become the focus of conflict and violence. There’s also child labour rife in a lot of conflict-affected and high-risk areas because these also happen to be areas where there is weak rule of law and weak governance institutions as well. So I think this is the only material topic mentioned in the GRI mining standard that is geographic based as well. All the other topic issues like child labour or tailings of dams or recycling and this is the first time that the GRI is asking companies, in this case mining companies, ‘Are you operating in a conflict --affected and high-risk area?’ and then there’s some follow-on human rights and international humanitarian law based questions which in my opinion is brilliant and also really aligns this standard with the UN Guiding Principles, like as you said before the UN Guiding Principles doesn’t just say ‘the company should also respect international humanitarian law in conflict zones. It also makes a point of saying that it is in conflict affected areas where the most grievous human rights abuses occur’.

Eloise: Yes and your mention of the DRC the Democratic Republic of Congo before had me thinking also about there’s this tension I mentioned environmental impacts of mining but also in order to transition our global economy to a green economy we need a lot of transition minerals. A lot of those minerals are located in high-risk conflict-affected areas and there is this great tension that we are highly dependent on the mining of those minerals in order to transition and at the same time we need to be really aware that we’re not making human rights conditions worse for people living in proximity to those mines. Yes it is a fascinating intersection.

Jonathan: And what’s great for me, anyway in terms of my personal sort of theory of change I guess about the GRI is again, it’s not mandating ‘thou shalt not mine in these areas’ it is simply asking companies that are operating in such areas to be mindful of human rights and humanitarian law issues and responsible security practice issues as well and to be trying to operate in the most sustainable and responsible way and I think that’s ultimately a good thing for the company, people and the planet.

Eloise: Yes certainly and I just want to come back to something you said before too because I think something people often overlook is the fact that IHL might apply to a whole country even if the fighting or the hostilities are located in a region far away from where your business has operations or has their suppliers located. So that awareness that the interconnection is a complex and the way they impact on people outside a business, outside the exact location of hostilities is really interesting.

Jonathan: Also so let me point out that the GRI mining sector standard, it doesn’t ask you if you are operating in a conflict zone. It’s about conflict-affected and high-risk areas which is actually language and terminology used by the European Union for example and others. The European Union have adopted a conflict minerals regulation. They have a list of conflict-affected and high-risk areas and why I love that is I go back to sort of where I started: International Humanitarian Law is not just about law, the relevance of International Humanitarian Law should not be simply reduced to ‘what are my legal obligations’ but rather these are ethical precepts that have been enshrined in international treaties and therefore their relevance should not just be restricted ‘where does international humanitarian law apply in a strict legal sense’. If you ask me that question, they apply to situations of armed conflict though, not necessarily to high-risk areas, not to countries that may be sliding into conflict or recovering from conflict, and I think that there is relevance of international humanitarian law precepts about protecting of civilians, of not expropriating property, of not pillaging, of protecting the environment which are all aspects of international humanitarian law, that are similarly relevant to those areas just as they are relevant to conflict, active conflict zones as well.

Eloise: You’ve given me a great opening there Jonathan to ask you about the other topic that was included in the GRI mining standard which was the use of private security and I am interested, on the back of what you just said, whether you could speak about some of the red flags or factors that will indicate heightened human rights risk, where companies are using private security, where there is not necessarily an ongoing or current armed conflict. That standard, could you tell us a little bit about why that topic was included?

Jonathan: I should call out the Australian Red Cross, DCAF (Democratic Control of Armed Forces) Geneva Centre for Security Sector Governance, the International Committee of the Red Cross, the Heartland Initiative, Investor Alliance for Human Rights and the list goes on and on. There was, in the end, a bunch of different civil society actors and academics that really tried to brief the global reporting initiative and the sustainability standards board about the relevance of all this and about where they could improve on businesses treatment of conflict and conflict-related issues. One of those aspects was also around responsible security. The GRI Global Reporting Initiative general standards actually have the security standard in their GRI 410. But its only disclosure requirement for a company reporting under that topic was how many people are trained adequately in responsible security in human rights. That’s it. So reduced responsible security practices merely to asking the question about training – there was more that could and should have been said and so for this mining sector standard, what’s great is that they’ve also included the topic on security practices and they actually ask questions, or they recommend that companies also report on how does the company prevent or mitigate adverse impacts on people, from their engagement with public and private security providers. And similar to the conflict affected in high-risk areas, they are actually asking companies how are you adhering to international humanitarian law? So more proactive disclosure requests being made of companies, which is awesome. Not merely about training but also about how do we engage with public and private security providers and prevent adverse harm. Two more things, they also ask about – are you a member of the voluntary principals on security and human rights. That’s a two decade+ old multi-stakeholder initiative that really is striving for best practice in responsible security amongst the extractive sector, governance and civil society are all part of that and they develop some wonderful guidance. That is a nice benchmark I think to put in and by putting it in, hopefully it is a spur for companies that are reporting under the GRI standards, that are not yet a member of the VPs (Voluntary Principals), to consider. And if I may, just one more – so much I could say! – but I love that it also teases out public and private security providers, because in the past a lot of companies and today, a lot of companies engage with States, with local or national police or militaries to provide security for their operations, their assets, their people. The obligation under the UNGPs to respect human rights, you’re not absolved of that obligation to respect human rights as a company simply because it is a sovereign security provider that you have engaged and so by acknowledging that in the GRI, hopefully companies will also consider their engagement with those public security providers which is a completely different relationship than a company engaging and paying private security contractors like a private security firm to provide security for a mine site or something. It’s a completely different power dynamic absolutely, far more sensitive, but the GRI for the first time, are asking companies to consider the adverse impacts on people even by their engagement with those public security providers which I think is exciting.

Eloise: It brought me back to thinking about, obviously when companies are engaging with public security providers that raises really interesting questions around direct participation in hostilities under IHL, and even when they are using private security contractors, the importance of training, as you were speaking about, for those security providers is that it helps them understand when they might be giving up the protections that business get under IHL as civilians, their personnel and their assets, as civilian assets and I think businesses need to really cognisant of how they are integrating IHL and human rights into their training and in their engagement with both private and public security to ensure they retain that protection.

Jonathan: In terms of the relevance of international humanitarian law to business, is that international humanitarian law provides protections to business and if you don’t know what those protections are and if you don’t know how you might lose them, well you might lose them and become a legitimate target and caught up in an armed conflict and that’s not a good outcome.

Eloise: It goes both ways. You can be benefiting from participants to the armed conflict, you can be benefiting from their support but you can also be, by paying royalties, taxes, fees in these fragile states where, as you say, weak rule of law, weak governance might mean that those payments are financing the armed conflicts so there are so many levels on which businesses can – there are so many touch points between the business and the conflict.

Jonathan: Absolutely, and again if I may – let’s not get hung up too much on the formalistic legal accountability – I would suggest that a prudent corporate response is also to be risk averse, even where the red lines potentially are, even if they were clear, and they’re not, in terms of legal interpretation of what is direct participation in hostilities for example, we need to be erring on the side of caution as a company and to me, that’s just prudent business practice, looking out for one’s own self-interest.

Eloise: Certainly, the reputational risks of being associated with the conflict.

Jonathan: Reputational, legal risks and people risks as well.

Eloise: Of course, for personnel. That brings me to an interesting point which I’d love to get your views on, which is the GRI is a reporting standard. It’s a voluntary initiative to my understanding. They don’t create binding legal obligations but I think a number of commentators have observed, particularly around this GRI standard for mining, that this provides a very useful blueprint for companies to put in place the due diligence and reporting frameworks that will enable them to comply with increasingly onerous regulatory requirements around due diligence and reporting on human rights impacts. I’d be interested to know from you why you think reporting and transparency particularly around conflict and private security and public security is important and how does it actually help drive responsible business.

Jonathan: It’s such a good question and we won’t tell the listeners about our earlier conversation about CSDDD, but I think it’s actually a wonderful moment to talk about the value of private governance instruments which is how I describe the Global Reporting Initiative sustainability standards versus public governance, like laws, legislation and treaties. The CSDDD (the Corporate Sustainability Due Diligence Directive) that so many folks in the business and human rights community, the ESG communities were looking forward to, maybe some with trepidation, some with excitement, but that does not seem to have made it to the finish line. Current negotiations or deliberations in Europe seem to be at an impasse, shall we say, a topic for a different podcast episode. So there are limitations also for the law and I think we often, as lawyers, sometimes we forget that there are non-legal ways of regulating and improving conduct as well and I think voluntary standards have a long pedigree in improving corporate business practice. The UN Guiding Principles on Business and Human Rights themselves, are not binding, they’re not a treaty. Again, we’re negotiating a treaty on business on human rights but that’s years away, if ever, to be realised. So there is utility in this voluntary framework. It also taps into, again, those changing societal expectations, changing corporate expectations – internally of what they want to be as a responsible, sustainable business. For all those reasons, these companies that want to do good and be sustainable and responsible – they need indicators, they need guidelines and that’s where the global reporting initiative comes in. I think it’s close to 80% of the world’s largest businesses use the GRI as their sustainability reporting framework. Some may say ‘well it’s just reporting, everyone puts out a sustainability report, it’s glossy, lots of sexy photos and wonderful mumbo jumbo and acronyms and logos and what’s the point? If you don’t measure something, you don’t know what it is, you can’t act. So part of producing that sustainability report is asking these types of questions, asking the human rights questions, asking responsible security or humanitarian law questions. So the process that goes into reporting on sustainability is just as important as the eventual 50-page sustainability report. People don’t see the amount of corporate resources, time, effort, people that are devoted to developing that sustainability report and so I would like to think that the reporting also leads to other real world outcomes in terms of internal processes. Then the reporting itself is a lever for change, right? Greater transparency leads to greater accountability. There’s lots of different stakeholders that read those sustainability reports and go back to the companies and ask questions about gaps and things that they could and should do better. Another element of why reporting is important, is also the investment community and now increasingly looking at ESG or sustainability standards for where they put their trillions of dollars in investments in. So it behoves the company again, to be reporting diligently, to be managing their sustainability risks prudently and effectively as well.

Eloise: I think that’s right Jonathan. I think you’ve touched on the key point – better information leads to better decision-making and I think we were speaking about before hit record, this process – what comes at the end of it is a report. It looks like a monologue but what precedes it is a dialogue and the reporting standards provide a really important imperative for companies to actually engage with stakeholders in a meaningful way and in an ongoing way, you should hope, because it’s not the end of the line, this annual report has to go through a process and it goes through a process of review and as you say, it gives stakeholders, civil society investors, governments a chance to interrogate what companies are doing, what their impacts are.

Jonathan: Absolutely and not necessarily just for the outcome of punishing or pointing the finger, but also to improve.

Eloise: To promote best practice.

Jonathan: Exactly.

Eloise: It raises the bar. If you see some companies doing a better job, you look at those other companies that are not meeting the standard and say ‘what do you need to do, what do you need to put in place in order to meet that high water-mark’.

Jonathan: Absolutely.

Eloise: I think that’s a positive uplifting note to end on Jonathan! Thank you so much for your time today. For all of our listeners, please click follow wherever you’re listening to this podcast, so you can be notified of new episodes.

Jonathan: Thanks for having me Eloise.

Eloise: Thanks Jonathan.